Exhibit 10.3
 
NOTE CONVERSION AGREEMENT
 
THIS NOTE CONVERSION AGREEMENT (this “Agreement”) is entered into on April 4,
2013, by and between VistaGen Therapeutics, Inc., a Nevada corporation (the
“Company”), and Platinum Long Term Growth VII, LLC, a Delaware limited liability
company (“Platinum”).
 
WHEREAS, Platinum is the holder of certain Senior Secured Convertible Promissory
Notes of the Company, issued on the dates and in the principal amounts set forth
on Schedule A (the “Notes”), which Notes were issued pursuant to the terms of a
Note Exchange and Purchase Agreement, dated as of October 11, 2012, between the
Company and Platinum (“NEPA”);

WHEREAS, in order to secure the Company’s obligations to Platinum under the
terms of the Notes, the Company and Platinum entered into (i) the Amended and
Restated Security Agreement, attached hereto as Exhibit A (the “Security
Agreement”), pursuant to which Platinum was granted a security interest in
substantially all of the Company’s assets; and (ii) a Negative Covenant,
attached hereto as Exhibit B (the “Negative Covenant”), prohibiting VistaGen
Therapeutics, Inc., a California corporation and wholly owned subsidiary of the
Company (“VistaGen California”), and Artemis Neuroscience, Inc., a Maryland
corporation and wholly owned subsidiary of VistaGen California (“Artemis)
(together, the “Subsidiaries”), from incurring, among other things, certain
kinds of liens or indebtedness, and from agreeing to any merger or other
organizational change;

WHEREAS, in addition, the Company, the Subsidiaries and Platinum entered into
the Intellectual Property and Stock Pledge Agreement, attached hereto as Exhibit
C (the “IP Security Agreement”), pursuant to which Platinum was granted a
security interest in (i) all intellectual property of VistaGen California, and
(ii) all of the capital stock and other equity interests of VistaGen California
in Artemis;

WHEREAS, the Company has agreed to sell shares of its common stock, par value
$0.001 per share (“Common Stock”), in a private transaction(s) resulting in
gross proceeds to the Company of $36.0 million (the “Qualified Financing”)
pursuant to the agreements attached hereto as Annex A (the “QF Documents”).  The
Qualified Financing will result in a change in control of the Company, assuming
conversion or exercise of all issued and outstanding derivative securities of
the Company; and
 
WHEREAS, the Company has requested that Platinum convert the principal balance
and all accrued but unpaid interest due and owing Platinum under the terms of
the Notes (the “Outstanding Balance”) into shares of the Company’s Common Stock
upon consummation of the Qualified Financing (the “Note Conversion”), and to
terminate the Security Agreement, Negative Covenant and IP Security Agreement
(together, the “Security Agreements”).
 
NOW, THEREFORE, for and in consideration of the mutual agreements set forth
herein, the parties hereto agree as follows:
 
1.         Note Conversion. Subject to the satisfaction or waiver of the
conditions to closing set forth in Section 7 of this Agreement (the “Closing”),
the Outstanding Balance due Platinum under the terms of the Notes shall convert
into that number of shares of Common Stock equal to the Outstanding Balance on
the date of Closing (the “Closing Date”), divided by $0.50 (the “Conversion
Shares”).
 
2.         Manner of Conversion/Termination of Notes. On the Closing Date, the
Company shall deliver (i) to Platinum written notice of the closing of the
Qualified Financing, together with evidence of the receipt by the Company of
$36.0 million in gross proceeds from the Qualified Financing and the issuance of
72 million shares of Common Stock as contemplated by the QF Documents (the “QF
Notice”); and (ii) to the Company’s transfer agent an irrevocable notice to
issue and deliver to Platinum a certificate or certificates or other document
evidencing the Conversion Shares (the “Conversion Instructions”), which
Conversion Shares shall be delivered within three (3) business days of
Closing.  Upon receipt by Platinum of the QF Notice and Conversion Instructions,
the Notes shall be deemed paid in full, including accrued interest thereon, and
all rights of Platinum under the Notes shall terminate and be of no further
force and effect (other than its right to receive the Conversion Shares pursuant
to the Conversion Instructions).

 
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3.         Termination of the Security Agreement, Negative Covenant and IP
Security Agreement. On the Closing Date, the Security Agreements shall terminate
and be of no further force and effect, and Platinum shall execute any release,
termination statement, or other document reasonably requested by the Company
necessary to release Platinum’s security or other interest in and to any asset
of the Company and the Subsidiaries granted or issued to Platinum under the
terms of the Security Agreements, including by way of example and not by
limitation, Platinum’s security interest in and to any and all intellectual
property of VistaGen California, as described in Schedule B.

4. Representations, Warranties and Covenants of Platinum. Platinum hereby makes
the following representations and warranties to the Company, and covenants for
the benefit of the Company:
 
(a) Platinum is a limited liability company validly existing and in good
standing under the laws of the jurisdiction of its organization.
 
(b) This Agreement has been duly authorized, validly executed and delivered by
Platinum and is a valid and binding agreement and obligation of Platinum
enforceable against Platinum in accordance with its terms, subject to
limitations on enforcement by general principles of equity and by bankruptcy or
other laws affecting the enforcement of creditors’ rights generally, and
Platinum has full power and authority to execute and deliver the Agreement and
the other agreements and documents contemplated hereby and to perform its
obligations hereunder and thereunder.
 
(c) Platinum understands that the Conversion Shares are being offered and sold
to it in reliance on specific provisions of Federal and state securities laws
and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
Platinum set forth herein for purposes of qualifying for exemptions from
registration under the Securities Act of 1933, as amended (the “Securities Act”)
and applicable state securities laws.
 
(d) Platinum is an “accredited investor” as defined under Rule 501 of Regulation
D promulgated under the Securities Act.
 
(e) Platinum is and will be acquiring the Conversion Shares for Platinum’s own
account, for investment purposes, and not with a view to any resale or
distribution in whole or in part, in violation of the Securities Act or any
applicable securities laws; provided, however, that notwithstanding the
foregoing, Platinum does not covenant to hold the Conversion Shares for any
minimum period of time.
 
(f) The offer and sale of the Conversion Shares is intended to be exempt from
registration under the Securities Act, by virtue of Section 3(a)(9) and/or 4(2)
thereof.  Platinum understands that the Conversion Shares are “restricted
securities,” as that term is defined in the Securities Act and the rules
thereunder, have not been registered under the Securities Act, and that none of
the Conversion Shares can be sold or transferred unless they are first
registered under the Securities Act and such state and other securities laws as
may be applicable or the Company receives an opinion of counsel reasonably
acceptable to the Company that an exemption from registration under the
Securities Act is available (and then the Conversion Shares may be sold or
transferred only in compliance with such exemption and all applicable state and
other securities laws).
 
(g) Platinum has not assigned, conveyed or otherwise transferred any interest in
and to the Notes to any third party, and owns and holds, beneficially and of
record, the entire right, title, and interest in and to the Notes free and clear
of all rights and Encumbrances (as defined below). As used herein,
“Encumbrances” shall mean any security or other property interest or right,
claim, lien, pledge, option, charge, security interest, contingent or
conditional sale, or other title claim or retention agreement, interest or other
right or claim of third parties, whether perfected or not perfected, voluntarily
incurred or arising by operation of law, and including any agreement (other than
this Agreement) to grant or submit to any of the foregoing in the future.
 
5.           Representations, Warranties and Covenants of the Company.  The
Company represents and warrants to Platinum, and covenants for the benefit of
Platinum, as follows:

 
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(a) The Company has been duly incorporated and is validly existing and in good
standing under the laws of the state of Nevada, with full corporate power and
authority to own, lease and operate its properties and to conduct its business
as currently conducted, and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place where the nature
of its properties or the conduct of its business requires such registration or
qualification, except where the failure to register or qualify would not have a
Material Adverse Effect.  For purposes of this Agreement, “Material Adverse
Effect” shall mean any material adverse effect on the business, operations,
properties, prospects, or financial condition of the Company and its
subsidiaries and/or any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of the Company to
perform any of its obligations under this Agreement in any material respect.
 
(b) The Conversion Shares have been duly authorized by all necessary corporate
action and, when paid for or issued in accordance with the terms hereof, the
Conversion Shares shall be validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of refusal
of any kind.
 
(c) This Agreement has been duly authorized, validly executed and delivered on
behalf of the Company and is a valid and binding agreement and obligation of the
Company enforceable against the Company in accordance with its terms, subject to
limitations on enforcement by general principles of equity and by bankruptcy or
other laws affecting the enforcement of creditors’ rights generally, and the
Company has full power and authority to execute and deliver the Agreement and
the other agreements and documents contemplated hereby and to perform its
obligations hereunder and thereunder.
 
(d) The execution and delivery of the Agreement and the consummation of the
transactions contemplated by this Agreement by the Company, will not (i)
conflict with or result in a breach of or a default under any of the terms or
provisions of, (A) the Company’s certificate of incorporation or by-laws, or (B)
of any material provision of any indenture, mortgage, deed of trust or other
material agreement or instrument to which the Company is a party or by which it
or any of its material properties or assets is bound, (ii) result in a violation
of any provision of any law, statute, rule, regulation, or any existing
applicable decree, judgment or order by any court, Federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction over
the Company, or any of its material properties or assets or (iii) result in the
creation or imposition of any material lien, charge or encumbrance upon any
material property or assets of the Company or any of its subsidiaries pursuant
to the terms of any agreement or instrument to which any of them is a party or
by which any of them may be bound or to which any of their property or any of
them is subject except in the case of clauses (i)(B), (ii) or (iii) for any such
conflicts, breaches, or defaults or any liens, charges, or encumbrances which
would not have a Material Adverse Effect.
 
(e) The delivery and issuance of the Conversion Shares in accordance with the
terms of and in reliance on the accuracy of Platinum’s representations and
warranties set forth in this Agreement will be exempt from the registration
requirements of the Securities Act.
 
(f) No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required in
connection with the valid execution and delivery of this Agreement or the offer,
sale or issuance of the Conversion Shares or the consummation of any other
transaction contemplated by this Agreement.
 
(g) The Company has complied and will comply with all applicable federal and
state securities laws in connection with the offer, issuance and delivery of the
Conversion Shares hereunder.
 
 (h)           The Company shall cause its Common Stock to continue to be
registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
(the “Exchange Act”), and not take any action or file any document (whether or
not permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend its reporting and filing obligations under the Exchange Act
and the Securities Act, except as permitted herein.  The Company will take all
action necessary to continue the listing or trading of its Common Stock on the
OTC Bulletin Board or other exchange or market on which the Common Stock is
trading.

 
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(i)           In the event that the Conversion Shares are sold in a manner that
complies with an exemption from registration, the Company shall promptly cause
its counsel (at its expense) to issue to the transfer agent an opinion
permitting removal of the legend (indefinitely if pursuant to Rule 144(k) of the
Securities Act (or its successor provisions, including any provision that
permits unlimited resales after the relevant holding period set forth in Rule
144), or to permit sales of the Conversion Shares if pursuant to the other
provisions of Rule 144 of the Securities Act).
 
           6.           Warrant Adjustments.  The Parties agree and acknowledge
that (i) the issuance of the QF Securities, and (ii) the grant to certain
officers and directors of the Company of ten-year warrants to purchase an
aggregate of 3.0 million shares of the Company’s Common Stock at an exercise
price of $0.64 per share (the “Option Issuance”), shall trigger adjustments to
the exercise price and number of warrant shares under (i) Article IV of the
common stock purchase warrants issued to Platinum pursuant the NEPA (the “NEPA
Warrants”), and (ii) the Series A Exchange Warrants (as defined in the NEPA)
that may be issued to Platinum upon consummation of a Series A Exchange (as
defined in the NEPA) (together, the “Warrant Adjustments”).   Notwithstanding
the above, and the provisions requiring Warrant Adjustments in the NEPA Warrants
and the Series A Exchange Warrants, the Parties agree and acknowledge that the
exercise price of the NEPA Warrants and the Series A Exchange Warrants shall be
reduced to $0.50 per share as a result of the issuance of any Common Stock
pursuant to the QF Documents, and no other Warrant Adjustments shall be made as
a result of the issuance of the QF Securities pursuant to the QF Documents or
the Option Issuance, including without limitation, any adjustment to the number
of Shares of Common Stock issuable upon exercise of the NEPA Warrants and the
Series A Exchange Warrants.   The Parties further agree and acknowledge that, as
a result of the foregoing, to the extent of any conflict between the terms and
conditions of the NEPA Warrants and Series A Exchange Warrants, and the terms
and conditions set forth in this Section 6, the terms of this Section 6 shall
control.
 
7.           Conditions Precedent to the Obligation of the Company to Consummate
the Note Conversion.  The obligation hereunder of the Company to issue and
deliver the Conversion Shares to Platinum and consummate the Note Conversion is
subject to the satisfaction or waiver, at or before the Closing Date, of each of
the conditions set forth below.  These conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole discretion.
 
(a) Platinum shall have executed and delivered this Agreement.
 
(b) Platinum shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by Platinum at or prior to
the Closing Date.
 
(c) The representations and warranties of Platinum shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
 
8.           Conditions Precedent to the Obligation of Platinum to Consummate
the Note Conversion. The obligation hereunder of Platinum to surrender the
Notes, accept the Conversion Shares and consummate the Note Conversion is
subject to the satisfaction or waiver, at or before the Closing Date, of each of
the conditions set forth below.  These conditions are for Platinum’s sole
benefit and may be waived by Platinum at any time in its sole discretion.
 
(a) The Company shall have executed and delivered this Agreement.
 
(b) The Company shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by the Agreement
to be performed, satisfied or complied with by the Company at or prior to the
Closing Date.
 
(c) Each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time, except for representations and warranties that
speak as of a particular date, which shall be true and correct in all material
respects as of such date.
 
(d) No statute, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement at or prior to the Closing Date.

 
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(e) As of the Closing Date, no action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, shall be pending against or
affecting the Company, or any of its properties, which questions the validity of
the Agreement or the transactions contemplated thereby or any action taken or to
be taken pursuant thereto.  As of the Closing Date, no action, suit, claim or
proceeding before or by any court or governmental agency or body, domestic or
foreign, shall be pending against or affecting the Company, or any of its
properties, which, if adversely determined, is reasonably likely to result in a
Material Adverse Effect.
 
(f)           On or before April 30, 2013, the Company shall have
fully consummated the Qualified Financing on the terms set forth in the QF
Documents attached hereto as Annex A, issuing 72 million shares of Common Stock
thereunder, and delivered to Platinum the QF Notice and Conversion Instructions.
 
9.           Governing Law; Consent to Jurisdiction.  This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New York
without giving effect conflicts of law principles that would result in the
application of the substantive laws of another jurisdiction.  Each of the
Parties consents to the exclusive jurisdiction of the Federal courts whose
districts encompass any part of the State of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions.  Each
Party waives its right to a trial by jury.  Each Party to this Agreement
irrevocably consents to the service of process in any such proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such Party at its address set forth herein.  Nothing herein shall affect the
right of any Party to serve process in any other manner permitted by law.
 
10.           Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express overnight
courier, registered first class mail, or telecopier (provided that any notice
sent by telecopier shall be confirmed by other means pursuant to this Section
10), initially to the address set forth below, and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 10.
 
if to the Company:
 
VistaGen Therapeutics, Inc.
384 Oyster Point Blvd., Suite No. 8
South San Francisco, California 94080
Attention: Chief Executive Officer
Tel. No.: (650) 244-9990 ext. 224
Fax No.: (888) 482-2602
 
       with a copy to:
 
Disclosure Law Group
501 West Broadway, Suite 800
San Diego, California 92101
Attention: Daniel W. Rumsey, Esquire
Tel No.: (619) 795-1134
Fax No.: (619) 330-2101
 
if to Platinum:
 
Platinum Long Term Growth VII, LLC
152 West 57th Street, 4th Floor
New York, NY 10019
Attention: Michael Goldberg, M.D.
Tel. No.: (212) 271-7895
Fax No.: (212) 582-2424

 
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with a copy to:
 
Burak Anderson & Melloni, PLC
30 Main Street, Suite 210
Burlington, Vermont 05401
Attention: Shane W. McCormack, Esquire
Tel No.: (802) 862-0500
Fax No.: (802) 862-8176
 
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; when receipt is acknowledged,
if telecopied; or when actually received or refused if sent by other means.

11.           Disclosure of Transaction. The Company shall file with the
Securities and Exchange Commission a Current Report on Form 8-K (the “Form 8-K”)
describing the material terms of the transactions contemplated hereby as soon as
practicable following the Closing Date but in no event more than two (2)
business days following the Closing Date.
 
12.           Entire Agreement.  This Agreement constitutes the entire
understanding and agreement of the parties with respect to the subject matter
hereof and supersedes all prior and/or contemporaneous oral or written proposals
or agreements relating thereto all of which are merged herein.  This Agreement
may not be amended or any provision hereof waived in whole or in part, except by
a written amendment signed by both of the Parties.
 
13.           Counterparts. This Agreement may be executed by facsimile
signature and in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.

 
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IN WITNESS WHEREOF the parties have signed this instrument as of the date first
set forth above.

ADDRESS:
   
VISTAGEN THERAPEUTICS, INC.
384 Oyster Point Blvd., Suite No. 8
South San Francisco, California 94080
           
By: /s/ Shawn K. Singh
      Name: Shawn K. Singh
Title: Chief Executive Officer
       
ADDRESS:
   
PLATINUM LONG TERM GROWTH VII, LLC
152 West 57th Street, 4th Floor
New York, NY 10019
           
By: /s/ Michael Goldberg
      Name: Michael Goldberg
Title: Portfolio Manager

 
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ANNEX A
 
 

 
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SCHEDULE A

SENIOR SECURED CONVERTIBLE PROMISSORY NOTES ISSUED TO PLATINUM

Date of Issuance
 
Principal Amount
 
October 11, 2012
  $ 1,272,577.27  
October 11, 2012
  $ 500,000.00  
October 19, 2012
  $ 500,000.00  
February 22, 2013
  $ 250,000.00  
March 12, 2013
  $ 750,000.00  
Total
  $ 3,272,577.27  

 
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SCHEDULE B

All of the “Collateral” under and as defined in that certain Intellectual
Property and Security Agreement by and between Vistagen Therapeutics, Inc., a
California corporation, and Platinum Long Term Growth VII, LLC, dated as of
October 11, 2012, including, but not limited to, the following:
 
Patents:
 
 
Country
 
 
Title
 
Application Number Filing Date
 
Publication Number Publication Date
 
 
Patent
 
 
Inventors /Assignees
 
 
Status
US
 
Toxicity Typing Using Liver Stem Cells
 
11/445,733 06/01/2006
 
8,143,009
03/27/12
2007/0111195 05/17/2007
 
09/881,526 06/14/2001
 
Inventor:
Snodgrass, H.R.
Assignee:
VistaGen Inc.
 
Issued
US
 
Toxicity Typing Using Liver Stem Cells
 
13/401,623
02/21/12
 
11/445,733 06/01/2006
     
Inventor:
Snodgrass, H.R.
Assignee:
VistaGen Inc.
 
Pending
US
 
Pancreatic Endocrine Progenitor Cells Derived From Pluripotent Stem Cells
 
12/464,005 05/11/2009
 
2009/0280096 11/12/2009
 
61/052,155 05/09/2008
61/061,070 06/12/2008
 
Inventor:
Kubo, A., Bonham, K, Stull, R. Snodgrass, H.R.
 
Pending

 
Trademarks:

VISTAGEN                      US, Switzerland, Europe

VistaGen Therapeutics – use trademark, not
registered,                                                                                                US

 
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EXHIBIT A
 

 
 
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EXHIBIT B
 

 
 
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EXHIBIT C