NASC 8-K
Can B Corp (NASC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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Securities registered pursuant to Section 12(b) of the Act:
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| None | N/A | N/A |
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 DEFINITIVE MATERIAL AGREEMENT.
Issuance of OID Note
On October 27, 2023, Can B Corp., a Florida corporation (the “Company”), completed the sale of a promissory note (the “Initial Note”) in the principal amount of $156,250 to Walleye Opportunities Fund, Ltd. (the “Investor”) pursuant to a Securities Purchase Agreement between the Company and the Investor (the “Stock Purchase Agreement”). The purchase price of the Note was $125,000, representing a 20% original issue discount. The Initial Note is non-interest bearing, except in the case of the event of a default, in which case interest will accrue from the date of the default at a rate equal to the lower of 18% per annum or the maximum rate permitted by law. The Initial Note becomes due on October 27, 2024.
The Investor may elect to convert the principal amount of the Initial Note and default interest, if any, subject to adjustment at a price equal to 90% of the lowest daily volume weighted average price of the common stock during the fifteen trading days preceding the conversion date.
The Investor and/or investors introduced by the Investor may purchase up to an additional $1,693,750 aggregate principal amount of notes having terms substantially similar to the Initial Note (the “New Notes” and collectively with the Initial Note, the “Notes”). In addition to the principal and interest payment obligations under the Notes, the Company has agreed to pay and/or cause its newly formed 70% owned subsidiary, Nascent Pharma, LLC (“Nascent”,) to pay the Investor fifteen percent (15%) of all amounts that would otherwise be distributable to the Company by Nascent until the Investor receives distributions in the aggregate amount that equal the sum of (a) 200% of the purchase price of notes previously issued by the Company to the Investor plus (b) 200% of the principal amount of certain notes previously issued by the Company and acquired by the Investor from a third party plus (c) 100% of the purchase price of Notes purchased pursuant to the Stock Purchase Agreement; provided, however, if the Investor and/or other investors purchase $1,875,000 aggregate principal amount of Notes pursuant to the Stock Purchase Agreement, the obligation to pay 100% of the purchase price of the Notes shall be increased to 200% of the purchase price of such Notes. The amounts distributable by Nascent to the Company, if any, will represent the proceeds of Nascent’s enforcement of certain patents it is seeking to acquire. Nascent has not yet acquired such patents and no assurance can be given that it will be able to complete such acquisition. Under the terms of the Stock Purchase Agreement, the purchase of New Notes by the Investor and/or investors introduced by the Investor is subject to, among other things, Nascent’s acquisition of the patents. If Nascent does not complete the acquisition of the patents, the Company does not expect that any New Notes will be purchased and the Company will have no obligation to pay additional consideration to the Investor.
In the event of a default under a Note, the Company shall be required to pay the holder of the Note an amount equal to the amount determined by multiplying the principal amount of the Note then outstanding plus default interest by 135%, plus costs of collection. The Investor may elect to accept payment of any such amount in cash and/or shares of the Company’s common stock, valued for this purpose at the lower of the conversion price then in effect or a 60% discount to the lowest volume weighted average price of the common stock during the five trading days preceding the conversion date.
The Investor has been granted a right of first refusal to participate in future financing transactions conducted by the Company.
The Company has entered into a Registration Rights Agreement with the Investor pursuant to which the Company has agreed to file a registration statement with the Securities and Exchange Commission by December 11, 2023 to register for public resale the shares of common stock issuable upon the conversion of the Note and a consolidated note issued to the Investor in the principal amount of $1,354,210 (the “Consolidated Note”) which combined certain notes held by the Investor into a single note. If the Company fails to file the registration statement by December 11, 2023 or have the registration statement declared effective by the deadlines set forth in the Registration Rights Agreement, the Company will be required to make a payment of 2% of the amount then owed under the Note and the Consolidated Note for each 30 day period after the applicable deadline that the Company does not file the registration statement or the registration statement is not declared effective. The Investor has also been granted piggyback registration rights with respect to the shares of common stock issuable upon the conversion of the Notes it acquires and the Consolidated Note. Each of the Initial Note and Consolidated Note grants full ratchet anti-dilution protection to the Investor in the event that the Company issues common stock or rights to purchase common stock at a price less than the conversion or exercise price then in effect.
The Initial Note contains and the New Notes will contain a provision which provides that the holder will not be converted if the conversion would result in the holder becoming the beneficial owner of more than 9.99% of the Company’s outstanding common stock.
ITEM 2.03. CREATION OFA DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OFA REGISTRANT.
See Item 1.01 regarding the Note issued to the Investor and the obligations of the Company relating thereto.
ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES.
See Item 1.01 for discussion of the Note issued to the Investor. The foregoing securities were issued in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”), as amended, and Regulation D as promulgated under the Securities Act.
ITEM 9.01. FINANCIAL STATEMENT AND EXHIBITS.
| (d) | Exhibits. |
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.
Date: November 3, 2023
| Can B Corp. | ||
| By: | /s/ Marco Alfonsi | |
| Name: | Marco Alfonsi | |
| Title: | CEO | |
Exhibit 9.1
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms, this “Agreement”), dated as of October 26, 2023, by and between CAN B̅ CORP., a Florida corporation, with headquarters located at 960 South Broadway, Suite 120, Hicksville, NY 11801 (the “Company”), and the buyer identified on the signature page hereto (the “Buyer”).
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”) and Rule 506(b) promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act;
B. The Buyer holds each of the following promissory notes of the Company: (i) that certain Promissory Note, dated August 30, 2022, in the original principal amount of $385,000 (the “$385,000 Walleye Note”), (ii) that certain 20% Original Issue Discount Promissory Note, dated May 16, 2023, in the original principal amount of $437,500 (the “$437,500 Walleye Note”), (iii) that certain $100,000 Unsecured Promissory Note of the Borrower dated as of August 5, 2022, by and between the Company as borrower and Emergent Health Corp., a Wyoming corporation (“Emergent”) as lender (the “$100,000 Walleye Note”), which $100,000 Walleye Note was purchased by the Buyer from Emergent pursuant to that certain Note Purchase Agreement, dated August 3, 2023, by and between Emergent as seller and the Buyer as purchaser (the “Emergent NPA”), (iv) that certain $250,000 Unsecured Promissory Note of the Company, dated August 18, 2022, by and between the Company as borrower and Emergent as lender (the “$250,000 Walleye Note” and together with the $100,000 Walleye Note, collectively, the “Emergent Notes”), which $250,000 Walleye Note was purchased by the Buyer from Emergent pursuant to the Emergent NPA, and (v) that certain Promissory Note, dated February 27, 2023, in the original principal amount of $1,823,529 (the “February 2023 Walleye Secured Note”, together with the $385,000 Walleye Note, the $437,500 Walleye Note, the $100,000 Walleye Note and the $250,000 Walleye Note, collectively, the “Existing Notes”);
C. The Company is currently in need of additional funds to help finance its operations;
D. Subject to the terms and conditions set forth in this Agreement, the Buyer is willing to advance, or to cause to be advanced, up to $1,500,000 in additional funds, in one or more advances, to the Company, in exchange for (i) the issuance to the Buyer, of one or more 20% original issue discount promissory notes of the Company in substantially the form attached as Exhibit A hereto, in the aggregate original principal amount of up to $1,875,000 (reflecting 20% original issuance discount) (the “Maximum Offered Amount”), which shall be convertible into shares of common stock, nil par value per share, of the Company (the “Common Stock”) upon the terms and subject to the limitations and conditions set forth therein (such promissory notes substantially in the form of Exhibit A hereto issued by the Company hereunder, collectively, the “Notes”, and each, individually, a “Note”), and (ii) certain other consideration, including without limitation, the agreement of Nascent Pharma, LLC, a Nevada limited liability company in which the Company holds a 67% equity interest (“Nascent”) to pay the Buyer a certain portion of the distributions and proceeds that the Company would otherwise be entitled to receive from Nascent pursuant to the Nascent Operating Agreement and/or the Proposed UCANN Distribution Agreement (as defined below), with the aggregate potential amount of such distributions and proceeds to be paid by Nascent to the Buyer depending on, among other things, (1) the aggregate purchase price of the Existing Notes other than the Emergent Notes, (2) the aggregate principal amount of the Emergent Notes, and (3) the aggregate purchase price of Notes purchased by the Buyer hereunder, to be documented pursuant to a certain proposed Distribution and Assignment Agreement (as defined below) to be entered by and among the Company, Nascent and the Buyer, as described in further detail below.
NOW THEREFORE, in consideration of the foregoing and of the agreements and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Buyer hereby agree as follows:
1. Definitions. As used in this Agreement, each of the following terms has the meaning given to such term in this Section 1 or in the sections and subsections of this Agreement referred to below.
“Additional Consideration Amount” has the meaning set forth in Section 2(b).
“Business Day” shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed; provided, for the avoidance of doubt, that no such commercial banks shall be considered to be authorized or required by law or executive order to remain closed as a result of “stay at home”, “shelter-in-place”, “non-essential employee” or other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of such commercial banks are generally open for sue by customers on such day.
“Conversion Shares” means the shares of Common Stock issuable upon conversion of or otherwise pursuant to (i) any and all Notes issued by the Company pursuant to this Agreement and (ii) the Consolidated Amended and Restated Walleye Note.
“Consolidated Amended and Restated Walleye Note” has the meaning set forth in Section 8.
“Distribution and Assignment Agreement” has the meaning set forth in Section 2(b).
“Patent” means, (i) United States Patent No. US 9,730,911 B2 (Cannabis Extracts and Methods of Preparing and Using Same) and (ii) United States Patent No. US 10,555,928 B2 (Cannabis Extracts and Methods and Preparing and Using Same), or any of them (collectively, the “Patents”).
“Proposed UCANN Distribution Agreement” means a proposed Agreement for Distribution of Cash Distributions contemplated to be entered into between and among Earnest Blackmon, an individual, John Walsh, an individual, United Cannabis Corporation, a Colorado Corporation, UC Colorado Corporation, a Colorado corporation, DCS Enterprises of Green Bay, Inc., a Wisconsin corporation (“DCS”), the Company, Nascent and The Receivers, Inc., a Colorado Corporation, in its capacity as the court-appointed receiver in Case No. 2020CV30483, in Jefferson County District Court, State of Colorado pursuant to which, (1) the Company would among other things, cause Nascent to make distributions to the “Creditors” (as to be defined in the Proposed UCANN Distribution Agreement) on the “Creditor List” (as to be defined in the Proposed UCANN Distribution Agreement), of 5% of the Company’s share of the “Cash Available for Distribution” (as to be defined in the Proposed UCANN Distribution Agreement) until such Creditors have been paid an aggregate of $10,000,000.00 for their claims as set forth on the Creditor List (such distributions, “Proposed UCANN Pool Distributions”), and (2) Nascent would agree, among other things, to make such Proposed UCANN Pool Distributions simultaneously with distributions of “Cash Available for Distributions” (as to be defined in the Proposed UCANN Distribution Agreement) to DCS and the Company.
“Senior Distribution and Contingent Payment Agreements” has the meaning set forth in Section 8.
“Securities” means the Conversion Shares, the Notes issued by the Company pursuant to this Agreement, and the Consolidated Amended and Restated Walleye Note.
“Transaction Documents” means, collectively, this Agreement, the Notes, the Consolidated Amended and Restated Walleye Note, the Distribution and Assignment Agreement, the RRAs, all exhibits and schedules hereto and thereto, and any other documents or agreements executed in connection with the transactions contemplated hereunder (each, individually, a “Transaction Document”).
“Uplist Offering” means an offering of Common Stock (or units consisting of Common Stock and warrants to purchase Common Stock) that will result in the immediate listing for trading of the Common Stock on the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, or any other national securities exchange (or any successors to any of the foregoing).
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2. Purchase and Sale of Notes; Additional Consideration Amount.
(a) Purchase of Notes. Upon the terms and subject to the conditions set forth herein, (i) on the initial Closing Date (as defined below), the Company agrees to sell to the Buyer, and the Buyer agrees to purchase from the Company, a Note in the original principal amount of $156,250 (the “Initial Note”), and (ii) one or more subsequent Closing Dates, the Company agrees to sell to the Buyer, and the Buyer agrees to purchase from the Company, one or more additional Notes in the aggregate original principal amount of $1,718,750; provided, notwithstanding anything to the contrary set forth herein, (1) there shall be no additional Closings under this Agreement after February 15, 2024 (the “New Money Multiple Deadline”), and (2) at any time on or prior to the New Money Multiple Deadline, the Buyer may elect to introduce an additional party to act as the replacement for the Buyer in the purchase of such additional Notes other than the Initial Note (any such party, a “New Buyer”), in which case this Agreement shall be amended or amended and restated as needed and for the sole purpose of appropriately accounting for such New Buyer.
(b) Additional Consideration Amount; Distribution and Assignment Agreement. As additional consideration for the Buyer’s purchase of the Initial Note, simultaneously with the issuance of the Initial Note to the Buyer at the initial Closing, the Company and Nascent shall enter into a Distribution and Assignment Agreement with the Buyer substantially in the form attached as Exhibit B hereto (the “Distribution and Assignment Agreement”), which Distribution and Assignment Agreement shall provide, among other things, that Nascent shall pay the Buyer fifteen percent (15%) of the distributions and proceeds that the Company would otherwise be entitled to receive pursuant to the Nascent Operating Agreement and/or the Proposed UCANN Distribution Agreement until the Buyer receives an amount of such distributions and proceeds (the “Additional Consideration Amount”) equal to the sum of (A) two hundred percent (200%) of the aggregate purchase price of the Existing Notes other than the Emergent Notes (i.e., $4,500,000), plus (B) two hundred percent (200%) of the aggregate original principal amount of the Emergent Notes (i.e., $700,000), plus (C) one hundred percent (100%) of the purchase price of the Initial Note (i.e. $125,000) (the “Initial New Money Distribution Amount”), plus (D) one hundred percent (100%) of the aggregate purchase price of any subsequent Notes purchased by the Buyer from the Company pursuant this Agreement (the “Subsequent New Money Distribution Amount”), such that in the event the only Note purchased by the Buyer is the Initial Note, the Additional Consideration Amount would be $5,325,000; provided, that if the Buyer and/or one or more New Buyers purchase Notes in the aggregate principal amount of the Maximum Offered Amount pursuant to this Agreement on or prior to the New Money Multiple Deadline, then (1) the Initial New Money Distribution Amount shall be increased to two hundred percent (200%) of the purchase price of the Initial Note (i.e. $250,000), and (2) the Subsequent New Money Distribution Amount shall be increased to two hundred percent (200%) of the aggregate purchase price of the subsequent Notes purchased pursuant to this Agreement (i.e. $2,750,000), such that the Additional Consideration Amount (if the Maximum Offered Amount of Notes is purchased on or prior to the New Money Multiple Deadline) would be $8,200,000. In the event any New Buyer purchases any Notes hereunder on or prior to the New Money Multiple Deadline, the Distribution and Assignment Agreement shall be amended or amended and restated as needed and for the sole purpose of appropriately accounting for such New Buyer.
(c) Form of Payment. On each Closing Date: (i) the Buyer shall pay the amount identified as the actual amount of the purchase price of each Note to be issued and sold to the Buyer as of such Closing (the “Purchase Price” with respect to each Note) minus the amount of any legal fee reimbursement amount applicable to such Closing withheld from such Purchase Price pursuant to this Section 2(c) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, and (ii) the Company shall deliver such duly executed Note, together with the duly executed Distribution and Assignment Agreement and any other applicable deliverables provided for herein, to the Buyer. At the initial Closing for the purchase of the Initial Note, the Company shall reimburse the Buyer for a portion of its legal fees in connection with the transactions contemplated by this Agreement in the amount of $33,333, which amount may be withheld from the Purchase Price for the Initial Note at the Buyer’s discretion. At each subsequent Closing, the Company shall reimburse the Buyer for a prorated portion of $66,667 of Buyer’s legal fees in connection with the transactions contemplated by this Agreement, which amount may be withheld from the Purchase Price for the applicable Note at the Buyer’s discretion. By way of example, if a subsequent Closing occurs with respect to Notes having an aggregate Purchase Price of $500,000, $24,243 of Buyer’s legal fees will be reimbursed to the Buyer at such subsequent Closing. It is hereby acknowledged and agreed that (i) the Initial Note to be purchased by the Buyer at the initial Closing shall be in the original principal amount of $156,250, and the Purchase Price for such Initial Note shall be $125,000 (reflecting an original issuance discount of 20% on such Initial Note), and (ii) the aggregate original principal amount of all Notes being offered pursuant to this Agreement (including without limitation the Initial Note and any additional Notes purchased at any subsequent Closing) will be no more than $1,875,000, and the aggregate Purchase Price for all Notes being offered pursuant to this Agreement (including without limitation the Initial Note and any additional Notes purchased at any subsequent Closing) will be no more than $1,500,000 (reflecting an original issuance discount of 20% on all such Notes).
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(d) Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 7, Section 8, Section 9 and/or Section 10 below, as applicable, the date and time of the issuance and sale of each Note pursuant to this Agreement (each, a “Closing Date”) shall be on the date that the applicable Purchase Price for such Note is paid by Buyer and/or any other New Buyer purchasing such Note, as applicable, to the Company pursuant to terms of this Agreement.
(e) Closing. Each closing of the transactions contemplated by this Agreement (each, a “Closing”) shall occur on the applicable Closing Date at such location as may be agreed to by the parties (including via exchange of electronic signatures).
3. Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company as of the initial Closing Date that:
(a) Investment Purpose. Buyer is acquiring the Securities for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.
(b) Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).
(c) Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.
(d) Information. The Buyer and its advisors, if any, have been, and for so long as any Note or the Consolidated Amended and Restated Walleye Note remains outstanding, will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so long as any Note or the Consolidated Amended and Restated Walleye Note remains outstanding, will continue to be, afforded the opportunity to ask questions of the Company regarding its business and affairs. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information regarding the Company or otherwise and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 4 below.
(e) Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.
(f) Transfer or Re-sale. The Buyer understands that (i) the sale or resale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (1) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (2) the Buyer shall have delivered to the Company, at the cost of the Company, an opinion of counsel (which may be the Legal Counsel Opinion (as defined below)) that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (3) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 3(f) and who is an Accredited Investor, (4) the Securities are sold pursuant to Rule 144 or other applicable exemption, or (5) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Company, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged in connection with a bona fide margin account or other lending arrangement secured by the Securities, and such pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and the Buyer in effecting such pledge of Securities shall be not required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or otherwise.
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(g) Legends. The Buyer understands that until such time as the Securities have been registered under the 1933 Act or may be sold pursuant to Rule 144, Rule 144A under the 1933 Act, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Securities may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such Securities):
“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A, REGULATION S, OR OTHER APPLICABLE EXEMPTION UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The legend set forth above shall be removed and the Company shall issue a certificate or book entry statement for the applicable shares of Common Stock without such legend to the holder of any Security upon which it is stamped or (as requested by such holder) issue the applicable shares of Common Stock to such holder by electronic delivery by crediting the account of such holder’s broker with The Depository Trust Company (“DTC”), if, unless otherwise required by applicable state securities laws, (i) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (ii) the Company or the Buyer provides the Legal Counsel Opinion (as contemplated by and in accordance with Section 5(n) hereof) to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Company shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144, Rule 144A, Regulation S, or other applicable exemption at the Deadline (as defined in the Note), it will be considered an Event of Default (as defined in the Note).
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(h) Authorization; Enforcement. This Agreement has been duly and validly authorized by the Buyer and has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and except as may be limited by the exercise of judicial discretion in applying principles of equity.
4. Representations and Warranties of the Company. The Company represents and warrants to the Buyer:
(a) Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary, if any, free and clear of any liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid. Neither the Company nor any of its Subsidiaries are in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. As used in this Agreement, the term “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. As used in this Agreement, the term “Subsidiary” means any corporation, limited liability company or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.
(b) Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note, and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note and the Conversion Shares by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note, as well as the issuance and reservation for issuance of the Conversion Shares issuable upon conversion of the Note) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, its shareholders, or its debt holders is required, (iii) the Transaction Documents have been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign such Transaction Documents and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Transaction Documents, each of such instruments will constitute, a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their terms.
(c) Capitalization; Governing Documents. As of October 26, 2023, the authorized capital stock of the Company consisted of: 1,500,000,000 authorized shares of Common Stock, of which 26,156,663 shares were issued and outstanding, and 5,000,000 authorized shares of preferred stock, of which 15 shares of Series A Preferred Stock, and 4,000 shares of Series D Preferred Stock were issued and outstanding. All of such outstanding shares of capital stock of the Company and the Conversion Shares are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. As of the effective date of this Agreement, other than as disclosed on Schedule 4(c), (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of any of the Securities. The Company has furnished to the Buyer true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto.
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(d) Issuance of Conversion Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.
(e) Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect of the Conversion Shares to the Common Stock upon the conversion of the Note. The Company further acknowledges that its obligation to issue, upon conversion of the Note and the Conversion Shares, are absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
(f) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, note, evidence of indebtedness, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities is subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect), or (iv) except as disclosed on Schedule 4(c)(iii) trigger any anti-dilution and/or ratchet provision contained in any other contract in which the Company is a party thereto or any security issued by the Company. Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under the Transaction Documents in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and, upon conversion of the Note and/or issue the Conversion Shares as applicable. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the Principal Market (as defined herein) and does not reasonably anticipate that the Common Stock will be delisted by the Principal Market in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The “Principal Market” shall mean the principal securities exchange or trading market where such Common Stock is listed or traded, including but not limited to any tier of the OTC Markets, any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American, or any successor to such markets.
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(g) SEC Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, 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 light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to December 31, 2022, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. The Company is subject to the reporting requirements of the 1934 Act. The Company has never been a “shell company” as described in Rule 144(i)(1)(i).
(h) Absence of Certain Changes. Except as set forth on Schedule 4(h), since December 31, 2022, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.
(i) Absence of Litigation. Except as disclosed in the SEC Documents, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. The SEC Documents contain a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.
(j) Intellectual Property. The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future) except that as of October 26, 2023, neither the Company nor Nascent has yet acquired title to the Patents; there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.
(k) No Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.
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(l) Tax Status. The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority.
(m) Transactions with Affiliates. Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of stock options described in the SEC Documents, none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), 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 officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.
(n) Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyer pursuant to Section 3(d) hereof and otherwise in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).
(o) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’s purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.
(p) No Integrated Offering. 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 in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.
(q) No Brokers; No Solicitation. Other than as set forth on Schedule 4(q), the Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement, or the transactions contemplated hereby. The Company acknowledges and agrees that neither the Buyer nor its employee(s), member(s), beneficial owner(s), or partner(s) solicited the Company to enter into this Agreement and consummate the transactions described in this Agreement.
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(r) Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Since December 31, 2022, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.
(s) Environmental Matters.
(i) There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common law environmental liability or any liability under any Environmental Laws, and neither the Company nor any of its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company’s or any of its Subsidiaries’ business.
(iii) There are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries that are not in compliance with applicable law.
(t) Title to Property; Liens. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 4(t), if attached hereto, or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.
(u) Insurance. The Company and each of its Subsidiaries are 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 and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. Upon written request the Company will provide to the Buyer true and correct copies of all policies relating to directors’ and officers’ liability coverage, errors and omissions coverage, and commercial general liability coverage.
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(v) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company or any Subsidiary, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, 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 Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are 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 could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(w) Internal Accounting Controls. The Company and its Subsidiaries are in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the 1934 Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the 1934 Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the 1934 Act) that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.
(x) Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
(y) Solvency; Indebtedness. The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature. The Company’s financial statements for its most recent fiscal year end and interim financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Schedule 4(y) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments, and except as set forth in Schedule 4(y) none of the Company or its Subsidiaries are in default of any such Indebtedness. For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP.
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(z) No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.
(aa) No Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.
(bb) No Disqualification Events. 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 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 1933 Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 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.
(cc) Manipulation of Price. The Company has not, and to its knowledge no one acting on its behalf has: (i) taken, directly or indirectly, any action designed to cause or to result, or that could reasonably be expected to cause or result, in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company.
(dd) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or 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 Subsidiaries or 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.
(ee) Illegal or Unauthorized Payments; Political Contributions. Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any of the officers, directors, employees, agents or other representatives of the Company or any of its Subsidiaries or any other business entity or enterprise with which the Company or any Subsidiary is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services, whether or not in contravention of applicable law, (i) as a kickback or bribe to any person or (ii) to any political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving the direct or indirect use of funds of the Company or any of its Subsidiaries.
(ff) Breach of Representations and Warranties by the Company. The Company agrees that if the Company breaches any of the representations or warranties set forth in this Section 4 and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under Section 3.1(d) of the Notes and the Consolidated Amended and Restated Walleye Note.
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5. Additional Covenants, Agreements and Acknowledgments.
(a) Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities if required under Regulation D and to provide a copy thereof to the Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Buyer at the applicable closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date.
(b) Use of Proceeds. The Company shall use the proceeds advanced to the Company from the Buyer and any New Buyer pursuant to this Agreement for business development and the repayment of existing indebtedness as agreed upon between the Company and the Buyer, and not for (i) the repayment of any indebtedness owed to officers, directors or employees of the Company or their affiliates, (ii) any loan to or investment in any other corporation, partnership, enterprise or other person other than Nascent, (iii) any loan, credit, or advance to any officers, directors, employees, or affiliates of the Company, or (iv) in violation or contravention of any applicable law, rule or regulation.
(c) Intentionally Omitted.
(d) Most Favored Nations. Buyer, whether or not participating in a particular Subsequent Placement, shall have the right, exercisable at any time prior to the expiration of the Offer Period for such Subsequent Placement, to accept the securities and terms of such Subsequent Placement in lieu of the Securities and the terms of this Agreement (“MFN Right”). If the Company receives such notice from Buyer of the exercise of its MFN Right as of the expiration of the Offer Period for such Subsequent Placement, then: (i) effective upon the closing of such Subsequent Placement, the terms of the securities (and, if and to the extent relevant, the underlying securities) then held by Buyer and this Agreement (collectively, “Present Terms”) shall automatically be amended by (x) substituting the form, mix and terms of such securities (and, if and to the extent relevant, the underlying securities) with those of the securities from the Subsequent Placement and (y) incorporating by reference, mutatis mutandis, the terms of the Subsequent Placement in lieu of the Present Terms; and (ii) thereafter, upon the reasonable request of the Company or Buyer, the parties shall reasonably cooperate with each other in order to further or better evidence or effect such substitution(s) and amendment(s), and to otherwise carry out the intent and purposes of this Section, including the physical exchange of securities.
(e) Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Buyer in order to enforce any right or remedy under this Agreement, the Note and any document, agreement or instrument contemplated thereby. Notwithstanding any provision to the contrary contained in this Agreement, the Note and any document, agreement or instrument contemplated thereby, it is expressly agreed and provided that the total liability of the Company under this Agreement, the Note or any document, agreement or instrument contemplated thereby for payments which under applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under applicable law in the nature of interest that the Company may be obligated to pay under this Agreement, the Note and any document, agreement or instrument contemplated thereby exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law applicable to this Agreement, the Note and any document, agreement or instrument contemplated thereby is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Agreement, the Note and any document, agreement or instrument contemplated thereby from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to the Buyer with respect to indebtedness evidenced by this Agreement, the Note and any document, agreement or instrument contemplated thereby, such excess shall be applied by the Buyer to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at the Buyer’s election.
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(f) Restriction on Activities. Commencing as of the date first above written, and until the earlier of payment of the Note in full or full conversion of the Note, the Company shall not, directly or indirectly, without the Buyer’s prior written consent, which consent shall not be unreasonably withheld: (i) change the nature of its business; or (ii) sell, divest, acquire, change the structure of any material assets other than in the ordinary course of business; provided, however, that nothing contained herein shall prohibit the Company, through Nascent, from enforcing the Patents.
(g) Listing. The Company will, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the Principal Market or any equivalent replacement exchange or electronic quotation system (including but not limited to the Pink Sheets electronic quotation system) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any notices it receives from the Principal Market and any other exchanges or electronic quotation systems on which the Common Stock is then traded regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.
(h) Corporate Existence. The Company will, so long as the Buyer beneficially owns any of the Securities, maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading or quotation on the Principal Market, any tier of the NASDAQ Stock Market, the New York Stock Exchange or the NYSE MKT.
(i) No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.
(j) Breach of Covenants. The Company acknowledges and agrees that if the Company breaches any of the covenants set forth in this Section 5, in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under Section 3.1(c) of the Notes and the Consolidated Amended and Restated Walleye Note.
(k) Compliance with 1934 Act; Public Information Failures. For so long as the Buyer beneficially owns any Note, the Consolidated Amended and Restated Walleye Note or any Conversion Shares, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act. During the period that the Buyer beneficially owns any Note and/or the Consolidated Amended and Restated Walleye Note, if the Company shall (i) fail for any reason to satisfy the requirements of Rule 144(c)(1), including, without limitation, the failure to satisfy the current public information requirements under Rule 144(c) or (ii) if 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) (each, a “Public Information Failure”) then, as partial relief for the damages to the Buyer by reason of any such delay in or reduction of its ability to sell the Securities (which remedy shall not be exclusive of any other remedies available pursuant to this Agreement, the Note, or at law or in equity), the Company shall pay to the Buyer an amount in cash equal to three percent (3%) of the Purchase Price on each of the day of a Public Information Failure and on every thirtieth day (pro rated for periods totaling less than thirty days) thereafter until the date such Public Information Failure is cured. The payments to which a holder shall be entitled pursuant to this Section 5(k) are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (x) the last day of the calendar month during which such Public Information Failure Payments are incurred and (y) the third Business Day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 5% per month (prorated for partial months) until paid in full.
(l) Acknowledgement Regarding Buyer’s Trading Activity. Until all of the Notes purchased by the Buyer and the Consolidated Amended and Restated Walleye Note is fully repaid or fully converted, the Buyer shall not effect any “short sale” (as such term is defined in Rule 200 of Regulation SHO of the 1934 Act) of the Common Stock which establishes a net short position with respect to the Common Stock.
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(m) Disclosure of Transactions and Other Material Information. By 9:00 a.m., New York time, following the date this Agreement has been fully executed, the Company shall file a Current Report on Form 8-K (if required) describing the terms of the transactions contemplated by this Agreement in the form required by the 1934 Act and attaching this Agreement, the form of Note and the form of Consolidated Amended and Restated Walleye Note (the “8-K Filing”). From and after the filing of the 8-K Filing with the SEC, the Buyer shall not be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries or any of their respective officers, directors, employees or agents that is not disclosed in the 8-K Filing. In addition, effective upon the filing of the 8-K Filing, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and the Buyer or any of its affiliates, on the other hand, shall terminate.
(n) Legal Counsel Opinions. Upon the request of the Buyer from to time to time, the Company shall be responsible (at its cost) for promptly supplying to the Company’s transfer agent and the Buyer a customary legal opinion letter of its counsel (the “Legal Counsel Opinion”) to the effect that the resale of the Conversion Shares by the Buyer or its affiliates, successors and assigns is exempt from the registration requirements of the 1933 Act pursuant to Rule 144 (provided the holding period requirements of Rule 144 are satisfied and provided the Conversion Shares are not then registered under the 1933 Act for resale pursuant to an effective registration statement) or other applicable exemption (provided the requirements of such other applicable exemption are satisfied). In addition, the Buyer may (at the Company’s cost) at any time secure its own legal counsel to issue the Legal Counsel Opinion, and the Company will instruct its transfer agent to accept such opinion. The Company hereby agrees that it may never take the position that it is a “shell company” in connection with its obligations under this Agreement or otherwise.
(o) Piggyback Registration Rights. The Company hereby grants to the Buyer the piggy-back registration rights set forth on Exhibit C hereto, which piggy-back registration rights shall be in addition to and not in substitution for the registration rights set forth in each RRA (as defined in Section 8 below) delivered pursuant to this Agreement.
(p) Intentionally Omitted.
(q) Subsequent Variable Rate Transactions. From the date hereof until such time as the Note is fully converted or fully repaid, the Company shall be prohibited from effecting or entering into an agreement involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may issue securities at a future determined price. The Buyer shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.
(r) Intentionally Omitted.
(s) Non-Public Information. The Company covenants and agrees that neither it, nor any other person acting on its behalf will provide the Buyer or its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto the Buyer shall have consented to the receipt of such information and agreed with the Company to keep such information confidential. The Company understands and confirms that the Buyer shall be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company delivers any material, non-public information to the Buyer without such Buyer’s consent, the Company hereby covenants and agrees that such Buyer shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or affiliates, not to trade on the basis of, such material, non- public information, provided that the Buyer shall remain subject to applicable law. To the extent that any notice provided, information provided, or any other communications made by the Company, to the Buyer, constitutes or contains material non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice or other material information with the SEC pursuant to a Current Report on Form 8-K. In addition to any other remedies provided by this Agreement or the related transaction documents, if the Company provides any material non-public information to the Buyer without their prior written consent, and it fails to immediately (no later than that Business Day) file a Form 8-K disclosing this material non-public information, it shall pay the Buyer as partial liquidated damages and not as a penalty a sum equal to $3,000 per day beginning with the day the information is disclosed to the Buyer and ending and including the day the Form 8-K disclosing this information is filed.
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6. Transfer Agent Instructions. The Company shall issue irrevocable instructions to the Company’s transfer agent to issue certificates and/or issue shares electronically at the Buyer’s option, registered in the name of the Buyer or its nominee, upon conversion of the Notes, the Consolidated Amended and Restated Walleye Note and the issuance of the Conversion Shares issuable under the Notes and the Consolidated Amended and Restated Walleye Note, in such amounts as specified from time to time by the Buyer to the Company in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”). In the event that the Company proposes to replace its transfer agent, the Company shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to this Agreement (including but not limited to the provision in each of the Notes and the Consolidated Amended and Restated Walleye Note to irrevocably reserve shares of Common Stock in the Reserved Amount (as defined in each Note and in the Consolidated Amended and Restated Walleye Note)) signed by the successor transfer agent to the Company and the Company. Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates or book entry shares shall bear the restrictive legend specified in Section 3(g) of this Agreement. The Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 6 will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for Securities to be issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Securities issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note or this Agreement and (iv) it will provide any required corporate resolutions and issuance approvals to its transfer agent within 6 hours of each conversion of the Note. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 3(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company, at the cost of the Company, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to 144, Rule 144A, Regulation S, or other applicable exemption, the Company shall permit the transfer, and, in the case of the Securities, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.
7. Conditions to the Company’s Obligation to Sell the Initial Note. The obligation of the Company hereunder to issue and sell the Initial Note to the Buyer at the initial Closing is subject to the satisfaction, at or before the initial Closing Date, of each of the following conditions set forth in this Section 7, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:
(a) The Buyer shall have executed this Agreement and delivered the same to the Company.
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(b) The Buyer shall have delivered the Purchase Price for the Initial Note, net of any applicable withheld legal fee reimbursement amount, in accordance with Section 2(c) above.
(c) The Buyer shall have delivered to the Company a counterpart of the Distribution and Assignment Agreement, duly executed by the Buyer.
(d) The Buyer shall have delivered to the Company a counterpart of the RRA referred to in Section 8(i) below.
(e) The representations and warranties of the Buyer in this Agreement shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.
(f) No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
8. Conditions to the Buyer’s Obligation to Purchase the Initial Note. The obligation of the Buyer hereunder to purchase the Initial Note at the initial Closing is subject to the satisfaction, at or before the initial Closing Date, of each of the following conditions set forth in this Section 8, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:
(a) The Company shall have executed this Agreement and delivered the same to the Buyer.
(b) The Company shall have delivered to the Buyer the duly executed Initial Note in such denominations as the Buyer shall request and in accordance with Section 2(c) above.
(c) The Company shall have delivered to the Buyer that certain Consolidated Amended and Restated Promissory Note in the original principal amount of $1,354,210, substantially in the form attached hereto as Exhibit E (the “Consolidated Amended and Restated Walleye Note”), duly executed by the Company, which Consolidated Amended and Restated Walleye Note consolidates, amends and restates (i) the $385,000 Walleye Note, (ii) the $437,500 Walleye Note, (iii) the $100,000 Walleye Note and (iv) the $250,000 Walleye Note, subject to the terms and conditions set forth therein.
(d) The Company shall have delivered to the Buyer the Distribution and Assignment Agreement, duly executed by the Company and Nascent.
(e) Intentionally Omitted.
(f) The Company shall have delivered to the Buyer a true and complete copy of the limited liability company operating agreement of Nascent, together with all amendments thereto, as in effect on the Closing Date (the “Nascent Operating Agreement”), which Nascent Operating Agreement shall be to the satisfaction of the Buyer in its sole and absolute discretion.
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(g) The Company shall have delivered to the Buyer true and complete copies of any and all agreements, instruments or other documents, together with any and all amendments thereto, entered into by the Company, any Affiliate of the Company, Nascent and/or any Affiliate of Nascent, in each case as in effect as of the initial Closing Date, pursuant to which (i) the Company, Nascent or any Affiliate of the Company or of Nascent has any obligations or commitments to pay or distribute any “Cash Available for Distribution” (as such term is defined in the Nascent Operating Agreement) that the Company would otherwise be entitled to receive pursuant to the Nascent Operating Agreement, to any Person other than the Company, (ii) materially affecting the amount of “Cash Available for Distribution” that would be available for distribution to members of Nascent (including the Company), in the event Nascent, the Company or any Affiliate of the Company or Nascent is successful in prosecuting any claim, litigation, or other proceeding brought by or on behalf of Nascent, the Company or any Affiliate of the Company in order to enforce any alleged breach or infringement of the rights of the Company, Nascent or any Affiliate of the Company or Nascent with respect to any of the Patents, including without limitation (any such claim, litigation, or other proceeding, whether successful or not, a “Patent Claim”), or (iii) providing for the payment of any fees, distributions or other consideration to any third party Person (other than Nascent or the members of Nascent) contingent or payable upon or in connection with a successful prosecution of one or more Patent Claims (any and all of such agreements, instruments, and other documents executed by the Company, any Affiliate of the Company, Nascent and/or any Affiliate of Nascent as in effect as of any date, “Senior Distribution and Contingent Payment Agreements”), including without limitation, (1) the Proposed UCANN Distribution Agreement (provided the same has been executed on or prior to the initial Closing Date), (2) any and all agreements by and among any of the Company and/or Nascent, and Earnest Blackmon and/or one or more Affiliates of Earnest Blackmon, (3) any and all agreements, instruments or other documents providing for the payment of any fees to any third party for the provision of legal and/or other services to the Company, Nascent and/or any Affiliate of the Company or Nascent contingent or payable upon or in connection a successful prosecution of any Patent Claim, and (4) any and all agreements, promissory notes and other loan, investment and/or financing documents entered into by and among the Company, Nascent, and/or any Affiliate of the Company with one or more third party lenders or other financial institutions providing for the advance of funds to or on behalf of the Company, Nascent and/or any Affiliate of the Company or Nascent to be used in connection with the prosecution of any Patent Claim, all of which Senior Distribution and Contingent Payment Agreements shall be to the satisfaction of the Buyer in its sole and absolute discretion.
(h) The Company shall have delivered to the Buyer duly executed consents and waivers from the holders of those certain outstanding promissory notes of the Company set forth on Schedule 8(h) with respect to the transactions contemplated herein, each in form and substance satisfactory to the Buyer (the “Consents”).
(i) The Company shall have delivered to the Buyer a duly executed Registration Rights Agreement in the form attached as Exhibit D hereto (any such Registration Rights Agreement delivered by the Company to Buyer at the initial Closing and/or at any subsequent Closing pursuant to this Agreement, an “RRA”) covering the Conversion Shares issuable under the Initial Note purchased by the Buyer on the initial Closing Date and the Conversion Shares issuable under the Consolidated Amended and Restated Walleye Note.
(j) The Irrevocable Transfer Agent Instructions with respect to the initial Note, the Consolidated Amended and Restated Walleye Note and the Conversion Shares issuable thereunder, in form and substance satisfactory to the Buyer, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.
(k) The representations and warranties of the Company in this Agreement shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.
(l) No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
(m) No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.
(n) Trading in the Common Stock on the Principal Market shall not have been suspended by the SEC, FINRA or the Principal Market.
(o) The Company shall have delivered to the Buyer (i) a certificate of an officer of the Company and of Nascent evidencing the formation and good standing of the Company and of Nascent in such entity’s jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction, as of a recent date prior to the Closing Date and (ii) resolutions adopted by the Company’s Board of Directors and the applicable governing body of Nascent by written consent duly authorizing this Agreement and all other documents, instruments and transactions contemplated hereby, in form and substance satisfactory to the Buyer.
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(p) The Company shall have delivered to the Buyer a certificate of an officer of the Company, dated as of the Closing Date, certifying as to the fulfillment of the conditions set forth in subparagraphs (a) through (n) of this Section.
(q) From the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the SEC or the Principal Market and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of Buyer, makes it impracticable or inadvisable to purchase the Securities at the Closing.
(r) The Company shall have delivered any and all other documents and information that may be requested by the Buyer in connection with the transactions contemplated herein.
9. Conditions to the Company’s Obligation to Sell Subsequent Notes. The obligation of the Company hereunder to issue and sell additional Notes to the Buyer following the initial Closing is subject to the satisfaction, at or before such subsequent Closing Date, of each of the following conditions set forth in this Section 9, provided that all such conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:
(a) The Buyer shall have delivered the applicable Purchase Price for the subsequent Note to be purchased on such subsequent Closing Date in accordance with Section 2(c) above.
(b) The Buyer shall have delivered to the Company a counterpart of the additional RRA covering the Conversion Shares issuable under such subsequent Note, duly executed by the Buyer.
(c) The representations and warranties of the Buyer in this Agreement shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.
(d) No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
10. Conditions to the Buyer’s Obligation to Purchase Subsequent Notes. The obligation of the Buyer hereunder to purchase any additional Note following the initial Closing is subject to the satisfaction, at or before the subsequent Closing Date with respect to such additional Note, of each of the following conditions set forth in this Section 10, provided that all such conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion, provided further that this Agreement will be amended as needed if the Buyer elects to cause another person to provide for the Additional Funds:
(a) The Company shall have delivered to the Buyer the duly executed subsequent Note to be purchased on such subsequent Closing Date in such denominations as the Buyer shall request and in accordance with Section 2(c) above.
(b) The Company shall have delivered to the Buyer an additional RRA covering the Conversion Shares issuable under the applicable subsequent Note, duly executed by the Company.
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(c) The Irrevocable Transfer Agent Instructions with respect to the applicable subsequent Note and the Conversion Shares issuable thereunder, in form and substance satisfactory to the Buyer, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.
(d) The Company shall have delivered evidence satisfactory to the Buyer that Nascent is the sole owner of the Patents, free and clear of all liens, encumbrances, security interests, and rights of others.
(e) All Senior Distribution and Contingent Payment Agreements contemplated to be entered into by the Company, Nascent, or any Affiliate of the Company or Nascent shall have been executed and delivered to the Buyer, including without limitation, (1) the Proposed UCANN Distribution Agreement, (2) any and all agreements contemplated to be entered into by and among any of the Company and/or Nascent, and Earnest Blackmon and/or one or more Affiliates of Earnest Blackmon, (3) any and all agreements, instruments or other documents providing for the payment of any fees to any third party for the provision of legal and/or other services to the Company, Nascent and/or any Affiliate of the Company or Nascent contingent or payable upon or in connection a successful prosecution of any Patent Claim contemplated to be entered into by any of the Company, and/or Nascent or any Affiliate of the Company and/or Nascent, and (4) any and all agreements, promissory notes and other loan, investment and/or financing documents contemplated to be entered into by and among the Company, Nascent, and/or any Affiliate of the Company with one or more third party lenders or other financial institutions providing for the advance of funds to or on behalf of the Company, Nascent and/or any Affiliate of the Company or Nascent to be used in connection with the prosecution of any Patent Claim, and all of such executed Senior Distribution and Contingent Payment Agreements shall be to the satisfaction of the Buyer in its sole and absolute discretion.
(f) The Company shall have delivered to the Buyer the duly executed Consents.
(g) Neither the Company nor Nascent shall have breached or otherwise defaulted on any of its obligations under any Transaction Document executed and/or delivered prior to such subsequent Closing Date.
(h) The representations and warranties of the Company in this Agreement and in any other Transaction Document delivered prior to the applicable subsequent Closing Date shall be true and correct in all material respects as of the date when made and as of applicable subsequent Closing Date, as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement and any other Transaction Document delivered prior to the applicable Subsequent Closing Date to be performed, satisfied or complied with by the Company at or prior to the applicable subsequent Closing Date.
(i) No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
(j) No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.
(k) Trading in the Common Stock on the Principal Market shall not have been suspended by the SEC, FINRA or the Principal Market.
(l) The Company shall have delivered to the Buyer a certificate of an officer of the Company, dated as of the applicable subsequent Closing Date, certifying as to the fulfillment of the conditions set forth in subparagraphs (a) through (h) of this Section.
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(m) From the date hereof to the applicable subsequent Closing Date, trading in the Common Stock shall not have been suspended by the SEC or the Principal Market and, at any time prior to the applicable subsequent Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of Buyer, makes it impracticable or inadvisable to purchase the Securities at the applicable subsequent Closing.
(n) The Company shall have delivered any and all other documents and information that may be requested by the Buyer in connection with the transactions contemplated herein on or prior to the applicable subsequent Closing Date.
11. Governing Law; Miscellaneous.
(a) Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement, the Note, or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court of the State of Delaware. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTIONS CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement, the Note, or any other agreement, certificate, instrument or document contemplated hereby or thereby 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 law.
(b) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. A facsimile or .pdf signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile or .pdf signature. Delivery of a counterpart signature hereto by facsimile or email/.pdf transmission shall be deemed validly delivery thereof.
(c) Construction; Headings. This Agreement shall be deemed to be jointly drafted by the Company and the Buyer and shall not be construed against any person as the drafter hereof. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.
(d) Severability. In the event that any provision of the Transaction Documents is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Agreement, the Note, or any other agreement, certificate, instrument or document contemplated hereby or thereby.
(e) Entire Agreement; Amendments. The Transaction Documents 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 Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement or any agreement or instrument contemplated hereby may be waived or amended other than by an instrument in writing signed by the Buyer.
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(f) Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received) or (b) on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Company, to:
CAN B̅ CORP.
960 South Broadway, Suite 120
Hicksville, NY 11801
Attention: Marco Alfonsi
e-mail: [email protected]
If to the Buyer:
As provided on the signature page hereto
(g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Buyer. The Buyer may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.
(h) Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
(i) Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
(j) Publicity. The Company, and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, Principal Market or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, Principal Market (or other applicable trading market) or FINRA filings with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof and be given an opportunity to comment thereon).
(k) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
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(l) 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.
(m) Indemnification. In consideration of the Buyer’s execution and delivery of this Agreement and acquiring the Securities hereunder, and in addition to all of the Company’s other obligations under this Agreement or the Note, the Company shall defend, protect, indemnify and hold harmless the Buyer and its stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (i) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents, (ii) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or (iii) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from (A) the execution, delivery, performance or enforcement of the Transaction Documents, (B) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (C) the status of the Buyer or holder of the Securities as an investor in the Company pursuant to the transactions contemplated by this Agreement. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law.
(n) Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, the Note, or any other agreement, certificate, instrument or document contemplated hereby or thereby, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby, and to enforce specifically the terms and provisions hereof and thereof, without the necessity of showing economic loss and without any bond or other security being required.
(o) Payment Set Aside. To the extent that the (i) Company makes a payment or payments to the Buyer hereunder, pursuant to the Note or pursuant to any other agreement, certificate, instrument or document contemplated hereby or thereby, or (ii) the Buyer enforces or exercises its rights hereunder, pursuant to the Note, or pursuant to any other agreement, certificate, instrument or document contemplated hereby or thereby, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof (including but not limited to the sale of the Securities) are for any reason (A) subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, or disgorged by the Buyer, or (B) are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person or entity under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then (1) 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 and (2) the Company shall immediately pay to the Buyer a dollar amount equal to the amount that was for any reason (x) subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, or disgorged by the Buyer, or (y) required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person or entity under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action).
(p) Failure or Indulgence Not Waiver. No failure or delay on the part of the Buyer in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of the Buyer existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.
COMPANY:
CAN B̅ CORP.
| By: | /s/ MARCO ALFONSI | |
| Name: | MARCO ALFONSI | |
| Title: | CHIEF EXECUTIVE OFFICER |
BUYER:
Walleye Opportunities Master Fund Ltd
| By: | /s/ William England | |
| Name: | William England | |
| Title: | Chief Executive Officer of the Manager |
Address for Notice: 2800 Niagara Lane North, Plymouth, MN 55447
E-mail for Notice: [email protected]
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Exhibit A
FORM OF NOTE
(omitted)
Exhibit B
FORM OF DISTRIBUTION AND ASSIGNMENT AGREEMENT
(omitted)
Exhibit C
PIGGY-BACK REGISTRATION RIGHTS
All of the Conversion Shares shall be deemed “Registrable Securities” subject to the provisions of this Exhibit C. All capitalized terms used but not defined in this Exhibit C shall have the meanings ascribed to such terms in the Securities Purchase Agreement to which this Exhibit is attached.
| 1. | Piggy-Back Registration. |
1.1 Piggy-Back Rights. If, at any time on or after the date of the Closing, the Company proposes to file any Registration Statement under the 1933 Act (a “Registration Statement”) with respect to any offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for shareholders of the Company for their account (or by the Company and by shareholders of the Company), other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan on Form S-8, (ii) for a dividend reinvestment plan, (iii) in connection with a merger or acquisition, or (iv) for the Uplist Offering, then the Company shall (x) give written notice of such proposed filing to the holders of Registrable Securities appearing on the books and records of the Company as such a holder as soon as practicable but in no event less than ten (10) days before the anticipated filing date of the Registration Statement, which notice shall describe the amount and type of securities to be included in such Registration Statement, the intended method(s) of distribution, and the name of the proposed managing underwriter or underwriters, if any, of the offering, and (y) offer to the holders of Registrable Securities in such notice the opportunity to register the sale of such number of Registrable Securities as such holders may request in writing within three (3) days following receipt of such notice (a “Piggy-Back Registration”). The Company shall cause such Registrable Securities to be included in such registration, subject in the case of an underwritten offering to customary underwriter cutback provisions, and shall cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof (with the understanding that the Company shall file the initial prospectus covering the Buyer’s sale of the Registrable Securities at prevailing market prices on the same date that the Registration Statement is declared effective by the SEC).
1.2 Withdrawal. Any holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the Registration Statement. The Company (whether on its own determination or as the result of a withdrawal by persons making a demand pursuant to written contractual obligations) may withdraw a Registration Statement at any time prior to the effectiveness of such Registration Statement. Notwithstanding any such withdrawal, the Company shall pay all expenses incurred by the holders of Registrable Securities in connection with such Piggy-Back Registration as provided in Section 1.5 below.
1.3 The Company shall notify the holders of Registrable Securities at any time when a prospectus relating to such holder’s Registrable Securities is required to be delivered under the 1933 Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. At the request of such holder, the Company shall also prepare, file and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of the Registrable Securities, such prospectus shall not include 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 not misleading in light of the circumstances then existing. The holders of Registrable Securities shall not to offer or sell any Registrable Securities covered by the Registration Statement after receipt of such notification until the receipt of such supplement or amendment.
1.4 The Company may request a holder of Registrable Securities to furnish the Company such information with respect to such holder and such holder’s proposed distribution of the Registrable Securities pursuant to the Registration Statement as the Company may from time to time reasonably request in writing or as shall be required by law or by the SEC in connection therewith, and such holders shall furnish the Company with such information.
1.5 All fees and expenses incident to the performance of or compliance with this Exhibit C 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 SEC, (B) with respect to filings required to be made with any trading market on which the Common Stock is then listed for trading, (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) and (D) with respect to any filing that may be required to be made by any broker through which a holder of Registrable Securities intends to make sales of Registrable Securities with the FINRA, (ii) printing expenses, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) 1933 Act liability insurance, if the Company so desires such insurance, (vi) fees and expenses of all other persons or entities retained by the Company in connection with the consummation of the transactions contemplated by this Exhibit C and (vii) reasonable fees and disbursements of a single special counsel for the holders of Registrable Securities (selected by holders of the majority of the Registrable Securities requesting such registration). 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 of Registrable Securities.
1.6 The Company and its successors and assigns shall indemnify and hold harmless the Buyer, each holder of Registrable Securities, the officers, directors, members, partners, agents and employees (and any other individuals or entities 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 individual or entity who controls the Buyer or any such holder of Registrable Securities (within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other individuals or entities 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 individual or entity (each, an “Indemnified Party”), 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 related 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 such 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 1933 Act, the 1934 Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Exhibit C, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based upon information regarding the Buyer or such holder of Registrable Securities furnished to the Company by such party for use therein. The Company shall notify the Buyer and each holder of Registrable Securities promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Exhibit C of which the Company is aware.
1.7 If the indemnification under Section 1.6 is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then the Company 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 Company 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 the Company 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, the Company or the 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 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 Section 1.6 was available to such party in accordance with its terms. It is agreed that it would not be just and equitable if contribution pursuant to this Section 1.7 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 sentence. Notwithstanding the provisions of this Section 1.7, neither the Buyer nor any holder of Registrable Securities shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such party from the sale of all of their Registrable Securities pursuant to such Registration Statement or related prospectus exceeds the amount of any damages that such party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.
[End of Exhibit C]
Exhibit D
FORM OF REGISTRATION RIGHTS AGREEMENT
(omitted)
Exhibit E
FORM OF CONSOLIDATED AMENDED AND RESTATED WALLEYE NOTE
(omitted)
Exhibit 9.2
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE SPA)), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A OR REGULATION S UNDER SAID ACT OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
| Principal Amount: $156,250 | Issue Date: October 27, 2023 |
| Actual Amount of Purchase Price: $125,000 |
PROMISSORY NOTE (this “Note”)
FOR VALUE RECEIVED, CAN B̅ CORP., a Florida corporation (hereinafter called the “Borrower”) (Trading Symbol: CANB), hereby promises to pay to the order of Walleye Opportunities Master Fund Ltd, a Cayman Islands exempted company with limited liability, or its registered assigns (the “Holder”), in the form of lawful money of the United States of America, the principal sum of $156,250.00 (the “Principal Amount”), of which $125,000 is the actual amount of the purchase price (the “Consideration”) hereof plus an original issue discount in the amount of $31,250 (the “OID”) (subject to adjustment herein) on the date the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise, as further provided herein. The entire Principal Amount, together with any accrued and unpaid Default Interest and any other unpaid fees or other amounts outstanding under this Note shall be due and payable on October 27, 2024 (the “Maturity Date”), or on such earlier date as all or any portion of the Principal Amount, any such accrued and unpaid Default Interest and/or any such other unpaid fees and/or other amounts outstanding under this Note may be due and payable in accordance with the terms of this Note, whether upon acceleration or otherwise in accordance with the terms of this Note.
This Note may not be prepaid or repaid in whole or in part except as otherwise explicitly set forth herein.
All payments due hereunder (to the extent not converted into shares of common stock, nil par value per share, of the Borrower (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. As used herein, “$” or “Dollars” means United States Dollars. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business day, the same shall instead be due on the next succeeding day which is a Business day.
Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement, dated as of October 26, 2023, by and between the Borrower and the Holder, and pursuant to which this Note is being issued (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “SPA”). As used in this Note, the term “Issue Date” means October 27, 2023 (i.e. the date first written above). As used in this Note, the term “Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed; provided, for the avoidance of doubt, that no such commercial banks shall be considered to be authorized or required by law or executive order to remain closed as a result of “stay at home”, “shelter-in-place”, “non-essential employee” or other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of such commercial banks are generally open for sue by customers on such day. As used herein, the term “Trading Day” means any day that shares of Common Stock are listed for trading or quotation on the Principal Market, provided, however, that if the Common Stock is not then listed or quoted on any Principal Market, then any calendar day. “Principal Market” shall mean the principal securities exchange or trading market where the Common Stock is listed or traded, including but not limited to any tier of the OTC Markets, any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American, or any successor to such markets.
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall also apply to this Note:
ARTICLE I. CONVERSION RIGHTS
1.1 Conversions.
(a) At any time after the Issue Date until this Note is no longer outstanding, this Note (including the outstanding Principal Amount of this Note, any accrued and unpaid Default Interest and any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock) shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in this Article I). The Holder shall effect such conversions (“Conversions”) by delivering to the Borrower or the Borrower’s transfer agent a notice of conversion, (i) in the case of any Conversion effected prior to the occurrence of any Event of Default, the form of which is attached hereto as Annex A-1, specifying therein the principal amount of this Note to be converted and the date on which such Conversion shall be effected (such date, the “Conversion Date”), or in the case of any Conversion effected upon or after the occurrence of any Event of Default, the form of which is attached hereto as Annex A-2, specifying therein the principal amount of this Note to be converted (including any principal amount of this Note included in any Default Amount of this Note to be so converted), any accrued and unpaid Default Interest and any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock to be converted, and the Conversion Date on which such Conversion shall be effected (each such notice of conversion described under either of the foregoing clauses (i) or (ii) of this sentence, a “Notice of Conversion”), and which Notice of Conversion shall be delivered to the Borrower or the Borrower’s transfer agent in the manner set forth in Section 1.4(a); provided, notwithstanding anything to the contrary set forth herein, the Conversion Date with respect to any Conversion effected pursuant to delivery of any Notice of Conversion (including any Notice of Conversion specifying a particular Conversion Date and any Notice of Conversion that does not specify a Conversion Date) shall be determined in accordance with Section 1.4(a). No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. Conversions hereunder, (i) in the case of any Conversion effected prior to the occurrence of any Event of Default, shall have the effect of lowering the amount of outstanding principal amount of this Note in an amount equal to the applicable principal amount so converted, or (ii) in the case of any Conversion effected upon or after the occurrence of any Event of Default, shall have the effect of lowering the amount of outstanding obligation(s) of the Borrower payable under Section 3.2(a) by an amount equal to the applicable amount of any outstanding obligation(s) of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock.
(b) Conversion Price. Conversions of this Note pursuant to this Section 1.1 and/or Section 3.2(a) shall be effected at a conversion price equal to the Conversion Price. As used in this Note, the term “Conversion Price” means, with respect to any Conversion, a price per share of the Borrower’s Common Stock, equal to 90% of the lowest daily VWAP of the Common Stock during the fifteen (15) Trading Day period prior to the Conversion Date with respect to such Conversion; provided; notwithstanding anything to the contrary set forth in this Section 1.1, the Conversion Price shall be subject to adjustment in accordance with the terms and conditions of this Note, including without limitation upon the occurrence of an Event of Default as set forth in Section 3.2(a) and upon the occurrence of certain events as set forth in Section 1.6. Subject to Section 1.4(f), the number of shares of Common Stock issuable to the Holder upon any Conversion pursuant to this Section 1.1 and/or Section 3.2(a) as applicable, shall be equal to the ratio calculated by dividing (A) the amount in Dollars of the outstanding obligations of the Borrower under this Note elected by the Holder to be converted (which for the avoidance of doubt, shall (i) in the case of any Conversion effected prior to the occurrence of any Event of Default, be limited to the outstanding Principal Amount under this Note at the time of such Conversion, and (ii) in the case of any Conversion effected upon or after the occurrence of any Event of Default, may include any obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock, including without limitation the Default Amount) by (B) the Conversion Price.
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“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (i) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (ii) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX or any other Trading Market, and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (iii) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Borrower, the fees and expenses of which shall be paid by the Borrower. “Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).
1.2 Conversion Schedule; Records. The Holder and the Borrower shall maintain a Conversion Schedule showing the principal amount(s) converted (and as applicable, any other obligations of the Borrower under this Note converted, including without limitation, the amount of any accrued and unpaid Default Interest and any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock) and the date of any and all Conversion(s) effected. The Borrower may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery by the Holder of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.
1.3 Authorized and Reserved Shares. The Borrower covenants that at all times until the Note is satisfied in full, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of a number of Conversion Shares equal to the product calculated by multiplying (A) the sum of the number of Conversion Shares issuable upon the full conversion of this Note (assuming no payment of Principal Amount or interest) at the time of such calculation (taking into consideration any adjustments to the Conversion Price as provided in this Note) by (B) three (3) (the “Reserved Amount”). The Borrower represents that upon issuance, the Conversion Shares will be duly and validly issued, fully paid and non-assessable. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Conversion Shares or instructions to have the Conversion Shares issued as contemplated by Section 1.4(e) hereof, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates or cause the Borrower to electronically issue shares of Common Stock to execute and issue the necessary certificates for the Conversion Shares or cause the Conversion Shares to be issued as contemplated by Section 1.4(e) hereof in accordance with the terms and conditions of this Note.
If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default (as defined in this Note) under Section 3.1(c) of this Note. If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Reserved Amount on such date, then the board of directors of the Borrower shall use commercially reasonable efforts to amend the Borrower’s certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Reserved Amount at such time, as soon as possible and in any event not later than the 90th day after such date. The Borrower shall, if applicable: (A) in the time and manner required by the Principal Market, prepare and file with such Principal Market an additional shares listing application covering a number of shares of Common Stock, equal to or greater than the Reserved Amount if such application is made within 45 days of the Issue Date, (B) take all steps necessary to cause such shares of Common Stock to be approved for listing or quotation on such Principal Market as soon as possible thereafter, (C) provide to the Holder evidence of such listing or quotation and (D) maintain the listing or quotation of a number of shares of such Common Stock on such Principal Market or another Principal Market on any date equal to or greater than the Reserved Amount if such date is within 45 days of the Issue Date. The Borrower agrees to maintain the eligibility of the Common Stock for electronic transfer through the DTC or another established clearing corporation, including, without limitation, by timely payment of fees to the DTC or such other established clearing corporation in connection with such electronic transfer.
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1.4 Method of Conversion.
(a) Mechanics of Conversion. Conversions of this Note may be effected by the Holder pursuant to Section 1.1 and/or Section 3.2(a) by Holder’s submission to the Borrower or the Borrower’s transfer agent of a Notice of Conversion sent via by facsimile, e-mail or other reasonable means of communication. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date with respect to the applicable Conversion so long as the Notice of Conversion is sent to the Borrower or the Borrower’s transfer via by facsimile, e-mail or other reasonable means of communication before 5:30 p.m. (New York City time), on such date specified in the Notice of Conversion. Any Notice of Conversion submitted after 5:30 p.m. (New York City time) on any given date shall be deemed to have been delivered and received on the next Trading Day, which date shall be deemed to be the Conversion Date with respect to the applicable Conversion effected pursuant to such Notice of Conversion regardless of the Conversion Date specified in the Notice of Conversion. If no Conversion Date is specified in a Notice of Conversion, the Conversion Date with respect to the applicable Conversion shall be deemed to be (i) the date that such Notice of Conversion is sent to the Borrower or the Borrower’s transfer via by facsimile, e-mail or other reasonable means of communication, if such Notice of Conversion is sent to the Borrower or the Borrower’s transfer via by facsimile, e-mail or other reasonable means of communication before 5:30 p.m. (New York City time) on such date or (ii) the next Trading Day immediately following the date that such Notice of Conversion is sent to the Borrower or the Borrower’s transfer via by facsimile, e-mail or other reasonable means of communication, if such Notice of Conversion is sent to the Borrower or the Borrower’s transfer via by facsimile, e-mail or other reasonable means of communication after 5:30 p.m. (New York City time) on such date.
(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid Principal Amount of this Note (together with any accrued and unpaid Default Interest, and any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock, and any other fee or other amount permitted to be converted pursuant to this Note) has been so converted and all obligations of the Borrower owing under this Note have been paid in full, including without limitation any accrued and unpaid Default Interest and any other fees and/or other amounts owing by the Borrower under this Note. The Holder and the Borrower shall maintain records showing the Principal Amount (and, as applicable, the amount of any accrued and unpaid Default Interest, any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock, and any other fee or other amount permitted to be converted pursuant to this Note) so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Holder shall be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid Principal Amount of this Note (together with any accrued and unpaid Default Interest and any other obligations of the Borrower then owing under this Note, including without limitation any fees and/or other amounts then owing by the Borrower under this Note). The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted Principal Amount of this Note represented by this Note may be less than the amount stated on the face hereof.
(c) Payment of Taxes and Expenses. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid. Notwithstanding the foregoing, the issuance of Conversion Shares on conversion of this Note shall be made without charge to the Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares. The Borrower shall pay all transfer agent fees required for same-day processing of any Notice of Conversion and all fees to the DTC (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares. The Borrower shall pay all attorney fees required for the issuance of attorney legal opinions for removal of restrictive legends on Conversion Shares.
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(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower or the Borrower’s transfer agent from the Holder of any Notice of Conversion submitted in accordance with Section 1.4(a) and otherwise meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the applicable Conversion Shares (or cause the electronic delivery of such Conversion Shares as contemplated by Section 1.4(f) hereof) within one (1) Trading Day after such receipt (any such date, a “Deadline”). If the Borrower shall fail for any reason or for no reason to issue to the Holder on or prior to the applicable Deadline a certificate for the number of Conversion Shares or to which the Holder is entitled hereunder and register such Conversion Shares on the Borrower’s share register or to credit the Holder’s balance account with DTC (as defined below) for such number of Conversion Shares to which the Holder is entitled upon any Conversion of this Note (a “Conversion Failure”), then, in addition to all other remedies available to the Holder, (i) the Borrower shall pay in cash to the Holder on each day after such Deadline and during such Conversion Failure an amount equal to 2.0% of the product of (A) the sum of the number of Conversion Shares not issued to the Holder on or prior to the applicable Deadline and to which the Holder is entitled and (B) the VWAP of the Common Stock on the Trading Day immediately preceding the last possible date which the Borrower could have issued such Conversion Shares to the Holder without violating this Section 1.5(d); and (ii) upon written notice to the Borrower, the Holder may void all or any portion of the Notice of Conversion submitted by the Holder to effect such Conversion; provided that the voiding of all or any portion of any Notice of Conversion shall not affect the Borrower’s obligations to make any payments which have accrued prior to the date of such notice. In addition to the foregoing, if on or prior to the applicable Deadline, the Borrower shall fail to issue and deliver a certificate to the Holder and register such Conversion Shares on the Borrower’s share register or credit the Holder’s balance account with DTC for the number of Conversion Shares to which the Holder is entitled upon any Conversion of this Note or pursuant to the Borrower’s obligation pursuant to clause (ii) below, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such Conversion of this Note that the Holder anticipated receiving from the Borrower, then the Borrower shall, within two (2) Trading Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other reasonable and customary out-of-pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Borrower’s obligation to deliver such certificate (and to issue such Conversion Shares) or credit such Holder’s balance account with DTC for such Conversion Shares shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Conversion Shares or credit such Holder’s balance account with DTC and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock multiplied by (B) the closing sales price of the Common Stock on the date of applicable Deadline. Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Borrower’s failure to timely deliver certificates representing the Conversion Shares (or to electronically deliver such Conversion Shares) upon the conversion of this Note as required pursuant to the terms hereof.
(e) Obligation to Deliver Common Stock. Upon receipt by the Borrower or the Borrower’s transfer agent from the Holder of any Notice of Conversion submitted in accordance with Section 1.4(a) and otherwise meeting the requirements for conversion as provided in this Section 1.4, the Holder shall be deemed to be the holder of record of the Conversion Shares issuable upon the Conversion of the Principal Amount (and, as applicable any accrued and unpaid Default Interest and any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock pursuant to such Conversion) effected pursuant to the submission of such Notice of Conversion, the outstanding Principal Amount under this Note (and, as applicable, any accrued and unpaid Default Interest and any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock pursuant to such Conversion) shall be reduced to reflect such Conversion in accordance with Section 1.1, and, unless the Borrower defaults on any of its obligations under this Article I (including without limitation, delivery of the Conversion Shares with respect to such Conversion by the applicable Deadline with respect to such Conversion), all rights with respect to the portion of the Principal Amount of this Note (and, as applicable, any accrued and unpaid Default Interest and any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock pursuant to such Conversion) being so converted shall forthwith terminate except the right of the Holder to receive the Common Stock or other securities, cash or other assets, as herein provided, on such Conversion. If the Holder shall have submitted a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for the Conversion Shares (or cause the electronic delivery of the Conversion Shares as contemplated by Section 1.4(f) hereof) shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date with respect to any Conversion shall be determined in accordance with Section 1.4(a) hereof.
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(ii) Delivery of Conversion Shares by Electronic Transfer. Not later than the applicable Deadline with respect to any Conversion Shares issuable upon any Conversion of this Note, upon request of the Holder and its compliance with the provisions contained in (i) this Section 1.4 and (ii) Section 1.1 (with respect to any Conversion effected pursuant to Section 1.1 and/or Section 3.2(a), the Borrower shall cause the Conversion Shares required to be issued hereunder pursuant to such Conversion to be electronically transmitted by the Borrower’s transfer agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with the Depository Trust Company (“DTC”) through its Deposit Withdrawal Agent Commission, provided the Borrower is participating in the DTC’s Fast Automated Securities Transfer or Deposit/Withdrawal at Custodian programs and either (A) there is an effective registration statement permitting the issuance of the Conversion Shares to or resale of the Conversion Shares by the Holder or (B) the requisite holding period provided by Rule 144 for the resale of the Conversion Shares by the Holder has been satisfied, and otherwise by delivery of a certificate, registered in the Borrower’s share register in the name of the Holder or its designee.
(f) Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Borrower shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.
1.5 Concerning the Shares. The Conversion Shares issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the 1933 Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be the Legal Counsel Opinion (as defined in the SPA)) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption, or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the SPA). Except as otherwise provided in the SPA (and subject to the removal provisions set forth below), until such time as the Conversion Shares have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for the Conversion Shares that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE SPA)), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A, REGULATION S UNDER SAID ACT, OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
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The legend set forth above shall be removed and the Borrower shall issue to the Holder a certificate for the applicable Conversion Shares without such legend upon which it is stamped or (as requested by the Holder) issue the applicable Conversion Shares by electronic delivery by crediting the account of such holder’s broker with DTC, if, unless otherwise required by applicable state securities laws: (a) such Conversion Shares are registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) the Borrower or the Holder provides the Legal Counsel Opinion (as contemplated by and in accordance with Section 4(n) of the SPA) to the effect that a public sale or transfer of such Conversion Shares may be made without registration under the 1933 Act, which opinion shall be accepted by the Borrower so that the sale or transfer is effected. The Borrower shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance. The Holder agrees to sell all Conversion Shares, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Borrower does not accept the opinion of counsel provided by the Holder with respect to the transfer of Conversion Shares pursuant to an exemption from registration, such as Rule 144, Rule 144A, Regulation S, or other applicable exemption, at any Deadline, notwithstanding that the conditions of Rule 144, Rule 144A, Regulation S, or other applicable exemption, as applicable, have been met, it will be considered an Event of Default under Section 3.1(c) of this Note.
1.6 Effect of Certain Events.
(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons whereby the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in this Note) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of this Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not effectuate any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, at least thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
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(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a Subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.
(d) Purchase Rights. If, at any time when all or any portion of this Note is issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(e) Dilutive Issuance. If the Borrower, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants (or has issued, sold or granted as of the Issue Date, as the case may be) any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock or other securities convertible into, exercisable for, or otherwise entitle any person or entity the right to acquire, shares of Common Stock (including, without limitation, upon conversion of this Note, and any convertible notes or warrants outstanding as of or following the Issue Date), in each or any case at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal to the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or other securities are issued. By way of example, and for the avoidance of doubt, if the Borrower issues a convertible promissory note (including but not limited to a Variable Rate Transaction), and the holder of such convertible promissory note has the right to convert it into Common Stock at an effective price per share that is lower than the then Conversion Price (including but not limited to a conversion price with a discount that varies with the trading prices of or quotations for the Common Stock), then the Holder has the right to reduce the Conversion Price to such Base Conversion Price (including but not limited to a conversion price with a discount that varies with the trading prices of or quotations for the Common Stock) in perpetuity regardless of whether the holder of such convertible promissory note ever effectuated a conversion at the Base Conversion Price. In the event of an issuance of securities involving multiple tranches or closings, any adjustment pursuant to this Section 1.6(e) shall be calculated as if all such securities were issued at the initial closing. Notwithstanding the foregoing, the Holder may only enforce its rights under this Section 1.6(e) after the date that is one hundred eighty (180) calendar days after the Issue Date, provided, however, that at such time the Holder may enforce its rights to all adjustments hereunder that apply even if the Dilutive Issuance occurred prior to the date that is one hundred eighty (180) calendar days after the Issue Date.
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(f) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower shall, at its expense and within one (1) calendar day after the occurrence of each respective adjustment or readjustment of the Conversion Price, compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth (i) the Conversion Price in effect at such time based upon the Dilutive Issuance, (ii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note, (iii) the detailed facts upon which such adjustment or readjustment is based, and (iv) copies of the documentation (including but not limited to relevant transaction documents) that evidences the adjustment or readjustment. In addition, the Borrower shall, within one (1) calendar day after each written request from the Holder, furnish to such Holder a like certificate setting forth (i) the Conversion Price in effect at such time based upon the Dilutive Issuance, (ii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note, (iii) the detailed facts upon which such adjustment or readjustment is based, and (iv) copies of the documentation (including but not limited to relevant transaction documents) that evidences the adjustment or readjustment. For the avoidance of doubt, each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6 shall occur without any action by the Holder and regardless of whether the Borrower complied with the notification provisions in this Section 1.6. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Borrower or any of the Subsidiaries, the Borrower shall simultaneously file such notice with the SEC pursuant to a Current Report on Form 8-K.
1.7 Holder’s Conversion Limitations. The Borrower shall not effect any conversion of this Note, and the Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Borrower subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other convertible notes or any Warrant) beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 1.7, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 1.7 applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates or Attribution Parties) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Borrower each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Borrower shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1.7, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Borrower’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Borrower, or (iii) a more recent written notice by the Borrower or the Borrower’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Borrower shall within one (1) Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Borrower, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1.7 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.
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1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the Conversion Shares covered thereby (other than the Conversion Shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) Business Day after the expiration of the applicable Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies for the Borrower’s failure to convert this Note.
1.9 Note Obligations Independent from Distribution Obligations. The obligations of the Borrower to pay the Holder all principal, interest and other amounts owing to the Holder under this Note shall be in addition to, and not in substitution for, any obligations of the Borrower and Nascent Pharma, LLC, a Nevada limited liability company (“Nascent”) to pay Distributions (as defined in the Distribution and Assignment Agreement) to the Holder under the Distribution and Assignment Agreement, and any such Distributions (as defined in the Distribution and Assignment Agreement) paid to the Holder pursuant to the Distribution and Assignment Agreement shall be applied towards the Additional Consideration Obligation (as defined in the Distribution and Assignment Agreement) and not to reduce the principal balance or any other obligations of the Borrower outstanding under this Note, or any other promissory note or other instrument issued by the Borrower to the Holder. As used herein, the term “Distribution and Assignment Agreement” means that certain Distribution and Assignment Agreement dated as of October 27, 2023, by and among Nascent, the Borrower and the Holder (as amended, amended and restated, supplemented or otherwise modified from time to time).
ARTICLE II. NEGATIVE COVENANTS
2.1 Other Indebtedness. So long as the Borrower shall have any obligation under this Note, the Borrower shall not incur or suffer to exist or guarantee any indebtedness that is senior to or pari passu in right or priority of payment to the obligations of the Borrower under this Note, or otherwise secured by any assets of the Borrower or any of its Subsidiaries, other than Permitted Indebtedness. As used herein, the term “Permitted Indebtedness” (i) means any indebtedness incurred under or contemplated by the Arena Notes (used herein as defined in the Arena-Walleye Intercreditor Agreement) or any other Arena Transaction Document (used herein as defined in the Arena-Walleye Intercreditor Agreement), which Permitted Indebtedness is subject to terms and provisions of that certain letter agreement, dated as of February 27, 2023, by and among the Borrower, Walleye Opportunities Master Fund Ltd., Arena Special Opportunities Partners I, LP, a Delaware limited partnership (“ASOP I”), Arena Special Opportunities Fund, LP, a Delaware limited partnership (“ASOF”, and together with ASOP I, collectively, the “Arena Purchasers”), and Arena Investors, LP, a Delaware limited partnership (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Arena-Walleye Intercreditor Agreement”), (ii) indebtedness of the Borrower owing to the Holder under that certain Promissory Note of the Borrower in the original principal amount of $1,823,529, dated as of February 27, 2023, issued by the Borrower to Walleye Opportunities Master Fund Ltd (the “February 2023 Secured Walleye Note”), (iii) indebtedness of the Borrower under any other Note (as such term is defined in the SPA) issued under the SPA or under the Consolidated Amended and Restated Walleye Note (as defined in the SPA), and (iv) indebtedness of the Borrower owing to the Holder under the Distribution and Assignment Agreement and/or owing to any other parties joined to the Distribution and Assignment Agreement from time to time as additional assignees in accordance with the terms of the Distribution and Assignment Agreement and the SPA.
2.2 Reserved.
2.3 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any Subsidiary make any other payment or distribution in respect of its capital stock.
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2.4 Restriction on Stock Repurchases and Debt Repayments. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares, or repay any indebtedness of Borrower (other than the indebtedness of the Borrower owing under this Note, any other Note (as such term is defined in the SPA) issued under the SPA, the Consolidated Amended and Restated Walleye Note (as defined in the SPA), the Distribution and Assignment Agreement or under any other Transaction Documents) except for (i) pursuant to the terms of the February 2023 Secured Walleye Note, (ii) pursuant to the terms of the Arena Notes as in effect as of February 27, 2023 in accordance with the Walleye-Arena Intercreditor Agreement, (ii) pursuant to the terms of that certain Promissory Note held by Blue Lake dated as of March 22, 2022 (as amended by that certain Amendment #2 to Promissory Note, Amendment to Securities Purchase Agreement, Consent and Waiver Agreement dated as of February 23, 2023 by and between Blue Lake and the Borrower) as in effect as of February 27, 2023, (iii) pursuant to the terms of that certain Promissory Note held by Mast Hill dated as of March 22, 2022 (as amended by that certain Amendment #2 to Promissory Note, Amendment to Securities Purchase Agreement, Consent and Waiver Agreement dated as of February 23, 2023 by and between Mast Hill and the Borrower) as in effect as of February 27, 2023, (iv) regularly scheduled payments of interest and principal with respect to the other indebtedness of the Borrower outstanding as of October 26, 2023 pursuant to the terms of the documents evidencing such indebtedness listed on Schedule 4(y) of the SPA as in effect on October 26, 2023, or (v) pursuant to any provision of any document listed on Schedule 4(y) of the SPA as in effect on October 26, 2023, evidencing indebtedness of the Borrower outstanding as of October 26, 2023 providing for the conversion of such indebtedness into shares of the Borrower’s Common Stock.
2.5 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent by the Holder to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
2.6 Advances and Loans; Affiliate Transactions. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit, make advances to or enter into any transaction with any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, Subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the Issue Date and of which the Borrower has informed Holder in writing prior to the Issue Date, (b) in regard to transactions with unaffiliated third parties, made in the ordinary course of business or (c) in regard to transactions with unaffiliated third parties, not in excess of $100,000 in the aggregate of all such transactions. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, repay any affiliate (as defined in Rule 144) of the Borrower in connection with any indebtedness or accrued amounts owed to any such party.
2.7 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(10) Transaction while this Note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than $25,000, will be assessed and will become immediately due and payable to the Holder at its election in the form of a cash payment or added to the balance of this Note (under Holder’s and Borrower’s expectation that this amount will tack back to the Issue Date).
2.8 Preservation of Business and Existence, etc. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, (a) change the nature of its business; (b) sell, divest, change the structure of any material assets other than in the ordinary course of business; (c) enter into a Variable Rate Transaction; or (d) enter into any merchant cash advance transactions. In addition, so long as the Borrower shall have any obligation under this Note, the Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
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2.9 Noncircumvention. The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.10 Lost, Stolen or Mutilated Note. Upon receipt by the Borrower of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Borrower in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Borrower shall execute and deliver to the Holder a new Note.
ARTICLE III. EVENTS OF DEFAULT
3.1 Events of Default. It shall be considered an event of default if any of the following events listed in this Article III (each, an “Event of Default”) shall occur (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):
(a) Failure to Pay Principal or Interest. The Borrower fails to pay any Principal Amount hereof and/or interest thereon, in each case when such payment becomes due under this Note, whether at the Maturity Date, upon acceleration or otherwise in accordance with the terms of this Note.
(b) Conversion and the Shares. The Borrower (i) fails to issue Conversion Shares to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, (ii) fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for the Conversion Shares issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, (iii) fails to reserve the Reserved Amount at all times, (iv) the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for the Conversion Shares issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for two (2) Trading Days after the Holder shall have delivered a Notice of Conversion, and/or (v) fails to remain current in its obligations to its transfer agent (including but not limited to payment obligations to its transfer agent). It shall be an Event of Default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be added to the principal balance of the Note.
(c) Breach of Agreements and Covenants. The Borrower or Nascent breaches any covenant, agreement, or other term or condition contained in the SPA, this Note, any other Note (as such term is defined in the SPA), the Consolidated Amended and Restated Walleye Note, the Distribution and Assignment Agreement, any RRA, or in any other Transaction Document or in any agreement, statement or certificate given in writing pursuant hereto or thereto or in connection herewith or therewith.
(d) Breach of Representations and Warranties. Any representation or warranty of the Borrower or Nascent made in the SPA, this Note, any other Note (as such term is defined in the SPA), the Consolidated Amended and Restated Walleye Note, the Distribution and Assignment Agreement, or in any other Transaction Document, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note, any other Note (as such term is defined in the SPA), the Consolidated Amended and Restated Walleye Note, the SPA, the Distribution and Assignment Agreement or any RRA.
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(e) Receiver or Trustee. The Borrower, Nascent or any Subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
(f) Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower, Nascent or any Subsidiary of the Borrower or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
(g) Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower, Nascent or any Subsidiary of the Borrower.
(h) Failure to Comply with the 1934 Act. At any time after the Issue Date, the Borrower shall fail to comply with the reporting requirements of the 1934 Act and/or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act.
(i) Liquidation. Any dissolution, liquidation, or winding up of Borrower, Nascent or any Subsidiary of the Borrower or any substantial portion of its business.
(j) Cessation of Operations. Any cessation of operations by Borrower, Nascent or any Subsidiary of the Borrower or any admission by the Borrower, Nascent or any of Subsidiary of the Borrower that it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s, Nascent’s or any of the Borrower’s Subsidiaries’ ability to continue as a “going concern” shall not be an admission that the Borrower (or any such Subsidiary of the Borrower) cannot pay its debts as they become due.
(k) Maintenance of Assets. The failure by Borrower or Nascent to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).
(l) Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding.
(m) Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the SPA, signed by the successor transfer agent to Borrower and the Borrower.
(n) Cross-Default. The declaration of an event of default by any lender or other extender of credit to the Borrower under any notes, loans, agreements or other instruments of the Borrower evidencing any indebtedness of the Borrower (including those filed as exhibits to or described in the Borrower’s filings with the SEC), after the passage of all applicable notice and cure or grace periods.
(o) Variable Rate Transactions. The Borrower consummates a Variable Rate Transaction at any time on or after the Issue Date without the prior written consent of the Holder.
(p) Inside Information. Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date.
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(q) Unavailability of Rule 144. If, at any time on or after the date that is six (6) calendar months after the Issue Date, the Holder is unable to (i) obtain a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective clearing firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any portion of the Note into free trading shares of the Borrower’s Common Stock pursuant to Rule 144, and/or (ii) thereupon deposit such shares into the Holder’s brokerage account.
(r) Delisting, Suspension, or Quotation of Trading of Common Stock. If, at any time on or after the Issue Date, the Borrower’s Common Stock (i) is suspended from trading, (ii) halted from trading, and/or (iii) fails to be quoted or listed (as applicable) on a Principal Market.
(s) Registration Statement Failures. The Borrower fails to comply with any term or provision set forth in any RRA delivered pursuant to the SPA.
(t) Asset Sales; Fundamental Transactions. Any (i) sale, conveyance or disposition of all or substantially all of the assets of the Borrower, or (ii) consolidation, merger or other business combination of the Borrower with or into any other Person or Persons whereby the Borrower is not the survivor (any such transaction a “Section 1.6 Transaction”), which Section 1.6 Transaction is deemed by the Holder at its option to be an Event of Default pursuant to Section 1.6 of this Note.
3.2 Rights and Remedies Upon an Event of Default.
(a) Upon the occurrence of any Event of Default specified in this Article III, this Note shall become immediately due and payable, and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the product calculated by multiplying (a) the sum of the Principal Amount then outstanding plus accrued Default Interest through the date of full repayment by (b) 135% (collectively the “Default Amount”), as well as all costs, including, without limitation, legal fees and expenses, of collection, all without demand, presentment or notice, all of which hereby are expressly waived by the Borrower in cash; provided, notwithstanding anything to the contrary set forth herein, that the Holder may, in its sole discretion, determine to accept payment of any obligation of the Borrower payable under this Section 3.2(a) in Common Stock (using the Conversion Price as adjusted pursuant the last sentence of this Section 3.2(a)) or in cash, or in a combination of both Common Stock and cash. The Holder shall be entitled to exercise all other rights and remedies available at law or in equity. Commencing upon the occurrence of any Event of Default, the Principal Amount then outstanding shall bear interest at the rate of the lesser of (i) eighteen percent (18%) per annum and (ii) the maximum amount permitted by law from the due date thereof until the same is paid (“Default Interest”). Default Interest accrued hereunder shall be paid either in cash or in Common Stock, as determined by the Holder in its sole discretion, and shall be computed on the basis of a 365-day year for the actual number of days elapsed. Upon the payment in full of the Default Amount, as well as all costs, including, without limitation, legal fees and expenses, of collection, the Holder shall promptly surrender this Note to or as directed by the Borrower. In connection with such acceleration described herein, the Holder need not provide, and the Borrower 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 3.2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. For the avoidance of doubt, subject to Section 1.6(f), the number of shares of Common Stock issuable to the Holder upon any election of the Holder to accept payment of any obligation of the Borrower payable under this Section 3.2(a) in Common Stock shall be equal to the ratio calculated by dividing (A) the amount in Dollars of such obligation of the Borrower payable under this Section 3.2(a) the payment of which the Holder has elected to accept in Common Stock by (B) the Conversion Price. Additionally, upon the occurrence and continuance of an Event of Default, the Conversion Price shall be adjusted to the lower of (i) the Conversion Price on the date of the Event of Default or (ii) 60% discount to the lowest VWAP of the Borrower’s Common Stock during the five (5) Trading Day period immediately prior to the Conversion Date.
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(b) In case any one or more Events of Default shall occur and be continuing, Holder may proceed to protect and enforce its rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or for an injunction against a violation of any of the terms hereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. In case of a default in the payment of any portion of the Principal Amount, or any interest or other fees due and payable on this Note, Borrower will pay to Holder such further amount as shall be sufficient to cover the reasonable cost and expenses of collection, including, without limitation, reasonable attorneys’ fees, expenses and disbursements. No course of dealing and no delay on the part of Holder in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice Holder’s rights, powers or remedies. No right, power or remedy conferred by this Note upon Holder shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise.
ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of the Holder existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, requests, demands, and other communications provided for hereunder must be in writing and will be deemed to have been duly given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via e-mail prior to 5:30 p.m. (New York City time) on any Business Day; (b) the next Business Day after the date of transmission, if such notice or communication is delivered via e-mail on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day; (c) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given, addressed as follows:
| If to the Borrower: |
| CAN B̅ CORP. | |
| 960 South Broadway, Suite 120 | |
| Hicksville, NY 11801 | |
| Attention: Marco Alfonsi | |
| e-mail: [email protected] |
| If to the Holder: |
| Walleye Opportunities Master Fund Ltd | |
| 2800 Niagara Lane N. | |
| Plymouth, MN 55447 | |
| Attention: William England | |
| e-mail: [email protected] |
or as to the Borrower or the Holder, at such other address as shall be designated by such party in a written notice to the other party delivered in accordance with this Section 4.2.
4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.
4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. The Borrower shall not assign this Note or any rights or obligations hereunder without the prior written consent of the Holder. The Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
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4.5 Holder Fees and Expenses. Borrower agrees to pay to Holder, immediately upon written notice from Holder, all actual costs, expenses, disbursements, and legal fees and expenses incurred by Holder in connection with: (a) the collection, attempted collection, or negotiation and documentation of any settlement or workout of any payment due hereunder, and (b) any suit or proceeding whatsoever in regard to this Note or the protection or enforcement of the lien of any instrument securing this Note, including, without limitation, in connection with any litigation, mediation, bankruptcy or administrative proceeding, and including any appellate proceeding or judicial or non-judicial foreclosure proceeding in connection therewith.
4.6 Governing Law; Venue; Waiver of Jury Trial; Attorneys’ Fees. This Note shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court of the State of Delaware. The Borrower hereby irrevocably waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTIONS CONTEMPLATED HEREBY. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note or any other agreement, certificate, instrument or document contemplated hereby or thereby 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 law. The prevailing party in any action or dispute brought in connection with this the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby shall be entitled to recover from the other party its reasonable attorneys’ fees and costs.
4.7 Certain Amounts. At any time pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding Principal Amount (or the remaining portion thereof required to be paid at such time pursuant to this Note) plus Default Interest thereon, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.
4.8 Purchase Agreement. The Borrower and the Holder shall be bound by the applicable terms of the SPA and the documents entered into in connection herewith and therewith.
4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any change in control or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
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4.10 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
4.11 Construction; Headings. This Note shall be deemed to be jointly drafted by the Borrower and all the Holder and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.
4.12 Usury. To the extent it may lawfully do so, the Borrower hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Holder in order to enforce any right or remedy under this Note. Notwithstanding any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability of the Borrower under this Note for payments which under the applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under the applicable law in the nature of interest that the Borrower may be obligated to pay under this Note exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by applicable law and applicable to this Note is increased or decreased by statute or any official governmental action subsequent to the Issue Date, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Borrower to the Holder with respect to indebtedness evidenced by this the Note, such excess shall be applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Borrower, the manner of handling such excess to be at the Holder’s election.
4.13 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law (including any judicial ruling), then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.
4.14 Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of any security, or amendment to a security that was originally issued before the Issue Date, with any term that the Holder reasonably believes is more favorable to the holder of such security or with a term in favor of the holder of such security that the Holder reasonably believes was not similarly provided to the Holder in this Note, then (i) the Borrower shall notify the Holder of such additional or more favorable term within one (1) Business Day of the issuance and/or amendment (as applicable) of the respective security, and (ii) such term, at Holder’s option, shall become a part of the transaction documents with the Holder (regardless of whether the Borrower complied with the notification provision of this Section 4.14). The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing prepayment rate, interest rates, and original issue discounts. Notwithstanding the foregoing, the Holder may only enforce its rights under this Section 4.14 after the date that is one hundred eighty (180) calendar days after the Issue Date, provided, however, that at such time the Holder may enforce its rights to all adjustments hereunder that apply even if such adjustment was triggered or such issuance occurred prior to the date that is one hundred eighty (180) calendar days after the Issue Date.
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4.15 Right of First Refusal. If at any time while this Note is outstanding, the Borrower has a bona fide offer of capital or financing from any third party that the Borrower intends to act upon, then the Borrower must offer such opportunity on the same terms as such third party’s terms by providing written notice of the offer (an “Offer Notice”) concurrently to the Holder, the Arena Purchasers, Mast Hill Fund, L.P., a Delaware limited partnership (“Mast Hill”), Blue Lake Partners, LLC, a Delaware limited liability company (“Blue Lake”), and Fourth Man, LLC, a Nevada limited liability company (“Fourth Man”), subject to the terms of this Section 4.15. As used in this Section 4.15, the term “Offerees” shall mean, collectively, (i) the Holder, (ii) the Arena Purchasers (jointly), (iii) Mast Hill, (iv) Blue Lake and (v) Fourth Man, and, each individually an “Offeree”; provided for the avoidance of doubt that for purposes of this Section 4.15, the Arena Purchasers shall be considered to be a single Offeree. Within five (5) Business Days after receipt of an Offer Notice by any Offeree (the “Offer Response Period”), such Offeree shall notify the Borrower in writing (an “Offer Response Notice”) of such Offeree’s election to either (A) provide such capital or financing to the Borrower on the same terms as such third party’s terms (including without limitation matching the aggregate principal amount of such capital or financing proposed to be provided to the Borrower by such third party) or (B) waive such Offeree’s right to provide such capital or financing to the Borrower on the same terms as such third party’s terms. If any Offeree fails to deliver an Offer Response Notice to the Borrower prior to the end of the Offer Response Period, time being of the essence, then such Offeree shall be deemed to have elected option (B) above. In the event (x) more than one Offeree elects to provide such capital or financing to the Borrower on the same terms as such third party’s terms pursuant to Offer Response Notices sent by each such Offeree to the Borrower within the Offer Response Period, then each such Offeree shall provide a portion of such capital or financing to the Borrower pro rata in proportion to the respective ROFR Units (as defined below) of such Offerees, and in all other respects on the same terms as such third party’s terms, (y) only one Offeree elects to provide such capital or financing to the Borrower on the same terms as such third party’s terms pursuant to an Offer Response Notice sent by such Offeree to the Borrower within the Offer Response Period, then such Offeree shall provide (and none of the other Offerees shall have the right to provide) such capital or financing to the Borrower on the same terms as such third party’s terms (including without limitation matching the aggregate principal amount of such capital or financing proposed to be provided to the Borrower by such third party), or (z) none of the Offerees elect to provide such capital or financing to the Borrower on the same terms as such third party’s terms pursuant to an Offer Response Notice sent to the Borrower within the Offer Response Period, then the Borrower may obtain such capital or financing from such third party, provided the Borrower obtains such capital or financing from such third party upon the exact same terms and conditions set forth in the Offer Notice. If none of the Offerees elects to provide such capital or financing to the Borrower on the same terms as such third party’s terms pursuant to an Offer Response Notice sent to the Borrower within the Offer Response Period, and the Borrower does not receive the capital or financing from such third party in accordance with the foregoing clause (z) within thirty (30) days after the date of the last Offer Notice, so long as this Note remains outstanding at such time, the Borrower must again offer the capital or financing opportunity on the same terms as such third party’s terms by providing written notice of the offer concurrently to each of the Offerees pursuant to a further Offer Notice as described above, and the process detailed above shall be repeated. All Offer Notices required to be sent to the Holder under this Section 4.15 must be sent via electronic mail to [email protected]. For purposes of allocating the opportunity to provide the capital or financing to the Borrower on the same terms as the applicable third party’s terms to the applicable Offerees under clause (x) of the fourth sentence of this Section 4.15, the Offerees shall be and hereby are allocated units (with respect to each Offeree, such Offeree’s “ROFR Units”) representing the Offerees’ respective rights in connection with any such allocation of the opportunity, with such ROFR Units being allocated to the Offerees in the following amounts: (i) to the Holder, 2,149,706 ROFR Units, (ii) to the Arena Purchasers (as a single Offeree), 3,900,000 ROFR Units, (iii) to Mast Hill, 367,500 ROFR Units, (iv) to Blue Lake, 262,500 ROFR Units, and (v) to Fourth Man, 156,525 ROFR Units.
4.16 Dispute Resolution. In the case of a dispute as to the determination of the Conversion Price, the number of Conversion Shares issuable upon any Conversion, any prepayment amount or Default Amount, the closing bid price, or fair market value (as the case may be) or the arithmetic calculation of the Conversion Price, the number of Conversion Shares issuable upon any Conversion, the applicable prepayment amount(s) or Default Amount (as the case may be), the Borrower or the Holder shall submit the disputed determinations or arithmetic calculations via facsimile (i) within one (1) Trading Day after receipt of the applicable notice giving rise to such dispute to the Borrower or the Holder or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation within one (1) Trading Day of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower or the Holder, then the Borrower shall, within one (1) Trading Day, submit (a) the disputed determination of the Conversion Price, the closing bid price, or fair market value (as the case may be) to an independent, reputable investment bank selected by the Borrower and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Price, the number of Conversion Shares issuable upon any Conversion or any prepayment amount or Default Amount, to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Borrower. The Borrower shall cause at its expense the investment bank or the accountant to perform the determinations or calculations and notify the Borrower and the Holder of the results no later than one (1) Trading Day from the time it receives such disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation shall be binding upon all parties absent demonstrable error.
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4.17 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 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 Borrower to comply with the terms of this Note. The Borrower 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 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 Borrower (or the performance thereof). The Borrower 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 Borrower 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 Borrower shall provide all information and documentation to the Holder that is reasonably requested by the Holder to enable the Holder to confirm the Borrower’s compliance with the terms and conditions of this Note.
4.18 Disclosure. Upon receipt or delivery by the Borrower of any notice in accordance with the terms of this Note, unless the Borrower has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Borrower or its subsidiaries, the Borrower shall (i) within two (2) Business Days following any such receipt of a notice by the Borrower hereunder or (ii) immediately upon any such delivery of a notice by the Borrower hereunder, publicly disclose such material, nonpublic information on a Current Report on Form 8-K pursuant to Regulation FD. In the event that the Borrower believes that any such notice contains material, non-public information relating to the Borrower or its subsidiaries, the Borrower so shall indicate to the Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Borrower or its subsidiaries.
[signature page follows]
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IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its name by its duly authorized officer as of the date first written above.
| CAN B̅ CORP. | ||
| By: | /s/ Marco Alfonsi | |
| Name: | Marco Alfonsi | |
| Title: | Chief Executive Officer | |
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ANNEX A-1 - NOTICE OF CONVERSION
The undersigned hereby elects to convert $______________ in outstanding principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of CAN B̅ CORP., a Florida corporation (the “Borrower”), according to the conditions of the promissory note of the Borrower dated as of October 27, 2023 (the “Note”), as of the Conversion Date set forth below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any. Capitalized terms used but not defined herein shall have the meaning given to such terms in the Note.
Box Checked as to applicable instructions:
| ☐ | The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”). | |
| Name of DTC Prime Broker: | ||
| Account Number: | ||
| ☐ | The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
| Conversion Date: | ____________________________ | |
Converted Principal Amount |
||
| (set forth above): | $____________________________ | |
| Applicable Conversion Price: | $____________________________ | |
| Number of Shares of Common Stock to be | ||
| issued pursuant to this Conversion of the | ||
| Note: | _____________________________ | |
| Principal Amount due remaining under the | ||
| Note after this Conversion: | $____________________________ |
| By: | ||
| Name: | ||
| Title: | ||
| Date: |
[Signature Page to Annex A-1 – Notice of Conversion]
ANNEX A-2 - NOTICE OF CONVERSION
Reference is made to that certain Promissory Note dated as of October 27, 2023 (the “Note”) of CAN B̅ CORP., a Florida corporation (the “Borrower”). Capitalized terms used but not defined herein shall have the meaning given to such terms in the Note. No fee will be charged to the Holder for any conversion of the Note, except for transfer taxes, if any. The undersigned hereby elects to convert, by Conversion as of the Conversion Date set forth below, $_____________ (such amount, the “Total Default Obligations Converted Amount”) in obligations outstanding of the Borrower under Section 3.2(a) of the Note consisting of:
| (a) Default Amount being converted: | $___________________ | ||
| Principal Amount of Note being converted (included in calculation of Default Amount being converted: | $___________________ | ||
| Default Interest to be converted (included in calculation of Default Amount being converted): | $___________________ | ||
| (b) Costs, including without limitation legal fees and expenses, of collection, being converted: | $___________________ | ||
Total Default Obligations Converted Amount (add lines (a) and (b) above): |
$___________________ |
| Conversion Date: | __________________________ |
Total Default Obligations Converted Amount (set forth above): |
$___________________ | ||
| Applicable Conversion Price: | $___________________ | ||
| Number of Shares of Common Stock to be issued pursuant to this Conversion of the Total Default Obligations Converted Amount: | ___________________ | ||
| ___________________ | |||
| (a) Default Amount due remaining under the Note after this Conversion: | $___________________ | ||
| Principal Amount due remaining under the Note after this Conversion (included in calculation of Default Amount remaining due under the Note after this Conversion): | $___________________ | ||
| Default Interest due remaining under the Note after this Conversion (included in calculation of Default Amount remaining due under the Note after this Conversion): | $___________________ | ||
| (b) Costs, including without limitation legal fees and expenses, of collection, due remaining under the Note after this Conversion: | $___________________ | ||
| Total obligations of the Borrower under Section 3.2(a) of the Note due remaining due after this Conversion (add lines (a) and (b) above): | $___________________ |
[form continues on following page]
[Signature Page to Annex A-2 – Notice of Conversion]
Box Checked as to applicable instructions:
| ☐ | The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”). | |
| Name of DTC Prime Broker: | ||
| Account Number: | ||
| ☐ | The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
| By: | ||
| Name: | ||
| Title: | ||
| Date: |
[Signature Page to Annex A-2 – Notice of Conversion]
Exhibit 9.3
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE SPA)), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A OR REGULATION S UNDER SAID ACT OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
| Principal Amount: $1,354,210 | Effective Date: October 27, 2023 |
| Actual Amount of Purchase Price: $1,083,368 |
CONSOLIDATED AMENDED AND RESTATED PROMISSORY NOTE (this “Note”)
FOR VALUE RECEIVED, CAN B̅ CORP., a Florida corporation (hereinafter called the “Borrower”) (Trading Symbol: CANB), hereby promises to pay to the order of Walleye Opportunities Master Fund Ltd, a Cayman Islands exempted company with limited liability, or its registered assigns (the “Holder”), in the form of lawful money of the United States of America, the principal sum of $1,354,210.00 (the “Principal Amount”), of which $1,083,368 is the actual amount of the purchase price (the “Consideration”) hereof plus an original issue discount in the amount of $270,842 (the “OID”) (subject to adjustment herein) on the date the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise, as further provided herein. The entire Principal Amount, together with any accrued and unpaid Default Interest and any other unpaid fees or other amounts outstanding under this Note shall be due and payable on October 27, 2024 (the “Maturity Date”), or on such earlier date as all or any portion of the Principal Amount, any such accrued and unpaid Default Interest and/or any such other unpaid fees and/or other amounts outstanding under this Note may be due and payable in accordance with the terms of this Note, whether upon acceleration or otherwise in accordance with the terms of this Note.
Reference is made to that certain Securities Purchase Agreement, dated as of October 26, 2023, by and between the Borrower and the Holder (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “SPA”), pursuant to which the Borrower and the Holder have agreed, among other things, on the terms and subject to the conditions set forth therein, to (a) consolidate (i) that certain promissory note of the Borrower dated as of August 30, 2022 in the original principal amount of $385,000, issued by the Borrower in favor of the Holder (the “$385,000 Walleye Note”), (ii) that certain 20% Original Issue Discount Promissory Note of the Borrower dated as of May 17, 2023 in the original principal amount of $437,500, issued by the Borrower in favor of the Holder (the “$437,500 Walleye Note”), (iii) that certain $100,000 Unsecured Promissory Note of the Borrower dated as of August 5, 2022, by and between the Borrower as borrower and Emergent Health Corp., a Wyoming corporation (“Emergent”) as lender (the “$100,000 Walleye Note”), which $100,000 Walleye Note was purchased by the Holder from Emergent pursuant to that certain Note Purchase Agreement, dated as of August 3, 2023, by and between Emergent as seller and the Holder as purchaser (the “Emergent NPA”), and (iv) that certain $250,000 Unsecured Promissory Note of the Borrower dated as of August 18, 2022, by and between the Borrower as borrower and Emergent as lender, which $250,000 Unsecured Promissory Note was purchased by the Holder from Emergent pursuant to the Emergent NPA (the “$250,000 Walleye Note”, together with the $385,000 Walleye Note, the $437,500 Walleye Note and the $100,000 Walleye Note, each as amended, restated, amended and restated, supplemented or otherwise modified from time to time, collectively, the “Original Notes”), and the indebtedness evidenced by the Original Notes, to form a single note evidencing a principal indebtedness of $1,354,210 (reflecting the aggregate outstanding principal of the Original Notes and accrued interest thereon as of the Effective Date), and (b) to amend and restate such Original Notes, as so consolidated, on the terms and conditions hereinafter set forth. This Note consolidates, amends, restates and supersedes in their entirety the Original Notes. The Borrower and the Holder hereby confirm and agree that (i) upon execution and delivery of this Note, the Original Notes shall have no further force or effect and (ii) the principal amount outstanding under this Note as of the Effective Date is the Principal Amount set forth in the introductory paragraph of this Note.
This Note may not be prepaid or repaid in whole or in part except as otherwise explicitly set forth herein.
All payments due hereunder (to the extent not converted into shares of common stock, nil par value per share, of the Borrower (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. As used herein, “$” or “Dollars” means United States Dollars. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business day, the same shall instead be due on the next succeeding day which is a Business day.
Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in the SPA. As used in this Note, the term “Effective Date” means October 27, 2023 (i.e. the date first written above). As used in this Note, the term “Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed; provided, for the avoidance of doubt, that no such commercial banks shall be considered to be authorized or required by law or executive order to remain closed as a result of “stay at home”, “shelter-in-place”, “non-essential employee” or other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of such commercial banks are generally open for sue by customers on such day. As used herein, the term “Trading Day” means any day that shares of Common Stock are listed for trading or quotation on the Principal Market, provided, however, that if the Common Stock is not then listed or quoted on any Principal Market, then any calendar day. “Principal Market” shall mean the principal securities exchange or trading market where the Common Stock is listed or traded, including but not limited to any tier of the OTC Markets, any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American, or any successor to such markets.
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall also apply to this Note:
ARTICLE I. CONVERSION RIGHTS
1.1 Conversions.
(a) At any time after the Effective Date until this Note is no longer outstanding, this Note (including the outstanding Principal Amount of this Note, any accrued and unpaid Default Interest and any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock) shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in this Article I). The Holder shall effect such conversions (“Conversions”) by delivering to the Borrower or the Borrower’s transfer agent a notice of conversion, (i) in the case of any Conversion effected prior to the occurrence of any Event of Default, the form of which is attached hereto as Annex A-1, specifying therein the principal amount of this Note to be converted and the date on which such Conversion shall be effected (such date, the “Conversion Date”), or in the case of any Conversion effected upon or after the occurrence of any Event of Default, the form of which is attached hereto as Annex A-2, specifying therein the principal amount of this Note to be converted (including any principal amount of this Note included in any Default Amount of this Note to be so converted), any accrued and unpaid Default Interest and any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock to be converted, and the Conversion Date on which such Conversion shall be effected (each such notice of conversion described under either of the foregoing clauses (i) or (ii) of this sentence, a “Notice of Conversion”), and which Notice of Conversion shall be delivered to the Borrower or the Borrower’s transfer agent in the manner set forth in Section 1.4(a); provided, notwithstanding anything to the contrary set forth herein, the Conversion Date with respect to any Conversion effected pursuant to delivery of any Notice of Conversion (including any Notice of Conversion specifying a particular Conversion Date and any Notice of Conversion that does not specify a Conversion Date) shall be determined in accordance with Section 1.4(a). No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. Conversions hereunder, (i) in the case of any Conversion effected prior to the occurrence of any Event of Default, shall have the effect of lowering the amount of outstanding principal amount of this Note in an amount equal to the applicable principal amount so converted, or (ii) in the case of any Conversion effected upon or after the occurrence of any Event of Default, shall have the effect of lowering the amount of outstanding obligation(s) of the Borrower payable under Section 3.2(a) by an amount equal to the applicable amount of any outstanding obligation(s) of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock.
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(b) Conversion Price. Conversions of this Note pursuant to this Section 1.1 and/or Section 3.2(a) shall be effected at a conversion price equal to the Conversion Price. As used in this Note, the term “Conversion Price” means, with respect to any Conversion, a price per share of the Borrower’s Common Stock, equal to 90% of the lowest daily VWAP of the Common Stock during the fifteen (15) Trading Day period prior to the Conversion Date with respect to such Conversion; provided; notwithstanding anything to the contrary set forth in this Section 1.1, the Conversion Price shall be subject to adjustment in accordance with the terms and conditions of this Note, including without limitation upon the occurrence of an Event of Default as set forth in Section 3.2(a) and upon the occurrence of certain events as set forth in Section 1.6. Subject to Section 1.4(f), the number of shares of Common Stock issuable to the Holder upon any Conversion pursuant to this Section 1.1 and/or Section 3.2(a) as applicable, shall be equal to the ratio calculated by dividing (A) the amount in Dollars of the outstanding obligations of the Borrower under this Note elected by the Holder to be converted (which for the avoidance of doubt, shall (i) in the case of any Conversion effected prior to the occurrence of any Event of Default, be limited to the outstanding Principal Amount under this Note at the time of such Conversion, and (ii) in the case of any Conversion effected upon or after the occurrence of any Event of Default, may include any obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock, including without limitation the Default Amount) by (B) the Conversion Price.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (i) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (ii) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX or any other Trading Market, and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (iii) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Borrower, the fees and expenses of which shall be paid by the Borrower. “Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).
1.2 Conversion Schedule; Records. The Holder and the Borrower shall maintain a Conversion Schedule showing the principal amount(s) converted (and as applicable, any other obligations of the Borrower under this Note converted, including without limitation, the amount of any accrued and unpaid Default Interest and any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock) and the date of any and all Conversion(s) effected. The Borrower may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery by the Holder of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.
1.3 Authorized and Reserved Shares. The Borrower covenants that at all times until the Note is satisfied in full, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of a number of Conversion Shares equal to the product calculated by multiplying (A) the sum of the number of Conversion Shares issuable upon the full conversion of this Note (assuming no payment of Principal Amount or interest) at the time of such calculation (taking into consideration any adjustments to the Conversion Price as provided in this Note) by (B) three (3) (the “Reserved Amount”). The Borrower represents that upon issuance, the Conversion Shares will be duly and validly issued, fully paid and non-assessable. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Conversion Shares or instructions to have the Conversion Shares issued as contemplated by Section 1.4(e) hereof, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates or cause the Borrower to electronically issue shares of Common Stock to execute and issue the necessary certificates for the Conversion Shares or cause the Conversion Shares to be issued as contemplated by Section 1.4(e) hereof in accordance with the terms and conditions of this Note.
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If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default (as defined in this Note) under Section 3.1(c) of this Note. If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Reserved Amount on such date, then the board of directors of the Borrower shall use commercially reasonable efforts to amend the Borrower’s certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Reserved Amount at such time, as soon as possible and in any event not later than the 90th day after such date. The Borrower shall, if applicable: (A) in the time and manner required by the Principal Market, prepare and file with such Principal Market an additional shares listing application covering a number of shares of Common Stock, equal to or greater than the Reserved Amount if such application is made within 45 days of the Effective Date, (B) take all steps necessary to cause such shares of Common Stock to be approved for listing or quotation on such Principal Market as soon as possible thereafter, (C) provide to the Holder evidence of such listing or quotation and (D) maintain the listing or quotation of a number of shares of such Common Stock on such Principal Market or another Principal Market on any date equal to or greater than the Reserved Amount if such date is within 45 days of the Effective Date. The Borrower agrees to maintain the eligibility of the Common Stock for electronic transfer through the DTC or another established clearing corporation, including, without limitation, by timely payment of fees to the DTC or such other established clearing corporation in connection with such electronic transfer.
1.4 Method of Conversion.
(a) Mechanics of Conversion. Conversions of this Note may be effected by the Holder pursuant to Section 1.1 and/or Section 3.2(a) by Holder’s submission to the Borrower or the Borrower’s transfer agent of a Notice of Conversion sent via by facsimile, e-mail or other reasonable means of communication. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date with respect to the applicable Conversion so long as the Notice of Conversion is sent to the Borrower or the Borrower’s transfer via by facsimile, e-mail or other reasonable means of communication before 5:30 p.m. (New York City time), on such date specified in the Notice of Conversion. Any Notice of Conversion submitted after 5:30 p.m. (New York City time) on any given date shall be deemed to have been delivered and received on the next Trading Day, which date shall be deemed to be the Conversion Date with respect to the applicable Conversion effected pursuant to such Notice of Conversion regardless of the Conversion Date specified in the Notice of Conversion. If no Conversion Date is specified in a Notice of Conversion, the Conversion Date with respect to the applicable Conversion shall be deemed to be (i) the date that such Notice of Conversion is sent to the Borrower or the Borrower’s transfer via by facsimile, e-mail or other reasonable means of communication, if such Notice of Conversion is sent to the Borrower or the Borrower’s transfer via by facsimile, e-mail or other reasonable means of communication before 5:30 p.m. (New York City time) on such date or (ii) the next Trading Day immediately following the date that such Notice of Conversion is sent to the Borrower or the Borrower’s transfer via by facsimile, e-mail or other reasonable means of communication, if such Notice of Conversion is sent to the Borrower or the Borrower’s transfer via by facsimile, e-mail or other reasonable means of communication after 5:30 p.m. (New York City time) on such date.
(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid Principal Amount of this Note (together with any accrued and unpaid Default Interest, and any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock, and any other fee or other amount permitted to be converted pursuant to this Note) has been so converted and all obligations of the Borrower owing under this Note have been paid in full, including without limitation any accrued and unpaid Default Interest and any other fees and/or other amounts owing by the Borrower under this Note. The Holder and the Borrower shall maintain records showing the Principal Amount (and, as applicable, the amount of any accrued and unpaid Default Interest, any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock, and any other fee or other amount permitted to be converted pursuant to this Note) so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Holder shall be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid Principal Amount of this Note (together with any accrued and unpaid Default Interest and any other obligations of the Borrower then owing under this Note, including without limitation any fees and/or other amounts then owing by the Borrower under this Note). The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted Principal Amount of this Note represented by this Note may be less than the amount stated on the face hereof.
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(c) Payment of Taxes and Expenses. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid. Notwithstanding the foregoing, the issuance of Conversion Shares on conversion of this Note shall be made without charge to the Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares. The Borrower shall pay all transfer agent fees required for same-day processing of any Notice of Conversion and all fees to the DTC (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares. The Borrower shall pay all attorney fees required for the issuance of attorney legal opinions for removal of restrictive legends on Conversion Shares.
(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower or the Borrower’s transfer agent from the Holder of any Notice of Conversion submitted in accordance with Section 1.4(a) and otherwise meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the applicable Conversion Shares (or cause the electronic delivery of such Conversion Shares as contemplated by Section 1.4(f) hereof) within one (1) Trading Day after such receipt (any such date, a “Deadline”). If the Borrower shall fail for any reason or for no reason to issue to the Holder on or prior to the applicable Deadline a certificate for the number of Conversion Shares or to which the Holder is entitled hereunder and register such Conversion Shares on the Borrower’s share register or to credit the Holder’s balance account with DTC (as defined below) for such number of Conversion Shares to which the Holder is entitled upon any Conversion of this Note (a “Conversion Failure”), then, in addition to all other remedies available to the Holder, (i) the Borrower shall pay in cash to the Holder on each day after such Deadline and during such Conversion Failure an amount equal to 2.0% of the product of (A) the sum of the number of Conversion Shares not issued to the Holder on or prior to the applicable Deadline and to which the Holder is entitled and (B) the VWAP of the Common Stock on the Trading Day immediately preceding the last possible date which the Borrower could have issued such Conversion Shares to the Holder without violating this Section 1.5(d); and (ii) upon written notice to the Borrower, the Holder may void all or any portion of the Notice of Conversion submitted by the Holder to effect such Conversion; provided that the voiding of all or any portion of any Notice of Conversion shall not affect the Borrower’s obligations to make any payments which have accrued prior to the date of such notice. In addition to the foregoing, if on or prior to the applicable Deadline, the Borrower shall fail to issue and deliver a certificate to the Holder and register such Conversion Shares on the Borrower’s share register or credit the Holder’s balance account with DTC for the number of Conversion Shares to which the Holder is entitled upon any Conversion of this Note or pursuant to the Borrower’s obligation pursuant to clause (ii) below, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such Conversion of this Note that the Holder anticipated receiving from the Borrower, then the Borrower shall, within two (2) Trading Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other reasonable and customary out-of-pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Borrower’s obligation to deliver such certificate (and to issue such Conversion Shares) or credit such Holder’s balance account with DTC for such Conversion Shares shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Conversion Shares or credit such Holder’s balance account with DTC and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock multiplied by (B) the closing sales price of the Common Stock on the date of applicable Deadline. Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Borrower’s failure to timely deliver certificates representing the Conversion Shares (or to electronically deliver such Conversion Shares) upon the conversion of this Note as required pursuant to the terms hereof.
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(e) Obligation to Deliver Common Stock. Upon receipt by the Borrower or the Borrower’s transfer agent from the Holder of any Notice of Conversion submitted in accordance with Section 1.4(a) and otherwise meeting the requirements for conversion as provided in this Section 1.4, the Holder shall be deemed to be the holder of record of the Conversion Shares issuable upon the Conversion of the Principal Amount (and, as applicable any accrued and unpaid Default Interest and any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock pursuant to such Conversion) effected pursuant to the submission of such Notice of Conversion, the outstanding Principal Amount under this Note (and, as applicable, any accrued and unpaid Default Interest and any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock pursuant to such Conversion) shall be reduced to reflect such Conversion in accordance with Section 1.1, and, unless the Borrower defaults on any of its obligations under this Article I (including without limitation, delivery of the Conversion Shares with respect to such Conversion by the applicable Deadline with respect to such Conversion), all rights with respect to the portion of the Principal Amount of this Note (and, as applicable, any accrued and unpaid Default Interest and any other obligation of the Borrower payable under Section 3.2(a) the payment of which the Holder elects to accept in Common Stock pursuant to such Conversion) being so converted shall forthwith terminate except the right of the Holder to receive the Common Stock or other securities, cash or other assets, as herein provided, on such Conversion. If the Holder shall have submitted a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for the Conversion Shares (or cause the electronic delivery of the Conversion Shares as contemplated by Section 1.4(f) hereof) shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date with respect to any Conversion shall be determined in accordance with Section 1.4(a) hereof.
(ii) Delivery of Conversion Shares by Electronic Transfer. Not later than the applicable Deadline with respect to any Conversion Shares issuable upon any Conversion of this Note, upon request of the Holder and its compliance with the provisions contained in (i) this Section 1.4 and (ii) Section 1.1 (with respect to any Conversion effected pursuant to Section 1.1 and/or Section 3.2(a), the Borrower shall cause the Conversion Shares required to be issued hereunder pursuant to such Conversion to be electronically transmitted by the Borrower’s transfer agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with the Depository Trust Company (“DTC”) through its Deposit Withdrawal Agent Commission, provided the Borrower is participating in the DTC’s Fast Automated Securities Transfer or Deposit/Withdrawal at Custodian programs and either (A) there is an effective registration statement permitting the issuance of the Conversion Shares to or resale of the Conversion Shares by the Holder or (B) the requisite holding period provided by Rule 144 for the resale of the Conversion Shares by the Holder has been satisfied, and otherwise by delivery of a certificate, registered in the Borrower’s share register in the name of the Holder or its designee.
(f) Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Borrower shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.
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1.5 Concerning the Shares. The Conversion Shares issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the 1933 Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be the Legal Counsel Opinion (as defined in the SPA)) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption, or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the SPA). Except as otherwise provided in the SPA (and subject to the removal provisions set forth below), until such time as the Conversion Shares have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for the Conversion Shares that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE SPA)), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A, REGULATION S UNDER SAID ACT, OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The legend set forth above shall be removed and the Borrower shall issue to the Holder a certificate for the applicable Conversion Shares without such legend upon which it is stamped or (as requested by the Holder) issue the applicable Conversion Shares by electronic delivery by crediting the account of such holder’s broker with DTC, if, unless otherwise required by applicable state securities laws: (a) such Conversion Shares are registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) the Borrower or the Holder provides the Legal Counsel Opinion (as contemplated by and in accordance with Section 4(n) of the SPA) to the effect that a public sale or transfer of such Conversion Shares may be made without registration under the 1933 Act, which opinion shall be accepted by the Borrower so that the sale or transfer is effected. The Borrower shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance. The Holder agrees to sell all Conversion Shares, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Borrower does not accept the opinion of counsel provided by the Holder with respect to the transfer of Conversion Shares pursuant to an exemption from registration, such as Rule 144, Rule 144A, Regulation S, or other applicable exemption, at any Deadline, notwithstanding that the conditions of Rule 144, Rule 144A, Regulation S, or other applicable exemption, as applicable, have been met, it will be considered an Event of Default under Section 3.1(c) of this Note.
1.6 Effect of Certain Events.
(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons whereby the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in this Note) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.
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(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of this Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not effectuate any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, at least thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a Subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.
(d) Purchase Rights. If, at any time when all or any portion of this Note is issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(e) Dilutive Issuance. If the Borrower, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants (or has issued, sold or granted as of the Effective Date, as the case may be) any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock or other securities convertible into, exercisable for, or otherwise entitle any person or entity the right to acquire, shares of Common Stock (including, without limitation, upon conversion of this Note, and any convertible notes or warrants outstanding as of or following the Effective Date), in each or any case at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal to the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or other securities are issued. By way of example, and for the avoidance of doubt, if the Borrower issues a convertible promissory note (including but not limited to a Variable Rate Transaction), and the holder of such convertible promissory note has the right to convert it into Common Stock at an effective price per share that is lower than the then Conversion Price (including but not limited to a conversion price with a discount that varies with the trading prices of or quotations for the Common Stock), then the Holder has the right to reduce the Conversion Price to such Base Conversion Price (including but not limited to a conversion price with a discount that varies with the trading prices of or quotations for the Common Stock) in perpetuity regardless of whether the holder of such convertible promissory note ever effectuated a conversion at the Base Conversion Price. In the event of an issuance of securities involving multiple tranches or closings, any adjustment pursuant to this Section 1.6(e) shall be calculated as if all such securities were issued at the initial closing. Notwithstanding the foregoing, the Holder may only enforce its rights under this Section 1.6(e) after the date that is one hundred eighty (180) calendar days after the Effective Date, provided, however, that at such time the Holder may enforce its rights to all adjustments hereunder that apply even if the Dilutive Issuance occurred prior to the date that is one hundred eighty (180) calendar days after the Effective Date.
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(f) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower shall, at its expense and within one (1) calendar day after the occurrence of each respective adjustment or readjustment of the Conversion Price, compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth (i) the Conversion Price in effect at such time based upon the Dilutive Issuance, (ii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note, (iii) the detailed facts upon which such adjustment or readjustment is based, and (iv) copies of the documentation (including but not limited to relevant transaction documents) that evidences the adjustment or readjustment. In addition, the Borrower shall, within one (1) calendar day after each written request from the Holder, furnish to such Holder a like certificate setting forth (i) the Conversion Price in effect at such time based upon the Dilutive Issuance, (ii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note, (iii) the detailed facts upon which such adjustment or readjustment is based, and (iv) copies of the documentation (including but not limited to relevant transaction documents) that evidences the adjustment or readjustment. For the avoidance of doubt, each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6 shall occur without any action by the Holder and regardless of whether the Borrower complied with the notification provisions in this Section 1.6. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Borrower or any of the Subsidiaries, the Borrower shall simultaneously file such notice with the SEC pursuant to a Current Report on Form 8-K.
1.7 Holder’s Conversion Limitations. The Borrower shall not effect any conversion of this Note, and the Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Borrower subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other convertible notes or any warrant) beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 1.7, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 1.7 applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates or Attribution Parties) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Borrower each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Borrower shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1.7, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Borrower’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Borrower, or (iii) a more recent written notice by the Borrower or the Borrower’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Borrower shall within one (1) Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Borrower, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1.7 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.
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1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the Conversion Shares covered thereby (other than the Conversion Shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) Business Day after the expiration of the applicable Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies for the Borrower’s failure to convert this Note.
1.9 Note Obligations Independent from Distribution Obligations. The obligations of the Borrower to pay the Holder all principal, interest and other amounts owing to the Holder under this Note shall be in addition to, and not in substitution for, any obligations of the Borrower and Nascent Pharma, LLC, a Nevada limited liability company (“Nascent”) to pay Distributions (as defined in the Distribution and Assignment Agreement) to the Holder under the Distribution and Assignment Agreement, and any such Distributions (as defined in the Distribution and Assignment Agreement) paid to the Holder pursuant to the Distribution and Assignment Agreement shall be applied towards the Additional Consideration Obligation (as defined in the Distribution and Assignment Agreement) and not to reduce the principal balance or any other obligations of the Borrower outstanding under this Note, or any other promissory note or other instrument issued by the Borrower to the Holder. As used herein, the term “Distribution and Assignment Agreement” means that certain Distribution and Assignment Agreement dated as of October 27, 2023, by and among Nascent, the Borrower and the Holder (as amended, amended and restated, supplemented or otherwise modified from time to time).
ARTICLE II. NEGATIVE COVENANTS
2.1 Other Indebtedness. So long as the Borrower shall have any obligation under this Note, the Borrower shall not incur or suffer to exist or guarantee any indebtedness that is senior to or pari passu in right or priority of payment to the obligations of the Borrower under this Note, or otherwise secured by any assets of the Borrower or any of its Subsidiaries, other than Permitted Indebtedness. As used herein, the term “Permitted Indebtedness” (i) means any indebtedness incurred under or contemplated by the Arena Notes (used herein as defined in the Arena-Walleye Intercreditor Agreement) or any other Arena Transaction Document (used herein as defined in the Arena-Walleye Intercreditor Agreement), which Permitted Indebtedness is subject to terms and provisions of that certain letter agreement, dated as of February 27, 2023, by and among the Borrower, Walleye Opportunities Master Fund Ltd, Arena Special Opportunities Partners I, LP, a Delaware limited partnership (“ASOP I”), Arena Special Opportunities Fund, LP, a Delaware limited partnership (“ASOF”, and together with ASOP I, collectively, the “Arena Purchasers”), and Arena Investors, LP, a Delaware limited partnership (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Arena-Walleye Intercreditor Agreement”), (ii) indebtedness of the Borrower owing to the Holder under that certain Promissory Note of the Borrower in the original principal amount of $1,823,529, dated as of February 27, 2023, issued by the Borrower to Walleye Opportunities Master Fund Ltd (the “February 2023 Secured Walleye Note”), (iii) indebtedness of the Borrower under any Note (as such term is defined in the SPA) issued under the SPA, and (iv) indebtedness of the Borrower owing to the Holder under the Distribution and Assignment Agreement and/or owing to any other parties joined to the Distribution and Assignment Agreement from time to time as additional assignees in accordance with the terms of the Distribution and Assignment Agreement and the SPA.
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2.2 Reserved.
2.3 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any Subsidiary make any other payment or distribution in respect of its capital stock.
2.4 Restriction on Stock Repurchases and Debt Repayments. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares, or repay any indebtedness of Borrower (other than the indebtedness of the Borrower owing under this Note, any Note (as such term is defined in the SPA) issued under the SPA, or under the Distribution and Assignment Agreement or any other Transaction Documents) except for (i) pursuant to the terms of the February 2023 Secured Walleye Note, (ii) pursuant to the terms of the Arena Notes as in effect as of February 27, 2023 in accordance with the Walleye-Arena Intercreditor Agreement, (ii) pursuant to the terms of that certain Promissory Note held by Blue Lake dated as of March 22, 2022 (as amended by that certain Amendment #2 to Promissory Note, Amendment to Securities Purchase Agreement, Consent and Waiver Agreement dated as of February 23, 2023 by and between Blue Lake and the Borrower) as in effect as of February 27, 2023, (iii) pursuant to the terms of that certain Promissory Note held by Mast Hill dated as of March 22, 2022 (as amended by that certain Amendment #2 to Promissory Note, Amendment to Securities Purchase Agreement, Consent and Waiver Agreement dated as of February 23, 2023 by and between Mast Hill and the Borrower) as in effect as of February 27, 2023, (iv) regularly scheduled payments of interest and principal with respect to the other indebtedness of the Borrower outstanding as of October 26, 2023 pursuant to the terms of the documents evidencing such indebtedness listed on Schedule 4(y) of the SPA as in effect on October 26, 2023, or (v) pursuant to any provision of any document listed on Schedule 4(y) of the SPA as in effect on October 26, 2023, evidencing indebtedness of the Borrower outstanding as of October 26, 2023 providing for the conversion of such indebtedness into shares of the Borrower’s Common Stock.
2.5 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent by the Holder to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
2.6 Advances and Loans; Affiliate Transactions. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit, make advances to or enter into any transaction with any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, Subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the Effective Date and of which the Borrower has informed Holder in writing prior to the Effective Date, (b) in regard to transactions with unaffiliated third parties, made in the ordinary course of business or (c) in regard to transactions with unaffiliated third parties, not in excess of $100,000 in the aggregate of all such transactions. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, repay any affiliate (as defined in Rule 144) of the Borrower in connection with any indebtedness or accrued amounts owed to any such party.
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2.7 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(10) Transaction while this Note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than $25,000, will be assessed and will become immediately due and payable to the Holder at its election in the form of a cash payment or added to the balance of this Note (under Holder’s and Borrower’s expectation that this amount will tack back to the Effective Date).
2.8 Preservation of Business and Existence, etc. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, (a) change the nature of its business; (b) sell, divest, change the structure of any material assets other than in the ordinary course of business; (c) enter into a Variable Rate Transaction; or (d) enter into any merchant cash advance transactions. In addition, so long as the Borrower shall have any obligation under this Note, the Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
2.9 Noncircumvention. The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.10 Lost, Stolen or Mutilated Note. Upon receipt by the Borrower of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Borrower in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Borrower shall execute and deliver to the Holder a new Note.
ARTICLE III. EVENTS OF DEFAULT
3.1 Events of Default. It shall be considered an event of default if any of the following events listed in this Article III (each, an “Event of Default”) shall occur (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):
(a) Failure to Pay Principal or Interest. The Borrower fails to pay any Principal Amount hereof and/or interest thereon, in each case when such payment becomes due under this Note, whether at the Maturity Date, upon acceleration or otherwise in accordance with the terms of this Note.
(b) Conversion and the Shares. The Borrower (i) fails to issue Conversion Shares to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, (ii) fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for the Conversion Shares issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, (iii) fails to reserve the Reserved Amount at all times, (iv) the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for the Conversion Shares issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for two (2) Trading Days after the Holder shall have delivered a Notice of Conversion, and/or (v) fails to remain current in its obligations to its transfer agent (including but not limited to payment obligations to its transfer agent). It shall be an Event of Default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be added to the principal balance of the Note.
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(c) Breach of Agreements and Covenants. The Borrower or Nascent breaches any covenant, agreement, or other term or condition contained in the SPA, this Note, any Note (as such term is defined in the SPA), the Distribution and Assignment Agreement, any RRA, or in any other Transaction Document or in any agreement, statement or certificate given in writing pursuant hereto or thereto or in connection herewith or therewith.
(d) Breach of Representations and Warranties. Any representation or warranty of the Borrower or Nascent made in the SPA, this Note, any Note (as such term is defined in the SPA), the Distribution and Assignment Agreement, or in any other Transaction Document, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note, any Note (as defined in the SPA), the SPA, the Distribution and Assignment Agreement or any RRA.
(e) Receiver or Trustee. The Borrower, Nascent or any Subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
(f) Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower, Nascent or any Subsidiary of the Borrower or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
(g) Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower, Nascent or any Subsidiary of the Borrower.
(h) Failure to Comply with the 1934 Act. At any time after the Effective Date, the Borrower shall fail to comply with the reporting requirements of the 1934 Act and/or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act.
(i) Liquidation. Any dissolution, liquidation, or winding up of Borrower, Nascent or any Subsidiary of the Borrower or any substantial portion of its business.
(j) Cessation of Operations. Any cessation of operations by Borrower, Nascent or any Subsidiary of the Borrower or any admission by the Borrower, Nascent or any of Subsidiary of the Borrower that it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s, Nascent’s or any of the Borrower’s Subsidiaries’ ability to continue as a “going concern” shall not be an admission that the Borrower (or any such Subsidiary of the Borrower) cannot pay its debts as they become due.
(k) Maintenance of Assets. The failure by Borrower or Nascent to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).
(l) Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Effective Date of this Note and until this Note is no longer outstanding.
(m) Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the SPA, signed by the successor transfer agent to Borrower and the Borrower.
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(n) Cross-Default. The declaration of an event of default by any lender or other extender of credit to the Borrower under any notes, loans, agreements or other instruments of the Borrower evidencing any indebtedness of the Borrower (including those filed as exhibits to or described in the Borrower’s filings with the SEC), after the passage of all applicable notice and cure or grace periods.
(o) Variable Rate Transactions. The Borrower consummates a Variable Rate Transaction at any time on or after the Effective Date without the prior written consent of the Holder.
(p) Inside Information. Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date.
(q) Unavailability of Rule 144. If, at any time on or after the date that is six (6) calendar months after the Effective Date, the Holder is unable to (i) obtain a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective clearing firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any portion of the Note into free trading shares of the Borrower’s Common Stock pursuant to Rule 144, and/or (ii) thereupon deposit such shares into the Holder’s brokerage account.
(r) Delisting, Suspension, or Quotation of Trading of Common Stock. If, at any time on or after the Effective Date, the Borrower’s Common Stock (i) is suspended from trading, (ii) halted from trading, and/or (iii) fails to be quoted or listed (as applicable) on a Principal Market.
(s) Registration Statement Failures. The Borrower fails to comply with any term or provision set forth in any RRA delivered pursuant to the SPA.
(t) Asset Sales; Fundamental Transactions. Any (i) sale, conveyance or disposition of all or substantially all of the assets of the Borrower, or (ii) consolidation, merger or other business combination of the Borrower with or into any other Person or Persons whereby the Borrower is not the survivor (any such transaction a “Section 1.6 Transaction”), which Section 1.6 Transaction is deemed by the Holder at its option to be an Event of Default pursuant to Section 1.6 of this Note.
3.2 Rights and Remedies Upon an Event of Default.
(a) Upon the occurrence of any Event of Default specified in this Article III, this Note shall become immediately due and payable, and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the product calculated by multiplying (a) the sum of the Principal Amount then outstanding plus accrued Default Interest through the date of full repayment by (b) 135% (collectively the “Default Amount”), as well as all costs, including, without limitation, legal fees and expenses, of collection, all without demand, presentment or notice, all of which hereby are expressly waived by the Borrower in cash; provided, notwithstanding anything to the contrary set forth herein, that the Holder may, in its sole discretion, determine to accept payment of any obligation of the Borrower payable under this Section 3.2(a) in Common Stock (using the Conversion Price as adjusted pursuant the last sentence of this Section 3.2(a)) or in cash, or in a combination of both Common Stock and cash. The Holder shall be entitled to exercise all other rights and remedies available at law or in equity. Commencing upon the occurrence of any Event of Default, the Principal Amount then outstanding shall bear interest at the rate of the lesser of (i) eighteen percent (18%) per annum and (ii) the maximum amount permitted by law from the due date thereof until the same is paid (“Default Interest”). Default Interest accrued hereunder shall be paid either in cash or in Common Stock, as determined by the Holder in its sole discretion, and shall be computed on the basis of a 365-day year for the actual number of days elapsed. Upon the payment in full of the Default Amount, as well as all costs, including, without limitation, legal fees and expenses, of collection, the Holder shall promptly surrender this Note to or as directed by the Borrower. In connection with such acceleration described herein, the Holder need not provide, and the Borrower 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 3.2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. For the avoidance of doubt, subject to Section 1.6(f), the number of shares of Common Stock issuable to the Holder upon any election of the Holder to accept payment of any obligation of the Borrower payable under this Section 3.2(a) in Common Stock shall be equal to the ratio calculated by dividing (A) the amount in Dollars of such obligation of the Borrower payable under this Section 3.2(a) the payment of which the Holder has elected to accept in Common Stock by (B) the Conversion Price. Additionally, upon the occurrence and continuance of an Event of Default, the Conversion Price shall be adjusted to the lower of (i) the Conversion Price on the date of the Event of Default or (ii) 60% discount to the lowest VWAP of the Borrower’s Common Stock during the five (5) Trading Day period immediately prior to the Conversion Date.
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(b) In case any one or more Events of Default shall occur and be continuing, Holder may proceed to protect and enforce its rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or for an injunction against a violation of any of the terms hereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. In case of a default in the payment of any portion of the Principal Amount, or any interest or other fees due and payable on this Note, Borrower will pay to Holder such further amount as shall be sufficient to cover the reasonable cost and expenses of collection, including, without limitation, reasonable attorneys’ fees, expenses and disbursements. No course of dealing and no delay on the part of Holder in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice Holder’s rights, powers or remedies. No right, power or remedy conferred by this Note upon Holder shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise.
ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of the Holder existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, requests, demands, and other communications provided for hereunder must be in writing and will be deemed to have been duly given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via e-mail prior to 5:30 p.m. (New York City time) on any Business Day; (b) the next Business Day after the date of transmission, if such notice or communication is delivered via e-mail on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day; (c) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given, addressed as follows:
| If to the Borrower: |
| CAN B̅ CORP. | |
| 960 South Broadway, Suite 120 | |
| Hicksville, NY 11801 | |
| Attention: Marco Alfonsi | |
| e-mail: [email protected] |
| If to the Holder: |
| Walleye Opportunities Master Fund Ltd | |
| 2800 Niagara Lane N. | |
| Plymouth, MN 55447 | |
| Attention: William England | |
| e-mail: [email protected] |
or as to the Borrower or the Holder, at such other address as shall be designated by such party in a written notice to the other party delivered in accordance with this Section 4.2.
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4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.
4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. The Borrower shall not assign this Note or any rights or obligations hereunder without the prior written consent of the Holder. The Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
4.5 Holder Fees and Expenses. Borrower agrees to pay to Holder, immediately upon written notice from Holder, all actual costs, expenses, disbursements, and legal fees and expenses incurred by Holder in connection with: (a) the collection, attempted collection, or negotiation and documentation of any settlement or workout of any payment due hereunder, and (b) any suit or proceeding whatsoever in regard to this Note or the protection or enforcement of the lien of any instrument securing this Note, including, without limitation, in connection with any litigation, mediation, bankruptcy or administrative proceeding, and including any appellate proceeding or judicial or non-judicial foreclosure proceeding in connection therewith.
4.6 Governing Law; Venue; Waiver of Jury Trial; Attorneys’ Fees. This Note shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court of the State of Delaware. The Borrower hereby irrevocably waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTIONS CONTEMPLATED HEREBY. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note or any other agreement, certificate, instrument or document contemplated hereby or thereby 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 law. The prevailing party in any action or dispute brought in connection with this the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby shall be entitled to recover from the other party its reasonable attorneys’ fees and costs.
4.7 Certain Amounts. At any time pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding Principal Amount (or the remaining portion thereof required to be paid at such time pursuant to this Note) plus Default Interest thereon, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.
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4.8 Purchase Agreement. The Borrower and the Holder shall be bound by the applicable terms of the SPA and the documents entered into in connection herewith and therewith.
4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any change in control or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
4.10 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
4.11 Construction; Headings. This Note shall be deemed to be jointly drafted by the Borrower and all the Holder and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.
4.12 Usury. To the extent it may lawfully do so, the Borrower hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Holder in order to enforce any right or remedy under this Note. Notwithstanding any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability of the Borrower under this Note for payments which under the applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under the applicable law in the nature of interest that the Borrower may be obligated to pay under this Note exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by applicable law and applicable to this Note is increased or decreased by statute or any official governmental action subsequent to the Effective Date, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Borrower to the Holder with respect to indebtedness evidenced by this the Note, such excess shall be applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Borrower, the manner of handling such excess to be at the Holder’s election.
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4.13 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law (including any judicial ruling), then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.
4.14 Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of any security, or amendment to a security that was originally issued before the Effective Date, with any term that the Holder reasonably believes is more favorable to the holder of such security or with a term in favor of the holder of such security that the Holder reasonably believes was not similarly provided to the Holder in this Note, then (i) the Borrower shall notify the Holder of such additional or more favorable term within one (1) Business Day of the issuance and/or amendment (as applicable) of the respective security, and (ii) such term, at Holder’s option, shall become a part of the transaction documents with the Holder (regardless of whether the Borrower complied with the notification provision of this Section 4.14). The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing prepayment rate, interest rates, and original issue discounts. Notwithstanding the foregoing, the Holder may only enforce its rights under this Section 4.14 after the date that is one hundred eighty (180) calendar days after the Effective Date, provided, however, that at such time the Holder may enforce its rights to all adjustments hereunder that apply even if such adjustment was triggered or such issuance occurred prior to the date that is one hundred eighty (180) calendar days after the Effective Date.
4.15 Right of First Refusal. If at any time while this Note is outstanding, the Borrower has a bona fide offer of capital or financing from any third party that the Borrower intends to act upon, then the Borrower must offer such opportunity on the same terms as such third party’s terms by providing written notice of the offer (an “Offer Notice”) concurrently to the Holder, the Arena Purchasers, Mast Hill Fund, L.P., a Delaware limited partnership (“Mast Hill”), Blue Lake Partners, LLC, a Delaware limited liability company (“Blue Lake”), and Fourth Man, LLC, a Nevada limited liability company (“Fourth Man”), subject to the terms of this Section 4.15. As used in this Section 4.15, the term “Offerees” shall mean, collectively, (i) the Holder, (ii) the Arena Purchasers (jointly), (iii) Mast Hill, (iv) Blue Lake and (v) Fourth Man, and, each individually an “Offeree”; provided for the avoidance of doubt that for purposes of this Section 4.15, the Arena Purchasers shall be considered to be a single Offeree. Within five (5) Business Days after receipt of an Offer Notice by any Offeree (the “Offer Response Period”), such Offeree shall notify the Borrower in writing (an “Offer Response Notice”) of such Offeree’s election to either (A) provide such capital or financing to the Borrower on the same terms as such third party’s terms (including without limitation matching the aggregate principal amount of such capital or financing proposed to be provided to the Borrower by such third party) or (B) waive such Offeree’s right to provide such capital or financing to the Borrower on the same terms as such third party’s terms. If any Offeree fails to deliver an Offer Response Notice to the Borrower prior to the end of the Offer Response Period, time being of the essence, then such Offeree shall be deemed to have elected option (B) above. In the event (x) more than one Offeree elects to provide such capital or financing to the Borrower on the same terms as such third party’s terms pursuant to Offer Response Notices sent by each such Offeree to the Borrower within the Offer Response Period, then each such Offeree shall provide a portion of such capital or financing to the Borrower pro rata in proportion to the respective ROFR Units (as defined below) of such Offerees, and in all other respects on the same terms as such third party’s terms, (y) only one Offeree elects to provide such capital or financing to the Borrower on the same terms as such third party’s terms pursuant to an Offer Response Notice sent by such Offeree to the Borrower within the Offer Response Period, then such Offeree shall provide (and none of the other Offerees shall have the right to provide) such capital or financing to the Borrower on the same terms as such third party’s terms (including without limitation matching the aggregate principal amount of such capital or financing proposed to be provided to the Borrower by such third party), or (z) none of the Offerees elect to provide such capital or financing to the Borrower on the same terms as such third party’s terms pursuant to an Offer Response Notice sent to the Borrower within the Offer Response Period, then the Borrower may obtain such capital or financing from such third party, provided the Borrower obtains such capital or financing from such third party upon the exact same terms and conditions set forth in the Offer Notice. If none of the Offerees elects to provide such capital or financing to the Borrower on the same terms as such third party’s terms pursuant to an Offer Response Notice sent to the Borrower within the Offer Response Period, and the Borrower does not receive the capital or financing from such third party in accordance with the foregoing clause (z) within thirty (30) days after the date of the last Offer Notice, so long as this Note remains outstanding at such time, the Borrower must again offer the capital or financing opportunity on the same terms as such third party’s terms by providing written notice of the offer concurrently to each of the Offerees pursuant to a further Offer Notice as described above, and the process detailed above shall be repeated. All Offer Notices required to be sent to the Holder under this Section 4.15 must be sent via electronic mail to [email protected]. For purposes of allocating the opportunity to provide the capital or financing to the Borrower on the same terms as the applicable third party’s terms to the applicable Offerees under clause (x) of the fourth sentence of this Section 4.15, the Offerees shall be and hereby are allocated units (with respect to each Offeree, such Offeree’s “ROFR Units”) representing the Offerees’ respective rights in connection with any such allocation of the opportunity, with such ROFR Units being allocated to the Offerees in the following amounts: (i) to the Holder, 2,149,706 ROFR Units, (ii) to the Arena Purchasers (as a single Offeree), 3,900,000 ROFR Units, (iii) to Mast Hill, 367,500 ROFR Units, (iv) to Blue Lake, 262,500 ROFR Units, and (v) to Fourth Man, 156,525 ROFR Units.
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4.16 Dispute Resolution. In the case of a dispute as to the determination of the Conversion Price, the number of Conversion Shares issuable upon any Conversion, any prepayment amount or Default Amount, the closing bid price, or fair market value (as the case may be) or the arithmetic calculation of the Conversion Price, the number of Conversion Shares issuable upon any Conversion, the applicable prepayment amount(s) or Default Amount (as the case may be), the Borrower or the Holder shall submit the disputed determinations or arithmetic calculations via facsimile (i) within one (1) Trading Day after receipt of the applicable notice giving rise to such dispute to the Borrower or the Holder or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation within one (1) Trading Day of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower or the Holder, then the Borrower shall, within one (1) Trading Day, submit (a) the disputed determination of the Conversion Price, the closing bid price, or fair market value (as the case may be) to an independent, reputable investment bank selected by the Borrower and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Price, the number of Conversion Shares issuable upon any Conversion or any prepayment amount or Default Amount, to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Borrower. The Borrower shall cause at its expense the investment bank or the accountant to perform the determinations or calculations and notify the Borrower and the Holder of the results no later than one (1) Trading Day from the time it receives such disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation shall be binding upon all parties absent demonstrable error.
4.17 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 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 Borrower to comply with the terms of this Note. The Borrower 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 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 Borrower (or the performance thereof). The Borrower 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 Borrower 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 Borrower shall provide all information and documentation to the Holder that is reasonably requested by the Holder to enable the Holder to confirm the Borrower’s compliance with the terms and conditions of this Note.
4.18 Disclosure. Upon receipt or delivery by the Borrower of any notice in accordance with the terms of this Note, unless the Borrower has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Borrower or its subsidiaries, the Borrower shall (i) within two (2) Business Days following any such receipt of a notice by the Borrower hereunder or (ii) immediately upon any such delivery of a notice by the Borrower hereunder, publicly disclose such material, nonpublic information on a Current Report on Form 8-K pursuant to Regulation FD. In the event that the Borrower believes that any such notice contains material, non-public information relating to the Borrower or its subsidiaries, the Borrower so shall indicate to the Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Borrower or its subsidiaries.
[signature page follows]
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IN WITNESS WHEREOF, the Borrower has caused this Consolidated Amended and Restated Promissory Note to be signed in its name by its duly authorized officer as of the date first written above.
| BORROWER: | ||
| CAN B̅ CORP. | ||
| By: | /s/ Marco Alfonsi | |
| Name: | Marco Alfonsi | |
| Title: | Chief Executive Officer | |
Acknowledged and agreed to as of
the date first set forth above:
| HOLDER: | ||
| WALLEYE OPPORTUNITIES MASTER FUND LTD | ||
| By: | /s/ William England | |
| Name: | William England | |
| Title: | Chief Executive Officer of the Manager | |
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ANNEX A-1 - NOTICE OF CONVERSION
The undersigned hereby elects to convert $______________ in outstanding principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of CAN B̅ CORP., a Florida corporation (the “Borrower”), according to the conditions of the Consolidated Amended and Restated Promissory Note of the Borrower dated as of October 27, 2023 (the “Note”), as of the Conversion Date set forth below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any. Capitalized terms used but not defined herein shall have the meaning given to such terms in the Note.
Box Checked as to applicable instructions:
| ☐ | The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”). | |
| Name of DTC Prime Broker: | ||
| Account Number: | ||
| ☐ | The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
| Conversion Date: | ________________________ | |
Converted Principal Amount (set forth above): |
$________________________ | |
| Applicable Conversion Price: | $________________________ | |
| Number of Shares of Common Stock to be | ||
| issued pursuant to this Conversion of the | ||
| Note: | ________________________ | |
| Principal Amount due remaining under the | ||
| Note after this Conversion: | $________________________ |
| By: | ||
| Name: | ||
| Title: | ||
| Date: |
[Signature Page to Annex A-1 – Notice of Conversion]
ANNEX A-2 - NOTICE OF CONVERSION
Reference is made to that certain Consolidated Amended and Restated Promissory Note dated as of October 27, 2023 (the “Note”) of CAN B̅ CORP., a Florida corporation (the “Borrower”). Capitalized terms used but not defined herein shall have the meaning given to such terms in the Note. No fee will be charged to the Holder for any conversion of the Note, except for transfer taxes, if any. The undersigned hereby elects to convert, by Conversion as of the Conversion Date set forth below, $_____________ (such amount, the “Total Default Obligations Converted Amount”) in obligations outstanding of the Borrower under Section 3.2(a) of the Note consisting of:
| (a) Default Amount being converted: | $___________________ | ||
| Principal Amount of Note being converted (included in calculation of Default Amount being converted: | $___________________ | ||
| Default Interest to be converted (included in calculation of Default Amount being converted): | $___________________ | ||
| (b) Costs, including without limitation legal fees and expenses, of collection, being converted: | $___________________ | ||
Total Default Obligations Converted Amount (add lines (a) and (b) above): |
$___________________ |
| Conversion Date: | ______________________ |
Total Default Obligations Converted Amount (set forth above): |
$___________________ | ||
| Applicable Conversion Price: | $___________________ | ||
| Number of Shares of Common Stock to be issued pursuant to this Conversion of the Total Default Obligations Converted Amount: | ___________________ | ||
| ___________________ | |||
| (a) Default Amount due remaining under the Note after this Conversion: | $___________________ | ||
| Principal Amount due remaining under the Note after this Conversion (included in calculation of Default Amount remaining due under the Note after this Conversion): | $___________________ | ||
| Default Interest due remaining under the Note after this Conversion (included in calculation of Default Amount remaining due under the Note after this Conversion): | $___________________ | ||
| (b) Costs, including without limitation legal fees and expenses, of collection, due remaining under the Note after this Conversion: | $___________________ | ||
| Total obligations of the Borrower under Section 3.2(a) of the Note due remaining due after this Conversion (add lines (a) and (b) above): | $___________________ |
[form continues on following page]
[Signature Page to Annex A-2 – Notice of Conversion]
Box Checked as to applicable instructions:
| ☐ | The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”). | |
| Name of DTC Prime Broker: | ||
| Account Number: | ||
| ☐ | The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
| By: | ||
| Name: | ||
| Title: | ||
| Date: |
[Signature Page to Annex A-2 – Notice of Conversion]
Exhibit 9.4
DISTRIBUTION AND ASSIGNMENT AGREEMENT
THIS DISTRIBUTION AND ASSIGNMENT AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time in accordance with its terms, this “Agreement”), is made and entered into as of October 27, 2023 (the “Effective Date”), by and among, NASCENT PHARMA, LLC, a Nevada limited liability company (“Nascent”), CAN B̅ CORP., a Florida corporation (the “Company”), and WALLEYE OPPORTUNITIES MASTER FUND LTD, a Cayman Islands exempted company with limited liability (“Assignee”, and together with Nascent and the Company, collectively, the “Parties”, and each, individually, a “Party”). Capitalized terms used but not defined herein shall have the meaning given to such terms in the Purchase Agreement (as defined below).
WITNESSETH:
WHEREAS, the Company and Assignee entered into that certain Securities Purchase Agreement dated as of October 26, 2023 by and between the Company and Assignee in its capacity as the Buyer (as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “Purchase Agreement”), pursuant to which the Company agreed, among other things, that as additional consideration for Assignee’s purchase of one or more Notes of the Company in the aggregate principal amount of up to $1,875,000 (the “Maximum Offered Amount”), to cause Nascent to pay Assignee a certain portion of the distributions and proceeds that the Company would otherwise be entitled to receive from Nascent pursuant to the Nascent Operating Agreement (as defined below) and/or the Proposed UCANN Distribution Agreement (as defined below);
WHEREAS, immediately prior to the execution of this Agreement, Assignee held each of the following promissory notes of the Company: (i) that certain Promissory Note, dated August 30, 2022, in the original principal amount of $385,000 (the “$385,000 Walleye Note”), (ii) that certain 20% Original Issue Discount Promissory Note, dated May 16, 2023, in the original principal amount of $437,500 (the “$437,500 Walleye Note”), (iii) that certain $100,000 Unsecured Promissory Note of the Borrower dated as of August 5, 2022, by and between the Company as borrower and Emergent Health Corp., a Wyoming corporation (“Emergent”) as lender (the “$100,000 Walleye Note”), which $100,000 Walleye Note was purchased by Assignee from Emergent pursuant to that certain Note Purchase Agreement, dated August 3, 2023, by and between Emergent as seller and Assignee as purchaser (the “Emergent NPA”), (iv) that certain $250,000 Unsecured Promissory Note of the Company, dated August 18, 2022, by and between the Company as borrower and Emergent as lender (the “$250,000 Walleye Note”, and together with the $100,000 Walleye Note, collectively, the “Emergent Notes”), which $250,000 Walleye Note was purchased by Assignee from Emergent pursuant to the Emergent NPA, and (v) that certain Promissory Note, dated February 27, 2023, in the original principal amount of $1,823,529 (the “February 2023 Walleye Secured Note”, together with the $385,000 Walleye Note, the $437,500 Walleye Note, the $100,000 Walleye Note and the $250,000 Walleye Note, collectively, the “Existing Notes”);
WHEREAS, simultaneously with the execution of this Agreement, the Company and Assignee executed that certain Consolidated Amended and Restated Note dated as of the date hereof in the original principal amount of $1,354,210 (the “Consolidated Amended and Restated Walleye Note”), which Consolidated Amended and Restated Walleye Note consolidates, amends and restates (i) the $385,000 Walleye Note, (ii) the $437,500 Walleye Note, (iii) the $100,000 Walleye Note and (iv) the $250,000 Walleye Note, subject to the terms and conditions set forth therein.
WHEREAS, simultaneously with the execution of this Agreement, Assignee has purchased the Initial Note from the Company pursuant to the Purchase Agreement in the original principal amount of $156,250, and accordingly, the Parties are entering into this Agreement in accordance with Section 2(b) of the Purchase Agreement in order to provide, among other things, that (i) Nascent shall, and the Company shall cause Nascent to, pay Assignee fifteen percent (15%) of the distributions and proceeds that the Company would otherwise be entitled to receive from Nascent pursuant to the Nascent Operating Agreement and/or the Proposed UCANN Distribution Agreement until Assignee receives an aggregate amount of such distributions and proceeds (the “Additional Consideration Amount”) equal to the sum of (A) two hundred percent (200%) of the aggregate purchase price of the Existing Notes other than the Emergent Notes (i.e., $4,500,000), plus (B) two hundred percent (200%) of the aggregate original principal amount of the Emergent Notes (i.e., $700,000) (the sum of (A) and (B) to be referred to herein as the “Prior Money Distribution Amount”), plus (C) one hundred percent (100%) of the Purchase Price of the Initial Note (i.e. $125,000) (the “Initial New Money Distribution Amount”), plus (D) one hundred percent (100%) of the aggregate Purchase Price of any subsequent Notes purchased by Assignee from the Company pursuant to the Purchase Agreement (the “Subsequent New Money Distribution Amount”); provided, that if Assignee and/or one or more New Buyers purchase Notes in the aggregate principal amount of the Maximum Offered Amount pursuant to the Purchase Agreement on or prior to the New Money Multiple Deadline, then (1) the Initial New Money Distribution Amount shall be increased to two hundred percent (200%) of the Purchase Price of the Initial Note (i.e., $250,000), and (2) the Subsequent New Money Distribution Amount shall be increased to two hundred percent (200%) of the aggregate Purchase Price of such subsequent Notes purchased pursuant to the Purchase Agreement (i.e., $2,750,000), such that the Additional Consideration Amount (if the Maximum Offered Amount of Notes is purchased on or prior to the New Money Multiple Deadline) would be $8,200,000.
NOW, THEREFORE, in accordance with the Purchase Agreement and in consideration of the premises and the mutual agreements hereinafter contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Assignee, intending to be legally bound, hereby agree as follows:
1. Definitions. As used in this Agreement, each of the following terms has the meaning given to such term in this Section 1 or in the sections and subsections of this Agreement referred to below. Capitalized terms used and not defined herein have the meaning given to such terms in the Purchase Agreement.
“Additional Consideration Amount” has the meaning set forth in the recitals.
“Assignment” has the meaning set forth in Section 4.
“Cash Available for Distribution” has the meaning given to such term in the Nascent Operating Agreement (except for instances in this Agreement specifically referring to “Cash Available for Distribution” as to be defined in the Proposed UCANN Distribution Agreement).
“Distributions” means (A) any and all distributions made by Nascent or proceeds received from Nascent, including without limitation (i) distributions of Cash Available for Distribution under the Nascent Operating Agreement and (ii) distributions of “Cash Available for Distribution” (under and as such term is to be defined in the Proposed UCANN Distribution Agreement), and (B) any and all distributions and proceeds of any kind from any source related to, arising out of, or in connection with the Patents, including without limitation any royalties from the Patents and any Patent Claims, including without limitation, any proceeds of any settlement with respect to any Patent Claim.
“Distributions Rights” means, all right, title and interest of the Company to or in any and all Distributions, including without limitation any right of the Company to be paid or receive such Distributions, whether now existing or hereafter arising.
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“Equity Interest” means all shares of capital stock (whether denominated as common stock or preferred stock), equity interests, beneficial partnership or membership interests, joint venture interests, units, limited liability company interests, participations or other ownership or profit interests in or equivalents (regardless of how designated) of or in a Person (other than an individual), whether voting or non-voting.
“Initial New Money Distribution Amount” has the meaning set forth in the recitals.
“Nascent Operating Agreement” has the meaning set forth in Section 6(c)(ii).
“Patent” means, (i) United States Patent No. US 9,730,911 B2 (Cannabis Extracts and Methods of Preparing and Using Same) and (ii) United States Patent No. US 10,555,928 B2 (Cannabis Extracts and Methods and Preparing and Using Same), or any of them (collectively, the “Patents”).
“Patent Claim” means, any claim, litigation, or other proceeding brought by or on behalf of the Company, Nascent or any other entity in which the Company has an interest in order to enforce any alleged breach of any rights of the Company, Nascent or any other entity in which the Company has an interest with respect to any of the Patents, whether now existing or hereafter arising (collectively, “Patent Claims”).
“Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or any governmental authority.
“Proposed Blackmon Distribution Agreement” means a proposed agreement between the Company and Earnest Blackmon, an individual (“Blackmon”), pursuant to which it is contemplated that the Company would agree to cause Nascent to pay Blackmon a portion of the Distributions that the Company would otherwise be entitled to receive under the terms of the Nascent Operating Agreement equal to the sum of (A) fifty percent (50%) of the Distributions that the Company would otherwise be entitled to receive from Nascent under the terms of the Nascent Operating Agreement but for such Proposed Blackmon Distribution Agreement (the “Blackmon Gross Distributions”), minus (B) the amounts payable to Creditors pursuant to the Proposed UCANN Distribution Agreement (up to a maximum of five percent of the total amount of up to $10,000,000 of Distributions made pursuant to the Proposed UCANN Distribution Agreement), minus (C) eight percent (8%) of the Blackmon Gross Distributions, which portion of the Blackmon Gross Distributions shall be paid to a third party marketing and service company (such net Distributions proposed to be paid to Blackmon, the “Proposed Blackmon Distributions”).
“Proposed Distribution and Contingent Payment Agreements” means, collectively, the Proposed Blackmon Distribution Agreement, the Proposed McCarter Engagement Letter, the Proposed Patent Claim Financing Agreement, the Proposed UCANN Distribution Agreement (each, a “Proposed Distribution and Contingent Payment Agreement”).
“Proposed McCarter Engagement Letter” means a proposed engagement letter contemplated to be entered into by and among McCarter & English LLP (“McCarter”), Nascent and/or the Company, pursuant to which it is contemplated that (i) McCarter would agree to undertake the representation of the Company and/or Nascent as legal counsel in the Company’s and/or Nascent’s pursuit of one or more Patent Claims and (ii) Nascent would agree to pay and/or the Company would agree to cause Nascent to pay, fees to McCarter for such representation on a contingency basis in an amount equal to ten percent (10%) of the gross proceeds recovered with respect to such Patent Claims (such proposed fees, the “Proposed McCarter Contingency Fees”).
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“Proposed Patent Claim Financing Agreement” means a proposed financing agreement contemplated to be entered into by Nascent and/or the Company with a third-party lender (the “Patent Claim Lender”), pursuant to which it is contemplated that (i) the Patent Claim Lender would advance one or more loans to Nascent (“Patent Claim Loans”) to be used by Nascent for the purpose enabling Nascent and/or the Company to pursue one or more Patent Claims, and (ii) Nascent would agree to pay, and/or the Company would agree to cause Nascent to pay, as first priority distributions, fees to the Patent Claim Lender in an amount equal to 200% of the aggregate amount of Patent Claim Loans advanced by Patent Claim Lender under the Proposed Patent Claim Financing Agreement (such fees, the “Proposed Patent Claim Lender Fees”).
“Proposed UCANN Distribution Agreement” means a proposed Agreement for Distribution of Cash Distributions contemplated to be entered into between and among Blackmon, John Walsh, an individual (“Walsh”), United Cannabis Corporation, a Colorado Corporation (“United Cannabis”), UC Colorado Corporation, a Colorado corporation (“UC Colorado”), DCS Enterprises of Green Bay, Inc., a Wisconsin corporation (“DCS”), the Company, Nascent and The Receivers, Inc., a Colorado Corporation, in its capacity as the court-appointed receiver in Case No. 2020CV30483, in Jefferson County District Court, State of Colorado (the “UCC Receiver”), pursuant to which, (1) the Company would among other things, cause Nascent to make distributions to the “Creditors” (as to be defined in the Proposed UCANN Distribution Agreement) on the “Creditor List” (as to be defined in the UCANN Proposed Distribution Agreement), of 5% of the Company’s share of the “Cash Available for Distribution” (as to be defined in the Proposed UCANN Distribution Agreement) until such Creditors have been paid an aggregate of $10,000,000.00 for their claims as set forth on the Creditor List (such distributions, “Proposed UCANN Pool Distributions”), and (2) Nascent would agree, among other things, to make such Proposed UCANN Pool Distributions simultaneously with distributions of “Cash Available for Distributions” (as to be defined in the Proposed UCANN Distribution Agreement) to DCS and the Company.
“Prior Money Distribution Amount” has the meaning set forth in the recitals.
“Reversion” has the meaning set forth in Section 4.
“Subsequent New Money Distribution Amount” has the meaning set forth in the recitals.
2. Additional Consideration Amount. The Parties agree and acknowledge that, as of the date of this Agreement, the Additional Consideration Amount is equal to $5,325,000 (calculated as the sum of (A) the Prior Money Distribution Amount (i.e. $5,200,000) plus (B) the Initial New Money Distribution Amount in effect prior to the Maximum Offered Amount of Notes being sold pursuant to the Purchase Agreement on or prior to the New Money Multiple Deadline (i.e. $125,000)). The Additional Consideration Amount shall be increased at each subsequent Closing under the Purchase Agreement by an amount equal to the Subsequent New Money Distribution Amount applicable to the subsequent Note purchased by Assignee at such Closing (calculated as one hundred percent (100%) of the Purchase Price of such subsequent Note); provided, that if Assignee and/or one or more New Buyers purchase Notes in the aggregate principal amount of the Maximum Offered Amount pursuant to the Purchase Agreement on or prior to the New Money Multiple Deadline, then (1) the Initial New Money Distribution Amount shall be increased to two hundred percent (200%) of the Purchase Price of the Initial Note (i.e. $250,000), and (2) the Subsequent New Money Distribution Amount shall be increased to two hundred percent (200%) of the aggregate purchase price of subsequent Notes purchased pursuant to the Purchase Agreement (i.e. $2,750,000) such that the Additional Consideration Amount (if the Maximum Offered Amount of Notes is purchased on or prior to the New Money Multiple Deadline) would be $8,200,000. For the avoidance of doubt, in the event no subsequent Notes are purchased pursuant to the Purchase Agreement after the date of this Agreement (i.e. the only Note purchased Assignee is the Initial Note purchased by Assignee), the Additional Consideration Amount shall remain not less than $5,325,000, and the rights of Assignee and the obligations of the Company and Nascent set forth in this Agreement as in effect on the date hereof with respect to the Additional Consideration Amount in the amount of $5,325,000 shall not be contingent upon or require Assignee or any other Person to purchase any Note other than the Initial Note.
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3. Payment of Distributions.
(a) Upon receipt by Nascent at any time on or after the Effective Date of any proceeds as a result of or in connection with any Patent Claim, simultaneously with and upon each and any occasion that Nascent pays any Distributions to the Company, Nascent shall pay Assignee fifteen percent (15%) of the Distributions that the Company would otherwise be entitled to receive from Nascent pursuant to the Nascent Operating Agreement and/or the Proposed UCANN Distribution Agreement but for the Assignment, as applicable, in cash in immediately available funds in accordance with the wire instructions set forth on Schedule I hereto or as otherwise directed via instructions provided by Assignee, until Assignee has received Distributions pursuant to this Section 3(a) in an amount equal to the Additional Consideration Amount in effect at such time. The Company agrees to cause Nascent to comply with any and all of its obligations pursuant to this Agreement, including without limitation, any obligation of Nascent to pay Assignee Distributions pursuant to this Section 3(a).
(b) Any obligation of Nascent to pay (and any obligation of the Company to cause Nascent to pay) Distributions to Assignee under Section 3(a) above (any such obligation, an “Additional Consideration Obligation”) shall be in addition to and not in substitution for the obligation of the Company to pay all principal, interest and other amounts owing to Assignee in respect of (i) the Initial Note purchased by Assignee on the date hereof, (ii) any other Note purchased by Assignee pursuant to the Purchase Agreement, (iii) the Consolidated Amended and Restated Walleye Note held by Assignee, and (iv) the February 2023 Walleye Note, and any Distributions paid to Assignee pursuant to Section 3(a) above shall be applied towards the Additional Consideration Obligation and shall not be deemed to satisfy the outstanding balance of any Note purchased by Assignee or any obligations of the Company owing to Assignee under any other promissory note or other instrument held by Assignee. To the extent at any time Nascent owes any Additional Consideration Obligation to Assignee pursuant to Section 3(a), the Company hereby guarantees the payment of such Additional Consideration Obligation to Assignee in accordance with the terms of this Agreement.
4. Assignment of Distributions Rights; Reversion of Distributions Rights. In furtherance of the foregoing, the Company does hereby sell, transfer, assign, set over and otherwise convey to Assignee, all right, title and interest of the Company, whether now existing or hereafter arising, in fifteen percent (15%) of all Distributions Rights (the “Purchased Distributions Rights”), and all present and future rights, claims, demands, causes and choses in action in respect of any or all of the foregoing and all payments on or under and all proceeds of any kind and nature in respect of any of the foregoing (the “Assignment”); provided, that upon Assignee’s receipt of Distributions pursuant to Section 3(a) above in an amount equal to the Additional Consideration Amount, the Purchased Distributions Rights assigned to Assignee pursuant to the Assignment shall automatically revert to the Company (the “Reversion”).
5. Assignment Intended as Sale; Grant of Security Interest. It is the intention of the Company and Assignee that the Assignment contemplated by this Agreement shall constitute an absolute and irrevocable sale of the Purchased Distributions Rights from the Company to Assignee free and clear of all liens and rights of others and it is intended that the beneficial interest in and title to the Purchased Distributions Rights shall not be part of the Company’s estate in the event of the filing of a petition by or against the Company under any bankruptcy or insolvency law; provided, for the avoidance of doubt and notwithstanding anything to the contrary set forth herein, the Purchased Distribution Rights shall automatically revert to the Company upon Assignee’s receipt of Distributions pursuant to Section 3(a) above in an amount equal to the Additional Consideration Amount. In the event that, notwithstanding the intent of the Company and Assignee, the Assignment is held not to be a sale, this Agreement shall constitute a security agreement under applicable law and the Company hereby grants to Assignee a continuing security interest in, lien on and right of set-off against all right, title and interest of interest of the Company, whether now or hereafter arising, in and to the Purchased Distributions Rights as continuing collateral security for the payment of any Additional Consideration Obligation due hereunder (the “Collateral”).
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6. Representations and Warranties of the Company and Nascent. The Company and Nascent each hereby makes the following representations and warranties to Assignee on and as of the Effective Date:
(a) Authorization; Enforcement. (i) Each of the Company and Nascent has all requisite corporate power and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby including without limitation the Assignment and the granting by the Company of security interests in the Collateral to Assignee hereunder; (ii) the execution and delivery of this Agreement and the consummation by each of the Company and Nascent of the transactions contemplated hereby have been duly authorized by the Company’s Board of Directors and the Company in its capacity as the manager of Nascent and no further consent or authorization of the Company, Nascent, the Board of Directors of the Company or any shareholders or members of the Company or Nascent, as applicable, or any debt holders of the Company or Nascent is required, (iii) this Agreement has been duly executed and delivered by each of the Company and Nascent by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and bind the Company and Nascent accordingly, and (iv) this Agreement constitutes, a legal, valid and binding obligation of the Company and Nascent, enforceable against the Company and Nascent in accordance with its terms.
(b) No Conflicts. The execution, delivery and performance of this Agreement by the Company and Nascent and the consummation by the Company and Nascent of the transactions contemplated hereby (including, without limitation, the Assignment and the granting by the Company of security interests in the Collateral to Assignee hereunder) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws of the Company or of the Nascent Charter or Nascent Operating Agreement, (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, note, evidence of indebtedness, indenture, patent, patent license or instrument to which the Company, Nascent, or any Subsidiary of the Company is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree applicable to the Company, Nascent, or any Subsidiary of the Company or by which any property or asset of the Company, Nascent or any Subsidiary of the Company is bound or affected.
(c) Nascent and the Patents.
(i) Attached hereto as Exhibit A-1 is a true and complete copy of the certificate of formation of Nascent as filed in the office of the Secretary of the State of Nevada, together with all amendments thereto (the “Nascent Charter”). The Nascent Charter is in full force and effect on and as of the date hereof, has not been amended, modified or repealed, and no proceedings for the amendment, modification, superseding or rescission thereof are pending or contemplated, and no amendment or other document relating to or affecting the Nascent Charter has been filed in the office of the Secretary of the State of Nevada since such date, and no action has been taken by Nascent, the Company or any officers or any other members or its officers, manager, members or any other equity holders including without limitation in contemplation of the filing of any such amendment or other document or in contemplation of the liquidation or dissolution of Nascent. Attached hereto as Exhibit A-2 is a true, complete and correct copy of the limited liability company operating agreement of Nascent, together with all amendments thereto (the “Nascent Operating Agreement”). The Nascent Operating Agreement is in full force and effect on and as of the date hereof, has not been amended, modified, superseded or repealed, and no proceedings for the amendment, modification, superseding or rescission thereof are pending or contemplated.
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(d) The Company’s Distributions Rights.
(i) The Company is a member of Nascent holding sixty-seven percent (67%) of the outstanding Equity Interests in Nascent, and accordingly, the Company is entitled to receive Distributions from Nascent of Cash Available for Distribution in its capacity as a member of Nascent, subject to and in accordance with (1) the Nascent Operating Agreement, (2) any provisions of the Proposed UCANN Distribution Agreement providing for distributions of “Cash Available for Distribution” (under and as to be defined in the Proposed UCANN Distribution Agreement), (3) any provisions of any Proposed Distribution and Contingent Payment Agreement pursuant to which the Company and/or Nascent has agreed or will agree to pay or distribute any Distributions of Cash Available for Distribution that the Company would otherwise be entitled to receive pursuant to the Nascent Operating Agreement to any Person other than the Company, and (4) the terms and provisions of this Agreement.
(ii) The Company is the sole manager of Nascent, with the power to manage the business and affairs of Nascent, including the power to determine the timing of distributions of Cash Available for Distribution to the members of Nascent, subject to and in accordance with (1) the Nascent Operating Agreement, (2) any provisions of the Proposed UCANN Distribution Agreement (if and when the same is executed) providing for the timing of distributions of “Cash Available for Distribution” (under and as to be defined in the Proposed UCANN Distribution Agreement), (3) any provisions of the other Proposed Distribution and Payment Agreements (if and when the same are executed) affecting the ability of the Company to determine the timing of Distributions of Cash Available for Distributions and (4) the terms and provisions of this Agreement.
(iii) Other than as provided pursuant to this Agreement and the Purchase Agreement, as of the date hereof neither the Company nor Nascent, nor any Affiliate or the Company or Nascent has any obligations or commitments, or has entered into any agreement with any third party Person, or executed any instrument or other document providing for the payment of fees, Distributions or other consideration to any third party Person contingent or payable upon or in connection with a successful prosecution of one or more Patent Claims or providing for the payment of Distributions of Cash Available for Distribution that the Company would otherwise be entitled to receive pursuant to the Nascent Operating Agreement to any Person other than the Company.
(iv) As of the date hereof, none of the Proposed Distribution and Contingent Payment Agreements has been fully executed and accordingly (A) neither the Company nor Nascent has any commitment or obligation under any such Proposed Distribution and Contingent Payment Agreement and (B) each such proposed Distribution and Contingent Payment Agreement may ultimately contain terms which differ from those described in the definition thereof set forth in this Agreement. As of the date hereof, neither the Company nor Nascent, nor any Affiliate of the Company or Nascent is contemplating entering into any agreement, document or instrument with any third Party Person providing for the payment of fees, Distributions or other consideration to any third party Person contingent or payable upon or in connection with a successful prosecution of one or more Patent Claims or providing for Distributions of Cash Available for Distribution that the Company would otherwise be entitled to receive pursuant to the Nascent Operating Agreement to any Person other than the Company, other than (1) the Proposed Distribution and Contingent Payment Agreements and (2) any ancillary documents to be delivered in connection therewith with terms that do not provide for the payment of fees, Distributions or other consideration to any third party Person contingent or payable upon or in connection with a successful prosecution of one or more Patent Claims and do not provide for the payment of Distributions that the Company would otherwise be entitled to receive pursuant to the Nascent Operating Agreement to any Person other than the Company other than the Proposed Blackmon Distributions, Proposed McCarter Contingency Fees, Proposed Patent Claim Lender Fees and Proposed UCANN Pool Distributions.
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7. Title to Purchased Distributions Rights. It is the intention of the Company and Assignee that the Assignment contemplated by this Agreement shall constitute an absolute and irrevocable sale of the Purchased Distributions Rights from the Company to Assignee free and clear of all liens and rights of others and it is intended that the beneficial interest in and title to the Purchased Distributions Rights) shall not be part of the Company’s estate in the event of the filing of a petition by or against the Company under any bankruptcy or insolvency law; provided, for the avoidance of doubt and notwithstanding anything to the contrary set forth herein, the Purchased Distribution Rights shall automatically revert to the Company upon Assignee’s receipt of Distributions pursuant to Section 3(a) above in an amount equal to the Additional Consideration Amount. No portion of the Purchased Distributions Rights has been sold, transferred, assigned, or pledged by the Company to any Person other than Assignee. The Company has good and marketable title to the Purchased Distributions Rights and, prior to the Assignment contemplated by this Agreement, the Company is the sole owner thereof, free and clear of all liens, claims, encumbrances, security interests, and rights of others, and upon the Assignment thereof to the Assignee, Assignee shall have good and marketable title to the Purchased Distribution Rights and shall be the sole owner thereof, free and clear of all liens, claims, encumbrances, security interests, and rights of others.
8. Other Covenants and Agreements of Nascent and Company.
(a) The Company shall, and shall cause Nascent to, use best efforts to, (i) cause the Patents to be contributed to Nascent pursuant to the Nascent Operating Agreement, and (ii) cause all rights, title, and interest in the Patents to be assigned to Nascent, including without limitation by causing any and all filings with the United States Patent Trademark Office necessary to effect such assignment under applicable law, as soon as reasonably practicable following the date hereof. Upon the written request of Assignee delivered to the Company from time to time, the Company shall promptly provide then current information to Assignee regarding the Company and Nascent’s efforts to cause the Patents to be assigned to Nascent, including by providing Assignee with copies of any and all agreements or documents entered into by the Company and/or Nascent and any filings made with the United States Patent and Trademark Office in pursuit of such assignment. The Company and Nascent covenant and agree that, without the prior written consent of Assignee, neither the Company nor Nascent, nor any Affiliate of the Company or Nascent shall enter into any agreement or execute any instrument providing for or permitting the assignment of the Patents to any Person other than Nascent.
(b) Until Assignee shall have received an amount of Distributions pursuant to Section 3(a) in an amount equal to the Additional Consideration Amount and assuming Nascent acquires title to the Patents, the Company shall, and shall cause Nascent to, use commercially reasonable efforts to pursue Patent Claims with a view to maximizing the amount of Cash Available for Distribution pursuant to the Nascent Operating Agreement and the amount of “Cash Available for Distribution” (as to be defined in the Proposed UCANN Distribution Agreement) and the amount of Distributions paid to Assignee pursuant to Section 3(a); and, in furtherance of the foregoing, the Company covenants (i) to use commercially reasonable efforts to determine in coordination with Nascent’s auditor whether there is Cash Available for Distribution and “Cash Available for Distribution” (as to be defined in the Proposed UCANN Distribution Agreement) at least once every calendar quarter, and (ii) to the extent there is any Cash Available for Distribution in any calendar quarter and/or “Cash Available for Distribution” (as to be defined in the Proposed UCANN Distribution Agreement) to use its power as manager of Nascent to cause all of such Cash Available for Distribution and/or “Cash Available for Distribution” (as to be defined in the Proposed UCANN Distribution Agreement) to be distributed in accordance with and subject to the Nascent Operating Agreement and/or the Proposed UCANN Distribution Agreement, as applicable, subject in each case to the provisions of this Agreement, by the end of such calendar quarter.
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(c) Until Assignee shall have received an amount of Distributions pursuant to Section 3(a) of this Agreement equal to the Additional Consideration Amount, the Company shall not, without the prior written consent of Assignee, (i) sell, assign, exchange, pledge or otherwise transfer, encumber, or otherwise diminish or impair any of its rights with respect to any portion of its Equity Interest in Nascent, or any of its Distributions Rights (other than pursuant to the Assignment effected by this Agreement), or (ii) withdraw as manager of Nascent.
(d) Until Assignee shall have received an amount of Distributions pursuant to Section 3(a) of this Agreement equal to the Additional Consideration Amount, neither Nascent nor the Company shall, nor shall the Company permit Nascent to, without the prior written consent of Assignee, sell, assign, exchange, pledge or otherwise transfer, encumber, or otherwise diminish or impair any of Nascent’s rights, whether now existing or hereafter arising, with respect to any of the Patents.
(e) Until Assignee shall have received an amount of Distributions pursuant to Section 3(a) of this Agreement equal to the Additional Consideration Amount, Nascent and the Company shall use commercially reasonable efforts to (i) enter into the Proposed Distribution and Contingent Payment Distribution Agreements on final terms that do not provide for the payment of fees, Distributions or other consideration to any third party Person contingent or payable upon or in connection with a successful prosecution of one or more Patent Claims and do not provide for the payment of Distributions of Cash Available for Distribution that the Company would otherwise be entitled to receive pursuant to the Nascent Operating Agreement to any Person, other than the Proposed Blackmon Distributions, Proposed McCarter Contingency Fees, Proposed Patent Claim Lender Fees and Proposed UCANN Pool Distributions, and (ii) not enter into or permit any Affiliate of Nascent or the Company to enter into, any agreement with any third party Person, or execute or permit any Affiliate of Nascent or the Company to execute any instrument or document, providing for the payment of fees, Distributions or other consideration to any third party Person contingent or payable upon or in connection with a successful prosecution of one or more Patent Claims or providing for the payment of Distributions of Cash Available for Distribution that the Company would otherwise be entitled to receive pursuant to the Nascent Operating Agreement to any Person other than the Company, other than the Proposed Blackmon Distributions, Proposed McCarter Contingency Fees, Proposed Patent Claim Lender Fees and Proposed UCANN Pool Distributions.
(f) Upon the entry by the Company, Nascent or any Affiliate of the Company or Nascent into any agreement with any third party Person, or the execution by the Company, Nascent or any Affiliate of the Company or Nascent of any instrument or document providing for the payment of fees, Distributions or other consideration to any third party Person contingent or payable upon or in connection with a successful prosecution of one or more Patent Claims or providing for the payment of Distributions that the Company would otherwise be entitled to receive pursuant to the Nascent Operating Agreement to any Person other than the Company, including without limitation any of the Proposed Distribution and Contingent Payment Agreements and any ancillary documents executed in connection therewith, the Company shall promptly, and in any event within three (3) Business Days following the date any such agreement, instrument or document, is executed by the Company, Nascent or any Affiliate of the Company, send written notice thereof to Assignee and provide a duly executed copy of each such agreement, instrument or document, to Assignee. For the avoidance of doubt, the agreements, instruments and documents required to be provided by the Company to Assignee pursuant to this Section 8(e) include any amendments or other instruments modifying, waiving or terminating any provisions of any agreement, instrument and/or other document otherwise required to be delivered by the Company to Assignee pursuant to the foregoing sentence of this Section 8(e).
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(g) Until Assignee shall have received an amount of Distributions pursuant to Section 3(a) of this Agreement equal to the Additional Consideration Amount, the Company shall not, and the Company shall not permit Nascent to, amend, modify, waive, terminate any term or provision in the Nascent Operating Agreement or consent to any such amendment, modification, waiver or termination, to the extent doing so would reasonably be expected to impair, decrease or delay the payment of (i) the amount of Cash Available for Distribution that would otherwise be available at any time to be paid as Distributions to the members of Nascent (including the Company), (ii) the potential amount of any Distributions that the Company, Nascent or any entity in which the Company has an interest, would otherwise recover and/or be entitled to in the event that the Company, Nascent or any entity in which the Company has an interest is successful in prosecuting any Patent Claim or (iii) the potential amount of Distributions that would otherwise be distributed to Assignee pursuant to the terms of this Agreement.
9. Miscellaneous.
(a) Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by any Party against any other Party or Parties concerning the transactions contemplated by this Agreement, or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court of the State of Delaware. The Parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTIONS CONTEMPLATED HEREBY. The prevailing Party shall be entitled to recover from the other Party and/or Parties, as applicable, its reasonable attorney’s fees and costs. Each Party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other agreement, certificate, instrument or document contemplated hereby or thereby 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 law.
(b) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each Party and delivered to the other Party. A facsimile or .pdf signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile or .pdf signature. Delivery of a counterpart signature hereto by facsimile or email/.pdf transmission shall be deemed validly delivery thereof.
(c) Construction; Headings. This Agreement shall be deemed to be jointly drafted by Nascent, the Company and Assignee and shall not be construed against any person as the drafter hereof. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.
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(d) Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Agreement, or any other agreement, certificate, instrument or document contemplated hereby or thereby.
(e) Entire Agreement. This Agreement and the other Transaction Documents contain the entire understanding of the parties with respect to the matters covered herein and therein and supersede any prior understandings or written or oral agreements between the Parties respecting the subject matter of this Agreement and the other Transaction Documents. To the extent of any conflict between any term or provision of this Agreement and/or any other Transaction Document, on the one hand, and any term or provision in any prior agreement between any of the Parties (including without limitation that certain letter agreement re: Waiver of Security Interest dated as of March 22, 2023 by and between the Company and Assignee), on the other hand, with respect to the matters covered in this Agreement and the other Transaction Documents, the terms of this Agreement and the other Transaction Documents shall control.
(f) Amendments. No provision of this Agreement or any agreement or instrument contemplated hereby may be waived or amended other than by an instrument in writing signed by each of the Parties.
(g) Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or to such other address as such Party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (1) upon hand delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received) or (2) on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to Nascent and/or the Company, to:
CAN B̅ CORP.
960 South Broadway, Suite 120
Hicksville, NY 11801
Attention: Marco Alfonsi
e-mail: [email protected]
If to Assignee, to:
Walleye Opportunities Master Fund Ltd
2800 Niagara Lane North
Plymouth, MN 55447
e-mail: [email protected]
(h) Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their successors and assigns. the Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of Assignee. Assignee may assign its rights hereunder to any Person without the consent of the Company.
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(i) Third Party Beneficiaries. This Agreement is intended for the benefit of the Parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
(j) Survival. The representations and warranties of the Company and Nascent and the agreements and covenants set forth in this Agreement shall survive the sale, transfer and assignment of the Purchased Distributions Rights to the Company.
(k) Further Assurances. Each Party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(l) 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.
(m) Indemnification. the Company shall defend, indemnify and hold harmless Assignee, and its stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (i) any misrepresentation or breach of any representation or warranty made by the Company, (ii) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or (iii) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law. The indemnification obligations of the Company under this Section 9(m) shall survive the termination of this Agreement and the other Transaction Documents.
(n) Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Company by vitiating the intent and purpose of the transactions contemplated hereby and under the Purchase Agreement. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement or any other agreement, certificate, instrument or document contemplated hereby will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, or any other agreement, certificate, instrument or document contemplated hereby, that Assignee shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement, or any other agreement, certificate, instrument or document contemplated hereby, and to enforce specifically the terms and provisions hereof and thereof, without the necessity of showing economic loss and without any bond or other security being required.
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(o) Payment Set Aside. To the extent that the (i) the Company makes a payment or payments to the Assignee hereunder, or pursuant to any other agreement, certificate, instrument or document contemplated hereby, or (ii) Assignee enforces or exercises its rights hereunder, pursuant to this Agreement or pursuant to any other Transaction Document, or any agreement, certificate, instrument or document contemplated hereby or thereby, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are for any reason (A) subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, or disgorged by the Assignee, or (B) are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person or entity under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then (1) 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 and (2) the Company shall immediately pay to Assignee a dollar amount equal to the amount that was for any reason (x) subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, or disgorged by Assignee, or (y) required to be refunded, repaid or otherwise restored to Assignee, a trustee, receiver or any other Person or entity under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action).
(p) Failure or Indulgence Not Waiver. No failure or delay on the part of Assignee in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of Assignee existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.
| NASCENT: | ||
| NASCENT PHARMA, LLC | ||
| By: | Can B̅ Corp., its sole Manager | |
| By: | /s/ Marco Alfonsi | |
| Name: | Marco Alfonsi | |
| Title: | Chief Executive Officer |
| COMPANY: | ||
| CAN B̅ CORP. | ||
| By: | /s/Marco Alfonsi | |
| Name: | Marco Alfonsi | |
| Title: | Chief Executive Officer |
| ASSIGNEE: | ||
| WALLEYE OPPORTUNITIES MASTER FUND LTD | ||
| By: | /s/William England | |
| Name: | William England | |
| Title: | Chief Executive Officer of the Manager |
[Signature Page to Distribution and Assignment Agreement]
Schedule I
Wire Instructions
(for payments to Assignee)
(omitted)
EXHIBIT A-1
Nascent Pharma, LLC Certificate of Formation
(omitted)
EXHIBIT A-2
Nascent Pharma, LLC Operating Agreement
(omitted)
Exhibit 9.5
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of October 27, 2023, by and between CAN B̅ CORP., a Florida corporation (the “Company”), and the investor identified on the signature page hereto (together with it permitted assigns, the “Investor”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the securities purchase agreement by and between the parties hereto, dated as of October 26, 2023 (as amended, restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”).
WHEREAS:
The Company has agreed, upon the terms and subject to the conditions of the Purchase Agreement, to sell to the Investor the Securities and to induce the Investor to enter into the Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “Securities Act”), and applicable state securities laws.
NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following meanings:
a. “Effective Date” means the date that the applicable Registration Statement has been declared effective by the SEC.
b. “Investor” shall have the meaning set forth above.
c. “Person” means any individual or entity including but not limited to any corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.
d. “Register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more registration statements of the Company in compliance with the Securities Act and/or pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis (“Rule 415”), and the declaration or ordering of effectiveness of such registration statement(s) by the United States Securities and Exchange Commission (the “SEC”).
e. “Registrable Securities” means all of the (i) Conversion Shares issuable under the Note purchased by the Investor on the initial Closing Date, (ii) Conversion Shares issuable under the Consolidated Amended and Restated Walleye Note, and (iii) shares of Common Stock issued to the Investor as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitation on purchases under the Purchase Agreement or the related agreements entered into therewith.1
f. “Registration Statement” means one or more registration statements of the Company covering only the sale of the Registrable Securities.
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2. REGISTRATION.
a. Mandatory Registration. The Company shall, within forty five (45) calendar days from the date of this Agreement (the “Filing Deadline”), file with the SEC an initial Registration Statement covering the maximum number of Registrable Securities as shall be permitted to be included thereon in accordance with applicable SEC rules, regulations and interpretations, including but not limited to Rule 415 under the Securities Act, so as to permit the resale of such Registrable Securities by the Investor at then-prevailing market prices (and not fixed prices), subject to the aggregate number of authorized shares of the Company’s Common Stock then available for issuance in its Certificate of Incorporation. The initial Registration Statement shall register only Registrable Securities unless otherwise approved by the Investor. The Investor and its counsel shall have a reasonable opportunity to review and comment upon such Registration Statement and any amendment or supplement to such Registration Statement and any related prospectus prior to its filing with the SEC, and the Company shall give due consideration to all reasonable comments. The Investor shall furnish all information reasonably requested by the Company for inclusion therein. The Company shall have the Registration Statement and any amendment declared effective by the SEC no later than the Effectiveness Deadline. The Company shall keep the Registration Statement effective pursuant to Rule 415 promulgated under the Securities Act and available for the resale by the Investor of all of the Registrable Securities covered thereby at all times until the date on which the Investor shall have resold all the Registrable Securities covered thereby and no Available Amount remains under the Purchase Agreements (the “Registration Period”). The Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any 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 in which they were made, not misleading. In the event that the Registration Statement becomes stale, the Company shall immediately file one or more post-effective amendments to obtain an effective Registration Statement.
b. Rule 424 Prospectus. The Company shall, as required by applicable securities regulations, from time to time file (in each case, at the earliest possible date) with the SEC, pursuant to Rule 424 promulgated under the Securities Act, the prospectus and prospectus supplements, if any, to be used in connection with sales of the Registrable Securities under the Registration Statement. The Company shall file such initial prospectus covering the Investor’s sale of the Registrable Securities on the same date that the Registration Statement is declared effective by the SEC. The Investor and its counsel shall have a reasonable opportunity to review and comment upon such prospectus prior to its filing with the SEC, and the Company shall give due consideration to all such comments. The Investor shall use its reasonable best efforts to comment upon such prospectus within one (1) Business Day from the date the Investor receives the final pre-filing version of such prospectus.
c. Sufficient Number of Shares Registered. In the event the number of shares available under the Registration Statement is insufficient to cover all of the Registrable Securities, the Company shall amend the Registration Statement or file a new Registration Statement (a “New Registration Statement”), so as to cover all of such Registrable Securities (subject to the limitations set forth in Section 2(a)) as soon as practicable, but in any event not later than ten (10) Business Days after the necessity thereof arises, subject to any limits that may be imposed by the SEC pursuant to Rule 415 under the Securities Act. The Company shall use it reasonable best efforts to cause such amendment and/or New Registration Statement to become effective as soon as practicable following the filing thereof. In the event that any of the Registrable Securities are not included in the Registration Statement, or have not been included in any New Registration Statement and the Company files any other registration statement under the Securities Act (other than on Form S-4, Form S-8, or with respect to other employee related plans or rights offerings) (“Other Registration Statement”) then the Company shall include such remaining Registrable Securities in such Other Registration Statement. The Company agrees that it shall not file any such Other Registration Statement unless all of the Registrable Securities have been included in such Other Registration Statement or otherwise have been registered for resale as described above.
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d. Offering. If the staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering pursuant to a Registration Statement filed pursuant to this Agreement as constituting an offering of securities that does not permit such Registration Statement to become effective and be used for resales by the Investor under Rule 415 at then prevailing market prices (and not fixed prices), or if after the filing of the initial Registration Statement with the SEC pursuant to Section 2(a), the Company is otherwise required by the Staff or the SEC to reduce the number of Registrable Securities included in such initial Registration Statement, then the Company shall reduce the number of Registrable Securities to be included in such initial Registration Statement (with the prior consent, which shall not be unreasonably withheld, of the Investor and its legal counsel as to the specific Registrable Securities to be removed therefrom) until such time as the Staff and the SEC shall so permit such Registration Statement to become effective and be used as aforesaid. In the event of any reduction in Registrable Securities pursuant to this paragraph, the Company shall file one or more New Registration Statements in accordance with Section 2(c) until such time as all Registrable Securities have been included in Registration Statements that have been declared effective and the prospectus contained therein is available for use by the Investor. Notwithstanding any provision herein or in the Purchase Agreement to the contrary, the Company’s obligations to register Registrable Securities (and any related conditions to the Investor’s obligations) shall be qualified as necessary to comport with any requirement of the SEC or the Staff as addressed in this Section 2(d).
e. Effect of Failure to File and Obtain and Maintain Effectiveness of any Registration Statement.
(i) If a Registration Statement covering the resale of all of the Registrable Securities required to be covered thereby (disregarding any reduction pursuant to Section 2(d)) and required to be filed by the Company pursuant to this Agreement is not filed with the SEC on or before the Filing Deadline for such Registration Statement then, as partial relief for the damages to Investor by reason of any such delay in its ability to sell the underlying Common Stock (which remedy shall not be exclusive of any other remedies available at law or in equity, including, without limitation, specific performance), to the extent no Conversion Shares have been registered, the Company shall be obligated to make payments to Investor, as liquidated damages and not as a penalty, in an amount equal to 2% of the amount then currently outstanding under the Initial Note and the Consolidated Amended and Restated Walleye Note (including, without limitation, all principal, interest and other payments due thereon) for each 30-day period following the Filing Deadline, and such payments shall be made to Investor in cash not later than two (2) Trading Days after the end of each 30-day period.
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(ii) If a Registration Statement covering the resale of all of the Registrable Securities required to be covered thereby (disregarding any reduction pursuant to Section 2(d)) and required to be filed by the Company pursuant to this Agreement (x) is not declared effective by the SEC on or before the Effectiveness Deadline (as defined below) for such Registration Statement (an “Effectiveness Failure”), and (y) if on the Business Day immediately following the Effective Date for such Registration Statement the Company shall not have filed a “final” prospectus for such Registration Statement with the SEC under Rule 424 in accordance with Section 2(b) (whether or not such a prospectus is technically required by such rule), then, as partial relief for the damages to Investor by reason of any such delay in its ability to sell the underlying Common Shares (which remedy shall not be exclusive of any other remedies available at law or in equity, including, without limitation, the remedies set forth in Section 2(e)(i) above) the Company shall be deemed to not have satisfied this clause (ii) and such event shall be deemed to be an Effectiveness Failure), then to the extent no Conversion Shares have been registered, the Company shall be obligated to make payments to Investor, as liquidated damages and not as a penalty, in an amount equal to 2% of the amount then currently outstanding under the Initial Note and the Consolidated Amended and Restated Walleye Note (including, without limitation, all principal, interest and other payments due thereon) for each 30-day period or pro rata for any portion thereof following the Effectiveness Deadline, and such payments shall be made to Investor in cash not later than two (2) Trading Days after the end of each 30-day period. “Effectiveness Deadline” means (i) with respect to the initial Registration Statement required to be filed pursuant to Section 2(a), the earlier of the (A) 90th calendar day following the date of this Agreement (or, if such Registration Statement is subject to a full review by the SEC, the 120th calendar day after the date of this Agreement) and (B) 2nd Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement will not be reviewed or will not be subject to further review and (ii) with respect to any additional Registration Statements that may be required to be filed by the Company pursuant to this Agreement, the earlier of the (A) 30th calendar day following the date on which the Company was required to file such additional Registration Statement (or, if such Registration Statement is subject to a full review by the SEC, the 90th calendar day after such required filing date) and (B) 2nd Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement will not be reviewed or will not be subject to further review.
3. RELATED OBLIGATIONS.
With respect to the Registration Statement and whenever any Registrable Securities are to be registered pursuant to Section 2 including on any New Registration Statement, the Company shall use its reasonable best efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:
a. The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to any registration statement and the prospectus used in connection with such registration statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep the Registration Statement or any New Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement or any New Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such registration statement.
b. The Company shall permit the Investor to review and comment upon the Registration Statement or any New Registration Statement and all amendments and supplements thereto at least two (2) Business Days prior to their filing with the SEC, and not file any document in a form to which Investor reasonably objects. The Investor shall use its reasonable best efforts to comment upon the Registration Statement or any New Registration Statement and any amendments or supplements thereto within two (2) Business Days from the date the Investor receives the final version thereof. The Company shall furnish to the Investor, without charge, any correspondence from the SEC or the Staff to the Company or its representatives relating to the Registration Statement or any New Registration Statement.
c. Upon request of the Investor, the Company shall furnish to the Investor, (i) promptly after the same is prepared and filed with the SEC, at least one copy of such registration statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits, (ii) upon the effectiveness of any registration statement, a copy of the prospectus included in such registration statement and all amendments and supplements thereto (or such other number of copies as the Investor may reasonably request) and (iii) such other documents, including copies of any preliminary or final prospectus, as the Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by the Investor. For the avoidance of doubt, any filing available to the Investor via the SEC’s live EDGAR system shall be deemed “furnished to the Investor” hereunder.
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d. The Company shall use reasonable best efforts to (i) register and qualify the Registrable Securities covered by a registration statement under such other securities or “blue sky” laws of such jurisdictions in the United States as the Investor reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify the Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.
e. As promptly as practicable after becoming aware of such event or facts, the Company shall notify the Investor in writing of the happening of any event or existence of such facts as a result of which the prospectus included in any registration statement, as then in effect, includes an untrue statement of a material fact or omits 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, and promptly prepare a supplement or amendment to such registration statement to correct such untrue statement or omission, and deliver a copy of such supplement or amendment to the Investor (or such other number of copies as the Investor may reasonably request). The Company shall also promptly notify the Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a registration statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to the Investor by email on the same day of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or supplements to any registration statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a registration statement would be appropriate.
f. The Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of any registration statement, or the suspension of the qualification of any Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify the Investor of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
g. The Company shall (i) cause all the Registrable Securities to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, or (ii) secure designation and quotation of all the Registrable Securities on the Principal Market. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section.
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h. The Company shall cooperate with the Investor to facilitate the timely preparation and delivery of the Registrable Securities (not bearing any restrictive legend) either by DWAC, DRS, or in certificated form if DWAC or DRS is unavailable, to be offered pursuant to any registration statement and enable such Registrable Securities to be in such denominations or amounts as the Investor may reasonably request and registered in such names as the Investor may request.
i. The Company shall at all times provide a transfer agent and registrar with respect to its Common Stock.
j. If reasonably requested by the Investor, the Company shall (i) immediately incorporate in a prospectus supplement or post-effective amendment such information as the Investor believes should be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities; (ii) make all required filings of such prospectus supplement or post-effective amendment as soon as practicable upon notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any registration statement.
k. The Company shall use its reasonable best efforts to cause the Registrable Securities covered by any registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.
l. Within one (1) Business Day after any registration statement which includes the Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investor) confirmation that such registration statement has been declared effective by the SEC in the form attached hereto as Exhibit A. Thereafter, if requested by the Investor at any time, the Company shall require its counsel to deliver to the Investor a written confirmation whether or not the effectiveness of such registration statement has lapsed at any time for any reason (including, without limitation, the issuance of a stop order) and whether or not the registration statement is current and available to the Investor for sale of all of the Registrable Securities.
m. The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of Registrable Securities pursuant to any registration statement.
4. OBLIGATIONS OF THE INVESTOR.
a. The Company shall notify the Investor in writing of the information the Company reasonably requires from the Investor in connection with any registration statement hereunder. The Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.
b. The Investor agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any registration statement hereunder.
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c. The Investor agrees that, upon receipt of any notice from the Company of the happening of any event or existence of facts of the kind described in Section 3(f) or the first sentence of 3(e), the Investor will immediately discontinue disposition of Registrable Securities pursuant to any registration statement(s) covering such Registrable Securities until the Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(f) or the first sentence of 3(e). Notwithstanding anything to the contrary, the Company shall cause its transfer agent to promptly deliver shares of Common Stock without any restrictive legend in accordance with the terms of the Purchase Agreement or the related agreements entered into therewith, as applicable, in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of Section 3(e) and for which the Investor has not yet settled.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than sales or brokerage commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company, shall be paid by the Company.
6. INDEMNIFICATION.
a. To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Investor, each Person, if any, who controls the Investor, the members, the directors, officers, partners, employees, agents, representatives of the Investor and each Person, if any, who controls the Investor within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, attorneys’ fees, amounts paid in settlement or expenses, joint or several, (collectively, “Claims”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in the Registration Statement, any New Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to the Registration Statement or any New Registration Statement or (iv) any material violation by the Company of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, “Violations”). The Company shall reimburse each Indemnified Person promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information about the Investor furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Registration Statement, any New Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e); (ii) with respect to any superseded prospectus, shall not inure to the benefit of any such person from whom the person asserting any such Claim purchased the Registrable Securities that are the subject thereof (or to the benefit of any person controlling such person) if the untrue statement or omission of material fact contained in the superseded prospectus was corrected in the revised prospectus, as then amended or supplemented, if such revised prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e), and the Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving rise to a violation and such Indemnified Person, notwithstanding such advice, used it; (iii) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e); and (iv) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investor pursuant to Section 9.
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b. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.
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c. The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.
d. The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS AND DISCLOSURE UNDER THE SECURITIES ACTS.
With a view to making available to the Investor the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit the Investor to sell securities of the Company to the public without registration (“Rule 144”), the Company agrees, at the Company’s sole expense, to:
a. make and keep public information available, as those terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144;
c. furnish to the Investor so long as the Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting and or disclosure provisions of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration; and
d. take such additional action as is requested by the Investor to enable the Investor to sell the Registrable Securities pursuant to Rule 144, including, without limitation, delivering all such legal opinions, consents, certificates, resolutions and instructions to the Company’s Transfer Agent as may be requested from time to time by the Investor and otherwise fully cooperate with Investor and Investor’s broker to effect such sale of securities pursuant to Rule 144.
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The Company agrees that damages may be an inadequate remedy for any breach of the terms and provisions of this Section 8 and that Investor shall, whether or not it is pursuing any remedies at law, be entitled to equitable relief in the form of a preliminary or permanent injunctions, without having to post any bond or other security, upon any breach or threatened breach of any such terms or provisions.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor.
10. AMENDMENT OF REGISTRATION RIGHTS.
No provision of this Agreement may be amended or waived by the parties from and after the date that is one Business Day immediately preceding the initial filing of the Registration Statement with the SEC. Subject to the immediately preceding sentence, no provision of this Agreement may be (i) amended other than by a written instrument signed by both parties hereto or (ii) waived other than in a written instrument signed by the party against whom enforcement of such waiver is sought. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by email (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses for such communications shall be:
If to the Company, to:
CAN B̅ CORP.
960 South Broadway, Suite 120
Hicksville, NY 11801
Email: [email protected]
Attention: Marco Alfonsi
If to the Investor:
As provided on the signature page hereto
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or at such other address and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s email account containing the time, date, recipient email address, as applicable, and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by, or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
c. The corporate laws of the State of Delaware shall govern all issues concerning this Agreement. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court of the State of Delaware, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. 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 to such party at the address for such 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 manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.
d. The Agreement, Purchase Agreement, Initial Note, Consolidated Amended and Restated Walleye Note and ancillary documentation entered into between the Company and Investor therewith constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. The Agreement, Purchase Agreement, Initial Note, Consolidated Amended and Restated Walleye Note and ancillary documentation entered into between the Company and Investor therewith supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.
e. Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties hereto.
f. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
g. This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by e-mail in a “.pdf” format data file of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
h. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
i. 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.
j. 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.
* * * * * *
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of day and year first above written.
| THE COMPANY: | ||
| CAN B̅ CORP. | ||
| By: | /s/ Marco Alfonsi | |
| Name: | MARCO ALFONSI | |
| Title: | CHIEF EXECUTIVE OFFICER | |
| INVESTOR: | ||
| WALLEYE OPPORTUNITIES MASTER FUND LTD | ||
| By: | /s/ William England | |
| Name: | William England | |
| Title: | Chief Executive Officer of the Manager | |
Address for Notice: 2800 Niagara Lane North, Plymouth, MN 55447
E-mail for Notice: [email protected]
[Signature Page to Registration Rights Agreement]
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EXHIBIT A
TO REGISTRATION RIGHTS AGREEMENT
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
______________, 2023
________________
________________
________________
Re: Effectiveness of Registration Statement
Ladies and Gentlemen:
We are counsel to CAN B̅ CORP., a Florida corporation (the “Company”), and have represented the Company in connection with that certain Securities Purchase Agreement, dated as of October 26, 2023 (the “Purchase Agreement”), entered into by and between the Company and Walleye Opportunities Master Fund Ltd, a Cayman Islands company (the “Investor”) pursuant to which the Company has agreed to issue to the Investor certain shares of common stock of the Company, nil par value per share, in accordance with the terms of the Purchase Agreement and the related documents referenced below. In connection with the transactions contemplated by the Purchase Agreement, the Company has registered with the U.S. Securities & Exchange Commission the following shares of Common Stock:
| (1) | ___________ Conversion Shares (as defined in the Purchase Agreement) issued and/or to be issued to the Investor upon the conversion of the Initial Note (as defined in the Purchase Agreement) in accordance with the Initial Note. | |
| (2) | ___________ Conversion Shares issued and/or to be issued to the Investor upon the conversion of the Consolidated Amended and Restated Walleye Note (as defined in the Purchase Agreement) in accordance with the Consolidated Amended and Restated Walleye Note. |
Pursuant to the Purchase Agreement, the Company also has entered into a Registration Rights Agreement, dated as of the initial Closing Date (under and as defined in the Purchase Agreement) with the Investor (the “Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement) under the Securities Act of 1933, as amended (the “Securities Act”). In connection with the Company’s obligations under the Purchase Agreement and the Registration Rights Agreement, on [_____], 2023, the Company filed a Registration Statement (File No. 333-[_________]) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the resale of the Registrable Securities.
In connection with the foregoing, we advise you that a member of the SEC’s staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the Securities Act at [_____] [A.M./P.M.] on [__________], 2023 and we have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the Securities Act pursuant to the Registration Statement and may be issued without any restrictive legend.
| Very truly yours, | |||
| [Company Counsel] | |||
| By: | |||
| cc: | Walleye Opportunities Master Fund Ltd | ||