Note, Warrant and Preferred Stock Purchase Agreement, dated February 27, 2017 by and between ULURU Inc. and Velocitas Partners, LLC

 

1.

Purchase and Sale of Preferred Stock; Issuance of Warrant and Note.

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1.1.

The Loans

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1.2.

Velocitas Subdistributor Assignment

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1.3.

Sale and Issuance of Preferred Shares

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1.4.

Closing; Delivery

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1.5.

Defined Terms Used in this Agreement

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2.

Representations and Warranties of the Company

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2.1.

Organization, Good Standing, Corporate Power and Qualification

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2.2.

Capitalization

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2.3.

Authorization

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2.4.

Valid Issuance of Securities

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2.5.

Governmental Consents and Filings

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2.6.

Litigation

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2.7.

Intellectual Property

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2.8.

Compliance with Other Instruments

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2.9.

Agreements; Actions

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2.10.

Certain Transactions

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2.11.

Property

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2.12.

Financial Statements

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2.13.

Changes

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2.14.

Employee Matters

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2.15.

Tax Returns and Payments

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2.16.

Compliance with Healthcare Laws

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2.17.

Permits

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2.18.

No Commitment for Additional Financing

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2.19.

Disclosure

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2.20.

Offering

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3.

Representations and Warranties of the Purchasers

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3.1.

Authorization

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3.2.

Purchase Entirely for Own Account

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3.3.

Disclosure of Information

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3.4.

Restricted Securities

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3.5.

No Public Market

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3.6.

Legends

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3.7.

Accredited Investor

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3.8.

Foreign Investors

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3.9.

No General Solicitation

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3.10.

Exculpation Among Purchasers

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3.11.

Residence

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3.12.

Bad Actor Representation

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4.

Representations of Velocitas

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4.1.

Subdistributor Agreements

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4.2.

Velocitas Subdistributor Assignment

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4.3.

Consents and Filings

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4.4.

Litigation

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5.

Closing Conditions

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5.1.

First Closing

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5.2.

Second Closing

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6.

Covenants.

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6.1.

Secondary Placement

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6.2.

Shareholder Meeting

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6.3.

Further Assurances

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7.

Miscellaneous.

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7.1.

Successors and Assigns

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7.2.

Counterparts

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7.3.

Titles and Subtitles

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7.4.

Notices

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7.5.

No Finder’s Fees

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7.6.

Fees and Expenses

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7.7.

Amendments and Waivers

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7.8.

Severability

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7.9.

Delays or Omissions

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7.10.

Entire Agreement

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7.11.

Arbitration

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1.	Purchase and Sale of Preferred Stock; Issuance of Warrant and Note.

 

1.1. The Loans

 

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1.2. Velocitas Subdistributor Assignment

 

. At the Second Closing, in consideration of the execution of an Assignment and Assumption Agreement by and between the Company and Velocitas GmbH, in substantially the form attached hereto as Exhibit E with respect to the Subdistributor Agreements (the “Velocitas Subdistributor Assignment”), the Company shall issue to Velocitas 13,375,000 shares of Common Stock, reflecting an aggregate value of approximately $535,000 based upon a price per share of Common Stock equal to $0.04, representing equivalent value to the value of the assigned Subdistributor Agreements. The shares of Common Stock issued to the Velocitas pursuant to this Section 1.2 shall be referred to in this Agreement as the “Assignment Shares”; together with the Preferred Shares, the “Shares”.

 

1.3. Sale and Issuance of Preferred Shares

 

. Subject to the terms and conditions of this Agreement and the closing conditions set forth in Section 5.3, each Purchaser agrees to purchase, and the Company agrees to sell and issue to each Purchaser, at the Second Closing, that number of shares of Series B Preferred Stock set forth opposite such Purchaser’s name on Exhibit A, at a purchase price of $4,000 per share (the “Per-Share Price”), and the aggregate purchase price for the shares of Series B Preferred Stock (the “Preferred Shares”) acquired by each Purchaser shall be the sum of the Per-Share price multiplied by the number of Preferred Shares subscribed to by such Purchaser (the “Purchase Price”). The Purchasers shall have the right to determine the aggregate number of Preferred Shares to be purchased by the Purchasers at the Second Closing by written notice to the Company containing a substitute Exhibit A at least two (2) Business Days prior to the Second Closing; provided, that the aggregate Purchase Price of the number of Preferred Shares to be purchased by the Purchasers at the Second Closing as reflected in such substitute Exhibit A shall be at least two million dollars ($2,000,000) and shall not exceed five million dollars ($5,000,000).

 

1.4. Closing; Delivery

 

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1.5. Defined Terms Used in this Agreement

 

2.	Representations and Warranties of the Company

 

2.1. Organization, Good Standing, Corporate Power and Qualification

 

2.2. Capitalization

 

.

 

2.3. Authorization

 

.  All corporate action required to be taken on the part of the Company, its Subsidiaries and their respective officers, directors, and stockholders in order to authorize the Company and its Subsidiaries to enter into the Transaction Agreements, and to issue the Shares at the Closings, has been taken or will be taken prior to the applicable Closing.  The Transaction Agreements, when executed and delivered by the Company and its Subsidiaries, shall constitute valid and legally binding obligations of the Company and its Subsidiaries, enforceable against the Company and its Subsidiaries in accordance with their respective terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, or (iii) to the extent the indemnification provisions contained herein may be limited by applicable laws and principles of public policy.

 

2.4. Valid Issuance of Securities

 

.  The Shares, the Warrant, the shares of Common Stock issuable upon exercise of the Warrant (the “Exercise Shares”), the Notes and the shares of Common Stock issuable upon conversion of the Notes (the “Conversion Shares” and together with the Warrant, the Exercise Shares and the Notes, the “Securities”), when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under the Transaction Agreements, the Company’s bylaws, and applicable state and federal securities laws.

 

2.5. Governmental Consents and Filings

 

.  No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any U.S. federal, state or local governmental authority is required on the part of the Company in connection with the issuance of the Securities or the consummation of the transactions contemplated by this Agreement, except for (i) qualifications or filings under the Securities Act, and the regulations thereunder, (ii) qualification or filings required under all other applicable federal and state securities laws and stock exchange or stock quotation service regulations as may be required in connection with the transactions contemplated by this Agreement and (iii) such consents and waivers as have been obtained or expired by their terms.

 

2.6. Litigation

 

.  There is no claim, action, suit, proceeding, or, to the Company’s knowledge, investigation pending or to the Company’s knowledge, currently threatened in writing (i) against the Company or its Subsidiaries; (ii) against any officer or director of the Company or its Subsidiaries arising out of their employment or board relationship with the Company or its Subsidiaries; (iii) that questions the validity of the Transaction Agreements or the right of the Company or its Subsidiaries to enter into them, or to consummate the transactions contemplated by the Transaction Agreements; or (iv) that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.  Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any of its officers or directors is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality (in the case of officers or directors, such as would affect the Company).  There is no action, suit, proceeding or, to the Company’s knowledge, investigation by the Company or its Subsidiaries pending or which the Company or its Subsidiaries intends to initiate.

 

2.7. Intellectual Property

 

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2.8. Compliance with Other Instruments

 

.  Neither the Company nor its Subsidiaries is in material violation or default (i) of any provisions of its articles or certificate of incorporation or bylaws, (ii) of any instrument, judgment, order, writ or decree, (iii) under any note, indenture or mortgage, or (iv) under any material lease, agreement, contract or purchase order to which the Company or any of its Subsidiaries is a party or by which it is bound that is required to be listed on the Disclosure Letter, or (v) any Law, the violation of which would have a Material Adverse Effect.  The execution, delivery and performance of the Transaction Agreements and the consummation of the transactions contemplated by the Transaction Agreements will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (i) a default under the Company’s articles or certificate of incorporation or bylaws, or any such provision, instrument, judgment, order, writ, decree, contract or agreement; or (ii) an event which results in the creation of any Lien upon any assets of the Company or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to the Company or its Subsidiaries.

 

2.9. Agreements; Actions

 

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2.10. Certain Transactions

 

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2.11. Property

 

.  Except as disclosed in the SEC Documents, the property and assets that the Company and its Subsidiaries own are free and clear of all Liens, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property or assets.  With respect to the property and assets it leases, the Company and its Subsidiaries are in compliance with such leases and, to its knowledge, holds a valid leasehold interest free of any Liens other than those of the lessors of such property or assets.  Neither Company nor any of its Subsidiaries owns any real property.

 

2.12. Financial Statements

 

.  The Company has delivered or made available via EDGAR or otherwise the (a) the audited consolidated balance sheet of the Company and its Subsidiaries as of December 31, 2015 and the related statements of operations and cash flows for the fiscal year then-ended; and (b) the unaudited consolidated balance sheet and related statements of operations and cash flows of the Company and its Subsidiaries as of and for the nine (9)-month period ended September 30, 2016 (the “Financial Statements”). With the exception of the items noted in Section 2.12 of the Disclosure Letter, the Financial Statements are true and correct in all material respects and present fairly the financial condition and operating results of the Company and its Subsidiaries as of the dates and during the periods indicated therein. The Financial Statements comply as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto, except as set forth in the respective SEC Documents.  The Financial Statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods indicated, except that the unaudited Financial Statements may exclude certain footnotes required under GAAP and are subject to normal year-end audit adjustments, which are not expected to be material either individually or in the aggregate, and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the Financial Statements, or described in Section 2.12 of the Disclosure Letter, the Company has no liabilities required to be reflect on a financial statement in accordance with GAAP other than liabilities incurred in the ordinary course of business subsequent to September 30, 2016. The Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with GAAP.

 

2.13. Changes

 

.  To the Company’s knowledge, and other than events disclosed in the Company’s SEC filings, since September 30, 2016, there have been no events that have had or could reasonably be expected to result in a Material Adverse Effect.

 

2.14. Employee Matters

 

.

 

2.15. Tax Returns and Payments

 

.  There are no federal, state, county, local or foreign taxes due and payable by the Company or any of its Subsidiaries which have not been timely paid.  There are no accrued and unpaid federal, state, county, local or foreign taxes of the Company or any of its Subsidiaries which are due, whether or not assessed or disputed.  There have been no examinations or audits of any tax returns or reports by any applicable Governmental Entity.  The Company and its Subsidiaries has duly and timely filed all federal, state, county, local and foreign tax returns required to have been filed by it and there are in effect no waivers of applicable statutes of limitations with respect to taxes for any year.

 

2.16. Compliance with Healthcare Laws

 

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2.17. Permits

 

.  The Company and its Subsidiaries have all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack of which could reasonably be expected to have a Material Adverse Effect.  Neither the Company nor any of its Subsidiaries is in default in any material respect under any of such franchises, permits, licenses or other similar authority.

 

2.18. No Commitment for Additional Financing

 

. The Company acknowledges and agrees that none of Velocitas, any Purchaser or any of their respective Affiliates has made any representation, undertaking, commitment or agreement to provide or assist the Company in obtaining any financing, investment or other assistance, other than the acquisition of the Securities as set forth herein and subject to the conditions set forth herein. In addition, the Company acknowledges and agrees that (i) no statements, whether written or oral, made by any of Velocitas, any Purchaser or any of their respective Affiliates or representatives on or after the date of this Agreement shall create an obligation, commitment or agreement to provide or assist the Company in obtaining any financing or investment, (ii) the Company shall not rely on any such statement by Velocitas, any Purchaser or any of their respective Affiliates or representatives and (iii) an obligation, commitment or agreement to provide or assist the Company in obtaining any financing or investment may only be created by a written agreement, signed by Velocitas, such Purchaser or such Affiliate and the Company, setting forth the terms and conditions of such financing or investment and stating that the parties intend for such writing to be a binding obligation or agreement.

 

2.19. Disclosure

 

.  The SEC Documents, when filed, complied as to form with applicable requirements under the Securities Exchange Act of 1934, as amended and did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances under which they were made. Neither the Transaction Agreements nor any other documents or certificates delivered in connection herewith, when taken as a whole, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.

 

2.20. Offering

 

.  Assuming the accuracy of the representations and warranties of (i) the Purchaser in Section 3 and (ii) Velocitas in Section 4, the offer, sale and issuance of the Securities constitute transactions exempt from the registration requirements of Section 5 of the Securities Act and from the registration or qualification requirements of applicable state securities laws. Neither the Company nor any agent on its behalf has solicited or will solicit any offers to sell or has offered to sell or will offer to sell all or any part of the Notes, the Shares or the Conversion Shares to any Person or Persons so as to bring the sale of such securities by the Company within the registration provisions of the Securities Act or any state securities laws.

 

3.	Representations and Warranties of the Purchasers

 

. Each Purchaser hereby represents and warrants to the Company, severally and not jointly, solely with respect to such Purchaser, that:

 

3.1. Authorization

 

.  The Purchaser has full power and authority to enter into the Transaction Agreements.  The Transaction Agreements to which the Purchaser is a party, when executed and delivered by the Purchaser, will constitute valid and legally binding obligations of the Purchaser, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, or (b) to the extent the indemnification provisions contained in the Investors’ Rights Agreement may be limited by applicable federal or state securities laws

 

3.2. Purchase Entirely for Own Account

 

.  This Agreement is made with the Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s execution of this Agreement, the Purchaser hereby confirms, that the Securities to be acquired by the Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same.  By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of such Securities.

 

3.3. Disclosure of Information

 

.  Purchaser has received and reviewed copies of the SEC Documents filed on behalf of the Company and has had access to all publicly available information with respect to the Company.  Purchaser has relied solely on the SEC Documents and the representations and warranties set forth in this Agreement with respect to Purchaser’s decision to execute this Agreement and has not relied upon any oral statement by any officer, director or agent of the Company (or any third party) and agrees that it is not authorized to rely on any representations or warranties other than as set forth herein.

 

3.4. Restricted Securities

 

.  The Purchaser understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser’s representations as expressed herein.  The Purchaser understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Purchaser must hold the Securities to be acquired by the Purchaser indefinitely unless they are registered with the SEC and qualified by state authorities, or an exemption from such registration and qualification requirements is available.  The Purchaser acknowledges that the Company has no obligation to register or qualify the Securities except pursuant to the Investors’ Rights Agreement.  The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Purchaser’s control, and which the Company is under no obligation and may not be able to satisfy.

 

3.5. No Public Market

 

.  The Purchaser understands that no public market now exists for the Securities, and that the Company has made no assurances that a public market will ever exist for the Securities.

 

3.6. Legends

 

.  The Purchaser understands that the Securities and any securities issued in respect of or exchange for the Securities, may be notated with one or all of the following legends:

 

“THE SECURITIES OF THE COMPANY EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR IN ANY STATE IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND VARIOUS APPLICABLE STATE SECURITIES LAWS.  SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR ASSIGNED OR A SECURITY INTEREST CREATED THEREIN UNLESS THE PURCHASER, TRANSFEREE, ASSIGNEE, PLEDGEE OR HOLDER OF SUCH SECURITY INTEREST COMPLIES WITH ALL STATE AND FEDERAL SECURITIES LAWS (I.E., SUCH SECURITIES ARE REGISTERED UNDER SUCH LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE THEREUNDER) AND UNLESS THE SELLER, TRANSFEROR, ASSIGNOR, PLEDGOR OR GRANTOR OF SUCH SECURITY INTEREST PROVIDES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE TRANSACTION CONTEMPLATED WOULD NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.”

 

(a) Any legend set forth in, or required by, the other Transaction Agreements.

 

(b) Any legend required by the securities laws of any state to the extent such laws are applicable to the Shares represented by the certificate, instrument, or book entry so legended.

 

3.7. Accredited Investor

 

.  The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

 

3.8. Foreign Investors

 

.  If the Purchaser is not a United States person (as defined by Section 7701(a)(30) of the Code), the Purchaser hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Securities to be acquired by the Purchaser, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Securities.  The Purchaser’s subscription and payment for and continued beneficial ownership of the Securities to be acquired by the Purchaser will not violate any applicable securities or other laws of the Purchaser’s jurisdiction.

 

3.9. No General Solicitation

 

.  Neither the Purchaser, nor any of its officers, directors, employees, agents, stockholders or partners has either directly or indirectly, including, through a broker or finder (a) engaged in any general solicitation, or (b) published any advertisement in connection with the offer and sale of the Securities.

 

3.10. Exculpation Among Purchasers

 

.  The Purchaser acknowledges that it is not relying upon any Person in making its investment or decision to invest in the Company.  The Purchaser agrees that neither any Purchaser nor the respective controlling Persons, officers, directors, partners, agents, or employees of any Purchaser shall be liable to any other Purchaser for any action heretofore taken or omitted to be taken by any of them in connection with the purchase of the Securities to be acquired by the Purchaser.

 

3.11. Residence

 

.  If the Purchaser is an individual, then the Purchaser resides in the state or province identified in the address of the Purchaser set forth on Exhibit A; if the Purchaser is a partnership, corporation, limited liability company or other entity, then the office or offices of the Purchaser in which its principal place of business is identified in the address or addresses of the Purchaser set forth on Exhibit A.

 

3.12. Bad Actor Representation

 

. The Purchaser is familiar with the “bad actor” provisions of Rule 506(d) under the Securities Act (“Rule 506(d)”) and except as set forth on the Disqualification and Disclosure Questionnaire in the form attached hereto as Exhibit J (the “Disqualification Questionnaire”), the Purchaser, inclusive of the control persons of the Purchaser, is not and has not been subject to or experienced any of the events described in Rule 506(d)(1)(i)-(viii) (a "Disqualifying Event").  The Purchaser agrees to notify the Company as soon as practicable of the Purchaser, inclusive of the control persons of the Purchaser, becoming subject to or experiencing a Disqualifying Event or the occurrence of any other event that would cause the representations set forth in the preceding sentence to be inaccurate.

 

4.	Representations of Velocitas

 

.  Velocitas represents and warrants to the Company that:

 

4.1. Subdistributor Agreements

 

.  There are no Subdistributor Agreements other than the arrangement or agreements described on Exhibit A to the Velocitas Subdistributor Assignment, which Exhibit A identifies each Subdistributor, all Subdistributor Agreements to which such Subdistributor is a part and the territories with respect to which such Subdistributor has rights.  Neither Velocitas GmbH nor, to the knowledge of Velocitas, any other party (excluding Altrazeal Trading GmbH and Altrazeal AG) to a Subdistributor Agreement is in violation or default under any Subdistributor Agreement in any material respect, excluding any minimum purchase order obligations set forth therein.  Neither Velocitas nor Velocitas GmbH has any liability pursuant to any Subdistributor Agreement to any other party to any Subdistributor Agreement other than as set forth in such Subdistributor Agreement, including performance following the date hereof in accordance with the terms of such Subdistributor Agreement.  Without limiting the foregoing, except for deposits and payments outstanding in the ordinary course of business, neither Velocitas nor Velocitas GmbH has any liability under, or owes any money to any party to any Subdistributor Agreement with respect to, any such Subdistributor Agreement.  The Company has been provided true, correct and complete copies (or summaries with respect to verbal agreements) of the Subdistributor Agreements.

 

4.2. Velocitas Subdistributor Assignment

 

. Subject to the receipt of the consent of the Company, Velocitas GmbH and to the extent required under the applicable the Velocitas Subdistributor Assignment, the other parties thereto , the execution, delivery and performance of the Velocitas Subdistributor Assignment by Velocitas GmbH and the consummation of the transactions contemplated by the Velocitas Subdistributor Assignment will not result in any violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (i) a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement; or (ii) an event which results in the creation of any lien, charge or encumbrance upon any assets of Velocitas or Velocitas GmbH or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to Velocitas or Velocitas GmbH; provided, that the Company acknowledges that the foregoing representation does not address the consent of Altrazeal Trading GmbH or Altrazeal AG.

 

4.3. Consents and Filings

 

.  No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Person or any Governmental Entity is required on the part of the Velocitas or Velocitas GmbH in connection with the consummation of the transactions contemplated by the Velocitas Subdistributor Assignment such consents and waivers as have been obtained or expired by their terms, which shall not have been obtained prior to the Second Closing.

 

4.4. Litigation

 

.  There is no claim, action, suit, proceeding, or, to Velocitas’ knowledge, investigation pending or to the Velocitas’ knowledge, currently threatened in writing against Velocitas, Velocitas GmbH or any officer or director of Velocitas or Velocitas GmbH that questions the validity of, or arises under or relates to any Subdistributor Agreements or the right of Velocitas GmbH to enter into them, or to consummate the transactions contemplated by the Velocitas Subdistributor Assignment.

 

5.	Closing Conditions

 

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5.1. First Closing

 

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(a) The obligations of Velocitas to purchase the Initial Note at the First Closing are subject to the fulfillment, on or before the First Closing, of each of the following conditions, unless otherwise waived by Velocitas in its sole discretion:

 

i. The representations and warranties of the Company set forth herein, the Initial Note and the Security Agreement shall be true and complete in all respects as of the date of the First Closing as though made on and as of such date (other than those representations and warranties that are made as of a specified date, in which case, such representations and warranties shall be true and correct in all material respects as of such specified date);

 

ii. the Company shall have performed all of the covenants of the Company set forth herein, the Initial Note and the Security Agreement that are required to be performed on or prior to the First Closing;

 

iii. the Vice President and Chief Financial Officer of the Company shall have delivered Velocitas at the First Closing a certificate certifying that the conditions specified in Sections 5.1(a)(i) and 5.1(a)(i)(ii) have been fulfilled;

 

iv. the Vice President and Chief Financial Officer of the Company shall have delivered Velocitas at the First Closing a certificate certifying that attached thereto are correct and complete copies of: (A) the resolutions duly and validly adopted by the Board of Directors evidencing its authorization of the execution and delivery of the Transaction Agreements and appointing Vaidehi Shah as a director of the Company and Vaidehi Shah as Chief Executive Officer of the Company; (B) the articles or certificate of incorporation and by-laws of the Company and each of its Subsidiaries; (C) a good standing certificate for the Company and each of its Subsidiaries from the Secretary of State of the State of Nevada or Delaware, as applicable, dated within seven (7) days of the date of the First Closing; and (E) written resignations and general releases of each of the Resigning Officer and Directors in their capacities as directors and officers (other than Terrance Wallberg who shall be required to resign only in his capacity as a director), in form and substance acceptable to Velocitas; provided, that, the releases and resignations of Terrence Wallberg and Robert Goldrich as directors of the Company and its subsidiaries shall be effective as of the Second Closing;

 

v. the Company shall have delivered to Velocitas at the First Closing, (A) the Initial Note duly executed by the Company; (B) the Security Agreement duly executed by the Borrower Entities; (C) the Investors’ Rights Agreement duly executed by the Company and the investors specified therein (other than Velocitas and any Purchaser); (D) the Voting Agreement duly executed by the Company and the investors specified therein (other than Velocitas and any Purchaser) and (E) the BackStop Agreement duly executed by the Company and the investors specified therein (other than Velocitas and any Purchaser);

 

vi. all authorizations, approvals or permits, if any, of any Governmental Entity that are required in connection with the lawful issuance and sale of the Initial Note (and the Common Stock issuable upon conversion thereof) and the Securities pursuant to this Agreement shall be obtained and effective as of the First Closing;

 

vii. all corporate and other proceedings in connection with the transactions contemplated at the First Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to Velocitas;

 

viii. the Company shall have provided notices of the transactions contemplated by the Transaction Agreement to any persons holding (or allegedly holding) any preemptive or similar rights, and either (A) such rights shall have been waived with respect to the transactions contemplated by the Transaction Agreements, or (B) the period for exercise shall have expired with respect to the transactions contemplated by the Transaction Agreements without any holder of such preemptive rights having exercised the same; and

 

ix. Velocitas shall have received an opinion from one or more law firms dated as of the First Closing, in substantially the form attached hereto, with customary opinions regarding corporate authority, approval, valid and binding obligation, due issuance, perfection (with respect to the Liens granted under the Security Agreement) and exemption from Section 5 under the Securities Act.

 

(b) The obligations of the Company to issue the Initial Note and execute the Security Agreement at the First Closing are subject to the fulfillment, on or before the First Closing, of each of the following conditions, unless otherwise waived by the Company in its sole discretion:

 

i. The representations and warranties of Velocitas contained in Section 4 shall be true and correct in all respects as of the First Closing;

 

ii. Velocitas shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by Velocitas on or prior to the First Closing;

 

iii. Velocitas shall have delivered to the Company at the First Closing, (A) the Security Agreement duly executed by Velocitas; (B) a Disqualification Questionnaire completed and executed by Velocitas and each prospective appointee of Velocitas to the Board of Directors or as an officer of the Company; (C) the Investors’ Rights Agreement duly executed by Velocitas; (D) the Voting Agreement duly executed by Velocitas and (E) the BackStop Agreement duly executed by Velocitas; and

 

iv. all authorizations, approvals or permits, if any, of any Governmental Entity that are required in connection with the lawful issuance and sale of the Initial Note (and the Common Stock issuable upon conversion thereof) shall be obtained and effective as of the First Closing.

 

5.2. Second Closing

 

.

 

(a) The obligations of Velocitas to purchase the Second Note, and of the Purchasers to acquire the Preferred Shares are subject to the fulfillment, on or before the Second Closing, of each of the following conditions, unless otherwise waived by Velocitas in its sole discretion:

 

i. The representations and warranties of the Company set forth herein and the other Transaction Agreement shall be true and complete in all material respects as of the date of the Second Closing as though made on and as of such date (other than those representations and warranties that are made as of a specified date, in which case, such representations and warranties shall be true and correct in all material respects as of such specified date);

 

ii. the Company shall have performed all of the covenants of the Company set forth herein and the other Transaction Agreements that are required to be performed on or prior to the Second Closing;

 

iii. since the date of this Agreement, no Material Adverse Effect shall have occurred;

 

iv. the Vice President and Chief Financial Officer of the Company shall deliver Velocitas at the Second Closing a certificate certifying that the conditions specified in Sections 5.2(a)(i), 5.2(a)(i)(ii) and 5.2(a)(i)(iii) have been fulfilled;

 

v. the Company shall have delivered to Velocitas at the Second Closing: (A) the Second Note, duly executed by the Company; (B) the Warrant, duly executed by the Company; (C) a copy of an irrevocable instruction letter to the transfer agent of the Company directing the transfer agent to issue within, three (3) Business Days of the Second Closing, certificates representing the Assignment Shares bearing such legends as are required by the Transaction Agreements; and (D) the Velocitas Subdistributor Assignment, duly executed by the Company;

 

vi. the Company shall have delivered to the Purchasers a copy of an irrevocable instruction letter to the transfer agent of the Company directing the transfer agent to issue, within three (3) Business Days of the Second Closing, certificates representing the Preferred Shares bearing such legends as are required by the Transaction Agreements;

 

vii. all authorizations, approvals or permits, if any, of any Governmental Entity that are required in connection with the lawful issuance and sale of the Second Note, the Preferred Shares, the Warrant and the Assignment Shares (and the Common Stock issuable upon conversion thereof) pursuant to this Agreement shall be obtained and effective as of the Second Closing;

 

viii. the Company shall have provided notices of the transactions contemplated by the Transaction Agreement to any persons holding (or allegedly holding) any preemptive or similar rights, and either (A) such rights shall have been waived with respect to the transactions contemplated by the Transaction Agreements, or (B) the period for exercise shall have expired with respect to the transactions contemplated by the Transaction Agreements without any holder of such preemptive rights having exercised such rights;

 

ix. the Company shall have taken all necessary actions to give effect to the resignation of each of the Resigning Officers and Directors, and the Board of Directors shall be comprised with, only the following individuals: Arindam Bose, Bradley Sacks, Anish Shah, Vaidehi Shah and Oksana Tiedt; and

 

x. the Purchasers shall have received an opinion from one or more law firms dated as of the Second Closing, in substantially the form attached hereto, with customary opinions regarding corporate authority, valid and binding obligation, valid issuance of the Securities and compliance with or exemption from Section 5 under the Securities Act.

 

(b) The obligations of the Company to issue the Second Note, the Warrant, the Assignment Shares and the Preferred Shares at the Second Closing are subject to the fulfillment, on or before the Second Closing, of each of the following conditions, unless otherwise waived by the Company in its sole discretion:

 

i. The representations and warranties of the Purchasers in Section 3 and Velocitas contained in Section 4 shall be true and correct in all respects as of the Second Closing;

 

ii. Velocitas and the Purchasers shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by Velocitas or the Purchasers on or prior to the Second Closing;

 

iii. Velocitas shall have delivered to the Company at the Second Closing, the Velocitas Subdistributor Assignment duly executed by Velocitas GmbH;

 

iv. The Purchasers shall have delivered to the Company at the Second Closing, (A) the Investors’ Rights Agreement duly executed by the Purchasers; and (B) the Voting Agreement duly executed by the Purchasers;

 

v. Velocitas GmbH shall have delivered to the Company all consents (other than those of the Company, Altrazeal Trading GmbH or Altrazeal AG) required in connection with the Velocitas Subdistributor Assignment.

 

vi. All authorizations, approvals or permits, if any, of any Governmental Entity that are required in connection with the lawful issuance and sale of the Second Note, the Warrant, the Assignment Shares, the Preferred Shares (and the Common Stock issuable upon conversion thereof) pursuant to this Agreement shall be obtained and effective as of the Second Closing.

 

6.	Covenants.

 

6.1. Secondary Placement

 

.  If the aggregate Purchase Price paid by all of the Purchasers with respect to the Preferred Shares at the Second Closing under this Agreement is less than U.S. $4.0 million, then the Company shall use commercially reasonable efforts to pursue a private placement of Common Stock within 180 days of the Second Closing, and starting no later than June 30, 2017, with the objective of raising gross proceeds of no less than the difference, if any, between U.S. $4.0 million and the aggregate Purchase Price paid by all of the Purchasers with respect to the Preferred Shares at the Second Closing under this Agreement (the “Private Placement”).  The Board of Directors of the Company will determine the amount, price and other terms of the Private Placement. In the Private Placement, the investors will be permitted to join the Investment Rights Agreement, and major investors in the Private Placement (and any purchaser under the BackStop Agreement) will also be permitted to appoint directors.  BackStop Investor shall be an intended third party beneficiary of this Section 6.1.

 

6.2. Shareholder Meeting

 

.  The Company will call a meeting of its shareholders to be held no later than June 30, 2017 and submit at such meeting an amendment to the Articles increasing the authorized shares of Common Stock to a number not less than the Conversion Threshold, as defined in the Certificate of Designation.

 

6.3. Further Assurances

 

.  The Company shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions as Velocitas and the Purchaser may reasonably deem necessary or desirable to evidence and effectuate the transactions, including obtaining enforceable waivers in respect of any preemptive or similar rights directly or indirectly affecting any of its securities that shall be applicable to the issuance and sale of the Securities.

 

7.	Miscellaneous.

 

 

7.1. Successors and Assigns

 

.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

7.2. Counterparts

 

.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

7.3. Titles and Subtitles

 

.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

7.4. Notices

 

.  All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt, or (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next Business Day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) Business Day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt.  All communications shall be sent to the respective parties at their address as set forth on the signature page or Exhibit A, or to such e-mail address, facsimile number or address as subsequently modified by written notice given in accordance with this Subsection 7.4.  If notice is given to the Company, a copy shall also be sent to Bryan T. Allen ***@***), Parr Brown Gee & Loveless, P.C., 101 South 200 East, Suite 700, Salt Lake City, Utah 84111 and if notice is given to the Purchasers, a copy shall also be given to R. Ronald Hopkinson ***@***), Cooley LLP, 1114 Avenue of the Americas, New York, NY 10036.

 

7.5. No Finder’s Fees

 

.  Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction.  Each Purchaser agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which each Purchaser or any of its officers, employees or representatives is responsible.  The Company agrees to indemnify and hold harmless each Purchaser from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

 

7.6. Fees and Expenses

 

.  At the First Closing, the Company shall pay the reasonable fees and expenses of Velocitas, including fees and expenses of Cooley LLP, the counsel for Velocitas, in an amount not to exceed $50,000 in the aggregate.  All other legal and other fees and expenses incurred by the Company or Purchasers in connection with the transaction contemplated by the Transaction Agreements will be borne by the party incurring such legal and other fees and expenses.

 

7.7. Amendments and Waivers

 

.  This Agreement may be amended, terminated or waived only with the written consent of the Company, and (i) each of the Purchasers party hereto.  Notwithstanding the foregoing, the Company may modify Exhibit A without the consent of the Purchasers to add Purchasers not previously identified on Exhibit A, to remove anticipated Purchasers who have not executed counterparts to this Agreement or to modify investment amounts consistent with the actual subscriptions by the Purchasers.

 

7.8. Severability

 

.  The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

 

7.9. Delays or Omissions

 

.  No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

7.10. Entire Agreement

 

.  This Agreement (including the Exhibits hereto), the Certificate or Designation and the other Transaction Agreements constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled.

 

7.11. Arbitration

 

. This Agreement, and all claims or causes of action (whether in contract or otherwise) that may be based upon, arise out of, or relate to this Security Agreement or the negotiation, execution, or performance of this Agreement (including any claim or cause or action based upon, arising out of, or related to any representation or warranty made in or in connection with this Agreement or as an inducement to this Agreement), shall be governed by the internal laws of the State of New York.  Any issue, controversy, or claim arising out of or related to this Agreement or any related documents hereto that cannot be resolved by mutual agreement shall be settled or resolved by binding arbitration in New York, New York pursuant to the Federal Arbitration Act and in accordance with the Commercial Arbitration Rules of the American Arbitration Association now or hereafter in effect. The parties to the dispute shall unanimously select the arbitrator. In the event the parties to the dispute are unable to unanimously select an arbitrator within ten (10) Business Days of a meeting called to appoint an arbitrator, the arbitrator shall be selected in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator shall have the right to award individual relief which the arbitrator deems proper under the evidence presented and applicable law and consistent with the parties’ rights to, and limitations on, damages and other relief as expressly set forth in this Agreement. The award and decision of the arbitrator shall be conclusive and binding on all parties, and judgment upon the award may be entered in any court of competent jurisdiction. The expenses of the arbitration, including the arbitrator’s fees and expert witness fees, incurred by the parties to the arbitration, may be awarded to the prevailing party, in the discretion of the arbitrator, or may be apportioned between the parties in any manner deemed appropriate by the arbitrator. Unless and until the arbitrator decides that one party is to pay for all (or a share) of such expenses, both parties shall share equally in the payment of the arbitrator’s fees as and when billed by the arbitrator. The foregoing agreement to arbitrate shall be specifically enforceable under applicable law in any court having jurisdiction thereof. IN AGREEING TO THE METHOD OF DISPUTE RESOLUTION SET FORTH IN THIS ARBITRATION CLAUSE, THE PARTIES SPECIFICALLY ACKNOWLEDGE THAT EACH PREFERS TO RESOLVE DISPUTES BY ARBITRATION RATHER THAN THROUGH THE FORMAL COURT PROCESS. FURTHER, EACH OF THEM UNDERSTANDS THAT BY AGREEING TO ARBITRATION EACH OF THEM IS WAIVING THE RIGHT TO RESOLVE DISPUTES ARISING OR RELATING TO THIS AGREEMENT IN COURT BY A JUDGE OR JURY, THE RIGHT TO A JURY TRIAL, THE RIGHT TO DISCOVERY AVAILABLE UNDER THE APPLICABLE RULES OF CIVIL PROCEDURE, THE RIGHT TO FINDINGS OF FACT BASED ON THE EVIDENCE, AND THE RIGHT TO ENFORCE THE LAW APPLICABLE TO ANY CASE ARISING OR RELATING TO THIS AGREEMENT BY WAY OF APPEAL, EXCEPT AS ALLOWED UNDER THE FEDERAL ARBITRATION ACT. EACH OF THEM ALSO ACKNOWLEDGES THAT EACH HAS HAD AN OPPORTUNITY TO CONSIDER AND STUDY THIS ARBITRATION PROVISION, TO CONSULT WITH COUNSEL, TO SUGGEST MODIFICATION OR CHANGES, AND, IF REQUESTED, HAS RECEIVED AND REVIEWED A COPY OF THE FEDERAL ARBITRATION ACT AND THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION.

 

 

 

 

[to be agreed upon for Second Closing]