Exhibit 10.2

 

EXCHANGE AGREEMENT

 

THIS EXCHANGE AGREEMENT (the “Agreement”) is dated this 4th day of April, 2016,
by and among AMEDICA CORPORATION, a Delaware corporation (the “Company”), all of
the subsidiaries of the Company that are party to the Agreement (collectively,
“Subsidiaries”), and RIVERSIDE MERCHANT PARTNERS, LLC (the “Holder”).

 

WHEREAS, the Holder beneficially owns and holds $1,000,000 of the outstanding
principal of that certain Loan and Security Agreement dated June 30, 2014, as
amended (the “Term Loan”), as set forth on Exhibit A hereto (the “Initial
Securities”);

 

WHEREAS, subject to certain conditions contained herein, the Holder desires to
purchase an additional $2,000,000 of the outstanding principal of the Term Loan,
as set forth on Exhibit A hereto (the “Subsequent Securities”; the Initial
Securities and the Subsequent Securities, collectively, “Securities”);

 

WHEREAS, the Holder desires to exchange $1,000,000 of the Initial Securities
(the “First Exchange”) for a Senior Convertible Promissory Note in the principal
amount of $1,000,000 (the “First Exchange Note”) and a Warrant to purchase
100,000 shares of the Company’s common stock (the “Warrant”; the First Exchange
Note and the Warrant, collectively, the “First Exchange Securities”) as set
forth and memorialized on Exhibit B hereto, and the Company desires to issue the
First Exchange Securities in exchange for such Initial Securities, all on the
terms and conditions set forth in this Agreement in reliance on the exemption
from registration provided by Section 3(a)(9) of the Securities Act of 1933, as
amended (the “Securities Act”);

 

WHEREAS, in the event that the Holder purchases the Subsequent Securities it may
exchange the Subsequent Securities (the “Second Exchange”; the First Exchange
and the Second Exchange, collectively, the “Exchange”) for a Senior Convertible
Promissory Note in the principal amount of $2,000,000 (the “Second Exchange
Note”, and, together with the First Exchange Note, the “Notes”) and a Warrant to
purchase 100,000 shares of the Company’s common stock (the “Second Warrant”,
and, together with the First Warrant, the “Warrant”; the Second Exchange Note
and the Second Warrant, collectively, the “Second Exchange Securities”; the
First Exchange Securities and the Second Exchange Securities, collectively, the
“Exchange Securities”) as set forth and memorialized on Exhibit B hereto, and
the Company desires to issue the Second Exchange Securities in exchange for the
Subsequent Securities, all on the terms and conditions set forth in this
Agreement in reliance on the exemption from registration provided by Section
3(a)(9) of the Securities Act; and

 

WHEREAS, subject to the conditions contained herein, upon the Second Exchange,
Holder shall no longer have any rights as a Lender (as defined in the under the
Term Loan) under the Term Loan.

 

   

 

 

NOW, THEREFORE, in consideration of the terms and conditions contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Company and the Holder hereby agree as follows:

 

Section 1. Exchange. Subject to and upon the terms and conditions set forth in
this Agreement, the Holder agrees to surrender to the Company the Securities
and, in exchange therefore, the Company shall issue to the Holder the Exchange
Securities.

 

1.1 Closings.

 

(a) First Closing. On the First Closing Date (as defined below), the Company
will issue and deliver (or cause to be issued and delivered) the First Exchange
Securities to the Holder, or in the name of a custodian or nominee of the
Holder, or as otherwise requested by the Holder in writing, and the Holder will
surrender to the Company the Initial Securities. The closing of the First
Exchange shall occur on April 4, 2016, or as soon thereafter as the parties may
mutually agree in writing (the “First Closing Date”), subject to the provisions
of Section 4 and Section 5 herein.

 

(b) Second Closing. On the Second Closing Date (as defined below), the Company
will issue and deliver (or cause to be issued and delivered) the Second Exchange
Securities to the Holder, or in the name of a custodian or nominee of the
Holder, or as otherwise requested by the Holder in writing, and the Holder will
surrender to the Company the Subsequent Securities. Provided that all the
condition precedents to the Second Closing as set forth in Section 5 have been
met or waived, the closing of the Second Exchange shall occur (i) upon the
mutual agreement of the Company and the Holder in writing, at any time within
twenty (20) trading days of the First Closing Date, (ii) at the Company’s
option, on May 3, 2016, so long as the average VWAP (as defined in the First
Exchange Note) of the Company’s common stock on the applicable Trading Market
(as defined below) for the five (5) Trading Days immediately prior to May 3,
2016 is at least equal to 125% of the conversion price set forth in the First
Exchange Note or (iii) at any time during the ten (10) trading days following
May 3, 2016 (such tenth trading day being the “Termination Date”), upon the
mutual agreement of the Company and the Holder in writing (the “Second Closing
Date”; the First Closing Date and the Second Closing Date, collectively, the
“Closing Date”), subject to the provisions of Section 4 and Section 5 herein. In
the event that the closing of the Second Exchange does not occur by the
Termination Date, neither the Holder nor the Company shall be required to close
on the Second Exchange.

 

1.2 Section 3(a)(9). Assuming the accuracy of the representations and warranties
of each of the Company and the Holder set forth in Sections 2 and 3 of this
Agreement, the parties acknowledge and agree that the purpose of such
representations and warranties is, among other things, to ensure that the
Exchange qualifies as an exchange of securities under Section 3(a)(9) of the
Securities Act.

 

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Section 2. Representations and Warranties of the Company. The Company represents
and warrants to the Holder that:

 

2.1 Organization and Qualification. The Company and each of the subsidiaries of
the Company (the “Subsidiaries”) is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company, nor any Subsidiary is in violation
or default of any of the provisions of its respective certificate or certificate
of incorporation, bylaws or other organizational or charter documents. Each of
the Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result
in: (i) a material adverse effect on the legality, validity or enforceability of
this Agreement or any documents executed in connection herewith (the
“Transaction Documents”), (ii) a material adverse effect on the results of
operations, assets, business, or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”) and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

 

2.2 Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
this Agreement and each of the other Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and each of the other Transaction Documents by the Company and
the consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action on the part of the Company and no
further action is required by the Company, the Board of Directors or the
Company’s stockholders in connection herewith or therewith other than in
connection with the Required Approvals (as defined below). This Agreement and
each other Transaction Document to which it is a party has been (or upon
delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

 

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2.3 Issuance of Exchange Securities. The issuance of the Exchange Securities is
duly authorized and, upon issuance in accordance with the terms hereof, the
Exchange Securities shall be validly issued, fully paid and non-assessable. The
shares of Common Stock issued upon conversion or exercise of the Exchange
Securities, when issued and delivered in accordance with the terms of the
Exchange Securities, will be duly and validly issued, fully paid and
non-assessable, free and clear of all Liens (as defined below) imposed by the
Company, other than restrictions on transfer under applicable state and federal
securities laws. The shares of Common Stock issued upon exercise of the Exchange
Securities, when issued and delivered in accordance with the terms of the
Exchange Securities for the consideration expressed therein, will be duly and
validly issued, fully paid and non-assessable, free and clear of all Liens
imposed by the Company, other than restrictions on transfer under applicable
state and federal securities laws. Upon issuance in accordance herewith, the
issuance by the Company of the Exchange Securities is exempt from the
registration requirements of the Securities Act under Section 3(a)(9) of the
Securities Act and all of the shares of Common Stock issuable upon conversion or
exercise of the Exchange Securities and upon exercise of the Exchange Securities
will be freely transferable and freely tradable by the Holder without
restriction pursuant to Rule 144 of the Securities Act, assuming the Holder is
not an Affiliate and the holding period requirements of Rule 144 have been met.
The shares of Common Stock issuable upon conversion or exercise, as applicable,
of the Exchange Securities shall not bear any restrictive or other legends or
notations. The Company has reserved from its duly authorized capital stock a
number of shares of Common Stock for issuance of the shares underlying the
Exchange Securities at least equal to 100% of the Required Minimum on the date
hereof. “Required Minimum” means, as of any date, the maximum aggregate number
of shares of Common Stock then issued or potentially issuable in the future
pursuant to the Transaction Documents, including any shares of Common Stock
issuable upon exercise in full of all Exchange Securities or conversion in full
of all Exchange Securities (including shares of Common Stock issuable as payment
of interest on the Exchange Securities), ignoring any conversion or exercise
limits set forth therein, and assuming that the Conversion Price or Exercise
Price, as applicable, is at all times on and after the date of determination 94%
of the then Conversion Price or Exercise Price, as applicable, on the Trading
Day immediately prior to the date of determination.

 

2.4 No Conflicts. The execution, delivery and performance by the Company of this
Agreement and the other Transaction Documents to which it is a party, the
issuance of the Exchange Securities and the consummation by it of the
transactions contemplated hereby and thereby do not and will not: (i) conflict
with or violate any provision of the Company’s or any Subsidiary’s certificate
of incorporation, bylaws or other organizational or charter documents, (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any
options, contracts, agreements, liens, security interests, or other encumbrances
(“Liens”) upon any of the properties or assets of the Company or any Subsidiary,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.

 

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2.5 Acknowledgment Regarding the Exchange. The Company acknowledges and agrees
that the Holder is acting solely in the capacity of an arm’s length third party
with respect to this Agreement and the transactions contemplated hereby. The
Company further acknowledges the Holder is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby, and any advice given by the
Holder or any of their representatives or agents in connection with this
Agreement is merely incidental to the Exchange.

 

2.6 No Commission; No Other Consideration. The Company has not paid or given,
and has not agreed to pay or give, directly or indirectly, any commission or
other remuneration for soliciting the Exchange. The Exchange Securities are
being issued or exclusively for the exchange of the Securities and no other
consideration has or will be paid for the Exchange Securities.

 

2.7 3(a)(9) Representation. The Company has not, nor has any person acting on
its behalf, directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that would cause
the Exchange and the issuance of the Exchange Securities pursuant to this
Agreement to be integrated with prior offerings by the Company for purposes of
the Securities Act which would prevent the Company from delivering the Exchange
Securities to the Holder pursuant to Section 3(a)(9) of the Securities Act, nor
will the Company take any action or steps that would cause the Exchange,
issuance and delivery of the Exchange Securities to be integrated with other
offerings to the effect that the delivery of the Exchange Securities to the
Holder would be seen not to be exempt pursuant to Section 3(a)(9) of the
Securities Act.

 

2.8 No Third-party Advisors. Other than legal counsel, the Company has not
engaged any third parties to assist in the solicitation with respect to the
Exchange.

 

2.9 SEC Reports; Financial Statements. Except for the Company’s Form 10-Q for
the quarter ended March 31, 2016, the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act of 1934, as amended (the “Exchange
Act”), including pursuant to Section 13(a) or 15(d) of the Exchange Act, for the
two (2) years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the “SEC Reports”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such extension. As
of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act, as applicable,
and none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the SEC with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its consolidated
Subsidiaries as of and for 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, immaterial, year-end audit adjustments.

 

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2.10 Subsidiaries. All of the direct and indirect subsidiaries of the Company
are set forth in Schedule 2.10. The Company owns, directly or indirectly, all of
the capital stock or other equity interests of each Subsidiary free and clear of
any Liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase securities. If the
Company has no subsidiaries, all other references to the Subsidiaries or any of
them in the Transaction Documents shall be disregarded.

 

2.11 Filings, Consents and Approvals. Other than as set forth on Schedule 2.11,
the Company is not required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any court
or other federal, state, local or other governmental authority or any natural
person, firm, partnership, association, corporation, company, trust, business
trust or other entity (each, a “Person”) in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
the notice and/or application(s) to each applicable Trading Market for the
issuance and the listing of the shares of Common Stock issuable upon conversion
of the Exchange Securities and the shares of Common Stock issuable upon exercise
of the Exchange Securities for trading thereon in the time and manner required
thereby (the “Required Approvals”).

 

2.12 Capitalization. The capitalization of the Company is as set forth on
Schedule 2.12. No Person has any right of first refusal, preemptive right, right
of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Other than as set forth on Schedule
2.12, there are no outstanding options, warrants, scrip rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock or any securities of the Company which would entitle the holder
thereof to acquire at any time Common Stock, including, without limitation, any
debt, preferred stock, right, option, warrant or other instrument that is at any
time convertible into or exercisable or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock. All of the outstanding shares of
capital stock of the Company are duly authorized, validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase securities.
No further approval or authorization of any stockholder, the Board of Directors
or others is required for the issuance of the Exchange Securities. There are no
stockholder agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.

 

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2.13 DTC Eligibility. The Company, through the Transfer Agent, currently
participates in the DTC Fast Automated Securities Transfer (FAST) Program and
the Common Stock can be transferred electronically to third parties via the DTC
Fast Automated Securities Transfer (FAST) Program.

 

2.14 Material Changes; Undisclosed Events, Liabilities or Developments. Since
the date of the latest financial statements included in the SEC Reports, other
than as specifically disclosed in a subsequent SEC Report filed prior to the
date hereof or as otherwise set forth on Schedule 2.14: (i) there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made with the SEC,
(iii) the Company has not altered its method of accounting, (iv) the Company has
not declared or made any dividend or distribution of cash or other property to
its stockholder or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock and (v) the Company has not issued any
equity securities to any officer, director or Affiliate (as defined below),
except pursuant to existing Company stock option plans. The Company does not
have pending before the SEC any request for confidential treatment of
information. Except for the issuance of the Exchange Securities contemplated by
this Agreement, no event, liability, fact, circumstance, occurrence or
development has occurred or exists or is reasonably expected to occur or exist
with respect to the Company or its Subsidiaries or their respective businesses,
properties, operations, assets or financial condition, that would be required to
be disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least 1 Trading Day prior to the date that this representation is made.

 

2.15 Litigation. Other than as set forth on Schedule 2.15, there is no action,
suit, inquiry, notice of violation, proceeding or investigation pending or, to
the knowledge of the Company, threatened against or affecting the Company, any
Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Exchange Securities or (ii) could, if there
were an unfavorable decision, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by the SEC
involving the Company or any current or former director or officer of the
Company. The SEC has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.

 

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2.16 Labor Relations. No labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the Company, which
could reasonably be expected to result in a Material Adverse Effect. None of the
Company’s or its Subsidiaries’ employees is a member of a union that relates to
such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relationships
with their employees are good. To the knowledge of the Company, no executive
officer of the Company or any Subsidiary, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or
any other contract or agreement or any restrictive covenant in favor of any
third party, and the continued employment of each such executive officer does
not subject the Company or any of its Subsidiaries to any liability with respect
to any of the foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and regulations
relating to employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in compliance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

 

2.17 Compliance. Except as set forth on Schedule 2.17, neither the Company nor
any Subsidiary: (i) is in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority or (iii) is or has been in violation
of any statute, rule, ordinance or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws relating
to taxes, environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material Adverse Effect.

 

2.18 Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any Material Permit.

 

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2.19 Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them and good and marketable
title in all personal property owned by them that is material to the business of
the Company and the Subsidiaries, in each case free and clear of all Liens,
except for (i) Liens as do not materially affect the value of such property and
do not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries, (ii) Liens for the payment of
federal, state or other taxes, for which appropriate reserves have been made
therefor in accordance with GAAP and, the payment of which is neither delinquent
nor subject to penalties and (iii) Liens held by the Holder. Any real property
and facilities held under lease by the Company and the Subsidiaries are held by
them under valid, subsisting and enforceable leases with which the Company and
the Subsidiaries are in compliance.

 

2.20 Intellectual Property. Other than as set forth on Schedule 2.20, the
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
trade secrets, inventions, copyrights, licenses and other intellectual property
rights and similar rights as described in the SEC Reports as necessary or
required for use in connection with their respective businesses and which the
failure to so have could have a Material Adverse Effect (collectively, the
“Intellectual Property Rights”). None of, and neither the Company nor any
Subsidiary has received a notice (written or otherwise) that any of, the
Intellectual Property Rights has expired, terminated or been abandoned, or is
expected to expire or terminate or be abandoned, within two (2) years from the
date of this Agreement. Neither the Company nor any Subsidiary has received,
since the date of the latest audited financial statements included within the
SEC Reports, a written notice of a claim or otherwise has any knowledge that the
Intellectual Property Rights violate or infringe upon the rights of any Person,
except as could not have or reasonably be expected to not have a Material
Adverse Effect. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights. The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties, except where failure to do so
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

 

2.21 Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged, including, but not limited to, directors and
officers insurance coverage at least equal to the aggregate principal amount of
the Exchange Securities. Neither the Company nor any Subsidiary has any reason
to believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business without a significant
increase in cost.

 

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2.22 Transactions with Affiliates and Employees. Other than as set forth on
Schedule 2.22, none of the officers or directors of the Company or any
Subsidiary and, to the knowledge of the Company, none of the employees of the
Company or any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from providing for the borrowing of money from or lending of
money to, or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee, stockholder, member or partner, in each case in
excess of $120,000 other than for: (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.

 

2.23 Sarbanes-Oxley; Internal Accounting Controls. The Company and the
Subsidiaries are in compliance with any and all applicable requirements of the
Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and
all applicable rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof and as of the Closing Date. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that: (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company and the Subsidiaries have established
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure
controls and procedures to ensure that information required to be disclosed by
the Company in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the SEC’s rules and forms. The Company’s certifying officers have evaluated
the effectiveness of the disclosure controls and procedures of the Company and
the Subsidiaries as of the end of the period covered by the most recently filed
periodic report under the Exchange Act (such date, the “Evaluation Date”). The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no changes in the
internal control over financial reporting (as such term is defined in the
Exchange Act) that have materially affected, or is reasonably likely to
materially affect, the internal control over financial reporting of the Company
and its Subsidiaries.

 

2.24 Certain Fees. Except as set forth in Schedule 2.24, no brokerage or
finder’s fees or commissions are or will be payable by the Company or any
Subsidiaries to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents.

 

 10 

 

 

2.25 Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Exchange Securities, will not be or
be an Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become an “investment company” subject to
registration under the Investment Company Act of 1940, as amended.

 

2.26 Registration Rights. Other than as set forth on Schedule 2.26, , no Person
has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company or any Subsidiaries.

 

2.27 Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the SEC is contemplating
terminating such registration. Other than as set forth in Schedule 2.27, the
Company has not, in the 12 months preceding the date hereof, received notice
from the NASDAQ Capital Market or any other exchange or quotation service on
which the Common Stock is or has been listed or quoted (the “Trading Market”) to
the effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. Except as set forth in the SEC Reports, the
Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance
requirements.

 

2.28 Application of Takeover Protections. The Company and the Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s certificate of incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable to
the Holder as a result of the Holder and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation as a result of the Company’s issuance of the
Exchange Securities pursuant to the Exchange.

 

2.29 Disclosure. Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company confirms
that neither it nor any other Person acting on its behalf has provided the
Holder or its agents or counsel with any information that it believes
constitutes or might constitute material, non-public information. The Company
understands and confirms that the Holder will rely on the foregoing
representation in effecting transactions in securities of the Company. All of
the disclosure furnished by or on behalf of the Company to the Holder regarding
the Company and its Subsidiaries, their respective businesses and the
transactions contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The press releases disseminated by the Company during the
twelve months preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made and when made,
not misleading. The Company acknowledges and agrees that the Holder makes no nor
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3 hereof.

 

 11 

 

 

2.30 No Integrated Offering. Assuming the accuracy of the Holder’s
representations and warranties set forth in Section 3, neither the Company, nor
any of its Affiliates, nor any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause the Exchange to be
integrated with prior offerings by the Company for purposes of (i) the
Securities Act which would require the registration of any such securities under
the Securities Act, or (ii) any applicable shareholder approval provisions of
any Trading Market on which any of the securities of the Company are listed or
designated.

 

2.31 Solvency. The Company does not intend to incur debts beyond its ability to
pay such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt). The SEC Reports set forth as
of the date hereof describe all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments. For the purposes of this Agreement, “Indebtedness” means (x) any
liabilities for borrowed money or amounts owed in excess of $50,000 (other than
trade accounts payable incurred in the ordinary course of business), (y) all
guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same, are, or should be, reflected in
the Company’s consolidated balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (z) the present
value of any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP. Other than as set forth on Schedule 2.31,
neither the Company nor any Subsidiary is in default with respect to any
Indebtedness.

 

2.32 Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and its Subsidiaries each (i) has made or filed all United
States federal, state and local income and all foreign income and franchise tax
returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for periods subsequent
to the periods to which such returns, reports or declarations apply. There are
no unpaid taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of the Company or of any Subsidiary know
of no basis for any such claim.

 

 12 

 

 

2.33 Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to
the knowledge of the Company or any Subsidiary, any agent or other person acting
on behalf of the Company or any Subsidiary, has: (i) directly or indirectly,
used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made
any unlawful payment to foreign or domestic government officials or employees or
to any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company or any
Subsidiary (or made by any person acting on its behalf of which the Company is
aware) which is in violation of law or (iv) violated in any material respect any
provision of FCPA.

 

2.34 No Disagreements with Accountants and Lawyers. There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company to
arise, between the Company and the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers which could affect the Company’s ability to
perform any of its obligations under any of the Transaction Documents.

 

2.35 Acknowledgment Regarding Holder’s Exchange of Securities. The Company
acknowledges and agrees that the Holder is acting solely in the capacity of an
arm’s length party with respect to the Transaction Documents and the
transactions contemplated thereby.

 

2.36 Regulation M Compliance. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the issuance or resale of any of the
Exchange Securities or the shares of Common Stock into which the Exchange
Securities are convertible or exercisable, as applicable, (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
Exchange Securities or the shares of Common Stock into which the Exchange
Securities are convertible or exercisable, as applicable, or (iii) paid or
agreed to pay to any Person any compensation for soliciting another to purchase
any other securities of the Company.

 

2.37 Office of Foreign Assets Control. Neither the Company nor any Subsidiary
nor, to the Company’s knowledge, any director, officer, agent, employee or
affiliate of the Company or any Subsidiary is currently subject to any U.S.
sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”).

 

2.38 Bank Holding Company Act. Neither the Company nor any of its Subsidiaries
or Affiliates is subject to the Bank Holding Company Act of 1956, as amended
(the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve
System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries
or Affiliates owns or controls, directly or indirectly, five percent (5%) or
more of the outstanding shares of any class of voting securities or twenty-five
percent or more of the total equity of a bank or any entity that is subject to
the BHCA and to regulation by the Federal Reserve. Neither the Company nor any
of its Subsidiaries or Affiliates exercises a controlling influence over the
management or policies of a bank or any entity that is subject to the BHCA and
to regulation by the Federal Reserve.

 

 13 

 

 

2.39 Money Laundering. The operations of the Company and its Subsidiaries are
and have been conducted at all times in compliance with applicable financial
record-keeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, applicable money laundering
statutes and applicable rules and regulations thereunder (collectively, the
“Money Laundering Laws”), and no action, suit or proceeding by or before any
court or governmental agency, authority or body or any arbitrator involving the
Company or any Subsidiary with respect to the Money Laundering Laws is pending
or, to the knowledge of the Company or any Subsidiary, threatened.

 

Section 3. Representations and Warranties of the Holder. The Holder represents
and warrants to the Company that:

 

3.1 Ownership of the Securities. The Holder is the legal and beneficial owner of
the Securities. The Holder paid for the Securities, and has continuously held
the Securities since its issuance or purchase. The Holder, individually or
through an affiliate, owns the Securities outright and free and clear of any
options, contracts, agreements, liens, security interests, or other
encumbrances.

 

3.2 No Public Sale or Distribution. The Holder is acquiring the Exchange
Securities in the ordinary course of business for its own account and not with a
view toward, or for resale in connection with, the public sale or distribution
thereof; provided, however, that by making the representations herein, the
Holder does not agree to hold any of the Exchange Securities or the shares of
Common Stock into which such securities are convertible or exercisable, as
applicable, for any minimum or other specific term and reserves the right to
dispose of the Exchange Securities and the shares of Common Stock into which
such securities are convertible and exercisable at any time in accordance with
an exemption from the registration requirements of the Securities Act and
applicable state securities laws. The Holder does not presently have any
agreement or understanding, directly or indirectly, with any person to
distribute, or transfer any interest or grant participation rights in, the
Securities or the Exchange Securities.

 

3.3 Accredited Investor and Affiliate Status. The Holder is an “accredited
investor” as that term is defined in Rule 501 of Regulation D under the
Securities Act. The Holder is not, and has not been, for a period of at least
three months prior to the date of this Agreement (a) an officer or director of
the Company, (b) an “affiliate” of the Company (as defined in Rule 144) (an
“Affiliate”) or (c) a “beneficial owner” of more than 10% of the common stock
(as defined for purposes of Rule 13d-3 of the Exchange Act).

 

 14 

 

 

3.4 Reliance on Exemptions. The Holder understands that the Exchange is being
made in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and the Holder’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Holder set forth herein in order to determine the availability of such
exemptions and the eligibility of the Holder to complete the Exchange and to
acquire the Exchange Securities.

 

3.5 Information. The Holder has been furnished with all materials relating to
the business, finances and operations of the Company and materials relating to
the Exchange which have been requested by the Holder. The Holder has been
afforded the opportunity to ask questions of the Company. Neither such inquiries
nor any other due diligence investigations conducted by the Holder or its
representatives shall modify, amend or affect the Holder’s right to rely on the
Company’s representations and warranties contained herein. The Holder
acknowledges that all of the documents filed by the Company with the SEC under
Sections 13(a), 14(a) or 15(d) of the Exchange Act that have been posted on the
SEC’s EDGAR site are available to the Holder, and the Holder has not relied on
any statement of the Company not contained in such documents in connection with
the Holder’s decision to enter into this Agreement and the Exchange.

 

3.6 Risk. The Holder understands that its investment in the Exchange Securities
involves a high degree of risk. The Holder is able to bear the risk of an
investment in the Exchange Securities including, without limitation, the risk of
total loss of its investment. The Holder has sought such accounting, legal and
tax advice as it has considered necessary to make an informed investment
decision with respect to the Exchange. There is no assurance that the Exchange
Securities or any securities into which the Exchange Securities may convert will
continue to be quoted, traded or listed for trading or quotation on the OTCBB or
on any other organized market or quotation system.

 

3.7 No Governmental Review. The Holder understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement in connection with the Exchange or the
fairness or suitability of the investment in the Exchange Securities nor have
such authorities passed upon or endorsed the merits of the Exchange Securities.

 

3.8 Organization; Authorization. The Holder is duly organized, validly existing
and in good standing under the laws of its state of formation and has the
requisite organizational power and authority to enter into and perform its
obligations under this Agreement.

 

3.9 Validity; Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Holder and shall constitute the legal,
valid and binding obligations of the Holder enforceable against the Holder in
accordance with its terms. The execution, delivery and performance of this
Agreement by the Holder and the consummation by the Holder of the transactions
contemplated hereby (including, without limitation, the irrevocable surrender of
the Securities) will not result in a violation of the organizational documents
of the Holder.

 

 15 

 

 

3.10 Prior Investment Experience. The Holder acknowledges that it has prior
investment experience, including investment in securities of the type being
exchanged, including the Securities and the Exchange Securities, and has read
all of the documents furnished or made available by the Company to it and is
able to evaluate the merits and risks of such an investment on its behalf, and
that it recognizes the highly speculative nature of this investment. The Holder
acknowledges that in connection with the consummation of the exchange of the
Securities and the Exchange Securities it has not relied on the advice of any
third party (except legal and tax advice from its attorneys and accountants,
respectively).

 

3.11 Tax Consequences. The Holder acknowledges that the Company has made no
representation regarding the potential or actual tax consequences for the Holder
which will result from entering into the Agreement and from consummation of the
Exchange. The Holder acknowledges that it bears complete responsibility for
obtaining adequate tax advice regarding the Agreement and the Exchange.

 

3.12 No Registration, Review or Approval. The Holder acknowledges, understands
and agrees that the Exchange Securities are being exchanged hereunder pursuant
to an exchange offer exemption under Section 3(a)(9) of the Securities Act.

 

Section 4. Conditions Precedent to Obligations of the Company. :

 

4.1 First Closing. The obligation of the Company to consummate the transactions
contemplated by this Agreement on the First Closing Date is subject to the
satisfaction of each of the following conditions, provided that these conditions
are for the Company’s sole benefit and may be waived by the Company at any time
in its sole discretion by providing the Holder with prior written notice
thereof:

 

(a) Delivery. The Holder shall have delivered to the Company the requisite
Securities.

 

(b) No Prohibition. No order of any court, arbitrator, or governmental or
regulatory authority shall be in effect which purports to enjoin or restrain any
of the transactions contemplated by this Agreement.

 

(c) Representations. The accuracy in all material respects when made and on the
First Closing Date of the representations and warranties of the Holder contained
herein (unless as of a specific date therein).

 

4.2 Second Closing. The obligation of the Company to consummate the transactions
contemplated by this Agreement on the Second Closing Date is subject to the
satisfaction of each of the following conditions, provided that these conditions
are for the Company’s sole benefit and may be waived by the Company at any time
in its sole discretion by providing the Holder with prior written notice
thereof:

 

(a) Delivery. The Holder shall have delivered to the Company the requisite
Securities.

 

 16 

 

 

(b) No Prohibition. No order of any court, arbitrator, or governmental or
regulatory authority shall be in effect which purports to enjoin or restrain any
of the transactions contemplated by this Agreement.

 

(c) Representations. The accuracy in all material respects when made and on the
Second Closing Date of the representations and warranties of the Holder
contained herein (unless as of a specific date therein).

 

(d) Price of the Common Stock. The closing price of the Company’s common on the
applicable Trading Market on the Second Closing Date must be equal to at least
equal to or greater than the conversion price set forth in the First Exchange
Note.

 

Section 5. Conditions Precedent to Obligations of the Holder.

 

5.1 First Closing. The obligation of the Holder to consummate the transactions
contemplated by this Agreement on the First Closing Date is subject to the
satisfaction of each of the following conditions, provided that these conditions
are for the Holder’s sole benefit and may be waived by the Holder at any time in
its sole discretion by providing the Company with prior written notice thereof:

 

(a) No Prohibition. No order of any court, arbitrator, or governmental or
regulatory authority shall be in effect which purports to enjoin or restrain any
of the transactions contemplated by this Agreement.

 

(b) Representations. The representations and warranties of the Company shall be
true and correct in all material respects when made and on the First Closing
Date (unless as of a specific date therein).

 

(c) Covenants. All obligations, covenants and agreements of the Company required
to be performed under this Agreement at or prior to the First Closing Date shall
have been performed.

 

(d) Trading. From the date hereof to the relevant Closing Date, trading in the
Company’s common stock shall not have been suspended by the SEC or any Trading
Market and, at any time prior to the First Closing Date, trading in securities
generally as reported by Bloomberg L.P. shall not have been suspended or
limited, or minimum prices shall not have been established on securities whose
trades are reported by such service, or on any trading market, nor shall a
banking moratorium have been declared either by the United States or New York
State authorities nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment of the Holder makes it
impracticable or inadvisable to purchase the Exchange Securities at the First
Closing.

 

 17 

 

 

5.2 Second Closing. The obligation of the Holder to consummate the transactions
contemplated by this Agreement on the Second Closing Date is subject to the
satisfaction of each of the following conditions, provided that these conditions
are for the Holder’s sole benefit and may be waived by the Holder at any time in
its sole discretion by providing the Company with prior written notice thereof:

 

(a) No Prohibition. No order of any court, arbitrator, or governmental or
regulatory authority shall be in effect which purports to enjoin or restrain any
of the transactions contemplated by this Agreement.

 

(b) Representations. The representations and warranties of the Company shall be
true and correct in all material respects when made and on the Second Closing
Date (unless as of a specific date therein) for such representations and
warranties contained herein that are not qualified by “materiality” or “Material
Adverse Effect”.

 

(c) Covenants. All obligations, covenants and agreements of the Company required
to be performed under this Agreement at or prior to the Second Closing Date
shall have been performed.

 

(d) Trading. From the date hereof to the relevant Closing Date, trading in the
Company’s common stock shall not have been suspended by the SEC or any Trading
Market and, at any time prior to the Second Closing Date, trading in securities
generally as reported by Bloomberg L.P. shall not have been suspended or
limited, or minimum prices shall not have been established on securities whose
trades are reported by such service, or on any trading market, nor shall a
banking moratorium have been declared either by the United States or New York
State authorities nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment of the Holder makes it
impracticable or inadvisable to purchase the Exchange Securities at the Second
Closing.

 

(e) Price of the Common Stock. The average VWAP of the of the Company’s common
stock on the applicable Trading Market for the five (5) Trading Days immediately
prior to the Second Closing Date is at least equal to 125% of the conversion
price set forth in the First Exchange Note.

 

(f) No Event of Default. No Event of Default (as defined in the First Exchange
Note) shall have occurred and remain continuing under the First Exchange Note or
the Second Exchange Note.

 

Section 6. Holding Period. For the purposes of Rule 144 of the Securities Act,
the Company acknowledges that the holding period of the Exchange Securities may
be tacked on the holding period of the Securities, and the Company agrees not to
take a position contrary to this Section 6.

 

Section 7. Share Issuance Cap. In connection with the conversion or exercise of
the Notes, the Company shall not be required to issue in the aggregate more than
19.99% of the number of shares of Common Stock or 19.99% of the voting power of
the Company issued and outstanding immediately prior to the date hereof, and in
no event shall the Company be required to pay any penalties or fees of any kind
due to the operation of the provisions contained in this Section 7.

 

 18 

 

 

Section 8. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement
shall be construed under the laws of the state of New York, without regard to
principles of conflicts of law or choice of law that would permit or require the
application of the laws of another jurisdiction. The Company and the Holder each
hereby agrees that all actions or proceedings arising directly or indirectly
from or in connection with this Agreement shall be litigated only in the Supreme
Court of the State of New York or the United States District Court for the
Southern District of New York located in New York County, New York. The Company
and the Holder each consents to the exclusive jurisdiction and venue of the
foregoing courts and consents that any process or notice of motion or other
application to either of said courts or a judge thereof may be served inside or
outside the State of New York or the Southern District of New York by generally
recognized overnight courier or certified or registered mail, return receipt
requested, directed to such party at its or his address set forth below (and
service so made shall be deemed “personal service”) or by personal service or in
such other manner as may be permissible under the rules of said courts. THE
COMPANY AND THE HOLDER EACH HEREBY WAIVES ANY RIGHT TO A JURY TRIAL IN
CONNECTION WITH ANY LITIGATION PURSUANT TO THIS AGREEMENT.

 

Section 9. Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.

 

Section 10. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

 

Section 11. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

 

Section 12. No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

 

Section 13. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Holder, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Holder makes any representation, warranty,
covenant or undertaking with respect to such matters; provided, however, that
all representations and warranties contained in Term Loan, shall be incorporated
herein. No provision of this Agreement may be amended other than by an
instrument in writing signed by the Company and the Holder. No provision hereof
may be waived other than by an instrument in writing signed by the party against
whom enforcement is sought.

 

 19 

 

 

Section 14. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (a) upon receipt, when
delivered personally; (b) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (c) one calendar day (excluding
Saturdays, Sundays, and national banking holidays) after deposit with an
overnight courier service, in each case properly addressed to the party to
receive the same.

 

The addresses and facsimile numbers for such communications shall be:

 

If to the Company:

 

Amedica Corporation

1885 West 2100 South

Salt Lake City, UT 84119

Attn: Ty Lombardi, Chief Financial Officer

  

If to the Holder:

 

Riverside Merchant Partners, LLC

810 7th Avenue, 18th Floor

New York, NY 10019

Attn: David Bocchi, Member

 

or to such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.

 

Section 15. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Exchange Securities. The Holder may assign some
or all of its rights hereunder without the consent of the Company, in which
event such assignee shall be deemed to be the Holder hereunder with respect to
such assigned rights.

 

Section 16. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

 

Section 17. Survival of Representations. The representations and warranties of
the Company and the Holder contained in Sections 2 and 3, respectively, will
survive the closing of the transactions contemplated by this Agreement.

 

Section 18. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

Section 19. Release from Obligations Under the Securities. Upon the completion
of each Closing, the Holder acknowledges and agrees that the Company shall be
fully released from all obligations to the Holder under the Securities exchanged
by the Holder pursuant to such Closing. Notwithstanding the foregoing, in the
event that the Exchange Securities are deemed invalid, the Company’s obligations
to the Holder under the Securities shall be reinstated retroactively to the date
hereof and the obligations thereunder shall be deemed to be continuing and in
full force and effect.

 

[Signature Page Follows]

 

 20 

 

 

IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of the
date first written above.

 

AMEDICA CORPORATION       By:     Name:   Title:                               
US SPINE, INC.         By:     Name:     Title:           RIVERSIDE MERCHANT
PARTNERS, LLC         By:     Name:   Title:    

 

[Signature Page to Exchange Agreement]

 

   

 

 

Exhibit A

 

Securities

 

Pursuant to that certain Assignment Agreement and Second Amendment to Loan and
Security Agreement, dated as April 4, 2016 (the “Assignment Agreement”) by and
among the Company, the Holder, LLC, Hercules Technology III, L.P., a Delaware
limited partnership, and Hercules Capital, Inc. (fka, Hercules Technology Growth
Capital, Inc.), a Maryland corporation, $1,000,0000 of the outstanding principal
of Term Loan.

 

Pursuant to that certain Assignment Agreement and at the Holder’s option, an
additional $2,000,0000 of the outstanding principal of Term Loan.

 

   

 

 

EXHIBIT B

 

Form of and Schedule of Exchange Securities

 

Securities Issuable on the First Closing Date             Subordinated
Convertible Promissory Note, issued April 4, 2016  $1,000,000         Common
Stock Purchase Warrant to purchase 100,000 shares of the Company’s common stock,
issued April 4, 2016             Securities Issuable on the Second Closing Date 
           Subordinated Convertible Promissory Note, which may be issued as set
forth in Section 1.1(b) hereto  $2,000,000         Common Stock Purchase Warrant
to purchase 100,000 shares of the Company’s common stock, which may be issued as
set forth in Section 1.1(b) hereto