Item 1.01
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Entry into a Material Definitive Agreement.
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Securities Purchase Agreement
On June 29, 2016, Great Basin Scientific, Inc. (the Company) entered into a Securities Purchase Agreement dated June 29, 2016 (the
SPA) with certain investors named on the Schedule of Buyers attached to the SPA (each a Buyer) pursuant to which the Company has agreed to issue $75 million in principal face amount of senior secured convertible notes of the
Company (the Notes) and related Series H common stock purchase warrants (the Warrants). The Buyers will purchase Notes and related Series H Warrants through payment of cash at a discount by paying $906.67 for each $1,000 in
principal face amount of Notes and related Warrants.
The Notes will not bear any ordinary interest. The Company will receive total gross proceeds of $68
million, assuming all conditions for subsequent funding are met and no events of default occur, each as described below.
The SPA provides that each Buyer
shall pay for the Notes and the Warrants to be issued and sold to such Buyer at the closing (1) 8.8235% (approximately $6 million) of its applicable aggregate cash purchase price to the Company by wire transfer of immediately available funds
and (2) 91.1765% (approximately $62 million) of its applicable aggregate cash purchase price (Restricted Cash) to an account of the Company established for such Buyer (a Master Restricted Account) by wire transfer of
immediately available funds, such purchase price to be held and in accordance with and pursuant to the terms and conditions of an account control agreement between the Buyer and the bank (a Master Control Account Agreement).
Subject to obtaining the Stockholder Approval (as defined below) and certain other equity conditions as described below, the Restricted Cash will become
unrestricted and released to the Company as follows: (i) $6 million on the fifth trading day after January 30, 2017 (such date, the First Amortization Date)), (ii) $8 million after the fifth trading day after the last business day
of the calendar month following the First Amortization Date and (iii) $3,692,308 on the 75th trading day after the initial date the shares of common stock underlying the Notes are eligible to be resold pursuant to Rule 144 of the Securities Act of
1933, as amended (the 144 Date) and each 30th calendar day thereafter until all Restricted Cash has become unrestricted and released.
Release
of the remaining cash purchase price will be subject to certain equity conditions including, but not limited to:
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(i)
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all shares of common stock issuable pursuant to the terms of the Notes, including the shares of common stock issuable upon the conversion requiring the satisfaction of the equity conditions (in each case, without regard
to any restriction or limitation on conversions), shall be eligible for sale pursuant to Rule 144 without any volume limitation by the holder and no failure to have current public information under Rule 144 exists, and without the need for
registration under any applicable federal or state securities laws;
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(ii)
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on each day during the required measuring period, the common stock is designated for quotation on an acceptable exchange or market and shall not have been suspended from trading on such exchange or market (other than
suspensions of not more than five (5) days and occurring prior to the applicable date of determination due to business announcements by the Company);
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(iii)
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during the measuring period, the Company shall have delivered all shares of common stock pursuant to the terms of the Notes and upon exercise of the Warrants to the holders on a timely basis;
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(iv)
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the shares of common stock issuable upon conversion may be issued in full without violating beneficial owner limitations and Nasdaq regulations as set forth in the Notes;
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(v)
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during the measuring period, the Company shall not have failed to timely make any payments within five (5) Business Days of when such payment is due;
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(vi)
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during the measuring period, there shall not have occurred either (A) the public announcement of a pending, proposed or intended fundamental transaction which has not been abandoned, terminated or consummated, (B) an
Event of Default (as described below) or (C) an event that with the passage of time or giving of notice would constitute an Event of Default;
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(vii)
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the Company shall have no knowledge of any fact that would cause all shares of common stock issuable pursuant to the terms of the Notes, not to be eligible for sale pursuant to Rule 144 without any volume limitation by
the Holder (including, without limitation, by virtue of an existing or expected public information failure under Rule 144) and any applicable state securities laws;
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(viii)
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during the measuring period, the Company otherwise shall have been in compliance with and shall not have breached any provision, covenant, representation or warranty of any documents related to the Note transaction;
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(ix)
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the holder shall not be in possession of any material, nonpublic information received from the Company;
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(x)
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the shares of common stock issuable upon conversion are duly authorized and listed and eligible for trading without restriction on an eligible market;
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(xi)
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the daily dollar trading volume of the common stock as reported by Bloomberg for each trading day during the measuring period shall be at least $800,000;
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(xii)
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on each trading day during the measuring period, the weighted average price of the common stock equals or exceeds $1.30 (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar
transaction); and
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(xiii)
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the Company shall have a number of shares of common stock duly authorized and reserved for the issuance pursuant to the terms of this Note that is equal to, or greater than, the quotient obtained by dividing (A) 165.5%
of the applicable release amount, by (B) the conversion floor price (as set forth in the Note).
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Under the SPA, the Company has agreed to
call a meeting of its stockholders within 65 days of closing, solicit proxies at such meeting and use its reasonable best efforts to obtain the approval of its stockholders for purposes of complying with NASDAQ Listing Rule 5635(d) for the issuance
of shares of common stock underlying the Notes without giving effect to the exchange cap in the Notes in an amount that may be equal to or exceed 20% of our common stock outstanding before the issuance of the Notes and the issuance of shares of
common stock under the Warrants without giving effect to the exercise floor price set forth in the Warrants (the Stockholder Approval).
The
SPA contains customary representations and warranties of the Buyers and the Company regarding the purchase and offer and sell, respectively, of the Notes and Warrants. Under the SPA, the Company makes certain covenants including, but not limited to:
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(i)
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timely filing its reports with the Securities and Exchange Commission (the SEC) under the Securities Exchange Act of 1934, as amended (the Exchange Act),
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(ii)
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provision of certain financial information to the Buyers,
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(iii)
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maintaining the listing of the shares of Common Stock on an eligible market,
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(iv)
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payment of certain fees of the Buyers,
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(v)
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maintaining a share reserve of the Common Stock for issuance upon conversion of the Notes and exercise of the Warrants,
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(vi)
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until the later of (I) the date that 90 days after the date the Company obtains the required Stockholder Approval
and (II) the earlier of (a) the time of the registration of all of shares of common stock or (b)
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such time as all of such shares of common stock, if a registration statement is not available, may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be
in compliance with Rule 144(c)(1), restriction to grant any other registration rights,
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(vii)
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until the earlier of (a) the date the Company obtains the required Stockholder Approval or (b) one year from the closing, restriction to enter into any transaction that would constitute a Dilutive Issuance (as
defined in the SPA),
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(viii)
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for three years after the closing or until such time as no Notes are outstanding, will provide to certain of the Buyers certain rights of first refusal for up to 35% of subsequent financings of the Company, and
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(ix)
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use its reasonable best efforts to obtain the required Stockholder Approval.
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The closing of the transactions
contemplated by the SPA is expected to occur on or about June 30, 2016 and is subject to certain customary closing conditions and deliverables as set forth in the SPA, including but not limited to, the execution of certain subordination agreements
for the Companys outstanding indebtedness to Spring Forth Investments LLC and the Utah Autism Foundation. If the transactions in the SPA do not close in accordance with the terms of the SPA within 5 business days of the execution of the SPA,
then any non-breaching party may terminate the SPA.
Senior Secured Convertible Notes
The Notes will be represented by a form of senior secured convertible note attached to the SPA as
Exhibit A
. In addition to the terms and conditions of
the Notes as described above, the Notes provide that the Company will repay the principal amount of Notes in 15 equal installments (each a Installment Date) beginning on the First Amortization Date, and thereafter the last business day
of each calendar month through to the maturity date.
The price at which the Company will convert the installment amounts is equal to the lowest of
(i) the then prevailing conversion price, (ii) 80% of the arithmetic average of the lower of (i) the three lowest daily weighted average prices of the common stock during the twenty (20) consecutive trading day period ending on
the trading day immediately preceding the Installment Date and (iii) the weighted average price of the common stock on the trading day immediately preceding the Installment Date, subject in all cases to a floor price of $1.00.
Any holder of a Note may by notice to the Company accelerate up to four future installment payments to any applicable Installment Date, in which case the
Company will deliver shares of Common Stock for the conversion of such accelerated payments. The holder of a Note may also by notice to the Company defer any installment payment to a later Installment Date.
At any time after issuance the Notes will be convertible at the election of the holder into shares of common stock of the Company at an initial conversion
price equal to $2.00.
Conversion of the note is subject to a blocker provision which prevents any holder from converting into shares of common stock if
their beneficial ownership of the common stock would exceed either 4.99% or 9.99% of the Companys issued and outstanding common stock, as elected by the holder at closing.
Further, prior to the Company receiving the necessary Stockholder Approval, conversion of all Notes is limited to 19.99% of the Companys issued and
outstanding common stock on the date of closing. The conversion price is subject to certain adjustments upon the occurrence of certain dilutive events, including the issuance of certain options or convertible securities, and upon the occurrence of
certain corporate events, including stock splits and dividends.
At any time after the date that is nine months from the closing, issue of the Notes, the
Company shall have the right to redeem all, but not less than all, of the conversion amount then remaining under the Notes at a price equal to the greater of (x) 125% of the conversion amount being redeemed and (y) the product of (A) the conversion
amount
being redeemed and (B) the quotient determined by dividing (I) the greatest closing price of the shares of common stock during the period beginning on the date immediately preceding the
Companys notice of redemption and ending on the Company redemption date, by (II) the lowest conversion price in effect during such period.
Under
the Notes, the holders will have certain rights upon an Event of Default (as defined in the Notes). Such rights include (i) the remaining principal amount of the Notes bearing interest at a rate of 10% per annum, (ii) during the Event of
Default the conversion price being adjusted to the lowest of (a) the conversion price then in effect, (b) 75% of the lowest weighted average price of the Common Stock during the 30 consecutive trading day period ending on the trading day immediately
preceding the date of the event of default conversion and (c) 75% of the weighted average price of the Common Stock on the date of the applicable event of default conversion, and (iii) the holder having the right to demand redemption of all or a
portion of the Notes.
At any time after the earlier of the holders receipt of a notice of an Event of Default and the holder becoming aware of an
Event of Default and ending on the 15th trading day after the later of (x) the date such Event of Default is cured and (y) the holders receipt of an Event of Default notice, the holder may require the Company to redeem all or any portion of
the Note by delivering written notice to the Company. Each portion of this Note subject to redemption shall be redeemed by the Company in cash by wire transfer of immediately available funds at a price equal to the greater of (x) 125% of the
conversion amount being redeemed and (y) the product of (A) the conversion amount being redeemed and (B) the quotient determined by dividing (I) the greatest closing price of the shares of Common Stock during the period beginning on the date
immediately preceding such Event of Default and ending on the date the holder delivers the redemption notice, by (II) the lowest conversion price in effect during such period.
Event of Default includes, but is not limited to (and subject to the ability to cure in certain instances):
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(i)
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(A) the suspension from trading for more than an aggregate of ten (10) trading days in any 365-day period or (B) or failure of the common stock to be listed on an eligible market;
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(ii)
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failure to cure conversion failures of the Notes or exercise failures of the Warrants;
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(iii)
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certain failures to have enough authorized and unreserved shares of common stock to satisfy conversions of the Notes or exercises of the Warrants;
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(iv)
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the Companys failure to pay to the holder any amounts when and as due under the Notes or any other transaction document;
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(v)
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any default under, redemption of or acceleration prior to maturity of more than $100,000, individually or in the aggregate, of indebtedness of the Company;
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(vi)
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voluntary bankruptcy of the Company;
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(vii)
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involuntary bankruptcy, receivership or other similar proceedings before a court;
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(viii)
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subject to certain limitations, a final judgment or judgments for the payment of money aggregating in excess of $250,000, individually or in the aggregate, not covered by insurance;
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(ix)
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breaches of the representations, warranties and covenants in the transaction documents only if such breach continues for a period of at least an aggregate of five (5) Trading Days;
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(x)
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any breach or failure in any respect to comply with either Sections 8, 17 or 18 of the Note;
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(xi)
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the Company fails to perform or comply with any covenant or agreement contained in the Security Agreement;
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(xii)
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the Company shall fail to perform or comply with any covenant or agreement contained in any Master Control Account Agreement;
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(xiii)
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any material provision of any security document or Master Control Account Agreement (as determined by the applicable holder) shall at any time for any reason cease to be valid and binding on or enforceable against the
Company;
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(xiv)
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any Security Document, Master Control Account Agreement or any other security document, after delivery thereof pursuant hereto, shall for any reason fail or cease to create a valid and perfected;
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(xv)
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any bank at which any deposit account, blocked account, lockbox account or other account of the Company is maintained shall fail to comply with any material term of any deposit account, blocked account, lockbox account
or other similar agreement to which such bank is a party;
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(xvi)
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any material damage to, or loss, theft or destruction of, any collateral or a material amount of property of the Company, if any such event or circumstance could reasonably be expected to have a material adverse effect;
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(xvii)
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a false or inaccurate certification (including a false or inaccurate deemed certification) by the Company that the equity conditions are satisfied or that there has been no equity conditions failure or as to whether any
Event of Default has occurred;
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(xviii)
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the Companys failure for any reason after the date that is six (6) months immediately following the date of issuance to satisfy the current public information requirement under Rule 144(c) of the Securities Act;
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(xix)
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if as of the applicable date of determination (A) the holder of this Note is not an affiliate of the Company and (B) the shares of Common Stock issuable pursuant to the terms of the Notes and/or exercise of the Warrants
are eligible to be resold by the holder either pursuant to an effective registration statement in favor of the holder or Rule 144 of the Securities Act, the failure of such shares of Common Stock issuable pursuant to the terms of the Notes and/or
such Warrant, as applicable, to be issued and delivered to the holder without any restrictive legends; or
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(xx)
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any Event of Default occurs with respect to any other Notes.
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The Notes will also provide the holders with
certain rights upon the occurrence of a fundamental transaction, including but not limited to assumption rights and redemption rights.
The Company will
make certain negative covenants in the Notes, pursuant to which the Company agrees not to: (a) incur or guarantee, assume or suffer to exist any indebtedness, other than permitted indebtedness; (b) allow or suffer to exist any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property or assets of the Company other than permitted liens; (c) redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents
all or any portion of any indebtedness other than the Notes in an Event of Default shall have occurred; (d) redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents all or any portion of any
indebtedness (other than the Notes), prior to the scheduled maturity date of such indebtedness; (e) redeem or repurchase its equity interest or declare or pay any cash dividend or distribution; (f) make, any change in the nature of its business; (g)
encumber or allow any liens on, any of its intellectual property other than permitted liens; or (h) enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase, sale,
lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any affiliate, except in the ordinary course of business.
The Company will make certain affirmative covenants in the Notes, pursuant to which the Company agrees to: (a) maintain and preserve its existence,
rights and privileges, and become or remain duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary,
except where failure to do so would not result in a Material Adverse Effect; (b) maintain and preserve all of its properties which are reasonably necessary in the proper conduct of its business in good working order and condition, ordinary wear and
tear excepted, and comply at all times with the material provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent
any loss or forfeiture thereof or thereunder; (c) maintain insurance with responsible and reputable insurance companies or associations with respect to its properties) and business, in such
amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated; and
(d) maintain and preserve all of its intellectual property rights which are reasonably necessary in the proper conduct of its business.
Series H
Warrants
In connection with the issuance of the Notes under the SPA, the Company will also issue Series H Warrants, in the form attached to the SPA as
Exhibit B,
in an amount equal to 150% of the sum of the number of shares of common stock acquirable upon conversion of the Notes in full at the conversion price on the closing date (without regard to any limitations on conversions set forth
therein).
Each Series H Warrant will be exercisable by the holder beginning six months after the date of issuance and continuing for a period five years
thereafter. Each Series H Warrant will be exercisable initially at a price equal to $2.08, subject to adjustments for certain dilutive events and subject to an exercise price floor equal to $1.70.
The Series H Warrants are exercisable on a cashless basis in the event that there is no effective registration statement under the Securities Act covering the
resale of the shares of Common Stock issuable upon exercise of the Series H Warrants.
Security Agreement
Pursuant to the SPA and the Notes, the Company will enter into a Pledge and Security Agreement (the Security Agreement) with the lead investor, in
its capacity as collateral agent (in such capacity, the Collateral Agent) for all holders of the Notes. The Security Agreement creates a first priority security interest (second priority interest until the Companys December 2015
senior secured convertible notes are paid in full) in all of the personal property of the Company of every kind and description, tangible or intangible, whether currently owned and existing or created or acquired in the future (the
Collateral).
Under the Security Agreement the Company will agree to certain conditions on its maintenance and use of the Collateral,
including but not limited to the location of equipment and inventory, the condition of equipment, the payment of taxes and prevention of liens or encumbrances, the maintenance of insurance, the protection of intellectual property rights, and
limitations on transfers and sales.
Upon the occurrence of an Event of Default under the Security Agreement, the Collateral Agent will have
certain rights under the Security Agreement including taking control of the Collateral and, in certain circumstances, selling the Collateral to cover obligations owed to the holders of the Notes pursuant to its terms. Event of Default
under the Security Agreement means (i) any defined event of default under any one or more of the transaction documents (including the Notes), in each instance, after giving effect to any notice, grace, or cure periods provided for in the applicable
document, (ii) the failure by the Company to pay any amounts when due under the Notes or any other transaction document, or (iii) the breach of any representation, warranty or covenant by the Company under the Security Agreement.
The above is a summary of the material terms and conditions of the SPA, the Notes, the Series H Warrants, and the Security Agreement and is qualified in its
entirety by the full terms and conditions of such agreements which are attached hereto as Exhibits 10.1 through 10.4 and are hereby incorporated by reference.
Waiver Agreement with Holders of 2015 Convertible Notes
As previously disclosed on the Current Report on Form 8-K filed with the SEC on December 29, 2015, on December 28, 2015, Great Basin Scientific, Inc.
(the Company) entered into a Securities Purchase Agreement (the 2015 SPA) in relation to the issuance and sale by the Company to certain buyers as set forth in the Schedule of Buyers attached to the SPA (the 2015
Buyers) of $22.1 million aggregate principal amount of senior secured convertible notes (the 2015 Notes) and related Series D common stock purchase warrants (the Series D Warrants).
On June 29, 2016, the Company and certain buyers holding enough of the 2015 Notes and Series D Warrants to
constitute the required holders under Section 9(e) of the 2015 SPA and Section 19 of the 2015 Notes entered into waiver agreements to waive: (i) the Companys restriction to incur Indebtedness (as defined in the 2015 Notes) in accordance with
Section 17(a) of the 2015 Notes, (ii) the Companys restriction to incur Liens (as defined in the 2015 Notes) in accordance with Section 17(b) of the 2015 Notes, (iii) the Companys restriction to incur Indebtedness that ranks pari passu
with the 2015 Notes pursuant to Section 16 of the 2015 Notes and (iv) the Companys restriction in incur Liens (as defined in the 2015 Notes) on certain types of intellectual property in accordance with Section 17(g) of the 2015 Notes, in each
case of clauses (i) through (iii), solely with respect to entering into the Notes and related documents thereto and consummating the transactions contemplated thereby (collectively, the 2015 Note Waiver).
Further the Company and certain buyers holding enough of the 2015 Notes and Series D Warrants to constitute the required holders under Section 10 of the
Registration Rights Agreement entered into between the Company and the holders of the 2015 Notes and Series D Warrants entered into waiver agreements to waive: (i) any breach prior to and including June 29, 2016 under Section 2(a) of the
Registration Rights Agreement for the Companys failure to have the initial registration statement brought effective by the initial effectiveness deadline, (ii) any right to Registration Delay Payments (as defined under the Registration Rights
Agreement) prior to and including June 29, 2016 for failure to meet its obligations under Section 2(a), and (iii) compliance with the registration requirements of Section 2(a) from and including June 29, 2016, through August 31, 2016.
The foregoing is a summary description of the material terms of the 2015 Note Waiver and is qualified in its entirety by the form of the 2015 Note Waiver,
attached as Exhibit 10.5 to this Current Report on Form 8-K and incorporated by reference.
Waiver Agreement with Purchasers in June Unit Offering
On May 26, 2016, the Company entered into subscription agreements (Subscription Agreements) with certain investors relating to the sale
and issuance by the Company of up to 3,160,000 Units (the Units), at a price of $1.90 per Unit, each of which consists of one share of the Companys common stock and one Series G Warrant (the Unit Offering). The Unit
Offering closed on June 1, 2016.
On June 29, 2016, the Company and certain investors who executed Subscription Agreements in the Unit Offering
representing on the closing date of the Unit Offering at least sixty-seven percent (67%) of the aggregate number of shares of common stock purchased in the Unit Offering pursuant to the Subscription Agreements entered into waiver agreements to waive
the lock-up on issuance of securities contained in Section 18 of the Subscription Agreements solely with respect to the Companys offering and consummation of the Notes and Series H Warrants, the offer and issuance of the placement agent
warrants and the offer and issuance of the subordination warrants to be issued in connection with the Notes and Series H Warrants (Unit Waiver).
The foregoing is a summary description of the material terms of the Unit Waiver and is qualified in its entirety by the form of the Unit Waiver, attached as
Exhibit 10.6 to this Current Report on Form 8-K and incorporated by reference.