immediately and automatically due and payable in cash at the Mandatory Default Amount, without any written notice required by Lender for the Trigger Event to become an Event of Default, and (ii) cause interest on the outstanding balance of the Note beginning on the date the applicable Event of Default occurred to accrue at an interest rate equal to the lesser of 18% per annum simple interest or the maximum rate permitted under applicable law. In connection with the acceleration aforementioned, Lender need not provide any presentment, demand, protest, or other notice of any kind, and Lender may immediately and without expiration of any grace period enforce any and all of its rights and remedies under the Note and all other remedies available to it under applicable law.
Pursuant to the terms of the Purchase Agreement, until all of the Company’s obligations under the Note and all other transaction documents are paid and performed in full, or within the timeframes otherwise specifically set forth therein, the Company agreed to comply with certain covenants, including but not limited to the following: (i) the Company agreed not to make any Restricted Issuances (as defined in the Purchase Agreement and described below) without the Lender’s prior written consent, which consent may be granted or withheld in the Lender’s sole and absolute discretion, (ii) Company will not enter into any agreement or otherwise agree to any covenant, condition, or obligation that locks up, restricts in any way or otherwise prohibits Company: (a) from entering into a variable rate transaction with Lender or any affiliate of Lender, or (b) from issuing common stock, preferred stock, warrants, convertible notes, other debt securities, or any other Company securities to Lender or any affiliate of Lender, (iii) none of Company, Napo Pharmaceuticals, Inc., a Delaware corporation and subsidiary of the Company (“Napo”), or JAGX Sub will grant any security interest, lien, pledge or other encumbrance (other than nonconsensual security interests, liens, pledges or other encumbrances arising by operation of law) in any of its assets (including, without limitation, any equity interest in JAGX Sub) without Lender’s prior written consent, which consent may be granted or withheld in Lender’s sole and absolute discretion; (iv) neither Company nor JAGX Sub will sell, transfer, or issue any equity or grant any rights to any equity interest or voting rights in JAGX Sub without Lender’s prior written consent, which consent may be granted or withheld in Lender’s sole and absolute discretion; and (v) Company will not allow JAGX Sub to issue or incur any debt or conduct any business operations without Lender’s prior written consent, which consent may be granted or withheld in Lender’s sole and absolute discretion.
As defined in the Purchase Agreement, the term “Restricted Issuance” means the issuance, incurrence or guaranty of any debt obligations (including any merchant cash advance, account receivable factoring or other similar agreement) other than trade payables in the ordinary course of business, or the issuance of any securities that: (1) have or may have conversion rights of any kind, contingent, conditional or otherwise, in which the number of shares that may be issued pursuant to such conversion right varies with the market price of the shares of the Company’s common stock; (2) are or may become convertible into the Company’s common stock (including without limitation convertible debt, warrants or convertible preferred shares), with a conversion price that varies with the market price of the Company’s common stock, even if such security only becomes convertible following an event of default, the passage of time, or another trigger event or condition; (3) have a fixed conversion price, exercise price or exchange price that is subject to being reset at some future date at any time after the initial issuance of such debt or equity security (A) due to a change in the market price of Company’s common stock since the date of the initial issuance, or (B) upon the occurrence of specified or contingent events directly or indirectly related to the business of Company (including, without limitation, any “full ratchet” or “weighted average” anti-dilution provisions, but not including any standard anti-dilution protection for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction), or such security contains a fixed conversion price with a provision to increase the outstanding balance upon a breach or default; or (4) are issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any other similar settlement or exchange. For the avoidance of doubt, none of the following will be considered Restricted Issuances: (i) current or future “at the market” facilities; and (ii) direct offerings of common stock or warrants provided that such offerings do not contain any variable pricing terms.
Pursuant to the Purchase Agreement, the use of proceeds from the Note Financing shall be at the Company’s sole discretion, including but not limited to, repayment of all or part of the outstanding balances of those certain 6% convertible promissory notes issued by Company on June 24, 2025 (the “Bridge Notes”) pursuant to that certain Note Exchange and Warrant Purchase Agreement, dated as of June 24, 2025, by and between Company and the buyers named therein.
The foregoing description of the Note, the Purchase Agreement, the DACA, the Guaranty and the Pledge Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Note, the Purchase Agreement, the Guaranty and the Pledge Agreement, copies of which are filed as Exhibits 4.1, 10.1, 10.2, 10.3, and 10.4 to this report, respectively, and are incorporated herein by reference.
