Document:

Exhibit 10.12

 

STOCK SUBSCRIPTION AGREEMENT

ONCOCYTE CORPORATION

READ THIS AGREEMENT CAREFULLY BEFORE YOU INVEST

The shares of common stock, no par value (“Shares”) have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws and may not be offered for sale, sold, transferred, pledged or hypothecated to any person in the absence of an effective registration statement covering such Shares (or an exemption from such registration) and an opinion of counsel satisfactory to OncoCyte Corporation to the effect that such transfer or exercise complies with applicable securities laws.

 

SUBSCRIPTION AGREEMENT

This Agreement is entered into by Bernard Karfunkel (“Subscriber”) and OncoCyte Corporation, a California corporation (the “Company”).

1.             Subscription Offer.

 

(a)            Primary Subscription. The Company is offering to each registered holder (each a “Shareholder”) of shares of Company common stock, no par value (“Shares”), other than BioTime, Inc. the opportunity to subscribe to and purchase their respective pro rata percentage (“Allocation”) of a total of 3,000,000 Shares (the “Primary Subscription Shares”) at a price of $1.10 per Share (the “Subscription Price”).  A Shareholder’s Allocation shall be the total number of Primary Subscription Shares multiplied by the percentage determined by dividing (A) the total number of Shares owned of record by the Shareholder immediately before the Subscription Offer, by (B) the total number of Shares owned by all Shareholders other than BioTime in the aggregate immediately before the Subscription Offer.

	
Subscriber

	 	
Pro Rata Percentage

	 	
Shares in Allocation

	
Bernard Karfunkel

	 	
66.6666666666667%

	 	
2,000,000

(b)            BioTime Subscription.  The Company will also offer to BioTime the opportunity to subscribe to and purchase 6,000,000 Shares (the “BioTime Allocation”) at the Subscription Price. As of April 15, 2015, the total indebtedness of the Company to BioTime exceeded $6,600,000. BioTime may purchase 3,000,000 Shares of the BioTime Allocation pursuant to the Subscription Offer by cancelling $3,300,000 of the indebtedness of the Company, and, in addition, the Company may deliver to BioTime a convertible promissory note with respect to an additional $3,300,000 of indebtedness (the “Note”).  The Note will bear interest at the rate of 1% per annum, will contain customary default provisions, and will be convertible by BioTime into 3,000,000 Shares at the Subscription Price, subject to customary anti-dilution adjustments, on the Maturity Date. The Maturity Date will be the earlier of the date 18 months from the Expiration Date (defined below or any extension thereof) or the date six months after the date on which the Company completes a firm commitment underwritten initial public offering of Shares registered under the Securities Act of 1933, as amended.  If the Shareholders other than BioTime do not, in the aggregate, purchase 3,000,000 Shares in the Subscription Offer on or before the Expiration Date, BioTime may, in lieu of accepting the Note, convert into Shares at the Subscription Price the $3,300,000 of the Company indebtedness that would otherwise have been evidenced by the Note.

(c)            Expiration of Subscription Offer.  The Company’s offer to sell to the Shareholders their respective Allocations of Shares is referred to as the “Subscription Offer.”  The Subscription Offer shall expire on the Expiration Date and may not be accepted by a Shareholder after that date.  The Expiration Date is 5:00 p.m. California time on April 29, 2015.

 

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(d)            Assignment of Rights.  Prior to the Expiration Date, any Shareholder may assign, in whole or in part, to another Shareholder the assigning Shareholder’s rights to purchase their Allocation of Shares in the Subscription Offer.  A Shareholder who so assigns their rights shall notify the Company in writing of such assignment on or before the Expiration Date.

2.             Subscription For Shares.

(a)            Subscription Procedure. Subscriber may irrevocably subscribe to, and thereby irrevocable agree to purchase, on the terms and conditions of this Agreement, all or a portion of the Subscriber’s Allocation in the Subscription Offer by (a) entering the number of Shares to be purchased and the total Subscription Price for such Shares in the table on the Signature Page of this Agreement, (b) signing and dating this Agreement, and (c) delivering this Agreement, completed and signed as provided in clause (a) and (b), along with payment in full of the Subscription Price for the number of Shares to be purchased, to the Company as provided in this Agreement not later than the Expiration Date.

(b)            Subscription Irrevocable.  This Agreement will become an irrevocable obligation of Subscriber to purchase the number of Shares shown on the Signature Page, at the Subscription Price per Share, when a copy of this Agreement, signed by Subscriber, is countersigned by the Company.

(c)            Payment.  Subscriber shall pay the Subscription Price of the Shares by check for good funds payable to the order of the Company or by wire transfer to such account of the Company as the Company may specify.  If this Agreement is rejected or not accepted for any reason by the Company, all sums paid by the Subscriber will be promptly returned, without interest or deduction.

(d)            Purchase of Shares by BioTime.  If the Shareholders fail to purchase their entire Allocations of Shares in the Subscription Offer, then BioTime may, within sixty (60) days after the Expiration Date, purchase for cash or through the cancellation of Company indebtedness, at the Subscription Price, any or all of the Shares not so purchased by the other Shareholders.

(e)            Offer of Shares to New Investors.  Any of the Primary Subscription Shares not purchased by Shareholders and any Shares not purchased by BioTime, in the Subscription Offer may be offered and sold by the Company to new investors at such prices and on such terms as the Company may determine.

3.             Registration Rights.  If the Subscriber purchases Shares in the Subscription Offer, the Company will enter into an amendment to the September 2009 Registration Rights Agreement pursuant to which the Company will agree to register the Shares purchased by the Subscriber in the Subscription Offer for sale under the Securities Act of 1933, as amended (the “Securities Act”).

 

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4.             Investment Representations.  Subscriber represents and warrants to the Company that:

(a)            Due Diligence. Subscriber has made such investigation of the Company as Subscriber deemed appropriate for determining to acquire (and thereby make an investment in) the Shares.  In making such investigation, Subscriber has had access to such financial and other information concerning the Company as Subscriber requested.  Subscriber acknowledges and understands that the Company is an early stage venture engaged in research and development, without only limited history of operations, and has received only limited capital.  Subscriber acknowledges receipt of the Articles of Incorporation and Bylaws of the Company, and such copies of the minutes of the proceedings of the Board of Directors of the Company as Subscriber may have requested from the Company.  Subscriber has had a reasonable opportunity to ask questions of and receive answers from the executive officers of the Company concerning the Company, and to obtain such additional information concerning the Company as may have been possessed or obtainable by the Company without unreasonable effort or expense. All such questions have been answered to Subscriber’s satisfaction.

(b)            Unregistered Offer and Sale. Subscriber understands that the Shares are being offered and sold without registration under the Securities Act, or qualification under the California Corporate Securities Law of 1968, or under the laws of any other states, in reliance upon the exemptions from such registration and qualification requirements for non-public offerings.  Subscriber acknowledges and understands that the availability of the aforesaid exemptions depends in part upon the accuracy of certain of the representations, declarations and warranties made by Subscriber, and the information provided by Subscriber, in this Agreement,  Subscriber is making such representations, declarations and warranties, and is providing such information, with the intent that the same may be relied upon by the Company and its officers and directors in determining Subscriber’s suitability to acquire the Shares.  Subscriber understands and acknowledges that no federal, state or other agency has reviewed or endorsed the offering of the Shares or made any finding or determination as to the fairness of the offering or completeness of the information provided to Subscriber by the Company.

(c)            Restrictions on Transfer. Subscriber understands that the Shares may not be offered, sold, or transferred in any manner unless subsequently registered under the Securities Act, or unless there is an exemption from such registration available for such offer, sale or transfer.  Subscriber agrees that Subscriber will not sell, offer for sale, or transfer any of the Shares unless those Shares have been registered under the Securities Act, or unless there is an exemption from such registration and an opinion of counsel reasonably acceptable to the Company has been rendered stating that such offer, sale, or transfer will not violate any United States federal or state securities laws.  Subscriber acknowledges that (i) the certificates evidencing the Shares will contain a legend to the effect that transfer is prohibited except pursuant to registration under the Securities Act, or pursuant to an available exemption from registration under the Securities Act, and (ii) The Company will refuse to register the transfer, and will issue instructions to any transfer agent and registrar of the Shares to refuse to register the transfer, of any Shares not made pursuant to registration under the Securities Act or pursuant to an available exemption from registration under the Securities Act.

 

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(d)            Knowledge and Experience. Subscriber has such knowledge and experience in financial and business matters to enable Subscriber to utilize the information provided or otherwise made available to Subscriber by the Company to evaluate the merits and risks of an investment in the Shares and to make an informed investment decision.

(e)            Investment Intent.  Subscriber is acquiring the Shares solely for Subscriber’s own account and for investment purposes, and not with a view to, or for sale in connection with, any distribution of the Shares other than pursuant to an effective registration statement under the Securities Act or unless there is an exemption from such registration available for such offer, sale or transfer, such as SEC Rule 144.

(f)            Forward Looking Statements.  Information provided to Subscriber by the Company include matters that may be considered “forward looking” statements within the meaning of Section 27(a) of the Securities Act and Section 21(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements Subscriber acknowledges and agrees are not guarantees of future performance and involve a number of risks and uncertainties, and with respect to which the Company makes no representations or warranties.  Subscriber understands that the level of disclosure provided by the Company is less than that which would be provided in a securities offering registered under the Securities Act in reliance on the sophistication and investment experience of Subscriber.

(g)            No Assurance of Return on Investment.  It has never been represented, guaranteed or warranted to Subscriber by the Company or BioTime or any officer, director, employee, or agent of the Company or BioTime, that Subscriber will realize any specific value, sale price, or profit as a result of acquiring the Shares.

(h)            Nonpublic Information.  Subscriber understands that (1) this Agreement and other information provided to Subscriber by the Company contains confidential financial information about the Company and BioTime, Inc. that has not yet been publicly disclosed by the Company or BioTime, and therefore may be deemed material non-public information, (2) the Company is providing Subscriber the confidential information solely to satisfy its disclosure obligations under the Securities Act in connection with the offer and sale of the Shares to Subscriber pursuant to this Agreement, and (3) until such time as BioTime files a Form 8-K or other report under the Exchange Act with the Securities and Exchange Commission, Subscriber shall not (A) disclose to any other person any of the information contained in this Agreement or otherwise provided to Subscriber concerning the Company that has not previously been disclosed in a report filed by BioTime under the Exchange Act, or (B) purchase or sell any common shares of BioTime.

(i)               Authority; Enforceability.  The Subscriber has the power and authority to execute and deliver, and to perform all of Subscriber’s obligations under, this Agreement.  This Agreement has been duly executed and delivered by Subscriber.  This Agreement is the valid and binding agreements of the Subscriber, enforceable in accordance with their respective terms, except to the extent limited by any bankruptcy, insolvency, or similar law affecting the rights of creditors generally.

 

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(j)             No Conflict.  The execution and delivery of this Agreement and consummation of the transactions contemplated under this Agreement, including the purchase of the Shares, by the Subscriber do not and will not violate any provisions of (i) any rule, regulation, statute, or law applicable to the Subscriber, (ii) the terms of any order, writ, or decree of any court or judicial or regulatory authority or body by which the Subscriber is bound, or (iii) if the Subscriber is not a natural person, the certificate of incorporation, bylaws, or similar charter or governing documents of the Subscriber.

5.             Accredited Investor Qualification.  Subscriber represents that Subscriber qualifies as an “accredited investor” under Regulation D, promulgated under the Securities Act, in the following manner.  (Please check or initial all that apply to verify that you qualify as an “accredited investor.”)

	☒(a)	Subscriber is a natural person whose net worth, or joint net worth with spouse, at the date of purchase exceeds $1,000,000 (not including the value of Subscriber’s principal residence and excluding mortgage debt secured by Subscriber’s principal residence up to the estimated fair market value of the home, except that any mortgage debt incurred by Subscriber within 60 days prior to the date of this Agreement shall not be excluded from the determination of Subscriber’s net worth unless such mortgage debt was incurred to acquire the residence).

	☐(b)	Subscriber is a natural person whose individual gross income (excluding that of spouse) exceeded $200,000 in each of the past two calendar years, and who reasonably expects individual gross income exceeding $200,000 in the current calendar year.

	☐(c)	Subscriber is a natural person whose joint gross income with spouse exceeded $300,000 in each of the past two calendar years, and who reasonably expects joint gross income with spouse exceeding $300,000 in the current calendar year.

	☐(d)	Subscriber is a tax-exempt organization described in Section 501(c) (3) of the Internal Revenue Code, or a corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring Shares, with total assets in excess of $5,000,000.

	☐(e)	Subscriber is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring Shares, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of an investment in the Shares.

 

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6.             Miscellaneous.

(a)            This Agreement shall be governed by, interpreted, construed and enforced in accordance with the laws of the State of California, as such laws are applied to contracts by and among residents of California, and which are to be performed wholly within California.

(b)            The representations and warranties set forth herein shall survive the sale of Shares to Subscriber.

(c)            Neither this Agreement nor any provisions hereof shall be modified, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought.

(d)            Any notice, demand or other communication that any party hereto may be required, or may elect, to give shall be sufficiently given if (i) deposited, postage prepaid, in the United States mail addressed to such address as may be specified under this Agreement, (ii) delivered personally at such address, (iii) delivered to such address by air courier delivery service, or (iv) delivered by electronic mail (email) to such electronic mail address as may be specified under this Agreement.  The address for notice to the Company is: OncoCyte Corporation, 1301 Harbor Bay Parkway, Suite 100, Alameda, California 94502; Attention: Robert W. Peabody, Chief Financial Officer; email; rpeabody@biotimemail.com.  The address for notice of Subscriber is shown in Section 7.  Either party may change its address for notice by giving the other party notice of a new address in the manner provided in this Agreement.  Any notice sent by mail shall be deemed given three days after being deposited in the United States mail, postage paid, and addressed as provided in this Agreement.

(e)            This Agreement may be executed through the use of separate signature pages or in any number of counterparts, and each of such counterparts shall, for all purposes, constitute one agreement binding on all the parties, notwithstanding that all parties are not signatories to the same counterpart. Counterparts sent by electronic mail, facsimile, or other electronic means, including signatures thereon, shall be deemed originals.

(f)            Except as otherwise provided herein, the Agreement shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and assigns.  If the undersigned is more than one person, the obligation of the undersigned shall be joint and several and the agreements, representations, warranties and acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and his heirs, executors, administrators and successors.

(g)            This Agreement contains the entire agreement of the parties, and there are no representations, covenants or other agreements except for those stated or referred to herein.

(h)            This Agreement is not transferable or assignable by the undersigned except as may be provided herein.

 

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7.             Subscriber Information.

 

	 	
(a)

	
Address:

	
1671 52nd Street, Brooklyn, NY 11204

 

	 	
(b)

	
email:

	 

 

	 	
(c)

	
Telephone:

	
  (   )

 

	 	
(d)

	
Social Security Number:

	   

	 	 	
or Taxpayer Identification Number:

	   

 

	 	
(e)

	
State of Residence or Principal Place of Business:

	
New York

 

SUBSCRIBER SIGNATURE

IN WITNESS WHEREOF, the undersigned has entered into this Agreement and hereby agrees to purchase Shares for the price stated above and upon the terms and conditions set forth herein.  The undersigned hereby agrees to all of the terms of the Registration Rights Agreement and agrees to be bound by the terms and conditions thereof.

Dated:  April __, 2015

Primary Subscription:

	
Number of Shares

	 	
Total Subscription Price in Primary Subscription

	 	 	 	 	 
	
2,000,000

	
x $1.10 =

	
$

	
2,200,000

	 
	 	 	 	 	 
	 	 	  	
/s/ Bernard Karfunkel

	 
	 	 	  	
Bernard Karfunkel

	 

 

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ACCEPTANCE BY COMPANY

 

The Company hereby agrees to sell to the Subscriber the Shares referenced above in reliance upon all the representations, warranties, terms and conditions contained in this Agreement.

IN WITNESS WHEREOF, the undersigned, on behalf of the Company, has executed this acceptance as of the date set forth below.

	
Dated:  May 8, 2015

	ONCOCYTE CORPORATION	 
	 	 	 	 
	 	
By:

	
/s/ Joseph Wagner

	 
	 	 	 	
Joseph Wagner

	 

 

	 	
Title:

	
President

	 

 

 

8Exhibit 10.13

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND IS BEING ISSUED IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.  THIS NOTE IS SUBJECT TO RESTRICTION ON TRANSFER AND RESALE AND MAY NOT BE RESOLD OR OTHERWISE TRANSFERRED EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR QUALIFICATION OR EXEMPTION THEREFROM.

CONVERTIBLE PROMISSORY NOTE

	
$3,300,000

	
May 8, 2015

FOR VALUE RECEIVED, OncoCyte Corporation, a California corporation (Borrower), promises to pay to BioTime, Inc., a California corporation (Lender), the principal sum of Three Million Three Hundred Thousand Dollars ($3,300,000) and to pay interest on the principal remaining unpaid from time to time from the date of this Convertible Promissory Note (Note) until the date of payment in full or conversion into Conversion Shares (as provided below), payable as set forth below.

 

1.                   Terms and Conditions of Payment

(a)                 Interest.  Interest shall accrue and be payable at the rate of 1% per annum.  Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed.

(b)                 Payment.  All unpaid accrued interest in arrears shall be due and payable on January 2 of each year until the Maturity Date when the entire unpaid principal balance of this Note, plus all unpaid accrued interest shall be due and payable in full. The Maturity Date shall be November 30, 2016 or such earlier date on which payment in full may become due under Section 5.

(c)                 Date of Payment.  If the date on which a payment of principal or interest on this Note is due is a day other than a Business Day, then payment of such principal or interest need not be made on such date but may be made on the next succeeding Business Day.  A Business Day shall be a day other than a Saturday, Sunday, or other day on which banks in San Francisco, California are permitted or required to be closed.

(d)                Application of Payments.  All payments shall be applied first to costs of collection, next to late charges or other sums owing Lender, next to accrued interest, and then to principal, or in such other order or proportion as Lender, in Lender’s sole discretion, may determine.

 

(e)                 Currency.  All payments shall be made in United States Dollars.

 

(f)                  Default Interest Rate; Late Payment Charge.  In the event that any principal or interest is not paid within five (5) days from on the date on which the same is due and payable, such payment shall continue as an obligation of the Borrower, and interest from the due date on the entire unpaid balance of this Note shall accrue at the lesser of (i) fifteen percent (15%) per annum, or (ii) the highest interest rate permitted under applicable law (the Default Rate), until all past due amounts are paid in full.  From and after the Maturity Date or upon acceleration of this Note, the entire unpaid principal balance of this Note with all unpaid interest accrued thereon, and any and all other fees and charges then due at such maturity, shall bear interest at the Default Rate.

2.                   Prepayment.  Borrower may not prepay principal in whole or in part without the prior written consent of Lender, which consent Lender may grant or withhold in its sole and absolute discretion.

 

3.                   Conversion Rights.  Subject to and upon compliance with the provisions of this Section 3, this Note shall be convertible, in whole or in part, at the election of the holder, at any time and from time to time prior to the payment in full of the principal balance and interest accrued thereon, into fully paid and nonassessable Conversion Shares at the Conversion Price then in effect.  Upon the conversion of this Note or any part hereof, any accrued but unpaid interest with respect to the principal amount of this Note so converted shall likewise be converted into Conversion Shares. Lender or any other holder of this Note may convert this Note into Conversion Shares at any time on or after the first to occur of (i) November 8, 2016, (ii) the date that is six months after the first closing date on which Borrower completes a firm commitment underwritten initial public offering of its common stock or other capital stock registered under the Securities Act of 1933, as amended, and (iii) the occurrence of an Event of Default.

(a)                 Conversion Shares.  As used in this Note, the term Conversion Shares means shares of the common stock, no par value, of Borrower; provided that if Borrower shall effect a reclassification of its common stock (or any subsequent class or series of Conversion Shares), then, and in each such event, the class and series of shares constituting Conversion Shares shall be changed to reflect such reclassification such that upon conversion of the Note the holder shall receive the amount of securities of the class that such holder would have received had such conversion of the Note taken place and shares been issued immediately before such reclassification.

(b)                 Conversion Price.  The “Conversion Price” at which Conversion Shares shall initially be issuable upon conversion of this Note shall be $1.10 per share, subject to the adjustments set forth in Section 3(f).

(c)                 Number of Shares Issuable Upon Conversion.  This Note, or the portion hereof being converted, shall be converted into the number of Conversion Shares determined by dividing (i) the amount of principal and interest being converted by (ii) the Conversion Price in effect on the Conversion Date.

 

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(d)                 Mechanics of Conversion.  The holder of this Note may exercise the conversion right by surrendering this Note to the Secretary of the Borrower or any transfer agent of the Borrower, accompanied by written notice specifying the principal amount of this Note to be converted; provided, that all interest accrued on the amount of principal to be converted shall likewise be converted into Conversion Shares.  Conversion shall be deemed to have been effected on the later of the date when delivery of notice of an election to convert and this Note is made, or such later date, if any, specified in such notice. The date on which conversion is deemed to have been effected is referred to herein as the "Conversion Date."  Subject to the provisions of Section 3(f)(iii)), as promptly as practicable after the Conversion Date, the Borrower shall issue and deliver to or upon the written order of such holder a certificate or certificates for the number of Conversion Shares to which such holder is entitled and a check or cash with respect to any fractional interest in any Conversion Share as provided in Section 3(e).  Subject to the provisions of Section 3(f)(iii), the person in whose name the certificate or certificates for Conversion Shares are to be issued shall be deemed to have become a holder of record of such Conversion Shares on the Conversion Date.  Upon conversion of only a portion of the principal amount of this Note, the Borrower shall issue and deliver to or upon the written order of the holder of this Note so surrendered for conversion, at the expense of the Borrower, a new Note of like tenor evidencing the unconverted portion of this Note so surrendered.

(e)                 Fractional Shares.  No fractional Conversion Share or scrip shall be issued upon conversion of this Note.  If more than one Note of like tenor shall be surrendered for conversion at any one time by the same holder, the number of Conversion Shares issuable upon conversion thereof shall be computed on the basis of the aggregate amount of principal and accrued interest payable under the Notes so surrendered.  Instead of any fractional Conversion Share which would otherwise be issuable upon conversion of this Note, the Borrower shall pay a cash adjustment in respect of such fractional interest in an amount equal to that fractional interest at the then Current Market Price.

(f)                  Conversion Price Adjustments.  The Conversion Price shall be subject to adjustment from time to time as follows:

(i)              Conversion Shares Dividends, Subdivisions, Reclassifications or Combinations.  If the Borrower shall (A) declare a dividend or make a distribution on its Conversion Shares in Conversion Shares, (B) subdivide or reclassify the outstanding Conversion Shares into a greater number of shares, or (C) combine or reclassify the outstanding Conversion Shares into a smaller number of shares, the Conversion Price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the holder of this Note surrendered for conversion after such date shall be entitled to receive the number of Conversion Shares which the holder would have owned or been entitled to receive after the event described in (A), (B), or (C) had this Note (or the portion of this Note surrendered for conversion if the holder elects to convert only a portion of this Note) been converted immediately prior to such event.  Successive adjustments in the Conversion Price shall be made whenever any event specified above shall occur.

 

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(ii)              Rounding of Calculations; Minimum Adjustment.  All calculations under this Section 3(f) shall be made to the nearest cent or to the nearest one hundredth (1/100th) of a share, as the case may be.  Any provision of this Section 3 to the contrary notwithstanding, no adjustment in the Conversion Price shall be made if the amount of such adjustment would be less than one cent ($.01), but any such amount shall be carried forward and an adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate one cent ($.01) or more.  Notwithstanding the foregoing, the Board of Directors of Borrower may elect at any time to make an adjustment otherwise required under this Section 3(f) of less than one cent ($.01).

(iii)            Timing of Issuance of Additional Conversion Shares Upon Certain Adjustments.  In any case in which the provisions of this Section 3(f) require that an adjustment shall become effective immediately after a record date for an event, the Borrower may defer until the occurrence of such event (A) issuing on account of the conversion of this Note after such record date and before the occurrence of such event the additional Conversion Shares issuable upon such conversion by reason of the adjustment required by such event over and above the Conversion Shares issuable upon such conversion before giving effect to such adjustment, and (B) paying to such holder any amount of cash in lieu of a fractional Conversion Share pursuant to Section 3(e); provided that the Borrower upon request shall deliver to the holder of this Note a due bill or other appropriate instrument evidencing the holder's right to receive such additional shares, and such cash, upon the occurrence of the event requiring such adjustment.

(g)                Current Market Price.  The “Current Market Price” per Conversion Share for any date shall be determined by the Board of Directors as follows:

(i)                If the Conversion Shares are listed on a national securities exchange or if prices of Conversion Shares are quoted on the OTC Bulletin Board, the Current Market Price shall be the average of the last reported sale price of the Conversion Shares on such exchange or the OTC Bulletin Board for the last twenty (20) consecutive trading days prior to such date; or

(ii)              If the Conversion Shares are not so listed or quoted, the Current Market Price shall be an amount determined in such reasonable manner as may be prescribed by the Board of Directors of Borrower, irrespective of any accounting treatment.

(h)                Statement Regarding Adjustments.  Whenever the Conversion Price shall be adjusted as provided in Section 3(f), the Borrower shall forthwith file, at the principal office of the Borrower, a statement showing in detail the facts requiring such adjustment and the Conversion Price that shall be in effect after such adjustment, and the Borrower shall also cause a copy of such statement to be sent to the holder of this Note at the address of the holder reflected in the records of Borrower.  Where appropriate, such copy may be given in advance and may be included as part of a notice required to be mailed under the provisions of Section 3(i).

 

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(i)                  Notice to Holders.  In the event the Borrower shall propose to take any action of the type described in Section 3(f) that would result in an adjustment in the Conversion Price or a Sale Event described in Section 3(m), the Borrower shall give notice to the holder of this Note, in the manner set forth in Section 3(h), which notice shall specify the record date, if any, with respect to any such action and the approximate date on which such action is to take place.  Such notice shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action (to the extent such effect may be known at the date of such notice) on the Conversion Price and the number, kind or class of shares or other securities or property which shall be deliverable upon conversion of this Note.  In the case of any action which would require the fixing of a record date, such notice shall be given at least ten (10) days prior to the date so fixed, and in case of all other action, such notice shall be given at least fifteen (15) days prior to the taking of such proposed action.  Failure to give such notice, or any defect therein, shall not affect the legality or validity of any such action.

(j)                  Costs.  The Borrower shall pay all documentary, stamp, transfer or other transaction taxes, if any, attributable to the issuance or delivery of Conversion Shares upon conversion of this Note; provided that the Borrower shall not be required to pay any taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificate for such shares in a name other than that of the holder of this Note.

(k)                Reservation of Shares.  So long as any amount of principal or accrued interest on this Note remains unpaid, the Borrower shall reserve at all times free from preemptive rights, out of its authorized but unissued Conversion Shares, solely for the purpose of effecting the conversion of this Note, sufficient Conversion Shares to provide for the conversion of the outstanding principal balance of this Note plus accrued interest; and if at any time the number of authorized but unissued Conversion Shares shall not be sufficient to effect the conversion of this Note, in addition to such other remedies as shall be available to the holder of this Note, the Borrower will take such corporate action as may, in the opinion of counsel, be necessary to increase its authorized but unissued Conversion Shares to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to, as applicable, the Certificate of Incorporation of Borrower.

(l)                  Valid Issuance.  All Conversion Shares which may be issued upon conversion of this Note will upon issuance by the Borrower be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof, and the Borrower shall take no action which will cause a contrary result.

 

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(m)               Preservation of Conversion Rights Upon Merger, Consolidation, etc.  In case of any consolidation of Borrower with or merger of Borrower into another corporation or in case of any sale, transfer, license, or lease of all or substantially all the assets of Borrower to another corporation or other business entity (each such event a “Sale Event”), Borrower or such successor, purchaser or acquirer, as the case may be, shall execute an agreement that each holder of this Note shall have the right thereafter upon tender of this Note (or such portion thereof as the holder may designate) for conversion at the Conversion Price in effect immediately prior to such Sale Event, to receive the kind and amount of shares and other securities and property (including cash) which the holder would have owned or have been entitled to upon the happening of such Sale Event had this Note (or such portion thereof as the holder has designate for conversion) been converted immediately prior to such Sale Event (such shares and other securities and property (including cash) being referred to as the “Sale Consideration”); provided, however, that the Sale Consideration shall not include any dividends, interest or other income on or from such shares or other securities and property paid, payable, or accruing from the date of such Sale Event to the Conversion Date.  Each agreement pertaining to a Sale Event shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this paragraph.  The provisions of this paragraph shall similarly apply to each successive Sale Event.

(n)                 If Borrower shall issue rights, options or warrants to all holders of its outstanding common stock, without any charge to such holders, entitling them to subscribe for or purchase shares of common stock or other securities of Borrower (a “Rights Distribution”), or shall otherwise offer the holders of its common stock the opportunity to purchase additional shares of common stock or other securities of Borrower on a pro rata basis (a “Pro Rata Offer”), Borrower shall concurrently issue to the holder of this Note the number of rights, options or warrants that the holder would have received had this Note been converted into Conversion Shares immediately prior to the record date for the Rights Distribution, or in the case of a Pro Rata Offer, Borrower shall offer to sell to the holder of this Note, at the Pro Rata Offer subscription price, the number of shares of common stock or other securities that the holder would have been entitled to purchase had this Note been converted into Conversion Shares immediately prior to the Pro Rata Offer or the record date therefor.

 

4.                    Transfer of Note

(a)                 Borrower shall keep and maintain a register or registers in which Borrower shall register this Note and the transfer of this Note.  Any Person in whose name this Note is registered, or who has the right to have this Note so registered, shall have all of the rights of Lender.  All payments of principal, interest, and any other amount due or that becomes due under this Note, shall be paid to Lender by check mailed to Lender at Lender’s address of record or shall be paid by wire transfer of funds to such account as Lender may designate.  Lender may change the address or account for payment or Lender’s address for notice by delivery of written notice to Borrower at its principal executive office. Borrower may deem and treat the person or persons in whose name this Note shall be registered upon the books and records of Borrower as the absolute owner of this Note (regardless of whether this Note shall be past due, and notwithstanding any notation of ownership, endorsement, or other writing on this Note), for the purpose of receiving payment of or on account of principal, interest, and any other amount due or payable under this Note, and for all other purposes; and Borrower shall not be affected by any notice to the contrary unless such notice of transfer is given pursuant to this Note.  All such payments shall be valid and effectual to satisfy and discharge the liability on this Note to the extent of all sums so paid.

 

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(b)                 This Note may not be sold, pledged, hypothecated, negotiated, assigned, or otherwise transferred except pursuant to an effective registration statement under the Securities Act of 1933, as amended, and pursuant to effective registration or qualification under applicable state securities or “blue sky” laws, unless an exemption from such registration and qualification is available.  Borrower will make a stop transfer notation in the register maintained pursuant this Section with respect to such restrictions on transfer.  In connection with the issuance of any new Note or Notes that are presented for registration of transfer, Borrower will take the steps described in this paragraph.  Borrower may require, as a condition to registration of transfer, that the transferor or transferee deliver to Borrower an opinion of counsel, in form and substance acceptable to Borrower, to the effect that such transfer is exempt from the registration and qualification provisions of the Securities Act of 1933, as amended, and applicable state securities or “blue sky” laws.

(c)                 The transfer of this Note shall be registered by Borrower on the books and records of the Borrower subject to the terms, conditions, and restrictions of transfer set forth in this Note, but without payment of any charge other than a sum sufficient to reimburse Borrower for any tax or other governmental charge incident thereto.  Such registration of transfer shall be effected only upon compliance with all of the provisions of this Section 4, and upon surrender of this Note for transfer.  Upon any such registration of transfer, a new Note or Notes of the same aggregate principal amount will be issued to the transferee in exchange for this Note.  All Notes presented for registration of transfer, if so required by Borrower, shall be accompanied by a written instrument or instruments of transfer, in form satisfactory to Borrower, duly executed by the registered holder or by his duly authorized attorney or agent.

 

5.                   Default

(a)                 Upon the occurrence of an Event of Default, at Lender’s option, all unpaid principal and accrued interest, and all other amounts payable to Lender under this Note shall become immediately due and payable without presentment, demand, notice of non-payment, protest, or notice of non-payment, provided that no notice or demand shall be required if the Event of Default is a proceeding under any Debtor Relief Law. “Debtor Relief Law” means the Bankruptcy Code of the United States of America, as amended, or any other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief law affecting the rights of creditors generally.

 

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(b)                 For purposes of this Note, the following are Events of Default:  (a) the failure of Borrower to pay when due any interest, principal, or other amount payable under this Note, if such failure to pay continues for a period of fifteen (15) days; (b) Borrower becoming the subject of any order for relief in a proceeding under any Debtor Relief Law; (c) Borrower making an assignment for the benefit of creditors other than Lender; (d) Borrower applying for or consenting to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, or similar officer for it or for all or any part of its property or assets; (e) the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, or similar officer for Borrower, or for all or any part of the property or assets of Borrower, without the application or consent of Borrower if such appointment continues undischarged or unstayed for sixty (60) calendar days; (f) Borrower  instituting or consenting to any proceeding under any Debtor Relief Law with respect to Borrower, or all or any part of its property or assets, or the institution of any similar case or proceeding without the consent of Borrower, if such case or proceeding continues undismissed or unstayed for sixty (60) calendar days; (g) the dissolution or liquidation of Borrower, or the winding-up of the business or affairs of Borrower; (h) the taking of any action by Borrower to initiate any of the actions described in clauses (b) through (g) of this paragraph; (i) the issuance or levy of any judgment, writ, warrant of attachment or execution or similar process against all or any material part of the property or assets of Borrower if such process is not released, vacated or fully bonded within sixty (60) calendar days after its issue or levy; or (j) any material breach or default by Borrower under any loan agreement, promissory note, or other instrument evidencing indebtedness payable to a third party.

 

6.                   Miscellaneous

(a)                 Borrower and all guarantors and endorsers of this Note severally waive  (1) presentment, demand, protest, notice of dishonor, and all other notices, except as expressly provided in this Note; (2) any release or discharge arising from any extension of time, discharge of a prior party, and (3) any other cause of release or discharge other than actual payment in full of all indebtedness evidenced by or arising under this Note.

(b)                 The Lender shall not be deemed, by any act or omission, to have waived any of its rights or remedies under this Note unless such waiver is in writing and signed by Lender and then only to the extent specifically set forth in such writing.  A waiver with reference to one event shall not be construed as continuing or as a bar to or waiver of any right or remedy as to a subsequent event.  No delay or omission of Lender to exercise any right, whether before or after an Event of Default, shall impair any such right or shall be construed to be a waiver of any right or default, and the acceptance of any past-due amount at any time by the Lender shall not be deemed to be a waiver of the right to require prompt payment when due of any other amounts then or thereafter due and payable.

(c)                 Lender may accept, indorse, present for payment, and negotiate checks marked “payment in full” or with words of similar effect without waiving Lender’s right to collect from Borrower the full amount owed by Borrower.

 

(d)                 Upon any Event of Default, the Lender may exercise all rights and remedies provided for in this Note and by law, including, but not limited to, the right to immediate payment in full of this Note.

 

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(e)                 The rights and remedies of the Lender as provided in this Note and in law or equity shall be cumulative and concurrent, and may be pursued singularly, successively, or together at the sole discretion of the Lender, and may be exercised as often as occasion therefor shall occur; and the failure to exercise any such right or remedy shall in no event be construed as a waiver or a release of any such right or remedy.

(f)                   The terms, covenants, and conditions contained in this Note shall be binding upon the heirs, executors, administrators, successors, and assigns of Borrower and shall inure to the benefit of the heirs, executors, administrators, successors and assigns of Lender.

(g)                 If any provisions of this Note would require Borrower to pay interest on the indebtedness evidenced by or arising under this Note at a rate exceeding the highest rate allowable by applicable law, Borrower shall instead pay interest under this Note at the highest rate permitted by applicable law.

(h)                 This Note shall be construed under and governed by the laws of the State of California without regard to conflicts of law.

(i)                  Borrower agrees to pay all reasonable attorneys' fees incurred by Lenders in connection with enforcement of any of Lenders’ rights and remedies under this Note, whether or not any proceeding is commenced to enforce or protect such rights and remedies.  In the event of any lawsuit or other action to enforce any right or remedy of Lenders under this Note, or to resolve any dispute arising from or in connection with this Note, the prevailing party shall be entitled to recover its costs and expenses of such lawsuit or proceeding, including without limitation, reasonable attorneys' fees.

BORROWER:

	
OncoCyte Corporation

	 
	 	 	 
	
By:

	
/s/ Joseph Wagner

	 
	 		
Joseph Wagner

	 
	 	 	 
	
Title:  President

	 

 

 

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