ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
Effective
The terms of this bridge financing included the following agreements and
documents, each entered into as of
Securities Purchase Agreement
The Company entered into a Securities Purchase Agreement (the "Purchase
Agreement") by and between the Company and the Lender to issue the Note,
described below. Under the Purchase Agreement, the Company will issue
The Purchase Agreement also included customary representations, warranties, and covenants of the parties to such agreement.
Secured Convertible Promissory Note
The Company issued to the Lender the Note, which included the following terms:
? Principal Amount equal to
of
the Company to pay accrued expenses and for other general corporate purposes.
? Maturity date:
? The Note bears a one-time interest charge of 10%, which shall be paid at the
maturity date, unless the Note is converted into shares of Common Stock.
? The Lender may convert any or all of the obligations of the Note into shares of
Common Stock at a price per share (the "Conversion Price") equal to the
following, subject to customary adjustments for stock splits or similar
transactions:
-
to the average of the volume weighted average prices of the Common Stock during
the five (5) trading days prior to
means any day on which the Common Stock is tradable on the OTCQB or on the
principal securities exchange or other securities market on which the Common
Stock is then being traded; or if lower
- From and after the maturity date, a price equal to 70% of the average of the
two lowest daily volume-weighted average prices of the Common Stock for the 15
trading days prior to the Conversion Date.
? The number of shares of Common Stock that may be issued upon conversion is
subject to specified limitations of beneficial ownership that are set forth in
the Note of 4.99% or, at the option of the Lender, 9.99% of the issued and
outstanding shares of Common Stock, which limitations may be decreased or
terminated in the Lender's sole discretion upon 61 days' notice to the Company.
? The Company may prepay the Note in whole or part, subject to specified
prepayment premiums or penalties, equal to 15% for prepayments on or prior to
to
? The Note provided for certain customary events of default, including:
- Change of control, being: (1) acquisition of beneficial ownership of 50% or
more of the voting securities of the Company by any individual or legal entity
or group, other than in connection with an underwritten public offering; or (2)
merger or similar transaction where the stockholders of the Company do not own
50% of the aggregate voting power of the surviving entity after such
transaction; or (3) sale of all or substantially all of the assets and the
stockholders of the Company immediately prior to such transaction do not own
50% of the aggregate voting power of the acquiring entity immediately after
such transaction; or (4) a replacement at one time or within a two year period
of more than half of the members of the Board of Directors, if not approved by
a majority of the Board of Directors; or (5)
Watumull shall both have been terminated by the Company as Chief Executive
Officer and Chief Operating Officer other than for cause;
- Judgements entered against the Company for more than
vacated within 180 days;
- Failure of the Company to comply with the reporting obligations under the
Securities Exchange Act of 1934, as amended;
- Suspension of trading of the Common Stock that continues for 5 trading days; or
- Delisting of the Common Stock on the OTCQB or any other exchange that the
Common Stock is listed for trading that continues for 15 days.
? Upon any event of default, the principal of the Note is increased by 5% and, at
the Lender's option, the maturity of the Note is accelerated.
The Note also included customary representations, warranties, and covenants of the Company.
Security Agreement
The Company granted to the Lender a security interest pursuant to the terms of the Security Agreement (the "Security Agreement") by and between the Company and the Lender in specified collateral, including (as defined under the Uniform Commercial Code): all finished goods, including, without limitation, all inventory; all accounts, together with all instruments, all documents of title representing any of the foregoing, and all right, title, security, and guaranties with respect to each account, including any right of stoppage in transit; and the products and proceeds of all of the foregoing.
The Security Agreement also included customary representations, warranties, and covenants of the parties to such agreement. Upon any Event of Default under the terms of the Security Agreement, the Lender shall have the rights of a secured party under the Uniform Commercial Code, including the right to take possession and sell the collateral and use under a license the intellectual property of the Company related to its inventory.
Subsidiary Guaranty
? Incur or suffer to exist indebtedness or grant or suffer to exist any lien
that, in either case, provides a security interest that is senior to the
security interest granted by the Company on the collateral pledged under the
Security Agreement.
? Enter into any affiliated transaction, other than transactions that are made on
arm's length terms and approved by the majority of the disinterested directors . . .
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 2.03 by reference.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 3.02 by reference.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Exhibit No. Description 10.1 Form of Securities Purchase Agreement by and amongCardax, Inc. andHarbor Gates Capital, LLC 10.2 Form of Secured Convertible Promissory Note issued byCardax, Inc. toHarbor Gates Capital, LLC 10.3 Form of Security Agreement by and amongCardax, Inc. and HarborGates Capital, LLC 10.4 Form of Subsidiary Guaranty by and amongCardax Pharma, Inc. andHarbor Gates Capital, LLC 10.5 Form of Personal Guaranty ofDavid G. Watumull
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