Form 8-K - Current report

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): November 1, 2024

 

Beyond Air, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Delaware		001-38892		47-3812456
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

900 Stewart Avenue, Suite 301

Garden City, NY 11530

(Address of Principal Executive Offices and Zip Code)

 

[phone]

Registrant’s Telephone Number, Including Area Code

 

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $.0001 per share		XAIR		The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

 

Item 1.01 Entry Into a Material Definitive Agreement.

 

As previously disclosed, on September 27, 2024, Beyond Air, Inc. (the “Company”) entered into a binding term sheet (the “Term Sheet”) for a secured loan with certain lenders including its Chief Executive Officer Steven Lisi and director Robert Carey (collectively, the “Lender”). The Term Sheet was approved by each of the Company’s independent and disinterested directors, following the receipt of a recommendation from an independent investment bank.

 

On November 1, 2024, the Company entered into a Loan and Security Agreement (the “Agreement”) with the Lender to memorialize the provisions of the Term Sheet. The Agreement provides for a $11,500,000 loan (the “Loan”). The Loan bears interest at a rate per annum (subject to increase during an event of default) equal to 15% of which 3% shall be payable in cash and 12% payable in kind through June 30, 2026 and thereafter all in cash. If not earlier repaid in full, the outstanding principal amount of the Loan, together with any accrued and unpaid interest, shall be due and payable on October 4, 2034.

 

On a quarterly basis commencing October 1, 2026, to the extent that 8% of net sales (the “Royalty Interest”) for the immediately preceding fiscal quarter exceeds the amount of interest accrued for such fiscal quarter, then after giving effect to such interest payment and any other expenses due and owing on such date to Lender, the Company shall repay the principal amount of the Loan in cash in an amount equal to the lesser of (x) such difference and (y) the outstanding principal amount of the Loan on such date. If, on a quarterly basis commencing October 1, 2026, the amount of the Royalty Interest for the immediately preceding fiscal quarter is less than the amount of accrued interest due payable on the Loan for such fiscal quarter (the amount of such shortfall, the “Quarterly Interest Shortfall”), then a portion of the interest payment on any such interest payment date equal to the lesser of 100% of such interest payment and such Quarterly Interest Shortfall shall be paid in cash at a rate of 3% per annum and in kind at a rate of 12% per annum.

 

The Company’s obligations under the Agreement are secured by substantially all of the Company’s assets. The Agreement also includes events of default customary for financings of this type, in certain cases subject to customary periods to cure, following which the Lender may accelerate all amounts outstanding under the Loan. The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreement, a copy of which is attached as an exhibit to this Form 8-K and is incorporated herein by reference.

 

Also as previously disclosed, in connection with the Loan the Company issued to each of Mr. Lisi and Mr. Cary warrants (the “Warrants”) to purchase up to 3,295,544 and 9,886,633 shares of common stock, respectively, at an exercise price of $0.3793 per share. The Warrants may be exercised in whole or in part for a period of five years following shareholder approval of an increase in the Company’s authorized common stock. The Warrants (and the shares of common stock underlying the Warrants) were not registered under the Securities Act of 1933, as amended (the “Securities Act”), and were offered pursuant to an exemption from the registration requirements of the Securities Act provided under Section 4(a)(2) of the Securities Act. The foregoing description of the Warrants does not purport to be complete and is qualified in its entirety by reference to the full text of the form of Warrant, a copy of which is attached as an exhibit to this Form 8-K and is incorporated herein by reference.

 

 

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The information provided in Item 1.01 of this Form 8-K is hereby incorporated into this Item 2.03 by reference.

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The information provided in Item 1.01 of this Form 8-K is hereby incorporated into this Item 3.02 by reference.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No.		Description
4.1		Form of Warrant
10.1*		Loan and Security Agreement
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

* The schedules to this exhibit have been omitted because the registrant has determined that the information is both not material and is the type that the registrant treats as private or confidential.

 

 

 

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.

 

	BEYOND AIR, Inc.
Date: November 6, 2024	By:	/s/ Steven A. Lisi
	Name:	Steven A. Lisi
	Title:	Chief Executive Officer

 

 

 

Exhibit 4.1

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR IN ANY OTHER JURISDICTION. NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE MAY BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS, INCLUDING RULE 144 UNDER THE SECURITIES ACT. NOTWITHSTANDING THE FOREGOING, THIS SECURITY AND THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

 

Beyond Air, Inc.

 

WARRANT TO PURCHASE COMMON STOCK

 

Warrant No. [●]

Number of Shares: [●]

(subject to adjustment)

Original Issue Date: [●] (the “Original Issue Date”)

 

Beyond Air, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [●] or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company up to a total of [●] shares of common stock, $0.0001 par value per share (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”), at an exercise price per share equal to $[●] per share (as adjusted from time to time as provided in Section 9 herein, the “Exercise Price”), upon surrender of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”) at any time and from time to time on or after the Stockholder Approval Date (the “Initial Exercise Date”) and on or prior to the five-year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, and subject to the following terms and conditions:

 

1. Definitions. In addition to the other terms defined herein, the following terms are defined as follows:

 

(a) “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

(b) “Attribution Parties” means, collectively, the following Persons and entities: (i) any direct or indirect Affiliates of the Holder, (ii) any Person acting or who reasonably could be deemed to be acting as a Group together with the Holder or any of the foregoing and (iii) any other Persons whose beneficial ownership of the Common Stock reasonably could be aggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) or Section 16 of the Exchange Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.

 

 

(c) “Closing Sale Price” means, for any security as of any date, the last trade price for such security on the Principal Trading Market for such security, as reported by Bloomberg Financial Markets, or, if such Principal Trading Market begins to operate on an extended hours basis and does not designate the last trade price, then the last trade price of such security prior to 4:00 P.M., New York City time, as reported by Bloomberg Financial Markets, or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg Financial Markets, or, if no last trade price is reported for such security by Bloomberg Financial Markets, the average of the bid and ask prices, of any market makers for such security as reported in the OTC Link or “pink sheets” by OTC Markets Group Inc. (formerly OTC Markets Inc.) as of 4:00 P.M., New York City time on such date. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then the Board of Directors of the Company shall use its good faith judgment to determine the fair market value. The determination of the Board of Directors of the Company shall be binding upon all parties absent demonstrable error. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

 

(d) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(e) “Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

 

(f) “Principal Trading Market” means the national securities exchange or other trading market on which the Common Stock is primarily listed on and quoted for trading, which, as of the Original Issue Date shall be the Nasdaq Capital Market.

 

(g) “SEC” means the United States Securities and Exchange Commission.

 

(h) “Securities Act” means the Securities Act of 1933, as amended.

 

(i) “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, for the Company’s primary trading market or quotation system with respect to the Common Stock that is in effect on the date of delivery of an applicable Exercise Notice, which as of the Original Issue Date was “T+1”.

 

(j) “Stockholder Approval Date” means the date on which the Company obtains stockholder approval to increase the number of authorized shares of Common Stock sufficient for the issuance of the Warrant Shares upon the exercise of this Warrant.

 

(k) “Trading Day” means a day on which the Common Stock is traded on Principal Trading Market.

 

(l) “Transfer Agent” means Securities Transfer Corporation, the Company’s transfer agent and registrar for the Common Stock, and any successor appointed in such capacity.

 

(m) “VWAP” means, for any date, the daily volume weighted average price of the Common Stock on such date (or the nearest preceding date) on the Principal 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), or if the Common Stock is not then listed or quoted for trading on a securities exchange or trading market, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

(n) “Warrant Agent” means, initially, the Company in its capacity as transfer agent and registrar for the Warrants; provided that upon ten (10) days’ notice to the Holder, the Company may appoint a successor warrant agent which shall be the “Warrant Agent” hereunder.

 

 

2. Issuance of Securities; Registration of Warrants. The Warrant and the Warrant Shares are “restricted securities” under Rule 144 promulgated under the Securities Act. The Company shall register ownership of this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder (which shall include the initial Holder or, as the case may be, any assignee to which this Warrant is permissibly assigned hereunder) from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner and holder hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

3. Registration of Transfers. Subject to compliance with all applicable securities laws, the Company shall, or will cause the Warrant Agent to, register the transfer of all or any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, together with a written assignment of this Warrant substantially in the form attached hereto as Schedule 2 duly executed by the Holder or its agent or attorney, and payment for all applicable transfer taxes by the Holder or its transferee accompanied by reasonable evidence of authority of the party making such request that may be required by the Warrant Agent. Upon any such registration or transfer, a new warrant to purchase Common Stock in substantially the form of this Warrant (any such new warrant, a “New Warrant”) evidencing the portion of this Warrant so transferred shall be issued to the transferee, and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the New Warrant that the Holder has in respect of this Warrant. The Company shall, or will cause the Warrant Agent to, prepare, issue and deliver at the Company’s own expense any New Warrant under this Section 3. Until due presentment for registration of transfer, the Company may deem and treat the registered Holder of this Warrant as the absolute owner and holder for all purposes, absent actual notice to the contrary.

 

4. Exercise of Warrants.

 

(a) All or any part of this Warrant shall be exercisable by the registered Holder in any manner permitted by this Warrant at any time and from time to time on or after the Initial Exercise Date and on or before the Termination Date.

 

(b) The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached as Schedule 1 hereto (the “Exercise Notice”), completed and duly signed, and (ii) payment of the aggregate Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised (which may take the form of a “cashless exercise” if so indicated in the Exercise Notice and such “cashless exercise” is permitted pursuant to Section 10 below), and the date on which an Exercise Notice is delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date”. In the event that the aggregate Exercise Price is being paid in cash (a “Cash Exercise”), the Holder shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Exercise Notice by wire transfer within one (1) Trading Day following the Exercise Date (the “Exercise Price Delivery Deadline”). The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares, if any. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

 

5. Delivery of Warrant Shares.

 

(a) Upon exercise of this Warrant, the Company shall promptly but in no event later than the number of Trading Days comprising the Standard Settlement Period following the Exercise Date (or, in the case of a Cash Exercise, if the applicable aggregate Exercise Price is not received by the Company by the Exercise Price Delivery Deadline, one (1) Trading Day after the date the applicable aggregate Exercise Price is received by the Company): (1) credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with The Depository Trust Company (“DTC”) through its Deposit/Withdrawal At Custodian system if either (A) there is an effective registration statement permitting the issuance of such Warrant Shares to or resale of such Warrant Shares by the Holder, (B) such Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 promulgated under the Securities Act, or (C) any other unrestricted conditions are then satisfied in respect of such Warrant Shares, or (2) otherwise issue such Warrant Shares in the name of the Holder or its designee in restricted book-entry form in the Company’s share register. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. The Holder, or any other Person permissibly so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date, irrespective of the date such Warrant Shares are credited to the Holder’s or its designee’s DTC account or the date of the book entry positions evidencing such Warrant Shares, as the case may be. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if issued in restricted book-entry form, will contain a customary legend to the effect that the Warrant Shares are not registered.

 

(b) If within the Standard Settlement Period after the Exercise Date (or, in the case of a Cash Exercise, if the applicable aggregate Exercise Price is not received by the Company by the Exercise Price Delivery Deadline, one (1) Trading Day after the date the applicable aggregate Exercise Price is received by the Company), the Company fails to deliver to the Holder or its designee the required number of Warrant Shares in the manner required pursuant to Section 5(a) or fails to credit the Holder’s or its designee’s balance account with DTC for such number of Warrant Shares to which the Holder is entitled (including as the result of an Authorized Share Failure, but other than a failure caused by incorrect or incomplete information provided by the Holder to the Company or failure to pay the applicable aggregate Exercise Price), the Company shall pay additional damages to the Holder, in cash, for each thirty (30) day period thereafter that such exercise is not timely effected in an amount equal to (prorated for any partial period) one percent (1.00%) of (the product of (I) the number of Warrant Shares not issued and delivered to the Holder (in each case, free of any restrictive legend, provided, that any other unrestricted conditions are satisfied) and (II) the VWAP of a share of Common Stock on the Exercise Date. Alternatively, in lieu of the foregoing damages, but in addition to any other rights or remedies available to the Holder under this Warrant or otherwise at law or in equity, at the written election of the Holder made in the Holder’s sole discretion, if after such number of Trading Days comprising the Standard Settlement Period (or, in the case of a Cash Exercise, if the applicable aggregate Exercise Price is not received by the Company by the Exercise Price Delivery Deadline, one (1) Trading Day after the date the applicable aggregate Exercise Price is received by the Company) and prior to the receipt of such Warrant Shares, 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 the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall, within two (2) Trading Days after the Holder’s request and in the Holder’s sole and absolute discretion, either (1) pay in cash to the Holder an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased, at which point the Company’s obligation to issue such Warrant Shares shall terminate or (2) promptly honor its obligation to deliver to the Holder or its designee such Warrant Shares or credit the Holder’s or its designee’s balance account with DTC for such Warrant Shares and pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased in the Buy-In, less the product of (A) the number of shares of Common Stock purchased in the Buy-In, times (B) the price at which the sell order giving rise to such purchase obligation was executed by the Holder.  

 

(c) To the fullest extent permitted by law and subject to Section 5(b), the Company’s obligations to issue and deliver Warrant Shares in accordance with and subject to the terms hereof (including the limitations set forth in Section 11 below) are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance that might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. Subject to Section 5(b), nothing herein 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 Company’s failure to timely deliver the Warrant Shares upon exercise of the Warrant as required pursuant to the terms hereof.

 

 

6. Charges, Taxes and Expenses. Issuance and delivery of Warrant Shares upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, transfer agent fee or other incidental tax or expense (excluding any applicable stamp duties) in respect of the issuance of such shares, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any Warrant Shares or the Warrants in a name other than that of the Holder or an Affiliate thereof. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

 

7. Replacement of Warrant. In the event of any loss, theft or destruction of a Warrant for which the Company and the Warrant Agent shall have received from the registered holder an indemnification reasonably satisfactory to the Company and the Warrant Agent holding the Warrant Agent and Company harmless, the Warrant Agent shall issue a New Warrant in a form mutually agreed to by the Warrant Agent and the Company for those certificates alleged to have been lost, stolen or destroyed, absent notice to the Warrant Agent that such certificates have been acquired by a bona fide purchaser and, at the Company’s or the Warrant Agent’s request, reimbursement to the Company and the Warrant Agent of all reasonable expenses incidental thereto. The Warrant Agent may, at its option, issue replacement Warrants for mutilated certificates upon presentation thereof without such indemnity.

 

8. Reservation of Warrant Shares. The Company covenants that it will, from and after the Initial Exercise Date while this Warrant is outstanding, reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares that are issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other Purchase Rights (as defined below) of Persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The failure of the Company to reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock a sufficient number of shares of Common Stock to enable it to issue Warrant Shares upon exercise of this Warrant as herein provided is referred to herein as an “Authorized Share Failure.” The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and non-assessable. The Company will take all actions as may be reasonably necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, of any requirements of any securities exchange or automated quotation system upon which the Common Stock may be listed or of any contract to which the Company or any of its subsidiaries is bound. The Company further covenants that it will not, without the prior written consent of the Holder, increase the par value of the Common Stock at any time while this Warrant is outstanding. In furtherance of the Company’s obligations set forth in this Section 8, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than one hundred and eighty (180) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its commercially reasonable efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. Notwithstanding the foregoing, if any such time of an Authorized Share Failure, the Company is able to obtain the written consent of a majority of the shares of its issued and outstanding shares of Common Stock to approve the increase in the number of authorized shares of Common Stock, the Company may satisfy this obligation by obtaining such consent and submitting for filing with the SEC a definitive Information Statement on Schedule 14C, and such obligation shall be deemed satisfied on the 21st calendar day after such filing is accepted.

 

 

9. Certain Adjustments. The Exercise Price and number of Warrant Shares or issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9.

 

(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock or any other equity or equity equivalent securities issued and outstanding on the Original Issue Date and in accordance with the terms of such stock on the Original Issue Date or as amended, that is payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides its outstanding shares of Common Stock into a larger number of shares of Common Stock, (iii) combines (including by way of reverse stock split) its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) issues by reclassification of shares of capital stock any additional shares of Common Stock of the Company, then in each such case the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately before such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, provided, however, that if such record date shall have been fixed and such dividend is not fully paid on the date fixed therefor, the Exercise Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Exercise Price shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends. Any adjustment pursuant to clause (ii) through (iv) of this paragraph shall become effective immediately after the effective date of such subdivision, combination or issuance.

 

(b) Pro Rata Distributions. If, on or after the Original Issue Date but on or prior to the Termination Date, the Company shall declare or make any dividend or other pro rata distribution of its assets (or rights to acquire its assets) (including, without limitation, by way of return of capital) to holders of shares of Common Stock (including, without limitation, any distribution of cash, stock or other securities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction, but, for the avoidance of doubt, excluding any distribution of shares of Common Stock subject to Section 9(a), any distribution of Purchase Rights subject to Section 9(c) and any Fundamental Transaction (as defined below) subject to Section 9(d)) (a “Distribution”) then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage (as defined below)) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, that to the extent that the Holder’s right to participate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Distribution (and beneficial ownership) to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until the earlier of the Termination Date and such time or times as (all or a portion) its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted (all or such portion of) such Distribution (and any Distributions declared or made on such initial Distribution or on any subsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).

 

(c) Purchase Rights. If at any time on or after the Original Issue Date but prior to the Termination Date, the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property, in each case pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Warrant Shares acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) 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, issuance or sale of such Purchase Rights (provided, that to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (and shall not be entitled to beneficial ownership of such Common Stock as a result of such Purchase Right (and beneficial ownership) to such extent) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder until the earlier of the Termination Date and such time or times as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right to be held similarly in abeyance) to the same extent as if there had been no such limitation). As used in this Section 9(c), (i) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities and (ii) “Convertible Securities” mean any capital stock, debt, securities or other contractual rights (other than Options) directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock.

 

 

(d) Fundamental Transactions. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company or any Subsidiary, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions; provided, however, that the sale by the Company of any Subsidiary, other than a Material Subsidiary, or the sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets of any Subsidiary, other than a Material Subsidiary, do not constitute a Fundamental Transaction, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock or 50% or more of the voting power of the common equity of the Company, (iv) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires 50% or more of the outstanding shares of Common Stock or 50% or more of the voting power of the common equity of the Company (except for any such transaction in which the stockholders of the Company immediately prior to such transaction maintain, in substantially the same proportions, the voting power of such Person immediately after the transaction) or (v) the Company, directly or indirectly, in or more or related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock covered by Section 9(a) above) (in any such case, a “Fundamental Transaction”), then the Holder shall have the right to receive, upon any subsequent exercise of this Warrant, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitations on exercise contained herein), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitations on exercise contained herein). “Material Subsidiary” shall mean any subsidiary of the Company that is material to the business and operations of the Company as described in the SEC Reports. For the avoidance of doubt, any Subsidiary mentioned in any of the Company’s SEC Reports, which is involved in the manufacture, distribution or sale of the LungFit PH, shall be deemed a Material Subsidiary. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction; provided, however, that if the Fundamental Transaction is not within the Company’s control, including not approved by the Company’s Board of Directors, Holder shall only be entitled to receive from the Company or any Successor Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided, further, that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of Common Stock will be deemed to have received common stock of the Successor Entity (which Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as of the day of consummation of the applicable contemplated Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable contemplated Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the public announcement of the applicable contemplated Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the highest VWAP during the period beginning on the Trading Day immediately preceding the public announcement of the applicable contemplated Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the Trading Day of the Holder’s request pursuant to this Section 9(d) a remaining option time equal to the time between the date of the public announcement of the applicable contemplated Fundamental Transaction and the Termination Date and (E) a zero cost of borrow. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds (or such other consideration) within the later of (i) five business days of the Holder’s election and (ii) the date of consummation of the Fundamental Transaction.

 

 

The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 9(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the Exercise Price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall be added to the term “Company” under this Warrant (so that from and after the occurrence or consummation of such Fundamental Transaction, each and every provision of this Warrant referring to the “Company” shall refer instead to each of the Company and the Successor Entity or Successor Entities, jointly and severally), and the Successor Entity or Successor Entities, jointly and severally with the Company, may exercise every right and power of the Company prior thereto and the Successor Entity or Successor Entities shall assume all of the obligations of the Company prior thereto under this Warrant with the same effect as if the Company and such Successor Entity or Successor Entities, jointly and severally, had been named as the Company herein.

 

Notwithstanding the foregoing, in the event of a Change of Control, that is approved by the Company’s Board of Directors (and not for avoidance of doubt if the Change of Control is not within the Company’s control), the Holder shall surrender this Warrant and shall be entitled to receive from the Company or any Successor Entity, as of the date of consummation of such Change of Control, the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Change of Control, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration in connection with the Change of Control. As used herein, “Change of Control” means any Fundamental Transaction other than (i) any reorganization, recapitalization or reclassification of the Common Stock in which holders of the Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (or entities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities) after such reorganization, recapitalization or reclassification, (ii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company or (iii) a merger in connection with a bona fide acquisition by the Company of any Person in which (x) the gross consideration paid, directly or indirectly, by the Company in such acquisition is not greater than 20% of the Company’s market capitalization as calculated on the date of the consummation of such merger and (y) such merger does not contemplate a change to the identity of a majority of the board of directors of the Company. Notwithstanding anything herein to the contrary, any transaction or series of transactions that, directly or indirectly, results in the Company or the Successor Entity not having Common Stock or common stock, as applicable, registered under the 1934 Act and listed on an Eligible Market shall be deemed a Change of Control. As used herein, “Eligible Market” means The Nasdaq Capital Market, the NYSE American LLC, The Nasdaq Global Select Market, The Nasdaq Global Market or The New York Stock Exchange, Inc.

 

(e) Reserved.

 

(f) Certain Events. If any event occurs of the type contemplated by, or similar to, the provisions of this Section 9 but not expressly provided for by such provisions, then the Company’s Board of Directors will make an appropriate adjustment in the Exercise Price and the number of Common Shares obtainable upon exercise of this Warrant so as to protect the rights of the Holder; provided that no such adjustment will increase the Exercise Price or decrease the number of Common Shares obtainable as otherwise determined pursuant to this Section 9.

 

(g) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section 9 (including any adjustment to the Exercise Price that would have been effected but for the final sentence in this paragraph (g)), the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment, the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment. Notwithstanding the foregoing, in no event may the Exercise Price be adjusted below the par value of the Common Stock then in effect.

 

 

(h) Calculations. All calculations under this Section 9 shall be made to the nearest one ten-hundredth of one cent or the nearest share, as applicable.

 

(i) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will, at the written request of the Holder, promptly compute such adjustment, in good faith, in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s transfer agent and the Warrant Agent, and will issue a New Warrant to the Holder reflecting such calculations.

 

(j) Notice of Corporate Events. If, while this Warrant is outstanding, the Company (i) declares a dividend or any other pro rata distribution of cash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall deliver to the Holder a notice of such transaction at least five (5) days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. In addition, if while this Warrant is outstanding, the Company authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction contemplated by Section 9(d), other than a Fundamental Transaction under clause (iii) of Section 9(d), the Company shall deliver to the Holder a notice of such Fundamental Transaction at least thirty (30) days prior to the date such Fundamental Transaction is consummated.

 

10. Payment of Exercise Price. This Warrant may only be exercised for cash by payment of the Exercise Price; provided, however, if on the Exercise Date there is no effective registration statement registering, or a prospectus contained therein is not available for the resale of, all of the Warrant Shares by the Holder or if the Company undertakes a Fundamental Transaction and the Alternate Consideration is solely in the form of cash, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise,” in which event the Company shall issue to the Holder the number of Warrant Shares in an exchange of securities effected pursuant to Section 3(a)(9) of the Securities Act, determined as follows:

 

X = Y [(A-B)/A]

 

where:

 

“X” equals the number of Warrant Shares to be issued to the Holder;

 

“Y” equals the total number of Warrant Shares with respect to which this Warrant is then being exercised;

 

“A” equals the VWAP of the shares of Common Stock (as reported by Bloomberg Financial Markets) as of the Trading Day on the date immediately preceding the Exercise Date; and

 

“B” equals the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

 

For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a “cashless exercise” transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued.

 

Except as set forth in Section 5(b) (Buy-In remedy), Section 9(d) (purchases and other payments in respect of Fundamental Transactions) and Section 12 (payment of cash in lieu of fractional shares), in no event will the exercise of this Warrant be settled in cash.

 

 

11. Limitations on Exercise.

 

(a) The Holder shall be prohibited from exercising this Warrant if, immediately prior to or following such exercise (or portion of such exercise thereof), the Holder, together with its Attribution Parties, beneficially owns or would beneficially own as determined in accordance with Section 13(d) of the Exchange Act more than 9.99% (the “Maximum Percentage”) of the issued and outstanding Common Stock or any other class of equity security (other than an exempted security) of the Company that is registered pursuant to Section 12 of the Exchange Act. For purposes of calculating beneficial ownership, the aggregate number of shares of Common Stock beneficially owned by the Holder, together with its Attribution Parties, shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted portion of this Warrant beneficially owned by the Holder, together with its Attribution Parties, and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by the Holder, together with its Attribution Parties (including, without limitation, any convertible notes, convertible stock or warrants) that are subject to a limitation on conversion or exercise analogous to the limitation contained herein. For purposes of this Section 11(a), beneficial ownership shall be calculated and determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder, it being acknowledged and agreed that the Holder is solely responsible for any schedules required to be filed in accordance therewith. For purposes of this Warrant, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the SEC, as the case may be, (2) a more recent public announcement by the Company or (3) any other written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written request of the Holder, the Company shall within one (1) Business Day confirm to the Holder, orally and in writing, the number of shares of Common Stock then outstanding. Each delivery of an Exercise Notice by the Holder will constitute a representation by the Holder, upon which the Company shall be entitled to rely without investigation, that the Holder has evaluated the limitation set forth in this paragraph and determined that the issuance of the full number of Warrant Shares requested in such Exercise Notice is permitted under this paragraph. Any purported delivery of any number of shares of Common Stock or any other security upon exercise of this Warrant shall be void and have no effect to the extent, but only to the extent, that before or after such delivery, the exercising Holder, together with its Affiliates and any other Attribution Party would have beneficial ownership in excess of the Maximum Percentage. By written notice to the Company, the Holder may from time to time increase or decrease the Maximum Percentage to any other percentage not in excess of 19.99% specified in such notice; provided that any increase in the Maximum Percentage will not be effective until the sixty-first (61st) day after such notice is delivered to the Company.

 

(b) This Section 11 shall not restrict the number of shares of Common Stock which the Holder may receive or beneficially own in order to determine the amount of securities or other consideration that the Holder may receive in the event of a Fundamental Transaction as contemplated in Section 9(d) of this Warrant.

 

12. No Fractional Shares. No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares that would otherwise be issuable, the number of Warrant Shares to be issued shall be rounded down to the next whole number and the Company shall pay the Holder in cash the fair market value (based on the Closing Sale Price) for any such fractional shares; provided, however, the Company shall not be required to pay an amount for any fractional share less than $100.

 

13. Notices. Whenever notice is required to be given under this Warrant, including, without limitation, an Exercise Notice, unless otherwise provided herein, such notice shall be given in writing, (i) if delivered (a) from within the domestic United States, by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid or electronic mail or (b) from outside the United States, by internationally recognized overnight express courier or electronic mail, and (ii) will be deemed given (A) if delivered by first-class registered or certified mail domestic, three (3) Business Days after so mailed, (B) if delivered by nationally recognized overnight carrier, one (1) Business Day after so mailed, (C) if delivered by internationally recognized overnight express courier, two (2) Business Days after so mailed and (D) at the time of transmission, if delivered by electronic mail to the email address specified in this Section 13 prior to 5:00 p.m. (New York time) on a Trading Day, and (E) the next Trading Day after the date of transmission, if delivered by electronic mail to the email address specified in this Section 13 on a day that is not a Trading Day or later than 5:00 p.m. (New York time) on any Trading Day:

 

(i) If to the Company, to:

 

Beyond Air, Inc.

900 Stewart Avenue, Suite 301

Garden City, NY 11530

 

Attn: General Counsel

Email: [e-mail]

 

 

 

(ii) if to the Holder, at such address or other contact information delivered by the Holder to Company or as is on the books and records of the Company.

 

In connection with the delivery of any exercise or assignment of this Warrant, no ink-original Exercise Notice or assignment form, as applicable, shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Exercise Form or assignment form be required. For the avoidance of doubt, any Exercise Notice may be delivered by electronic mail.

 

14. Warrant Agent. The Warrant Agent shall initially serve as warrant agent under this Warrant. Upon ten (10) days’ notice to the Holder, the Company may appoint a new warrant agent. Any entity into which the Warrant Agent or any new warrant agent may be merged or any entity resulting from any consolidation to which the Warrant Agent or any new warrant agent shall be a party or any entity to which the Warrant Agent or any new warrant agent transfers substantially all of its corporate trust or stockholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.

 

15. Miscellaneous.

 

(a) No Rights as a Stockholder. Except as otherwise set forth in this Warrant, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, amalgamation, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

 

(b) Authorized Shares.

 

(i) Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate or articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, 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 Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

 

(ii) Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

(c) Successors and Assigns. Subject to compliance with applicable securities laws, this Warrant may be transferred or assigned by the Holder. This Warrant may not be assigned by the Company without the written consent of the Holder except to a successor in the event of a Fundamental Transaction. This Warrant shall be binding on and inure to the benefit of the Company and the Holder and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder, or their successors and assigns.

 

 

(e) Amendment and Waiver. The provisions of the Warrants may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder.

 

(f) Acceptance. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

 

(g) Governing Law; Jurisdiction. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT, AND ALL OTHER MATTERS RELATING HERETO, SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN 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. EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PERSON AT THE ADDRESS IN EFFECT FOR NOTICES TO IT 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. EACH OF THE COMPANY AND THE HOLDER HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.

 

(h) Headings. The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

 

(i) Severability. In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby, and the Company and the Holder will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

 

(j) Interpretation. When a reference is made in this Warrant to a Section, such reference shall be to a Section of this Warrant unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Warrant, they shall be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Warrant shall refer to this Warrant as a whole and not to any particular provision of this Warrant unless the context requires otherwise. The words “date hereof’ when used in this Warrant shall refer to the date of this Warrant. The terms “or,” “any” and “either” are not exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” All terms defined in this Warrant shall have the defined meanings when used in any document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Warrant are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. Unless otherwise specifically indicated, all references to “dollars” or “$” shall refer to, and all payments hereunder shall be made in, the lawful money of the United States. References to a Person are also to its successors and permitted assigns. When calculating the period of time between which, within which or following which any act is to be done or step taken pursuant to this Warrant, the date that is the reference date in calculating such period shall be excluded (and, unless otherwise required by law, if the last day of such period is not a Business Day, the period in question shall end on the next succeeding Business Day).

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Original Issue Date set out above.

 

Beyond Air, Inc.
By:
Name:
Title:

 

 

SCHEDULE 1

FORM OF EXERCISE NOTICE

 

[To be executed by the Holder to purchase shares of Common Stock under the Warrant]

 

Beyond Air, Inc.

 

Ladies and Gentlemen:

 

(1) The undersigned is the Holder of Warrant No. [●] (the “Warrant”) issued by Beyond Air, Inc., a Delaware corporation (the “Company”). Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.

 

(2) The undersigned hereby exercises its right to purchase [●] Warrant Shares pursuant to the Warrant.

 

(3) The Holder intends that payment of the Exercise Price shall be made as (check one):

 

☐ Cash Exercise

☐ “Cashless Exercise” under Section 10 of the Warrant

 

(4) If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $[●] in immediately available funds to the Company in accordance with the terms of the Warrant.

 

(5) Pursuant to this Exercise Notice, the Company shall deliver to the Holder Warrant Shares determined in accordance with the terms of the Warrant.

 

(6) By its delivery of this Exercise Notice, the undersigned represents and warrants to the Company that (i) it will not purchase or sell any securities, including the Warrant Shares, in violation of applicable securities laws and (ii) in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of Common Stock (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended) permitted to be owned under Section 11(a) of the Warrant to which this notice relates.

 

Dated:

 

Name of Holder:

 

By:
Name:
Title:

 

(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)

 

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Exercise Notice and hereby directs the Company’s transfer agent to issue the above indicated number of shares of Common Stock on or prior to the applicable Share Delivery Date.

 

Beyond Air, Inc.

 

By:
Name:
Title:

 

 

SCHEDULE 2

ASSIGNMENT FORM

 

(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

Name: _______________________________

 

Address: _______________________________________

 

Phone Number : ________________________________

 

Email Address: __________________________________

 

Dated: ______________________________________

 

Holder’s Signature: __________________________________

 

Holder’s Address: ___________________________________

 

 

 

Exhibit 10.1

 

LOAN AND SECURITY AGREEMENT

 

This LOAN AND SECURITY AGREEMENT (“Agreement”) is entered into as of November 1, 2024 but effective as of October 4, 2024, among Beyond Air, Inc., a Delaware corporation (the “Borrower”), BCR8V LLC, a Delaware limited liability company (“Lender”).

 

PRELIMINARY STATEMENTS

 

The Borrower has requested that Lender extend a $11,500,000 term loan to the Borrower.

 

Lender has indicated its willingness to lend on the terms and subject to the conditions set forth herein.

 

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

 

ARTICLE I

 

Definitions and Accounting Terms

 

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:

 

“Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. For purposes of this Agreement, in no event shall Lender constitute an Affiliate of the Borrower.

 

“Aggregate Accrual” has the meaning specified in Section 2.09.

 

“Agreement” means this Loan and Security Agreement, as amended, restated, extended, modified or supplemented from time to time in accordance with the terms hereof.

 

“AHYDO Date” has the meaning specified in Section 2.09.

 

“Amortization Payment” has the meaning specified in Section 2.04(a).

 

“Annual Audited Financial Statements” has the meaning specified in Section 5.08(b).

 

“Attorney Costs” means all reasonable fees, out-of-pocket expenses and disbursements of any law firm or other external legal counsel.

 

“Audit Arbitrator” has the meaning specified in Section 2.10(c).

 

“Borrower” has the meaning specified in the introductory paragraph to this Agreement.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the State of New York.

 

 

“Change in Control” means an event or series of events (a) as a result of which any Person or two or more Persons acting in concert shall have acquired by contract or otherwise, the power to control the management of the Borrower, or to control the Equity Interests of the Borrower entitled to vote for members of the Board of Directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such securities that such Person or Persons have the right to acquire pursuant to any option right) representing 50% or more of the combined voting power of such securities; or (b) that results in the sale of all or substantially all of the assets or businesses of the Borrower and its Subsidiaries, taken as a whole.

 

“Closing Date” means the first date all the conditions precedent in Article III are satisfied or waived.

 

“Closing Date Refinancing” has the meaning specified in Article III.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Collateral” has the meaning specified in Section 9.01.

 

“Commitment” means Lender’s obligation to make a loan to the Borrower pursuant to Section 2.01 in the principal amount of $11,500,000.

 

“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

 

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

 

“Default Rate” means an interest rate equal to the interest rate otherwise applicable to the Loan plus 2.00% per annum to the fullest extent permitted by applicable Laws.

 

“Dollar” and “$” mean lawful money of the United States.

 

“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

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“Event of Default” has the meaning specified in Section 8.01.

 

“Financial Statements” means the Quarterly Financial Statements and the Annual Audited Financial Statements.

 

“First Amortization Payment Date” means the Interest Payment Date following the Fiscal Quarter ending on September 30, 2026.

 

“Fiscal Quarter” means, for the first fiscal quarter of the Borrower in which the Closing Date occurs, the period beginning on the Closing Date and ending on the last day of the fiscal quarter of the Borrower in which the Closing Date occurs, and thereafter each successive fiscal quarter of the Borrower ending on March 31, June 30, September 30 or December 31.

 

“GAAP” means generally accepted accounting principles in the United States of America, as in effect from time to time.

 

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

 

“Indebtedness” of any Person means all obligations of such Person for borrowed money at any date, without duplication and without regard to whether matured or unmatured, absolute or contingent. Notwithstanding anything to the contrary set forth in this Agreement, Indebtedness does not include trade payables incurred in the ordinary course of business.

 

“Indemnified Liabilities” has the meaning specified in Section 11.05.

 

“Indemnitees” has the meaning specified in Section 11.05.

 

“Intellectual Property” means, as to any Person, all copyrights, patents, trademarks, inventions (whether or not patentable), designs, industrial designs, trade secrets, know-how, confidential information, domain names, data and database, customers lists, other proprietary rights and licenses of the foregoing, whether registered or not, now owned or hereafter acquired by such Person (or in which such Person has rights or the power to transfer rights to a secured party), wherever located.

 

“Interest Only Period” means the period beginning on the Closing Date and ending on June 30, 2026.

 

“Interest Payment Date” means, with respect to each Fiscal Quarter, the date that is the earlier of (i) forty-five (45) days after the end of such Fiscal Quarter and (ii) the date on which the Borrower (A) files its quarterly or annual financial statements with the SEC on Form 10-Q or Form 10-K following the end of such Fiscal Quarter or (B) in the event that the Borrower ceases to file any such periodic reports with the SEC, delivers to Lender the Quarterly Financial Statements for such Fiscal Quarter pursuant to Section 5.08(a).

 

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“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority.

 

“Lender” has the meaning specified in the introductory paragraph to this Agreement and its respective successors and assigns as permitted hereunder.

 

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

 

“Loan” means an extension of credit made under Article II in the form of a Loan by Lender to the Borrower.

 

“Loan Documents” means, collectively, this Agreement, each intellectual property security agreement executed by the Borrower in favor of Lender and any other document, agreement or instrument (other than the Warrants)which has been or will be executed by the Borrower or for the benefit of Lender in connection with this Agreement and the transactions described herein, all as may be amended, restated, extended, modified or supplemented from time to time.

 

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent) or financial condition of the Borrower and its Subsidiaries, taken as a whole; (b) a material impairment of the rights and remedies of Lender under any Loan Document, or of the ability of the Borrower to perform its obligations under any Loan Document; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Borrower of any Loan Document.

 

“Maturity Date” means the earlier of (a) October 4, 2034 and (b) the date that the Obligations shall become due and payable in full hereunder, whether by acceleration or otherwise.

 

“Maximum Accrual” has the meaning specified in Section 2.09.

 

“Maximum Rate” has the meaning specified in Section 11.09.

 

“Net Sales” means, with respect to each Fiscal Quarter, an amount (which shall not be less than zero) equal to the Borrower’s and its Subsidiaries’ “net revenue” for such Fiscal Quarter (including, for the avoidance of doubt, any licensing and milestone payments), as reported in (i) the Borrower’s periodic reports filed with the SEC on Form 10-Q and Form 10-K (as applicable) or (ii) if the Borrower ceases to file any such periodic reports with the SEC, the Financial Statements delivered pursuant to Section 5.08.

 

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“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, the Borrower arising under any Loan Document or otherwise with respect to any Loan whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against the Borrower of any proceeding under any Debtor Relief Laws naming the Borrower as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. Notwithstanding the foregoing, amounts, obligations and liabilities under any of the Warrants shall not be included in the defined term “Obligations”.

 

“Outstanding Amount” means, on any date, the amount of the Loan after giving effect to any borrowings and prepayments or repayments of Loan occurring on such date.

 

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

 

“PIK Interest” has the meaning specified in Section 2.05(a).

 

“PIK Payment” has the meaning specified in Section 2.05(a).

 

“Quarterly Financial Statements” has the meaning specified in Section 5.08(a).

 

“Quarterly Interest Shortfall” has the meaning specified in Section 2.04(c).

 

“Registered Intellectual Property” means Intellectual Property that is validly registered with the U.S. Patent and Trademark Office or the U.S. Copyright Office, as applicable.

 

“Related Persons” means Lender, together with its respective Affiliates, and the managers, members, officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.

 

“Royalty Interest” means, with respect to each Fiscal Quarter following the Interest Only Period, eight percent (8%) of Net Sales for such Fiscal Quarter.

 

“Same Day Funds” means with respect to disbursements and payments, immediately available funds in cash.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity (excluding, for the avoidance of doubt, charitable foundations) of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.

 

“Uniform Commercial Code” means the Uniform Commercial Code or any successor provision thereof as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code or any successor provision thereof (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.

 

4

 

“Warrants” means those certain Warrants, dated as of the Closing Date, exercisable for an aggregate of 15,159,504 shares of Common Stock (subject to the anti-dilution adjustments consistent with those set forth in Section 9 of the form of Warrant set forth as Exhibit A) and delivered to Lender (or its designated Affiliates) pursuant to Section 3.01(e) in such amounts as set forth on Schedule 1, in substantially the form attached hereto as Exhibit A.

 

SECTION 1.02. Other Definitions. The following terms used herein shall have the meaning given to them in the Uniform Commercial Code (and, if defined in more than one Article of the Uniform Commercial Code, shall have the meaning given in Article X thereof): account, certificated security, chattel paper, commercial tort claims, control (other than the use of such term in the definition of “Affiliate” herein), deposit account, document, equipment, electronic chattel paper, fixtures, general intangibles, goods, health-care-insurance receivable, instrument, inventory, investment property, letter of credit right, payment intangible, proceeds, promissory note, securities, securities intermediary, supporting obligations, tangible chattel paper and uncertificated securities.

 

SECTION 1.03. Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document: (a) the meanings of defined terms are equally applicable to the singular and plural forms of the defined terms; (b)(i) in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding” (ii) the terms “hereof”, “hereby”, “hereto,” “hereunder,” and similar terms mean this Agreement, the term “heretofore” means before, and the term “hereafter” means after, the effective date hereof, (iii) the term “including” means “including, without limitation” and (iv) the word “or” is not exclusive and (c) section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

 

SECTION 1.04. Accounting Terms. All accounting terms not specifically or completely defined herein shall be construed in conformity with GAAP.

 

SECTION 1.05. Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

 

ARTICLE II

 

The Commitment and Borrowings

 

SECTION 2.01. The Loan. The Borrower has requested a borrowing of a loan in the principal amount of $11,500,000 and, subject to the terms and conditions set forth herein, Lender has made to the Borrower a single loan in such amount. Amounts borrowed under this Section 2.01 and repaid or prepaid may not be reborrowed subject to Section 2.05.

 

SECTION 2.02. Prepayments. The Borrower may, upon notice to Lender, at any time or from time to time voluntarily prepay Loan in whole or in part, without premium or penalty. All prepayments under this Section 2.02 shall be accompanied by all accrued interest thereon.

 

5

 

SECTION 2.03. Termination of Commitment. The Commitment of Lender shall be automatically and permanently reduced to $0 upon the making of Lender’s Loan pursuant to Section 2.01.

 

SECTION 2.04. Amortization; Maturity Date.

 

(a) No scheduled amortization payments will be due on the Loan until the First Amortization Payment Date. On the First Amortization Payment Date and on each Interest Payment Date occurring thereafter, to the extent the Royalty Interest for the immediately preceding Fiscal Quarter exceeds the amount of interest accrued for such Fiscal Quarter then payable under Section 2.05, then after giving effect to such interest payment and any other expenses due and owing on such date to Lender, the Borrower shall repay the principal amount of the Loan in Same Day Funds in an amount equal to the lesser of (x) such difference and (y) the outstanding principal amount of the Loan on such date (such amount, the “Amortization Payment”). If not earlier repaid in full, the outstanding principal amount of the Loan, together with any accrued and unpaid interest, and all other Obligations then outstanding, shall be due and payable in Same Day Funds on the Maturity Date.

 

(b) The outstanding principal amount of the Loan and any interest or other Obligations due with respect to the Loan Documents shall be repayable solely from the Royalty Interest, except in the case of the amount due on the Maturity Date (whether by acceleration or otherwise). In the case of the occurrence of the Maturity Date, the Obligations shall be full recourse to the Borrower and its assets.

 

(c) If, on the First Amortization Payment Date and on any Interest Payment Date occurring thereafter, the amount of the Royalty Interest for the immediately preceding Fiscal Quarter is less than the amount of accrued interest due payable on the Loan for such Fiscal Quarter (the amount of such shortfall, the “Quarterly Interest Shortfall”), then a portion of the interest payment on any such Interest Payment Date equal to the lesser of 100% of such interest payment and such Quarterly Interest Shortfall (rounded up to the nearest whole Dollar) shall be paid in cash at a rate of 3% per annum and in kind at a rate of 12% per annum and such payment in kind shall increase the outstanding principal of the Loan on and after such Interest Payment Date by such amount paid in kind, and the balance of the interest payment shall be paid in cash. Such portion of the Quarterly Interest Shortfall that is capitalized and added to the outstanding principal amount of the Loan in accordance with the preceding sentence shall thereafter bear interest in accordance with Section 2.05 and otherwise be treated as an increase in the outstanding principal amount of the Loan for purposes of this Agreement.

 

SECTION 2.05. Interest.

 

(a) The Loan shall accrue and bear interest, on the outstanding daily balance thereof, at a rate of 15% per annum. For each Fiscal Quarter occurring during the Interest Only Period, interest accrued during such Fiscal Quarter on the Loan shall be paid in cash at a rate of 3% per annum and in kind at a rate of 12% per annum in arrears on the Interest Payment Date immediately following the end of such Fiscal Quarter. For each Fiscal Quarter following the Interest Only Period, interest accrued during such Fiscal Quarter on the Loan shall be due and payable in arrears on each Interest Payment Date immediately following the end of such Fiscal Quarter (commencing with First Amortization Payment Date) in cash in Same Day Funds, unless there is a Quarterly Interest Shortfall, in which case a portion of the amount of such shortfall shall automatically be paid in kind in accordance with Section 2.04(c). Any amounts paid in kind shall be capitalized and added to the outstanding principal amount of the Loan and thereafter shall thereafter bear interest in accordance with this Section 2.05 and otherwise be treated as an increase in the outstanding principal amount of the Loan for purposes of this Agreement (“PIK Interest” and such payment of PIK Interest hereinafter referred to as a “PIK Payment”). Notwithstanding the foregoing, the Borrower may not make a PIK Payment on any Interest Payment Date that is the Maturity Date or at any time that an Event of Default shall have occurred and be continuing.

 

6

 

(b) The Borrower shall pay interest on past due amounts of principal or interest hereunder at a rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand. For the avoidance of doubt, payments of interest shall not be considered past due to the extent the Borrower has made a PIK Payment in accordance with Section 2.05.

 

(c) Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

 

(d) All computations of interest for the Loan shall be made on the basis of a 360 day year and actual days elapsed. Interest shall accrue on the Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid.

 

SECTION 2.06. Evidence of Indebtedness. The Loan may be evidenced by one or more accounts or records maintained by Lender. The accounts or records maintained by Lender shall be conclusive evidence absent manifest error of the amount of the Loan made by Lender to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations.

 

SECTION 2.07. Payments Generally.

 

(a) All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to Lender by wire transfer to Lender as set forth in Schedule 2.07 (or as designated by Lender in a notice to the Borrower) in Same Day Funds not later than 2:00 p.m. Eastern Time on the date specified therein. Any payment received by a Lender after 2:00 p.m. Eastern Time shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.

 

(b) Except as otherwise expressly provided herein, if any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

 

(c) Any and all payments by or on account of any obligation of the Borrower under this Agreement shall be made without deduction or withholding for any taxes, except as required by applicable law. If any applicable law requires the deduction or withholding of any tax from any such payment by the Borrower, then the Borrower shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant governmental authority in accordance with applicable law, and the sum payable by the Borrower shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this paragraph) the Lender receives an amount equal to the sum it would have received had no such deduction or withholding been made.

 

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SECTION 2.08. Warrants. Each party hereto hereby acknowledges and agrees that the Loan that is made in connection with the delivery of a Warrant is part of an investment unit within the meaning of Section 1273(c)(2) of the Code, which includes any Warrant delivered on the date of the Loan. For federal income tax purposes, pursuant to Treasury Regulations § 1.1273-2(h), the Borrower, Lender acknowledges that the “issue price” of the Loan is 100% of the stated principal amount of the Loan, minus the fair market value of any Warrant delivered on the date of the Loan (as such fair market value is determined under such Warrant). Each of the Borrower and Lender agrees (i) to use the foregoing issue price and valuation for U.S. federal income tax purposes with respect to the transactions contemplated hereby, and (ii) to prepare and file all tax returns in a manner consistent with such allocation (in each case, unless otherwise required by applicable Laws) and shall not to take any position that is inconsistent with the provision of this Section 2.08 on any tax return or in any audit (unless otherwise required by a final determination by the U.S. Internal Revenue Service or a court of competent jurisdiction).

 

SECTION 2.09. Required AHYDO Payments. If at the end of any accrual period (as defined in Section 1272(a)(5) of the Code) with respect to any Loan ending after the fifth (5th) anniversary of the date that the Loan was funded (an “AHYDO Date”), the aggregate amount which would be includible in income (including, without limitation, original issue discount) of Lender with respect to the Loan for periods ending on or before the relevant AHYDO Date (the “Aggregate Accrual”) would exceed an amount equal to the sum of (x) the aggregate amount of interest to be paid in cash (within the meaning of Section 163(i) of the Code) for the Loan on or before such relevant AHYDO Date and (y) the product of (A) the issue price (within the meaning of Sections 1273(b) and 1274(a) of the Code) of the Loan and (B) the yield to maturity (interpreted in accordance with Section 163(i) of the Code) of the Loan (such sum, the “Maximum Accrual”), then the Borrower shall pay to Lender in cash an aggregate amount equal to the excess, if any, of the Aggregate Accrual over the Maximum Accrual. This Section 2.09 is intended to prevent the Loan from being classified as “applicable high yield discount obligations,” as defined in Section 163(i) of the Code, and shall be interpreted consistently therewith.

 

SECTION 2.10. Audits.

 

(a) From and after the First Amortization Payment Date, upon the written request of Lender, and not more than once in each fiscal year of the Borrower (so long as no Event of Default has occurred and is continuing), the Borrower shall permit an independent certified public accounting firm of national prominence selected by Lender and, subject to Section 2.10(b) below, paid for by the Borrower, and reasonably acceptable to the Borrower, to have access to and to review, during normal business hours and upon not less than 30 days’ prior written notice, the relevant documents and records of the Borrower and its Subsidiaries as may reasonably be necessary to verify the accuracy and timeliness of the reports and payments (including calculation of any Royalty Interest and any Quarterly Interest Shortfall and the payment of any Amortization Payment) made by the Borrower under this Agreement. Such review may cover the records for sales or other dispositions of the products of the Borrower and its Subsidiaries and Net Sales in any fiscal year of the Borrower ending no earlier than the first day of the previous fiscal year of the Borrower. The accounting firm shall be permitted to prepare and disclose to Lender a written report stating only whether the cash payments of principal and interest made to Lender pursuant to Sections 2.04 and 2.05 are correct or incorrect and the specific details concerning any discrepancies. Notwithstanding the foregoing, after the occurrence and during the continuance of an Event of Default, Lender shall have the right, as often, at such times and with such prior notice, as Lender shall determine, in its reasonable discretion, to have an independent certified public accounting firm of national prominence selected by Lender review the relevant documents and records of the Borrower and its Subsidiaries.

 

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(b) If such accounting firm reasonably concludes that any Amortization Payments or cash payments of interest pursuant to Section 2.05(a) were owed and were not paid when due during such period pursuant to the provisions of this Agreement, the Borrower shall pay any such undisputed late or unpaid amounts within thirty (30) days after the date Lender delivers to the Borrower a notice including the accounting firm’s written report and requesting such payment. Lender shall (i) treat all information that it receives under this Section 2.10 in accordance with the provisions of Section 11.17 and (ii) cause its accounting firm to enter into a reasonably acceptable confidentiality agreement with the Borrower obligating such firm to retain all such information in confidence pursuant to such confidentiality agreement, in each case except to the extent necessary for Lender to enforce its rights under this Agreement.

 

(c) In the event of a dispute with respect to any audit under Section 2.10, Lender and the Borrower shall work in good faith to resolve the disagreement. If Lender and the Borrower are unable to reach a mutually acceptable resolution of any such dispute within thirty (30) days, the dispute shall be submitted for resolution to a certified public accounting firm jointly selected by the certified public accountants of each of Lender and the Borrower or to such other Person as Lender and the Borrower shall mutually agree (the “Audit Arbitrator”). The decision of the Audit Arbitrator shall be final and the costs of such arbitration as well as the initial audit shall be borne between Lender and the Borrower in such manner as the Audit Arbitrator shall determine. If the Audit Arbitrator determines that the Borrower owes additional amounts, not later than thirty (30) days after such decision and in accordance with such decision, the Borrower shall pay such additional amounts.

 

ARTICLE III

 

Conditions Precedent to Borrowings

 

The effectiveness of the Commitment of Lender, and the funding of the Loan on the Closing Date, are subject to the satisfaction (or wavier by Lender) of the following conditions precedent:

 

(a) Lender’s receipt of (i) executed counterparts of this Agreement, (ii) such certificates of resolutions or other actions, incumbency certificates and/or other certificates of the Borrower as Lender may reasonably require, (iii) certified bylaws and certificate of incorporation for the Borrower, (iv) certificate of good standing of the Borrower in its jurisdiction of organization and (v) the results of searches for any effective UCC financing statements or tax Liens filed against the Borrower or its property, which results shall not show any such Liens (other than Liens approved by Lender);

 

(b) Lender’s receipt of (i) proper financing statements in form appropriate for filing under the Uniform Commercial Code of all jurisdictions that Lender may deem necessary or desirable in order to perfect the Liens created hereunder, covering the Collateral and (ii) intellectual property security agreements in form appropriate for filing with the United States Patent and Trademark Office, covering the Borrower’s Registered Intellectual Property consisting of patents and trademarks;

 

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(c) All expenses required to be paid hereunder and invoiced on or before the Closing Date shall have been paid in full in cash;

 

(d) The representations and warranties of the Borrower contained in Article IV or any other Loan Document shall be true and correct in all material respects on and as of the Closing Date; provided that, to the extent that such representations and warranties specifically refer to an earlier date, they shall be true and correct in all material respects as of such earlier date; provided, further that, any representation and warranty that is qualified by a “material” standard, a “Material Adverse Effect” standard or similar other standard shall be true and correct (after giving effect to any qualification therein) in all respects on such respective dates;

 

(e) No Default shall exist or would result from such proposed borrowing or from the application of the proceeds therefrom;

 

(f) On or before the Closing Date, the Borrower shall have repaid all outstanding Indebtedness under that certain Loan and Security Agreement, dated as of June 15, 2023, by and among the Borrower, the lenders party thereto and Avenue Capital Management II, L.P., as administrative agent and collateral agent (the “Closing Date Refinancing”); and

 

(g) Lender’s receipt of executed counterparts of the Warrants, each duly executed and delivered by the Borrower.

 

The execution of this Agreement by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Article III have been satisfied on and as of Closing Date.

 

ARTICLE IV

 

Representations and Warranties

 

The Borrower represents and warrants to Lender, as of the Closing Date, that:

 

SECTION 4.01. Existence, Qualification and Power; Compliance with Laws. The Borrower (a) is duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite corporate or other organizational power and authority to execute, deliver and perform its obligations under the Loan Documents, (c) is duly qualified and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, (d) is in compliance with all applicable Laws, orders, writs, injunctions and orders and (e) has all requisite governmental licenses, authorizations, consents and approvals to operate its business as currently conducted, except in each case referred to in clause (c), (d) or (e), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

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SECTION 4.02. Authorization; No Contravention. The execution, delivery and performance by the Borrower of each Loan Document has been duly authorized by all necessary corporate or other organizational action. The execution, delivery and performance by the Borrower of each Loan Document will not (a) contravene the terms of the Borrower’s certificate of incorporation, bylaws and each other governing document of the Borrower, (b) result in any breach or contravention of, or the creation of any Lien upon any material portion of the property or assets of the Borrower under (i) any Contractual Obligation to which the Borrower is a party or affecting the Borrower or the properties of the Borrower or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which the Borrower or its property is subject, except with respect to any breach, contravention or violation (but not creation of Liens) referred to in this clause (b), to the extent that such breach, contravention or violation could not reasonably be expected to have a Material Adverse Effect, or (c) violate any applicable Law in any material respect.

 

SECTION 4.03. Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by the Borrower of this Agreement or any other Loan Document, except for (i) filings necessary to perfect the Liens on the Collateral granted by the Borrower in favor of Lender, (ii) filings required under applicable securities laws and (iii) the approvals, consents, exemptions, authorizations, actions, notices and filings that have been duly obtained, taken, given or made and are in full force and effect.

 

SECTION 4.04. Binding Effect. The Borrower has duly executed and delivered this Agreement and each other Loan Document to which it is a party and each such Loan Document constitutes a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as such enforceability may be limited by Debtor Relief Laws and by general principles of equity and principles of good faith and fair dealing.

 

SECTION 4.05. Margin Regulations; Investment Company Act. The Borrower is not engaged, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System of the United States), or extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loan will be used for any purpose that violates Regulation U. The Borrower is not an “investment company” under the Investment Company Act of 1940.

 

SECTION 4.06. Title, Perfection and Priority. The Borrower has good and valid rights in or the power to transfer the Collateral and title to the Collateral with respect to which it has purported to grant a security interest hereunder, free and clear of all Liens securing any Indebtedness other than Liens approved by Lender. Upon the filing of an appropriate financing statement against the Borrower with the Secretary of State of Delaware, the security interest granted pursuant to this Agreement shall constitute a valid and continuing first priority perfected security interest in favor of Lender in all of the Collateral to the extent the security interest in such Collateral may be perfected by filing a financing statement under the Uniform Commercial Code.

 

SECTION 4.07. UCC Filing Information. The Borrower’s name in which it has executed this Agreement is the exact name as it appears in its organizational documents as filed with its jurisdiction of organization.

 

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SECTION 4.08. Use of Proceeds. The Borrower shall use the proceeds of the Loan for working capital and general corporate purposes, including the Closing Date Refinancing.

 

SECTION 4.09. Intellectual Property. The Borrower and each Subsidiary thereof owns or is licensed, or otherwise has the right to use, all Intellectual Property that is reasonably necessary for the operation of its business, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. A correct and complete list of all Registered Intellectual Property owned or licensed as of the date hereof by the Borrower or any of its Subsidiaries and that is material to the business of the Borrower and its Subsidiaries, taken as a whole, is set forth on Schedule 4.09 to this Agreement. The use of such Intellectual Property in all material respects by the Borrower and its Subsidiaries and the operation of their respective businesses does not infringe any valid and enforceable intellectual property rights of any other Person, except for any infringements that could not reasonably be expected to have a Material Adverse Effect. No claim or litigation regarding any such Intellectual Property is pending or, to the knowledge of the Borrower, threatened, in writing, in each case, that could reasonably be expected to have a Material Adverse Effect.

 

SECTION 4.10. Litigation. There are no actions, suits, investigations, proceedings, claims or disputes pending, or to the knowledge of the Borrower, threatened in writing or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Borrower or any Subsidiary thereof that could reasonably be expected to have a Material Adverse Effect. No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for therein not be consummated as therein provided.

 

ARTICLE V

 

Affirmative Covenants

 

So long as any Lender shall have any Commitment hereunder or any Loan or other Obligation hereunder shall remain outstanding, unpaid or unsatisfied, the Borrower shall:

 

SECTION 5.01. Notice of Default. Deliver to Lender promptly, upon becoming aware thereof, notice of any Default or Event of Default.

 

SECTION 5.02. Maintenance of Insurance. Except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, maintain with financially sound and reputable insurance companies not Affiliates of Borrower, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance compatible with the following standards) as are customarily carried under similar circumstances by such other Persons.

 

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SECTION 5.03. Payment of Taxes. Timely pay, discharge or otherwise satisfy, as the same shall become due and payable, all of its obligations and liabilities in respect of taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, except, in each case, to the extent (a) any such tax, assessment, charge or levy is being contested in good faith and by appropriate proceedings for which appropriate reserves have been established in accordance with GAAP or (b) the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

SECTION 5.04. Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence under the Laws of the jurisdiction of its organization and (b) take all reasonable action to maintain all corporate rights and privileges (including its good standing) except, in the case of this clause (b), to the extent that failure to do so could not reasonably be expected to (i) have a Material Adverse Effect or (ii) materially and adversely affect the interests of Lender in its capacity as such under the Loan Documents.

 

SECTION 5.05. Maintenance of Tangible Assets; Protection of Intellectual Property.

 

(a) Except if the failure to do so could not reasonably be expected to have a Material Adverse Effect, maintain, preserve and protect all of its material tangible assets necessary in the operation of its business in good working order, repair and condition, ordinary wear and tear excepted and casualty or condemnation excepted and consistent with past practice.

 

(b) Except if the failure to do so could not reasonably be expected to have a Material Adverse Effect, the Borrower shall and shall cause each of its Subsidiaries to: (a) protect, defend and maintain the validity and enforceability of their respective Intellectual Property; (b) promptly advise Lender in writing of material infringements of their respective Intellectual Property; and (c) not allow any Intellectual Property to be abandoned, forfeited or dedicated to the public, other than in the ordinary course of business.

 

SECTION 5.06. Compliance with Laws. Comply with the requirements of all Laws and all orders, writs, injunctions and decrees of any Governmental Authority applicable to it or to its business or property, except if the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

 

SECTION 5.07. Books and Records. Maintain proper books of record and account, in which entries that are full, true and correct in all material respects and are in conformity with GAAP consistently applied shall be made of all material financial transactions and matters involving the assets and business of the Borrower and its Subsidiaries.

 

SECTION 5.08. Financial Statements. In the event that the Borrower ceases to file its quarterly or annual financial statements on a timely basis as required by applicable Law or at all with the SEC on Form 10-Q or Form 10-K, deliver to Lender:

 

(a) as soon as available and in any event within forty-five (45) days after the end of each fiscal quarter of each fiscal year (i) the consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such fiscal quarter and (ii) the related consolidated statements of income, shareholders’ equity and cash flows of the Borrower and its Subsidiaries for such quarter and the portion of the fiscal year through the end of such fiscal quarter, in each case prepared in accordance with GAAP consistently applied (the “Quarterly Financial Statements”); and

 

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(b) as soon as available and in any event within ninety (90) days after the end of each fiscal year (i) the consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such fiscal year and (ii) the related consolidated statements of income, shareholders’ equity and cash flows of the Borrower and its Subsidiaries for such fiscal year, in each case prepared in accordance with GAAP consistently applied, accompanied by a report and opinion thereon of Marcum LLP or another firm of independent certified public accounts of recognized national standing reasonably acceptable to Lender, which report and opinion shall be prepared in accordance with generally accepted auditing standards (the “Annual Audited Financial Statements”).

 

SECTION 5.09. Intellectual Property. On an annual basis no later than 95 days after the last day of each fiscal year of the Borrower, the Borrower shall (a) provide Lender with a report of all new material Registered Intellectual Property that has been registered by the Borrower during the prior fiscal year of the Borrower, and (b) cause to be prepared, executed, and delivered to Lender any intellectual property security agreements filed with the U.S. Patent and Trademark Office in connection with this Agreement to identify such Registered Intellectual Property as being subject to the security interests created hereunder and thereunder.

 

ARTICLE VI

 

Negative Covenants

 

So long as any Lender shall have any Commitment hereunder or any Loan or other Obligation hereunder shall remain outstanding, unpaid or unsatisfied, the Borrower shall not (and the Borrower shall cause its Subsidiaries to not):

 

SECTION 6.01. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness secured by a Lien on the Collateral, except (a) Indebtedness of the Borrower under the Loan Documents, (b) Indebtedness existing on the date hereof and listed on Schedule 6.01, (c) Indebtedness (including capitalized leases) financing the acquisition of fixed or capital assets, (d) Indebtedness incurred under corporate credit cards in the ordinary course of business, (e) obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees and similar obligations provided by the Borrower and its Subsidiaries or obligations in respect of letters of credit, bank guarantees or similar instruments related thereto, in each case in the ordinary course of business, (f) intercompany Indebtedness between or among the Borrower and any of its Subsidiaries and (g) Indebtedness approved by Lender.

 

SECTION 6.02. Other Business. Engage in any material line of business other than the business the Borrower and its Subsidiaries conduct as of the Closing Date and any business reasonably related, incidental or complementary thereto or reasonable expansions or extensions thereof.

 

SECTION 6.03. Accounting Changes. Make any significant change in accounting treatment, reporting practices or fiscal year, except as required or permitted by GAAP.

 

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SECTION 6.04. Dividends. Make any dividend or distribution except (a) dividends and other distributions solely of Equity Interests of the Borrower or any Subsidiary, (b) so long as no Event of Default has occurred and is continuing, repurchases of stock from current or former officers, directors, employees, consultants or contractors (or their transferees, estates, or beneficiaries under their estates) not to exceed $500,000 in the aggregate in any calendar year, (c) the conversion of Borrower’s convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof, (d) the purchase, redemption or other acquisition of Borrower’s Equity Interests with the proceeds received from a substantially concurrent issue of new Equity Interests, (e) cashless repurchases of Equity Interests deemed to occur upon exercises of options and warrants or the settlement or vesting of other equity awards if such Equity Interests represent a portion of the exercise price of such options or warrants, or similar equity incentive awards, (f) the Borrower may acquire (or withhold) its Equity Interests pursuant to any employee stock option or similar plan to pay withholding taxes for which the Borrower is liable in respect of a current or former officer, director, employee, member of management or consultant upon such grant or award (or upon vesting or exercise thereof) and the Borrower may make deemed repurchases in connection with the exercise of stock options, (g) cash payments made by Borrower to redeem, purchase, repurchase or retire its obligations under options, warrants and other convertible securities issued by it in the nature of customary cash payment sin lieu of fractional shares and (h) dividends and distributions by any Subsidiary to the holders of its Equity Interests.

 

ARTICLE VII

 

Reserved

 

ARTICLE VIII

 

Events of Default and Remedies

 

SECTION 8.01. Events of Default. Each of the events referred to in clauses (a) through (g) of this Section 8.01 shall constitute an “Event of Default”:

 

(a) Non-Payment. The Borrower fails to pay within ten (10) Business Days after the same becomes due, any amount of principal of any Loan, any interest on any Loan or any other amount payable hereunder or with respect to any other Loan Document except for any interest as to which a PIK Payment is made or deemed to have been made hereunder; or

 

(b) Other Defaults. The Borrower fails to perform or observe any other covenant or agreement (not specified in Section 8.01(a) above) contained in any Loan Document on its part to be performed or observed and such failure continues for sixty (60) days after the earlier of (i) an officer of the Borrower becoming aware of such circumstances and (ii) receipt by the Borrower of written notice thereof from Lender; or

 

(c) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by the Borrower herein, in any other Loan Document to which it is a party, or in any document required to be delivered in connection herewith or therewith shall be untrue in any material respect when made or deemed made; or

 

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(d) Insolvency Proceedings, Etc. The Borrower institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or the Borrower applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer is appointed without the application or consent of the Borrower and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under any Debtor Relief Law relating to the Borrower or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding; or

 

(e) Change in Control. A Change in Control shall occur; or

 

(f) Invalidity of Loan Documents. Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or as a result of acts or omissions by Lender or the satisfaction in full of all the Obligations, ceases to be in full force and effect; or the Borrower contests in writing the validity or enforceability of any provision of any Loan Document; or the Borrower denies in writing that it has any or further liability or obligation under any Loan Document (other than as a result of repayment in full of the Obligations and termination of the Commitment), or purports in writing to revoke or rescind any Loan Document; or

 

(g) Collateral. Any Lien purported to be created hereunder shall cease to be, or shall be asserted by the Borrower not to be, a valid and perfected Lien on any Collateral, with the priority required hereunder, except as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents.

 

SECTION 8.02. Remedies upon Event of Default. (a) If any Event of Default occurs and is continuing, Lender may take any or both of the following actions: (i) declare the Commitment of Lender to be terminated, whereupon such Commitment shall be terminated and (ii) declare the unpaid principal amount of all outstanding Loan, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; and, exercise all rights and remedies available to Lender under the Loan Documents or applicable Law or in equity; provided that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Debtor Relief Laws of the United States, the Commitment of Lender shall automatically terminate, the unpaid principal amount of all outstanding Loan and all interest and other amounts as aforesaid shall automatically become due and payable without further act of Lender. Lender shall not in any way or manner be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring or arising in any manner or fashion from any cause; (c) any diminution in the value thereof; or (d) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other person whomsoever, in each case, other than in the event of Lender’s gross negligence or willful misconduct. All risk of loss, damage or destruction of the Collateral shall be borne by the Borrower unless resulting from Lender’s gross negligence or willful misconduct. Lender’s rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative. No exercise by Lender of one right or remedy shall be deemed an election, and no waiver by Lender of any Event of Default on Borrower’s part shall be deemed a continuing waiver. No delay by Lender shall constitute a waiver, election, or acquiescence by it. No waiver by Lender shall be effective unless made in a written document signed on behalf of Lender and then shall be effective only in the instance and for the purpose for which it was given.

 

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SECTION 8.03. Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Loan has automatically become immediately due and payable), any amounts received on account of the Obligations shall be applied in the following order:

 

First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts payable to Lender (including Attorney Costs payable under Section 11.04);

 

Second, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loan;

 

Third, to payment of that portion of the Obligations constituting unpaid principal of the Loan;

 

Fourth, to the payment of all other Obligations of the Borrower that are due and payable to Lender on such date; and

 

Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law.

 

ARTICLE IX

 

Grant of Security

 

SECTION 9.01. Grant; Collateral Description.

 

(a) The Borrower hereby grants to Lender, to secure the payment and performance in full of all of the Obligations, a security interest in and pledges and collaterally assigns to Lender, the following properties, assets and rights of the Borrower, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof (all of the same being hereinafter called the “Collateral”): all personal property and fixtures of every kind and nature including all goods (including inventory, equipment and any accessions thereto), all instruments (including promissory notes), all documents (including, if applicable, electronic documents), all accounts, all chattel paper (whether tangible or electronic), all deposit accounts, all letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), all commercial tort claims, all books and records, all securities, all investment property, all supporting obligations, all contract rights, all rights to the payment of money, all insurance claims, all general intangibles (including all payment intangibles and intellectual property), and products and proceeds of any and all of the foregoing.

 

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(b) Notwithstanding the foregoing the term “Collateral” for all purposes hereunder and under each other Loan Document shall not include: (i) more than sixty-five percent (65%) of the issued and outstanding Equity Interests entitled to vote owned or held of record by the Borrower in any Subsidiary that is a controlled foreign corporation (as defined in the Code), provided that the Collateral shall include one hundred percent (100%) of the issued and outstanding non-voting Equity Interests of such Subsidiary; (ii) “intent-to-use” trademarks at all times prior to the first use thereof, whether by the actual use thereof in commerce, the recording of a statement of use with the United States Patent and Trademark Office or otherwise, but only to the extent the granting of a security interest in such “intent to use” trademarks would be contrary to applicable Laws; (iii) any contract, permit, license, governmental authorization, instrument or chattel paper in which the Borrower has any right, title or interest if and to the extent such contract, permit, license, governmental authorization, instrument or chattel paper includes a provision containing a restriction on assignment such that the creation of a security interest in the right, title or interest of the Borrower therein would be prohibited and would, in and of itself, cause or result in a default thereunder enabling another person party to such contract, permit, license, governmental authorization, instrument or chattel paper to enforce any remedy with respect thereto; provided, however, that the foregoing exclusion shall not apply if such prohibition would be rendered ineffective pursuant to Sections 9-407(a) or 9-408(a) of the Uniform Commercial Code, as applicable and as then in effect in any relevant jurisdiction, or any other applicable Laws; (iv) assets to the extent (and only to the extent) and for so long as the grant of a security interest by Borrower in such assets would violate any provision of law applicable to the Borrower or such assets, after giving effect to any applicable anti-assignment provision of the Uniform Commercial Code or any applicable Laws or principles of equity and other than proceeds thereof to the extent that the assignment of the same is effective under the Uniform Commercial Code or other applicable Laws notwithstanding such restriction; (v) motor vehicles and other assets subject to certificates of title, except to the extent a security interest therein can be perfected by the filing of a UCC financing statement under the Uniform Commercial Code; (vi) Equity Interests in joint ventures for so long as the pledge of such Equity Interests is prohibited by such joint venture’s organizational or joint venture documents or any contractual obligation of such joint venture; (vii) any property subject to a Lien permitted hereunder; (viii) deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of employees, accounts (including trust accounts) used exclusively for bona fide escrow or fiduciary purposes; and (ix) any particular assets if the burden, cost or consequences of creating or perfecting such pledges or security interests in such assets is excessive in relation to the benefits to be obtained by Lender under the Loan Documents as reasonably determined by the Borrower in good faith.

 

SECTION 9.02. Perfection of Collateral.

 

(a) The Borrower hereby authorizes Lender on its behalf to, and upon Lender’s reasonable request from time to time, the Borrower will, execute (if signature is required) and deliver, and file and record in the proper filing and recording places, all such instruments, including Uniform Commercial Code financing statements covering all assets of the Borrower, and take all such other action, as Lender deems reasonably necessary or appropriate for perfecting or protecting or otherwise confirming the security interest in the Collateral granted hereunder. ¹

 

(b) The Borrower shall furnish to Lender from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Lender may reasonably request, all in reasonable detail and in form and substance reasonably satisfactory to Lender.

 

 

¹NTD: Collateral perfection actions to be limited to filing UCC financing statements and IP Security Agreements filed with the PTO. No additional perfection actions will be taken (e.g., delivery of subsidiary stock certificates).

 

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SECTION 9.03. Right to Realize upon Collateral. Except to the extent prohibited by applicable Laws that cannot be waived, this Section 9.03 shall govern Lender’s rights to realize upon the Collateral; provided that the rights of Lender set forth in this Section 9.03 shall only be exercised upon the occurrence and the during the continuation of an Event of Default. The provisions of this Section 9.03 are in addition to any rights and remedies available at law or in equity.

 

(a) Assembly of Collateral; Receiver. The Borrower shall, upon Lender’s request, assemble the Collateral and otherwise make it available to Lender. Lender may have a receiver appointed for all or any portion of the Borrower’s assets or business which constitutes the Collateral in order to manage, protect, preserve, sell and otherwise dispose of all or any portion of the Collateral.

 

(b) Waiver. To the extent it may lawfully do so, the Borrower waives and relinquishes the benefit and advantage of, and covenants not to assert against Lender or any Lender, any valuation, stay, appraisement, extension, redemption or similar laws now or hereafter existing which, but for this provision, might be applicable to the sale of any Collateral made under the judgment, order or decree of any court or privately under the power of sale conferred by this Agreement to Lender.

 

(c) Foreclosure Sale. All or any part of the Collateral may be sold for cash or other value in any number of lots at public or private sale, without demand, advertisement or notice and with or without representations or warranties and upon such terms as shall be acceptable to Lender; provided, however, that unless the Collateral to be sold threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender shall give the Borrower not less than 10 days’ prior written notice of the time and place of any public sale, or the time after which a private sale may be made, which notice the Borrower and Lender agrees to be reasonable. At any sale or sales of Collateral, Lender or any of its assigns may bid for and purchase all or any part of the property and rights so sold and may use all or any portion of the Obligations owed to Lender as payment for the property or rights so purchased, all without further accountability to the Borrower.

 

(d) Additional Rights. Lender shall have, for the benefit of itself, in any jurisdiction where enforcement hereof is sought, in addition to all other rights and remedies that Lender may have under applicable law or in equity or under this Agreement (including, without limitation, all rights set forth in this Section 9.03), all rights and remedies of a secured party under the Uniform Commercial Code as enacted in any jurisdiction. Lender shall further have the right, for the benefit of itself, to use any of the intellectual property Collateral for the sale of goods, completion of work in process or rendering of services in connection with enforcing any of the security interests granted to Lender by the Borrower. Taking possession of the Collateral shall not cure or waive any Event of Default or notice thereof or invalidate any act done pursuant to such notice.

 

SECTION 9.04. Custody of Collateral. Except as provided by applicable law that cannot be waived, Lender will have no duty as to the custody and protection of the Collateral, the collection of any part thereof or of any income thereon or the preservation or exercise of any rights pertaining thereto, including rights against prior parties, except for the use of reasonable care in the custody and physical preservation of any Collateral in its possession.

 

SECTION 9.05. Change of Name or Location. The Borrower shall not (a) change its legal name as it appears in official filings in the state of its organization, (b) change the location of its chief executive office, (c) change the type of entity that it is, or (d) change its state of organization, in each case, unless it shall have provided Lender prior written notice thereof and taken any action reasonably requested by Lender or otherwise required in connection therewith to continue the perfection following such change of any Liens in favor of Lender in any Collateral.

 

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ARTICLE X

 

[Reserved]

 

ARTICLE XI

 

Miscellaneous

 

SECTION 11.01. Amendments, Etc. Except as otherwise set forth in this Section 11.01 or elsewhere in this Agreement, no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower shall be effective unless in writing signed by Lender and the Borrower.

 

SECTION 11.02. Notices and Other Communications; Facsimile Copies.

 

(a) General. Unless otherwise expressly provided herein, all notices and other communications provided for hereunder or under any other Loan Document shall be in writing (including by electronic transmission). All such written notices shall be emailed or mailed to the applicable address or electronic mail address of such party as set forth on Schedule 11.02 or to such other address, electronic mail address or telephone number as shall be designated by such party in a notice to the other parties. All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on behalf of the relevant party hereto; (B) if delivered by mail, four (4) Business Days after deposit in the mails, postage prepaid; and (C) if delivered by electronic mail, when delivered.

 

(b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be transmitted and/or signed by facsimile or other electronic communication. The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually signed originals and shall be binding on the Borrower and Lender.

 

(c) Reliance by Lender. Lender shall be entitled to rely and act upon any notices purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower in the absence of gross negligence or willful misconduct of such Related Person or Lender. All telephonic notices to Lender may be recorded by Lender, and each of the parties hereto hereby consents to such recording.

 

SECTION 11.03. No Waiver; Cumulative Remedies. No failure by Lender to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law.

 

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SECTION 11.04. Attorney Costs and Expenses. The Borrower agrees (a) to pay or reimburse Lender for all Attorney Costs incurred in connection with the preparation, negotiation and execution of this Agreement and the other Loan Documents, and (b) to pay or reimburse Lender for all reasonable and documented out-of-pocket costs and expenses incurred in connection with the enforcement of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any legal proceeding, including any proceeding under any Debtor Relief Law, and including all Attorney Costs). The agreements in this Section 11.04 shall survive the termination of the Commitment and repayment of all other Obligations. All amounts due under this Section 11.04 shall be paid promptly, and in any event within ten (10) Business Days, following receipt by the Borrower of an invoice relating thereto setting forth such expenses in reasonable detail.

 

SECTION 11.05. Indemnification by the Borrower. The Borrower shall indemnify and hold harmless the Related Persons, Lender and its Affiliates (other than the Borrower), manager, members, directors, officers, employees, agents, trustees or advisors (collectively the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Commitment, Loan or the use or proposed use of the proceeds therefrom, or (c) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements resulted from (i) the gross negligence, bad faith or willful misconduct of such Indemnitee or (ii) or (ii) a claim brought by the Borrower against an Indemnitee for material breach of such Indemnitee’s obligations hereunder or under any other Loan Document, in each case, as determined by a court of competent jurisdiction in a final and non-appealable judgment. No Indemnitee will have any liability for any special, punitive, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date). Notwithstanding the foregoing in this Section 11.05, the Borrower shall not be liable for any settlement of any proceeding effected without the Borrower’s consent, but if settled with the Borrower’s written consent, or if there is a judgment against an Indemnitee in any such proceeding, the Borrower shall indemnify and hold harmless each Indemnitee to the extent and in the manner set forth above. The agreements in this Section 11.05 shall survive the replacement of Lender, the termination of the Commitment and the repayment, satisfaction or discharge of all the other Obligations.

 

SECTION 11.06. Taxes. The Borrower will pay all taxes and fees (including interest and penalties) including, without limitation, all recording and filing fees, issuance and documentary stamp and similar taxes, which may be payable in respect of the execution and delivery of this Agreement and each of the other Loan Documents.

 

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SECTION 11.07. Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to Lender, or Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then to the extent of such recovery, 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 setoff had not occurred.

 

SECTION 11.08. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor Lender may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of (x) in the case of an assignment or transfer by the Borrower, Lender and (y) in the case of an assignment or transfer by Lender, so long as no Event of Default under Section 8.01(a) or (d) shall have occurred and be continuing, the Borrower; provided, however that, without any consent otherwise required by this Section 11.08, Lender may transfer its interest hereunder to any of its Affiliates, so long as the Borrower promptly receives written notice of such transfer and such other information as the Borrower may reasonably request, including an assignment agreement and/or a joinder to this Agreement, in each case, duly executed and delivered by the applicable transferor and transferee and in form and substance reasonably satisfactory to the Borrower.

 

SECTION 11.09. Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loan or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

 

SECTION 11.10. Counterparts. This Agreement and each other Loan Document may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by telecopier of an executed counterpart of a signature page to this Agreement and each other Loan Document shall be effective as delivery of an original executed counterpart of this Agreement and such other Loan Document.

 

SECTION 11.11. Integration. This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control.

 

SECTION 11.12. Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof, and shall continue in full force and effect as long as any Loan or any other Obligation (other than Obligations that are not accrued and payable) hereunder shall remain unpaid or unsatisfied.

 

22

 

SECTION 11.13. Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

SECTION 11.14. GOVERNING LAW. THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

SECTION 11.15. WAIVER OF RIGHT TO TRIAL BY JURY; ARBITRATION. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE. In the event a dispute shall arise between the parties to this AGREEMENT, it is hereby agreed that the dispute shall be SUBJECT TO ARBITRATION IN NASSAU COUNTY, NEW YORK in accordance with AMERICAN ARBITRATION ASSOCIATION Rules of Arbitration. The arbitrator’s decision shall be final and binding and judgment may be entered thereon.

 

SECTION 11.16. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower and Lender and thereafter shall be binding upon and inure to the benefit of the Borrower and Lender and their respective successors and assigns.

 

SECTION 11.17. Confidentiality. Lender agrees to keep confidential, and not disclose to any Person all non-public information provided to Lender by or on behalf of the Borrower pursuant to this Agreement; provided that nothing herein shall prevent Lender from disclosing any such information (i) any Affiliate of Lender, (ii) to its employees, officers, directors, agents, attorneys, accountants, trustees and other professional advisors or those of any of its affiliates (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (iii) upon the request or demand of any Governmental Authority purporting to have jurisdiction over Lender, and (iv) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Law; provided that, in the case of disclosure pursuant to clause (iii) and (iv) above, Lender shall promptly provide notice to the Borrower to the extent reasonable and not prohibited by Law or any applicable Governmental Authority.

 

SECTION 11.18. Collateral Matters. Lender agrees, upon Borrower’s written request to release any Lien on any property granted to or held by Lender under any Loan Document (i) upon termination of the Commitment and payment in full of all Obligations, (ii) at the time the property subject to such Lien is transferred, including any property that becomes subject to a capital lease or purchase money Indebtedness permitted hereunder, as part of or in connection with any transfer permitted hereunder or under any other Loan Document. In each case as specified in this Section 11.18, Lender will promptly, at the Borrower’s expense, execute and deliver to the Borrower such documents as the Borrower may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Loan Documents.

 

23

 

SECTION 11.19. Further Assurances. Borrower shall, and shall cause each of its Subsidiaries to, (i) execute and deliver such further agreements and instruments and take such further action as may be reasonably requested by Lender to carry out the provisions and purposes of this Agreement and the other Loan Documents and (ii) file all UCC financing statements and IP Security Agreements necessary to create, preserve, and perfect the Liens of Lender in the Collateral; provided that the Borrower shall not be obligated to execute or deliver any agreement or instrument unless such agreement or instrument is governed by the laws of the United States or a State thereof.

 

SECTION 11.20. Limitation of Liability. Neither Lender nor any Related Persons shall have any liability with respect to, and Borrower hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages (including any claim for loss of profits, revenue or business) suffered or incurred by Borrower, however caused and based on any theory of liability in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents or the conduct, acts, or omissions of Lender or any of its agents in the negotiation, administration, or enforcement thereof. Borrower hereby waives, releases, and agrees not to sue Lender or any Related Persons, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents or the conduct, acts, or omissions of Lender or any of its agents in the negotiation, admiration, or enforcement of this Agreement or any of the other Loan Documents.

 

SECTION 11.21. No Duty. All attorneys, accountants, appraisers, and other professional Persons and consultants retained by Lender shall have the right to act exclusively in the interest of Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to Borrower or any of Borrower’s equity holders, Affiliates, officers, employees, attorneys, agents, or any other Person.

 

SECTION 11.22. Lender Not Fiduciary. The relationship between Borrower and Lender is solely that of debtor and creditor, and Lender has no fiduciary or other special relationship with Borrower, and no term or condition of any of the Loan Documents shall be construed so as to deem the relationship between Borrower and Lender to be other than that of debtor and creditor.

 

SECTION 11.23. NOTICE OF FINAL AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

24

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

	BORROWER
	BEYOND AIR, INC., as Borrower
	By:	/s/ Douglas Larson
	Name:	Douglas Larson
	Title:	Chief Financial Officer
	LENDER
	BCR8V LLC, as Lender
	By:	/s/ Robert Carey
	Name:	Robert Carey
	Title:	Panel Member

 

 

Cover	Nov. 01, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 01, 2024
Entity File Number	001-38892
Entity Registrant Name	Beyond Air, Inc.
Entity Central Index Key	0001641631
Entity Tax Identification Number	47-3812456
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	900 Stewart Avenue
Entity Address, Address Line Two	Suite 301
Entity Address, City or Town	Garden City
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	11530
City Area Code	(516)
Local Phone Number	665-8200
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $.0001 per share
Trading Symbol	XAIR
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

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