Document:

Exhibit 10.4

 

MANAGEMENT SERVICES AGREEMENT

 

This Management Services Agreement (this “Agreement”) is entered into as of March 23, 2018 (the “Commencement Date”) by and between Jaguar Health, Inc., a Delaware corporation (the “Company”), and Sagard Capital Partners Management Corp., a Delaware corporation (“Sagard Management”).

 

RECITALS

 

WHEREAS, the Company seeks the services of Sagard Management (or an affiliate designated by Sagard Management), and Sagard Management (or an affiliate designated by the Sagard Management) wishes to provide, certain management services relating to the affairs of the Company; and

 

WHEREAS, the Company and Sagard Management wish to enter into this Agreement in order to govern the terms and conditions of the provision of such management services.

 

AGREEMENT

 

NOW THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

 

1.              Services.  The Company hereby retains Sagard Management, and Sagard Management hereby agrees that, from the date hereof until March 31, 2021 (the “Initial Term”), it will collaborate with the Company and Company’s wholly-owned subsidiary, Napo Pharmaceuticals, Inc., on the following consulting and management advisory services to the Company:

 

(a)   assistance with strategic planning and analysis regarding the Company’s commercial strategy in Canada and the European Union (“EU”), including:

 

(i)                                     strategy for potential Canadian and EU regulatory approvals, including specifically options for regulatory filing in Canada on the basis of the U.S. approved new drug applications for crofelemer;

 

(ii)                                  participating in the preparation of, and rehearsals for, meeting(s) with representatives of Health Canada; and

 

(iii)                               coordinating projects for commercialization of the Company’s product(s) in Canada, including timing of potential business development relationships, pre-launch activities, investor relations, and regulatory timelines;

 

(b)   conducting research and due diligence for executive level human resource activities, including organizational design and recruitment and compensation/retention of potential senior managers/executives, advisors and directors;

 

(c)    strategic advice in connection with financing, acquisition and disposition transactions involving the Company, any of its direct or indirect subsidiaries and/or any of their respective business or product lines (however structured);

 

 

(d)   assistance with developing and executing on the Company’s investor relations strategy;

 

(e)    strategic advice in connection with the potential search for new business opportunities and strategic acquisitions for the Company;

 

(f)     providing insight regarding financing for acquisitions, growth and/or refinancing of the existing debt of the Company;

 

(g)    advice and counsel regarding capital expenditures; and

 

(h)   such other services (which may include financial and strategic planning and analysis, consulting services, human resources and executive recruitment services and other services) as Sagard Management and the Company may from time to time agree.

 

Notwithstanding the foregoing, the services will not include any legal services or legal services management or any services which may be deemed to constitute broker-dealer activities.

 

Sagard Management shall devote such time and efforts to the performance of services contemplated hereby as Sagard Management deems reasonably necessary or appropriate; provided, however, that no minimum number of hours is required to be devoted by Sagard Management on a weekly, monthly, annual or other basis. The Company acknowledges that Sagard Management’s services are not exclusive and that Sagard Management will render similar services to other persons and entities.  In providing services to the Company, Sagard Management will act as an independent contractor, and it is expressly understood and agreed that this Agreement is not intended to create, and does not create, any partnership, agency, joint venture or similar relationship and that neither Sagard Management, on the one hand, nor the Company, on the other hand, has the right or ability to contract for or on behalf of the other party, or to effect any transaction for the account of the other party. Sagard Management may contract with its affiliates to provide the services.

 

2.                                      Payment of Fees.

 

2.1          (a)         (i)                                            Subject to Sections 2.1(a)(ii) and 2.3, in consideration of the services that Sagard Management shall provide hereunder, the Company shall pay to Sagard Management an annual fee (the “Annual Fee”) in the amount of $450,000, prorated for any partial calendar year (not to exceed in the aggregate $1,350,000).

 

(ii)                                  The Annual Fees payable during the Initial Term shall be paid on the following terms:

 

(1)                                 The Annual Fee due for services performed in the first year of the Initial Term shall be paid in equal quarterly installments during the second and third years of the Initial Term concurrently with the quarterly payments due for the Annual Fee payable with respect to the second and third years of the Initial Term.  As such, quarterly payments of $168,750 shall be made during the second and third years of the Initial Term in the amounts and on the dates set forth on Schedule 2.1.  All such payments shall be paid on the applicable date (or, if such date is not a business day, on

 

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the immediately preceding business day).  For the avoidance of doubt, the parties understand that Sagard Management has agreed to defer payment of the Annual Fee due with respect to services provided during the first year of the Initial Term and that such payment shall be accrued (and not cancelled) until paid to Sagard Management pursuant to this Section 2.1(a)(ii).

 

2.2                               The Annual Fee shall be in addition to the reimbursement of expenses under Section 4.

 

2.3                               If Sagard Management elects in its discretion (it being agreed that Sagard Management shall have no obligation to do so) to defer a payment to which it is otherwise entitled pursuant to Section 2.1(a) of this Agreement, then such payment shall be accrued (and not cancelled) and then paid by the Company at such time as Sagard Management ends such deferral.

 

3.              Term.  This Agreement may be terminated earlier than the Initial Term upon (a) mutual consent of the parties, (b) the consummation of a Deemed Liquidation Event (as defined in the Certificate of Designation of Series A Convertible Participating Preferred Stock of the Company) (so long as all accrued and unpaid fees payable hereunder as of such termination have been paid in full), or (c) at the Company’s election, upon the consummation of a Fundamental Change (as defined in the Certificate of Designation of Series A Convertible Participating Preferred Stock of the Company) in which all of the Company’s shares of Series A Convertible Participating Preferred Stock are repurchased by the Company; provided, however, that (i) Sagard Management, on the one hand, and the Company, on the other hand, may terminate this Agreement following a material breach of the terms of this Agreement by the other party, and a failure to cure such breach within thirty (30) days following written notice thereof, and (ii) Sagard Management may terminate this Agreement upon not less than ten (10) days written notice to the Company; and provided, further, that each of (A) the obligations of the Company under Section 4 below and the provisions of Section 6 below (whether in respect of or relating to services rendered prior to termination of this Agreement), (B) the obligations of Sagard Management under Section 5(a) below, (C) any and all accrued and unpaid obligations of the Company owed under Section 2 above and (D) the provisions of Section 9 shall all survive any termination of this Agreement to the maximum extent permitted under applicable law.

 

4.                                      Expenses; Indemnification.

 

(a)                                 Expenses.  Sagard Management shall request advance written authorization for all expenses incurred by or on behalf of Sagard Management and Sagard Capital Partners, L.P. (“Sagard”) relating to operations of, or services provided by Sagard Management to, the Company or its affiliates from time to time under this Agreement.  Sagard agrees to provide to the Company such documentation as the Company may reasonably require to verify such expenses.

 

(b)                                 Indemnity and Liability.

 

(i)                                     The Company hereby indemnifies, defends and holds Sagard Management, and each of its respective partners, shareholders, members, affiliates, directors,

 

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officers, fiduciaries, employees and agents and each of the partners, shareholders, members, affiliates, directors, officers, fiduciaries, employees and agents of each of the foregoing (collectively, the “Indemnitees”), free and harmless from and against any and all actions, causes of action, suits, claims and liabilities and reasonable expenses in connection therewith, including without limitation reasonable attorneys’ fees and charges (collectively, the “Indemnified Liabilities”), incurred by the Indemnitees or any of them as a result of, arising out of, or in any way relating to (A) this Agreement or (B) operations of, or services provided by Sagard Management to, the Company or its affiliates from time to time, except for any such Indemnified Liabilities arising on account of such Indemnitee’s gross negligence or willful misconduct, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

 

(ii)                                  Notwithstanding anything to the contrary contained herein or in the certificate of incorporation, bylaws or other organizational documents of the Company, the Company acknowledges and agrees that although under certain circumstances certain Indemnitees may be entitled to indemnification and expense advancement and/or reimbursement from Sagard Management, Sagard or Sagard’s general partner or their respective affiliates (collectively, “Sagard Related Parties”) in connection with claims made against any such Indemnitee, the obligations of the Company hereunder and/or under the certificate of incorporation, bylaws or other organizational documents of the Company with respect to any claim by an Indemnitee are primary to any obligations of any Sagard Related Party with respect thereto and the Indemnitee will not be obligated to seek indemnification from or expense advancement or reimbursement by any Sagard Related Party with respect to any claim.  In addition: (A) the Company, on behalf of itself and any insurers providing liability insurance, hereby waives any rights of contribution or subrogation or any other right from or against each and every Sagard Related Party and every insurer providing liability insurance to the Sagard Related Parties and/or any Indemnitee with respect to any claim and (B) the Company acknowledges and agrees that if any Sagard Related Party provides indemnification, expense advancement, expense reimbursement or otherwise to an Indemnitee with respect to any liabilities, including Indemnified Liabilities, such Sagard Related Party or Parties shall be subrogated to the extent of such payment to all rights of recovery of Indemnitee under this Agreement or the certificate of incorporation, bylaws or other organization documents of the Company, as applicable.  Each of the Indemnitees and Sagard Related Parties is an intended third party beneficiary of this Section 4(b)(ii) and the Company agrees to take such further action as may be requested by any Indemnitee or Sagard Related Party to effectuate the contractual arrangement between the Company and the Indemnitees and Sagard Related Parties as set forth herein.

 

5.              Confidentiality; Status and Reports.

 

(a)                                 Confidentiality.

 

(i)                                     Sagard Management agrees to keep the Confidential Information (as defined below) strictly confidential; provided that Confidential Information may be disclosed to Sagard Management’s Representatives who need to know such information in connection with Sagard Management’s provision of services hereunder.  Disclosure of Confidential Information

 

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by Sagard Management or its Representatives may also be made with the Company’s prior consent.  Sagard Management agrees to inform its Representatives that are provided with Confidential Information by or on behalf of Sagard Management hereunder of the existence of this Agreement and to direct them to maintain the confidentiality of such Confidential Information (unless disclosure would be permitted hereunder).  Sagard Management agrees to be responsible for breach of this Agreement by such Representatives other than any such Representative that has entered into its own confidentiality agreement with the Company with respect to the Confidential Information or has agreed to abide by the confidentiality restrictions set forth in this Agreement in an instrument naming the Company as a third party beneficiary thereof.

 

(ii)                                  Notwithstanding anything to the contrary herein, if Sagard Management or any of its Representatives is requested or required pursuant to or in connection with any applicable law, rule, regulation or procedure of, under or before any governmental authority or self-regulatory agency (including any deposition, interrogatory, oral questioning, information or document request, subpoena, court order, regulatory filing, civil investigative demand or other similar process) to disclose Confidential Information, then such information may be disclosed without violation of this Agreement; provided that Sagard Management agrees to notify the Company, to the extent reasonably practicable and legally permitted under the circumstances, prior to such disclosure so that the Company may, if it so chooses, seek a protective order or other appropriate remedy protecting the confidentiality of the Confidential Information.  If the Company so requests in writing, Sagard Management will reasonably cooperate with the Company at the Company’s expense to obtain such a protective order or other appropriate remedy protecting the confidentiality of the Confidential Information.  Notwithstanding anything to the contrary in this Agreement, if Sagard Management or any of its Representatives are subject to an examination, inquiry, or proceeding by a regulatory governmental agency, Sagard Management or its Representatives may disclose any Confidential Information as requested by any regulator in the course of any such examination, inquiry, or proceeding, without complying with the foregoing notice and cooperation requirements so long as, in each case, such examination, inquiry or proceeding is not targeted at the Company, this Agreement or the Confidential Information.

 

(iii)                               Promptly following the written request of the Company, all Confidential Information provided to Sagard Management or (on its behalf) to any of its Representatives hereunder will be, at Sagard Management’s option, either returned to the Company or destroyed; provided, however, that Sagard Management and its Representatives

 

(1)         may each retain one copy of the Confidential Information for recordkeeping or regulatory purposes and for the purpose of defending its rights and obligations hereunder, and

 

(2)         will not be required to return or destroy any computer or other electronic hardware or systems, to render any electronic data irrecoverable or to disable any existing electronic data backup procedures.

 

(iv)                              The Company acknowledges that private investment vehicles managed by certain of Sagard Management’s affiliates are engaged in the purchase of debt and

 

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equity securities of numerous companies, that they may now own or may in the future purchase or sell securities of the Company or one or more of its affiliates, and that they may from time to time possess information with respect to the Company or one or more of its affiliates. The Company acknowledges that Sagard Management’s and its Representatives’ review of Confidential Information will inevitably enhance Sagard Management’s and its Representatives’ knowledge and understanding of the business of the Company in a way that cannot be separated from Sagard Management’s and its Representatives’ other knowledge, and the Company agrees that this Agreement shall not restrict Sagard Management or its Representatives in connection with the purchase, sale, consideration of, and decisions related to other investments and serving on the boards of such investments.  The Company acknowledges that Sagard Management or its affiliates’ directors, officers or employees may serve as directors of portfolio companies of investment funds managed by Sagard Management, and the Company agrees that such portfolio companies will not be deemed to have received Confidential Information solely because any such individual serves on the board of such portfolio company, provided, that (i) such individual has not provided such portfolio company or any other director, officer, employee or other representative of such portfolio company with Confidential Information, (ii) such portfolio company does not act at the direction of or with encouragement from such individual or Sagard Management and (iii) no Confidential Information has been provided to employees or agents of such portfolio company.

 

(v)                                 For purposes hereof:

 

(1)         “Confidential Information” means confidential information regarding the Company and its subsidiaries, regardless of the form of communication, furnished during the term of this Agreement to Sagard Management or (on its behalf) to its Representatives in connection with Sagard Management’s provision of services hereunder; provided that the term “Confidential Information” does not include information:

 

(a)         that is or becomes publicly available other than as a result of disclosure by Sagard Management or its Representatives in violation of this Agreement;

 

(b)                                 that was available to Sagard Management or its Representatives prior to its disclosure under this Agreement;

 

(c)                                  that is received from a third party not known by Sagard Management or its Representatives to have violated an obligation of confidentiality to the Company in disclosing such information; or

 

(d)                                 that is developed through the efforts of Sagard Management or its Representatives without use of the Confidential Information.

 

(2)         “Representative” means a person’s affiliates and its and their respective directors, partners, members, managers, officers, agents, control persons, employees, consultants and representatives (including actual and potential attorneys, accountants, advisors, financing sources and, if applicable, their respective advisors); provided that, for the avoidance of doubt, the term “Representatives” does not include any person that

 

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would otherwise fall within the definition of such term but has not been provided with Confidential Information by or on behalf of Sagard Management hereunder.

 

(b)   Status Updates.  Sagard Management and the Chief Executive Officer of the Company (“CEO”) shall review and agree upon the services provided hereunder no less frequently than on a monthly basis.  At the request of the CEO, Sagard Management shall provide no less frequently than on a monthly basis to the CEO a telephonic review of the services provided by Sagard Management, with a discussion of progress and findings to date, and to obtain feedback on methodology and information sources.  The CEO may also request an oral update by Sagard Management, given in person or by telephone, to be provided to the board of directors of the Company no more frequently than once a calendar quarter regarding the status of and services provided hereunder.  Likewise, Sagard Management shall make its management available by phone as reasonably requested from time to time by the CEO regarding the services provided under this Agreement.  The contents of any such calls or updates, and the contents of any research, report or analysis performed or provided hereunder by Sagard Management, shall be kept strictly confidential by the Company and shall not be shared or disclosed by the Company with any third party nor filed publicly with any governmental authority.

 

6.                                      Accuracy of Information; Disclaimer and Limitation of Liability; Opportunities.

 

(a)                                 Accuracy of Information. The Company shall furnish or cause to be furnished to Sagard Management such information as Sagard Management believes reasonably appropriate in connection with providing the services contemplated by this Agreement (all such information so furnished, the “Information”). The Company recognizes and confirms that the Sagard Management (a) will use and rely primarily on the Information and on information available from generally recognized public sources in performing the services contemplated by this Agreement without independent verification, (b) does not assume responsibility for the accuracy or completeness of the Information and such other information and (c) is entitled to rely upon the Information without independent verification.

 

(b)                                 Disclaimer — Standard of Care.  Sagard Management makes no representations or warranties, express or implied, in respect of the services to be provided by it hereunder.  In no event shall Sagard Management or any other Indemnitee be liable to the Company or any of its affiliates for any act, alleged act, omission or alleged omission on the part of Sagard Management that does not constitute gross negligence or willful misconduct as determined by a final, non-appealable determination of a court of competent jurisdiction.

 

(c)                                  Limitation of Liability.  In no event will Sagard Management or any of its affiliates be liable to the Company or any of its affiliates for any indirect, special, incidental or consequential damages, including lost profits or savings, whether or not such damages are foreseeable, or for any third party claims (whether based in contract, tort or otherwise), relating to the services to be provided by Sagard Management hereunder, except for Sagard Management’s or any of its affiliates’ gross negligence or willful misconduct.  The maximum liability of Sagard Management under this Agreement except for gross negligence or willful misconduct shall not exceed the aggregate amount of all fees actually paid to Sagard Management under Section 2.1(a).

 

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(d)                                 Freedom to Pursue Opportunities.  In recognition that Sagard Management and its affiliates currently have, and will in the future have or will consider acquiring, investments in numerous companies with respect to which Sagard Management or its affiliates may serve as an advisor, a director or in some other capacity, and recognition that Sagard Management and its affiliates have myriad duties to various investors and partners, and in anticipation that the Company and Sagard Management (or one or more affiliates, associated investment funds or portfolio companies, or clients of Sagard Management) may engage in the same or similar activities or lines of business and have an interest in the same areas of corporate opportunities, and in recognition of the benefits to be derived by the Company hereunder and in recognition of the difficulties which may confront any advisor who desires and endeavors fully to satisfy such advisor’s duties in determining the full scope of such duties in any particular situation, the provisions of this Section 6(d) are set forth to regulate, define and guide the conduct of certain affairs of the Company as they may involve Sagard Management.  Except as Sagard Management may otherwise agree in writing after the date hereof:

 

(i)                                     Sagard Management and its affiliates (including any employee or representative serving as a director of the Company) shall have the right: (A) to directly or indirectly engage in any business (including, without limitation, any business activities or lines of business that are the same as or similar to those pursued by, or competitive with, the Company), (B) to directly or indirectly do business with any client or customer of the Company and (C) to take any other action that Sagard Management believes in good faith is necessary to or appropriate to fulfill its obligations as described in the first sentence of this Section 6(d)(i), and (D) not to present potential transactions, matters or business opportunities to the Company, or any of its subsidiaries, and to pursue, directly or indirectly, any such opportunity for itself, and to direct any such opportunity to another person.

 

(ii)                                  Sagard Management and its officers, employees, partners, members, other clients, affiliates and other associated entities (including any employee or representative serving as a director of the Company) shall have no duty (contractual or otherwise) to communicate or present any corporate opportunities to the Company or any of its affiliates or to refrain from any action specified in Section 6(d)(i), and the Company on its own behalf and on behalf of its affiliates, hereby renounce and waive any right to require Sagard Management or any of its affiliates to act in a manner inconsistent with the provisions of this Section 6(d).

 

(iii)                               Neither Sagard Management nor any officer, director, employee, partner, member, stockholder, affiliate or associated entity thereof (including any employee or representative serving as a director of the Company) shall be liable to the Company or any of its affiliates for breach of any duty (contractual or otherwise) by reason of any activities or omissions of the types referred to in this Section 6(d) or of any such person’s participation therein  unless such potential transaction, matter or business opportunity is presented to, or acquired, created or developed by, or otherwise comes into the possession of, such party expressly and solely in such party’s capacity as a director of the Company.

 

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7.              Assignment, etc.  Except as provided below, no party shall have the right to assign this Agreement without the prior written consent of the other parties hereto.  Notwithstanding the foregoing, (a) Sagard Management may assign all or part of its rights and obligations hereunder to any affiliate of Sagard Management which provides services similar to those called for by this Agreement as long as such affiliate expressly assumes Sagard Management’s obligations hereunder and has the same or greater level of skill for the services provided hereunder, in which event Sagard Management shall be released of all of its rights and obligations hereunder, (b) the Company may collaterally assign any or all of its rights and interests hereunder to one or more subsidiaries or affiliates and (c) the provisions hereof for the benefit of Sagard shall inure to the benefit of its successors and assigns.

 

8.                                      Amendments and Waivers.  No amendment or waiver of any term, provision or condition of this Agreement shall be effective, unless in writing and executed by each of Sagard Management and the Company.  No waiver on any one occasion shall extend to or effect or be construed as a waiver of any right or remedy on any future occasion.  No course of dealing of any person nor any delay or omission in exercising any right or remedy shall constitute an amendment of this Agreement or a waiver of any right or remedy of any party hereto.

 

9.                                      Miscellaneous.

 

(a)                                 Choice of Law.  This Agreement and all matters arising under or related to this Agreement shall be governed by and construed in accordance with the domestic substantive laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.

 

(b)                                 Consent to Jurisdiction.  Each of the parties agrees that all actions, suits or proceedings arising out of, based upon or relating to this Agreement or the subject matter hereof shall be brought and maintained exclusively in the federal and state courts of the State of Delaware.  Each of the parties hereto by execution hereof (i) hereby irrevocably submits to the jurisdiction of the federal and state courts in the State of Delaware for the purpose of any action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof and (ii) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, suit or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that it is immune from extraterritorial injunctive relief or other injunctive relief, that its property is exempt or immune from attachment or execution, that any such action, suit or proceeding may not be brought or maintained in one of the above-named courts, that any such action, suit or proceeding brought or maintained in one of the above-named courts should be dismissed on grounds of forum non conveniens, should be transferred to any court other than one of the above-named courts, should be stayed by virtue of the pendency of any other action, suit or proceeding in any court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by any of the above-named courts.  Notwithstanding the foregoing, to the extent that any party hereto is or becomes a party in any litigation in connection with which it may assert indemnification rights set forth in this agreement, the court in which such litigation is being heard shall be deemed to be included in Section 9(b)(i) above.  Each of the parties hereto hereby consents to service of process in any such suit, action or proceeding in any manner permitted by the laws of the State of Delaware, agrees that service of process by registered or

 

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certified mail, return receipt requested, at the address specified in or pursuant to Section 11 is reasonably calculated to give actual notice and waives and agrees not to assert by way of motion, as a defense or otherwise, in any such action, suit or proceeding any claim that service of process made in accordance with Section 11 does not constitute good and sufficient service of process.  The provisions of this Section 9 shall not restrict the ability of any party to enforce in any court any judgment obtained in a federal or state court of the State of Delaware.

 

(c)                                  Waiver of Jury Trial.  To the extent not prohibited by applicable law which cannot be waived, each of the parties hereto hereby waives, and covenants that it will not assert (whether as plaintiff, defendant, or otherwise), any right to trial by jury in any forum in respect of any issue, claim, demand, cause of action, action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof, in each case whether now existing or hereafter arising and whether in contract or tort or otherwise. Each of the parties hereto acknowledges that it has been informed by each other party that the provisions of this Section 9(c) constitute a material inducement upon which such party is relying and will rely in entering into this Agreement and the transactions contemplated hereby.  Any of the parties hereto may file an original counterpart or a copy of this Agreement with any court as written evidence of the consent of each of the parties hereto to the waiver of its right to trial by jury.

 

10.                               Entire Agreement.  This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes any prior communication or agreement with respect thereto.

 

11.                               Notice.  All notices, demands, and communications required or permitted under this Agreement shall be in writing and shall be effective if served upon such other party and such other party’s copied persons as specified below to the address set forth for it below (or to such other address as such party shall have specified by notice to each other party) if (a) delivered personally, (b) sent and received by facsimile, or (c) sent by Federal Express or UPS or any other comparably reputable overnight courier service, postage prepaid, to the appropriate address as follows:

 

If to the Company:

 

Jaguar Health, Inc.

201 Mission Street, Suite 2375

San Francisco, CA 94105

Attention:                                         Chief Executive Officer

 

with a copy (not to constitute notice) to:

 

Reed Smith LLP

101 Second Street, Suite 1800

San Francisco, CA 94105

Attention:                                         Donald C. Reinke, Esq.

 

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If to Sagard Management to:

 

Sagard Capital Partners Management Corp.

280 Park Ave, Third Floor,

New York, New York 10017

Facsimile:                                         (203) 629-6721

Attention:                                         Chief Financial Officer

 

with a copy (not to constitute notice) to:

 

Finn Dixon & Herling LLP

Six Landmark Square

Stamford, Connecticut  06901-2048

Facsimile:                                         (203) 325-5001

Attention:                                         Charles J. Downey III, Esq.

 

Unless otherwise specified herein, such notices or other communications shall be deemed effective, (i) on the date received, if personally delivered or sent by facsimile during normal business hours, (ii) on the business day after being received if sent by facsimile other than during normal business hours and (iii) one (1) business day after being sent next-day delivery by Federal Express or UPS or other comparably reputable delivery service.  Each of the parties hereto shall be entitled to specify a different address by giving notice as aforesaid to each of the other parties hereto.

 

12.                               Severability.  If in any judicial or arbitral proceedings a court or arbitrator shall refuse to enforce any provision of this Agreement, then such unenforceable provision shall be deemed eliminated from this Agreement for the purpose of such proceedings to the extent necessary to permit the remaining provisions to be enforced.  To the full extent, however, that the provisions of any applicable law may be waived, they are hereby waived to the end that this Agreement be deemed to be valid and binding agreement enforceable in accordance with its terms, and in the event that any provision hereof shall be found to be invalid or unenforceable, such provision shall be construed by limiting it so as to be valid and enforceable to the maximum extent consistent with and possible under applicable law.

 

13.                               Counterparts.  This Agreement may be executed in counterparts, each of which when so executed shall be deemed to be an original and both of which shall constitute one and the same agreement.

 

(signature page to follow)

 

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[Signature Page to Management Services Agreement]

 

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed on its behalf as an instrument under seal as of the date first above written by its officer or representative thereunto duly authorized.

 

 

	
 
    	
 
    	
JAGUAR HEALTH, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Lisa Conte
    
	
 
    	
 
    	
 
    	
Name:
    	
Lisa Conte
    
	
 
    	
 
    	
 
    	
Title:
    	
Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
SAGARD CAPITAL PARTNERS MANAGEMENT CORP.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Samuel Robinson
    
	
 
    	
 
    	
 
    	
Name:
    	
Samuel Robinson
    
	
 
    	
 
    	
 
    	
Title:
    	
President
    

 

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Schedule 2.1
 Schedule of Payments

 

	
Payment Date
    	
 
    	
Amount of Payment
    	
 
    
	
June 30,   2019
    	
 
    	
$
    	
168,750
    	
 
    
	
September 30,   2019
    	
 
    	
$
    	
168,750
    	
 
    
	
December 31,   2019
    	
 
    	
$
    	
168,750
    	
 
    
	
March 31,   2020
    	
 
    	
$
    	
168,750
    	
 
    
	
June 30,   2020
    	
 
    	
$
    	
168,750
    	
 
    
	
September 30,   2020
    	
 
    	
$
    	
168,750
    	
 
    
	
December 31,   2020
    	
 
    	
$
    	
168,750
    	
 
    
	
March 31,   2021
    	
 
    	
$
    	
168,750
    	
 
    

 

13Exhibit 10.5

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of March 21, 2018, is entered into by and between JAGUAR HEALTH, INC., a Delaware corporation (“Company”), and CHICAGO VENTURE PARTNERS, L.P., a Utah limited partnership, its successors and/or assigns (“Investor”).

 

A.                                    Company and Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the Securities Act of 1933, as amended (the “1933 Act”), and the rules and regulations promulgated thereunder by the United States Securities and Exchange Commission (the “SEC”).

 

B.                                    Investor desires to purchase and Company desires to issue and sell, upon the terms and conditions set forth in this Agreement, a Secured Promissory Note, in the form attached hereto as Exhibit A, in the original principal amount of $1,090,340.91 (the “Note” or “Securities”), upon the terms and subject to the limitations and conditions set forth in such Note.

 

C.                                    This Agreement, the Note, the Security Agreement (as defined below), the Subordination Agreement (as defined below), and all other certificates, documents, agreements, resolutions and instruments executed and delivered to any party under or in connection with this Agreement, as the same may be amended from time to time, are collectively referred to herein as the “Transaction Documents”.

 

NOW, THEREFORE, in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Investor hereby agree as follows:

 

1.                                      Purchase and Sale of Securities.

 

1.1.                            Purchase of Securities. Company shall issue and sell to Investor and Investor agrees to purchase from Company the Note. In consideration thereof, Investor shall pay the Purchase Price (as defined below) to Company at the Closing (as defined below).

 

1.2.                            Form of Payment. On the Closing Date (as defined below), Investor shall pay the Purchase Price to Company via wire transfer of immediately available funds against delivery of the Note.

 

1.3.                            Closing Date. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on March 21, 2018 so long as all of the conditions set forth in Section 5 and Section 6 below have been satisfied, or such other mutually agreed upon date (the date upon which the Closing actually occurs, the “Closing Date”). The Closing shall occur on the Closing Date by means of the exchange by email of signed .pdf documents, but shall be deemed for all purposes to have occurred at the offices of Hansen Black Anderson Ashcraft PLLC in Lehi, Utah.

 

1.4.                            Collateral for the Note. The Note shall be secured by the collateral set forth in that certain Security Agreement attached hereto as Exhibit B listing substantially all of Company’s assets as security for Company’s obligations under the Transaction Documents (the “Security Agreement”); provided, however, that the security interest granted pursuant to the Security Agreement shall not become effective unless and until either: (a) Investor purchases the Company’s outstanding obligations (the “Hercules Debt”) under that certain Loan and Security Agreement between Company and Hercules Capital, Inc. (f/k/a  Hercules Technology Growth Capital, Inc.), a Maryland corporation (“Hercules”), on August 18, 2015, as amended, pursuant to the purchase right set forth in Section 4 of the Subordination Agreement; or (b) Company repays the Hercules Debt in full.

 

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1.5.                            Original Issue Discount; Transaction Expense Amount. The Note carries an original issue discount of $315,340.91 (the “OID”). In addition, Company agrees to pay $25,000.00 to Investor to cover Investor’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the Securities (the “Transaction Expense Amount”), all of which amount is included in the initial principal balance of the Note. The “Purchase Price”, therefore, shall be $750,000.00 computed as follows: $1,090,340.91 initial principal balance, less the OID, less the Transaction Expense Amount.

 

2.                                      Investor’s Representations and Warranties. Investor represents and warrants to Company that as of the Closing Date: (i) this Agreement has been duly and validly authorized; (ii) Investor has all necessary power and authority under all applicable provisions of law to execute and deliver each Transaction Document and to carry out their provisions; (iii) this Agreement constitutes a valid and binding agreement of Investor enforceable in accordance with its terms; (iv) Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D of the 1933 Act; (v) Investor is acquiring the Securities for investment for such Investor’s own account, and not with a view to, or for resale in connection with, any distribution thereof, and Investor has no present intention of selling or distributing any of the Securities, (vi) Investor has had an opportunity to discuss Company’s business, management and financial affairs with its management and to obtain any additional information which Investor has deemed necessary or appropriate for deciding whether or not to purchase the Securities, including an opportunity to receive, review and understand the information set forth in Company’s financial statements, capitalization and other business information as Investor deems prudent, (vii) Investor acknowledges that no other representations or warranties, oral or written, have been made by Company or any agent thereof except as set forth in this Agreement, (viii) Investor is aware that no federal, state or other agency has made any finding or determination as to the fairness of the investment, nor made any recommendation or endorsement of the Securities, (ix) Investor has such knowledge and experience in financial and business matters, including investments in other emerging growth companies that such individual or entity is capable of evaluating the merits and risks of the investment in the Note and it is able to bear the economic risk of such investment, (x) Investor has such knowledge and experience in financial and business matters that such individual is capable of utilizing the information made available in connection with the offering of the Securities, of evaluating the merits and risks of an investment in the Securities and of making an informed investment decision with respect to the Securities, (xi) neither Investor, nor any person or entity with whom such Investor shares beneficial ownership of the Securities, is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii); (xii) Investor is aware that there is currently no public market for the Note, that there is no guarantee that a public market will develop at any time in the future and Investor understands that the Note is unregistered and may not presently be sold except in accordance with applicable securities laws, (xiii) Investor understands that the Note cannot be readily sold or liquidated in case of an emergency or other financial need, (xiv) Investor acknowledges and agrees that the Note must be held indefinitely unless it is subsequently registered under the 1933 Act or an exemption from such registration is available, and Investor has been advised or is aware of the provisions of Rule 144 promulgated under the 1933 Act as in effect from time to time, which permits limited resale of securities purchased in a private placement subject to the satisfaction of certain conditions, including, among other things: the availability of certain current public information about the Company and the resale occurring following the required holding period under Rule 144, (xv) Investor is not affiliated in any way with Unkar Systems (as defined below), has no contractual or other relationship with Unkar Systems and receives no payments, kickbacks or other compensation of any kind from Unkar Systems, and (xvi) each instrument evidencing the Note which Investor may purchase hereunder may be imprinted with legends substantially in the following form:

 

“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATES IN THE UNITED STATES. THIS NOTE IS SUBJECT TO

 

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RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.

 

THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF SECTION 1271 ET SEQ. OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. PURSUANT TO TREASURY REGULATION SECTION 1.1275-3, A HOLDER MAY OBTAIN THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE, AND YIELD TO MATURITY FOR THIS NOTE BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO THE BORROWER AT THE FOLLOWING ADDRESS: 201 MISSION STREET, SUITE 2375, SAN FRANCISCO, CALIFORNIA 94105.”

 

Notwithstanding the foregoing representations and warranties, Company acknowledges and agrees that such representations and warranties do not affect Company’s obligations to repay the Note in full pursuant to the terms thereof.

 

3.                                      Company’s Representations and Warranties. Company represents and warrants to Investor that as of the Closing Date: (i) Company is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has the requisite corporate power to own its properties and to carry on its business as now being conducted; (ii) Company is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified would not reasonably be expected to have a material adverse effect on Borrower’s business, assets, properties, operations or financial condition or its ability to perform its obligations hereunder (a “Material Adverse Effect”); (iii) Company has registered its Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and is obligated to file reports pursuant to Section 13 or Section 15(d) of the 1934 Act; (iv) each of the Transaction Documents and the transactions contemplated hereby and thereby, have been duly and validly authorized by Company and all necessary actions have been taken; (v) this Agreement, the Note, the Security Agreement, the Subordination Agreement and the other Transaction Documents have been duly executed and delivered by Company and constitute the valid and binding obligations of Company enforceable in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency and similar laws affecting creditors’ rights and by general principles of equity; (vi) the execution and delivery of the Transaction Documents by Company, the issuance of Securities in accordance with the terms hereof, and the consummation by Company of the other transactions contemplated by the Transaction Documents do not and will not conflict with or result in a breach by Company of any of the terms or provisions of, or constitute a default under (a) Company’s formation documents or bylaws, each as currently in effect, (b) any indenture, mortgage, deed of trust, or other material agreement or instrument to which Company is a party or by which it or any of its properties or assets are bound, including, without limitation, any listing agreement for the Common Stock, except as would not reasonably be expected to have a Material Adverse Effect, or (c) any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal, state or foreign regulatory body, administrative agency, or other governmental body having jurisdiction over Company or any of Company’s properties or assets, except as would not reasonably be expected to have a Material Adverse Effect; (vii) no further authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders or any lender of Company is required to be obtained by Company for the issuance of the Securities to Investor or the entering into of the Transaction Documents; (viii) none of Company’s filings with the SEC contained, at the time they were filed, any untrue statement of a material fact or omitted to state any material fact

 

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required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not materially misleading; (ix) within the 12 months immediately preceding the date hereof, Company has filed all reports, schedules, forms, statements and other documents required to be filed by Company with the SEC under the 1934 Act on a timely basis or has received a valid extension of such time of filing and has filed any such report, schedule, form, statement or other document prior to the expiration of any such extension; (x) there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of Company, threatened against or affecting Company before or by any governmental authority or non-governmental department, commission, board, bureau, agency or instrumentality or any other person which would reasonably be expected to have a Material Adverse Effect; (xi) Company has not consummated any financing transaction that has not been disclosed in a periodic filing or current report with the SEC under the 1934 Act; (xii) Company is not, nor has it been at any time in the previous twelve (12) months, a “Shell Company,” as such type of “issuer” is described in Rule 144(i)(1) under the 1933 Act; (xiii) with respect to any commissions, placement agent or finder’s fees or similar payments that will or would become due and owing by Company to any person or entity as a result of this Agreement or the transactions contemplated hereby (“Broker Fees”), any such Broker Fees will be made in full compliance with all applicable laws and regulations and only to a person or entity that is a registered investment adviser or registered broker-dealer; (xiv) Investor shall have no obligation with respect to any Broker Fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this subsection that may be due in connection with the transactions contemplated hereby and Company shall indemnify and hold harmless each of Investor, Investor’s employees, officers, directors, stockholders, members, managers, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorneys’ fees) and expenses suffered in respect of any such claimed Broker Fees; (xv) neither Investor nor any of its officers, directors, stockholders, members, managers, employees, agents or representatives has made any representations or warranties to Company or any of its officers, directors, employees, agents or representatives except as expressly set forth in the Transaction Documents and, in making its decision to enter into the transactions contemplated by the Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor or its officers, directors, members, managers, employees, agents or representatives other than as set forth in the Transaction Documents; (xvi) Company acknowledges that the State of Utah has a reasonable relationship and sufficient contacts to the transactions contemplated by the Transaction Documents and any dispute that may arise related thereto such that the laws and venue of the State of Utah, as set forth more specifically in Section 8.3 below, shall be applicable to the Transaction Documents and the transactions contemplated therein; and (xvii) Company has performed due diligence and background research on Investor and its affiliates including, without limitation, John M. Fife, and, to its satisfaction, has made inquiries with respect to all matters Company may consider relevant to the undertakings and relationships contemplated by the Transaction Documents including, among other things, the following: http://investing.businessweek.com/research/stocks/people/person.asp?personId=7505107&ticker=UAHC; SEC Civil Case No. 07-C-0347 (N.D. Ill.); SEC Civil Action No. 07-CV-347 (N.D. Ill.); and FINRA Case #2011029203701. Company, being aware of the matters described in subsection (xvii) above, acknowledges and agrees that such matters, or any similar matters, have no bearing on the transactions contemplated by the Transaction Documents and covenants and agrees it will not use any such information as a defense to performance of its obligations under the Transaction Documents or in any attempt to avoid, modify or reduce such obligations.

 

4.                                      Company Covenants. Until all of Company’s obligations (other than contingent and indemnification obligations) under all of the Transaction Documents are paid in full, or within the timeframes otherwise specifically set forth below, Company will at all times comply with the following covenants: (i) so long the Note is outstanding and for at least twenty (20) Business Days (as defined in the Note) thereafter, Company will timely file on the applicable deadline (including any extensions thereof)

 

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all reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act that would otherwise impact the availability of Rule 144 of the 1933 Act, and will take all reasonable action under its control to ensure that adequate current public information with respect to Company, as required in accordance with Rule 144 of the 1933 Act, is publicly available, and until a Fundamental Transaction (as defined in the Note) will not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination; (ii) until a Fundamental Transaction, the Common Stock shall be listed or quoted for trading on any of (a) NYSE, (b) NASDAQ, (c) OTCQX, or (d) OTCQB; (iii) until a Fundamental Transaction, trading in Company’s Common Stock will not be suspended, halted, chilled, frozen, reach zero bid or otherwise cease on Company’s principal trading market; (iv) Company will not make any Variable Security Issuance (as defined below) that generates gross cash proceeds to the Company of less than the lesser of $1,000,000.00 and the then-current outstanding balance of the Note, without Investor’s prior written consent, which consent may be granted or withheld in Investor’s sole and absolute discretion; (v) at Closing and on the first day of each calendar quarter for so long as the Note remains outstanding or on any other date during which the Note is outstanding, as may be requested by Investor, Company shall cause its Chief Executive Officer to provide to Investor a certificate in substantially the form attached hereto as Exhibit C (the “Officer’s Certificate”) certifying in her personal capacity and in her capacity as Chief Executive Officer of Company that Company’s has not made any Variable Security Issuance in which Company received gross proceeds of less than the lesser of $1,000,000.00 and the then-current outstanding balance of the Note without Investor’s consent as of the date the applicable Officer’s Certificate is executed; (vi) Company will not grant a security interest in any of its assets without Investor’s prior written consent; (vii) in the event Investor exercises its right to purchase the Purchased Debt (as defined in the Subordination Agreement) from Hercules pursuant to Section 4 of the Subordination Agreement, Company will repay Investor an amount equal to the purchase price paid by Investor to Hercules for the Purchased Debt plus, if the Purchased Debt is in default at the time of the purchase or goes into default subsequent to the purchase, a premium in the amount of 17.5% multiplied by the purchase price will be added to the outstanding balance of the Purchased Debt; (viii) Company will not issue any shares of Common Stock to MEF I, LP or its affiliates (“MEF”) after the Closing Date; (ix) Company will repay the Hercules Debt and deliver confirmation thereof to Investor on or before March 26, 2018; (x) Company will repay all outstanding amounts owed to MEF and all outstanding amounts owed to Riverside Merchant Partners LLC in full and deliver confirmation thereof to Investor within five (5) Trading Days of the Closing Date; and (xi) Company will not incur any debt other than in the ordinary course of business, and in no event greater than $10,000.00, without Investor’s prior written consent. For purposes hereof, the term “Variable Security Issuance” means any issuance of any Company securities that (A) have or may have conversion rights of any kind, contingent, conditional or otherwise, in which the number of shares that may be issued pursuant to such conversion right varies with the market price of the Common Stock, or (B) are or may become convertible into Common Stock (including without limitation convertible debt, warrants or convertible preferred stock), with a conversion price that varies with the market price of the Common Stock, even if such security only becomes convertible following an event of default, the passage of time, or another trigger event or condition. For avoidance of doubt, the issuance of shares of Common Stock under, pursuant to, in exchange for or in connection with any contract or instrument, whether convertible or not, is deemed a Variable Security Issuance for purposes hereof if the number of shares of Common Stock to be issued is based upon or related in any way to the market price of the Common Stock, including, but not limited to, Common Stock issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any other similar settlement or exchange.

 

5.                                      Conditions to Company’s Obligation to Sell. The obligation of Company hereunder to issue and sell the Securities to Investor at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions:

 

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5.1.                            Investor shall have executed this Agreement and delivered the same to Company.

 

5.2.                            Investor shall have delivered the Purchase Price to Company in accordance with Section 1.2 above.

 

6.                                      Conditions to Investor’s Obligation to Purchase. The obligation of Investor hereunder to purchase the Securities at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions, provided that these conditions are for Investor’s sole benefit and may be waived by Investor at any time in its sole discretion:

 

6.1.                            Company shall have executed this Agreement, the Note and the Security Agreement, and delivered the same to Investor.

 

6.2.                            Company’s Chief Executive Officer shall have executed the Officer’s Certificate and delivered the same to Investor.

 

6.3.                            Company shall have delivered to Investor a fully executed Secretary’s Certificate substantially in the form attached hereto as Exhibit D evidencing Company’s approval of the Transaction Documents.

 

6.4.                            Company shall have delivered to Investor fully executed copies of all Transaction Documents required to be executed by Company herein or therein.

 

7.                                      Agreement to Amend Note.  In the event that Company raises at least $12,000,000.00 in equity after March 13, 2018 and on or before April 1, 2018 (as evidenced by a written confirmation of a receipt of funds by Company to Investor):

 

7.1.                            Company and Investor shall amend the Note as follows:

 

a.                                      Section 8 of the Note shall be deleted in its entirety and replaced with the following:

 

8.     Borrower Redemptions.  Beginning on the Redemption Start Date, Lender shall have the right, exercisable at any time in its sole and absolute discretion, to redeem a portion of the Note in any amount (such amount, the “Redemption Amount”) up to the Maximum Monthly Redemption Amount by providing Borrower with a notice substantially in the form attached hereto as Exhibit A (each, a “Redemption Notice”, and each date on which Lender delivers a Redemption Notice, a “Redemption Date”). For the avoidance of doubt, Lender may submit to Borrower one (1) or more Redemption Notices in any given calendar month, provided that the aggregate amount being redeemed in any calendar month does not exceed the Maximum Monthly Redemption Amount. Payments of each Redemption Amount will be made in cash or as otherwise mutually agreed upon and will be delivered to Lender on or before the third Business Day immediately following the applicable Redemption Date. Notwithstanding the foregoing Lender may not propose that any Redemption Amount be paid prior to the Redemption Start Date. Notwithstanding that failure to repay this Note in full by the Maturity Date is an Event of Default, the Redemption Dates shall continue after the Maturity Date pursuant to this Section 8 until the Outstanding Balance is repaid in full, provided that the aggregate

 

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Redemption Amounts in any given calendar month following an Event of Default may exceed the Maximum Monthly Redemption Amount.

 

b.                                      The definition for the term “Redemption Start Date” shall be deleted in its entirety and replaced with the following:

 

The term “Redemption Start Date” means October 19, 2018.

 

c.                                       The following definition shall be added to the Note:

 

“Maximum Monthly Redemption Amount” means $500,000.00, which is the maximum aggregate Redemption Amount for this Note that may be redeemed in any calendar month. For purposes of calculating the Maximum Monthly Redemption Amount, all Redemption Amounts redeemed under this Note shall be aggregated with all redemption amounts redeemed under the Other Notes.

 

d.                                      The following definition shall be added to the Note:

 

“Other Notes” means (a) that certain Secured Convertible Promissory Note in the original amount of $2,155,000.00 issued by Lender in favor of Borrower on June 29, 2017; (b) that certain Secured Promissory Note in the original amount of $1,587,500.00 issued by Lender in favor of Borrower on December 8, 2017; and (c) that certain Secured Promissory Note in the original amount of $2,240,909.00 issued by Lender in favor of Borrower on February 26, 2018.

 

7.2.                            The definition of “Other Notes” in Attachment 1 of that certain Secured Convertible Promissory Note in the original amount of $2,155,000.00 issued by Company in favor of Investor on June 29, 2017 (the “June 2017 Note”), that certain Secured Promissory Note in the original amount of $1,587,500.00 issued by Company in favor of Investor on December 8, 2017 (the “December 2017 Note”) and that certain Secured Promissory Note in the original amount of $2,240,909.00 issued by the Company in favor of Investor on February 26, 2018 (the “February 2018 Note”), shall be deleted in its entirety and replaced with the following:

 

“Other Notes” means:

 

FOR THE JUNE 2017 NOTE: “(a) that certain Secured Promissory Note in the original amount of $1,587,500.00 issued by Lender in favor of Borrower on December 8, 2017; (b) that certain Secured Promissory Note in the original amount of $2,240,909.00 issued by Lender in favor of Borrower on February 26, 2018; and (c) that certain Secured Promissory Note in the original amount of $1,090,340.91 issued by Lender in favor of Borrower on March 21, 2018”.

 

FOR THE DECEMBER 2017 NOTE: “(a) that certain Secured Convertible Promissory Note in the original amount of $2,155,000.00 issued by Lender in favor of Borrower on June 29, 2017; (b) that certain Secured Promissory Note in the original amount of $2,240,909.00 issued by Lender in favor of Borrower on February 26, 2018; and (c) that certain Secured Promissory Note in the original amount of $1,090,340.91 issued by Lender in favor of Borrower on March 21, 2018”.

 

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FOR THE FEBRUARY 2018 NOTE: “(a) that certain Secured Convertible Promissory Note in the original amount of $2,155,000.00 issued by Lender in favor of Borrower on June 29, 2017; (b) that certain Secured Promissory Note in the original amount of $1,587,500.00 issued by Lender in favor of Borrower on December 8, 2017; and (c) that certain Secured Promissory Note in the original amount of $1,090,340.91 issued by Lender in favor of Borrower on March 21, 2018”.

 

7.3.                            Notwithstanding anything herein to the contrary, all amendments set forth in Sections 7.1 and 7.2 above shall be expressly conditioned on Company’s continued compliance with the covenants set forth in Section 4 above. Upon the occurrence of a breach of any of the covenants set forth in Section 4 above, the foregoing amendments shall immediately and automatically terminate and shall be deemed void ab initio and of no further force or effect.

 

8.                                      Miscellaneous. The provisions set forth in this Section 8 shall apply to this Agreement, as well as all other Transaction Documents as if these terms were fully set forth therein; provided, however, that in the event there is a conflict between any provision set forth in this Section 8 and any provision in any other Transaction Document, the provision in such other Transaction Document shall govern.

 

8.1.                            Certain Capitalized Terms. To the extent any capitalized term used in any Transaction Document is defined in any other Transaction Document (as noted therein), such capitalized term shall remain applicable in the Transaction Document in which it is so used even if the other Transaction Document (wherein such term is defined) has been released, satisfied, or is otherwise cancelled or terminated.

 

8.2.                            Arbitration of Claims. The parties shall submit all claims, disputes and causes of action (each, a “Claim”) arising under this Agreement or any other Transaction Document or any other agreement between the parties and their affiliates or any Claim relating to the relationship of the parties to binding arbitration pursuant to rules of the American Arbitration Association. Within seven (7) calendar days of initiation of arbitration by either party, Investor will provide a list of five (5) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such five (5) arbitrators, the “Proposed Arbitrators”). Within five (5) calendar days after Investor has submitted to Company the names of the Proposed Arbitrators, Company must select by written notice to Investor, one (1) of the Proposed Arbitrators to act as the arbitrator. If Company fails to select one of the Proposed Arbitrators in writing within such 5-day period, then Investor may select the arbitrator from the Proposed Arbitrators by providing written notice of such selection to Company. The arbitrator shall be instructed to complete and shall complete the arbitration within six (6) months of commencement and shall only allow limited discovery on issues directly related to the applicable Claims. The parties hereby acknowledge and agree that the arbitration provisions set forth in this Section 8.2 (the “Arbitration Provisions”) are unconditionally binding on the parties hereto and are severable from all other provisions of this Agreement. By executing this Agreement, Company represents, warrants and covenants that Company has reviewed the Arbitration Provisions carefully, consulted with legal counsel about such provisions (or waived its right to do so), understands that the Arbitration Provisions are intended to allow for the expeditious and efficient resolution of any dispute hereunder, agrees to the terms and limitations set forth in the Arbitration Provisions, and that Company will not take a position contrary to the foregoing representations. Company acknowledges and agrees that Investor may rely upon the foregoing representations and covenants of Company regarding the Arbitration Provisions.

 

8.3.                            Governing Law; Venue. This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement shall be governed by, the internal laws of the State of Utah, without giving effect to

 

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any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Utah. Each party consents to and expressly agrees that exclusive venue for arbitration of any dispute arising out of or relating to any Transaction Document or the relationship of the parties or their affiliates shall be in Salt Lake County, Utah. Without modifying the parties obligations to resolve disputes hereunder pursuant to the Arbitration Provisions, for any litigation arising in connection with any of the Transaction Documents, each party hereto hereby (i) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court sitting in Salt Lake County, Utah, (ii) expressly submits to the exclusive venue of any such court for the purposes hereof, (iii) agrees to not bring any such action  outside of any state or federal court sitting in Salt Lake County, Utah, and (iv) waives any claim of improper venue and any claim or objection that such courts are an inconvenient forum or any other claim, defense or objection to the bringing of any such proceeding in such jurisdiction or to any claim that such venue of the suit, action or proceeding is improper. Finally, Company covenants and agrees to name Investor as a party in interest in, and provide written notice to Investor in accordance with Section 8.13 below prior to bringing or filing, any action (including without limitation any filing or action against any person or entity that is not a party to this Agreement) that is related in any way to the Transaction Documents or any transaction contemplated herein or therein, and further agrees to timely name Investor as a party to any such action. Company acknowledges that the governing law and venue provisions set forth in this Section 8.3 are material terms to induce Investor to enter into the Transaction Documents and that but for Company’s agreements set forth in this Section 8.3 Investor would not have entered into the Transaction Documents.

 

8.4.                            Specific Performance. Company acknowledges and agrees that irreparable damage may occur to Investor in the event that Company fails to perform any material provision of this Agreement or any of the other Transaction Documents in accordance with its specific terms. It is accordingly agreed that Investor shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement or such other Transaction Document and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which the Investor may be entitled under the Transaction Documents, at law or in equity. For the avoidance of doubt, in the event Investor seeks to obtain an injunction against Company or specific performance of any provision of any Transaction Document, such action shall not be a waiver of any right of Investor under any Transaction Document, at law, or in equity, including without limitation its rights to arbitrate any Claim pursuant to the terms of the Transaction Documents.

 

8.5.                            [Reserved].

 

8.6.                            Counterparts. Each Transaction Document may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of a Transaction Document (or such party’s signature page thereof) will be deemed to be an executed original thereof.

 

8.7.                            Document Imaging. Investor shall be entitled, in its sole discretion, to image or make copies of all or any selection of the agreements, instruments, documents, and items and records governing, arising from or relating to any of Company’s loans, including, without limitation, this Agreement and the other Transaction Documents, and Investor may destroy or archive the paper originals. The parties hereto (i) waive any right to insist or require that Investor produce paper originals, (ii) agree that such images shall be accorded the same force and effect as the paper originals, (iii) agree that Investor is entitled to use such images in lieu of destroyed or archived originals for any purpose, including as admissible evidence in any demand, presentment or other proceedings, and (iv) further agree that any executed facsimile (faxed), scanned, emailed, or other imaged copy of this Agreement or any

 

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other Transaction Document shall be deemed to be of the same force and effect as the original manually executed document.

 

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

 

8.9.                            Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

 

8.10.                     Entire Agreement. This Agreement, together with the other Transaction Documents, contains 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 Company nor Investor makes any representation, warranty, covenant or undertaking with respect to such matters. For the avoidance of doubt, all prior term sheets or other documents between Company and Investor, or any affiliate thereof, related to the transactions contemplated by the Transaction Documents (collectively, “Prior Agreements”), that may have been entered into between Company and Investor, or any affiliate thereof, are hereby null and void and deemed to be replaced in their entirety by the Transaction Documents. To the extent there is a conflict between any term set forth in any Prior Agreement and the term(s) of the Transaction Documents, the Transaction Documents shall govern.

 

8.11.                     No Reliance. Company acknowledges and agrees that neither Investor nor any of its officers, directors, members, managers, representatives or agents has made any representations or warranties to Company or any of its officers, directors, representatives, agents or employees except as expressly set forth in the Transaction Documents and, in making its decision to enter into the transactions contemplated by the Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor or its officers, directors, members, managers, agents or representatives other than as set forth in the Transaction Documents.

 

8.12.                     Amendments. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by both parties hereto.

 

8.13.                     Notices. Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of: (i) the date delivered, if delivered by personal delivery as against written receipt therefor or by email to an executive officer, or by facsimile (with successful transmission confirmation), (ii) the earlier of the date delivered or the third Business Day after deposit, postage prepaid, in the United States Postal Service by certified mail, or (iii) the earlier of the date delivered or the third Business Day after mailing by express courier, with delivery costs and fees prepaid, in each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by five (5) calendar days’ advance written notice similarly given to each of the other parties hereto):

 

If to Company:

 

Jaguar Health, Inc.

Attn: Lisa A. Conte

201 Mission Street, Suite 2375

San Francisco, CA 94105

 

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With a copy to (which copy shall not constitute notice):

 

Reed Smith LLP

Attn: Don Reinke
 1510 Page Mill Road, Suite 110
 Palo Alto, CA, 94304

 

If to Investor:

 

Chicago Venture Partners, L.P.

Attn: John Fife

303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601

 

With a copy to (which copy shall not constitute notice):

 

Hansen Black Anderson Ashcraft PLLC

Attn: Jonathan Hansen

3051 West Maple Loop Drive, Suite 325

Lehi, Utah 84043

 

8.14.                     Successors and Assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Investor hereunder may be assigned by Investor to a third party, including its affiliates, in whole or in part, without the need to obtain Company’s consent thereto. Company may not assign its rights or obligations under this Agreement or delegate its duties hereunder without the prior written consent of Investor.

 

8.15.                     Survival. The representations and warranties of Company and the agreements and covenants set forth in this Agreement shall survive the Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of Investor. Company agrees to indemnify and hold harmless Investor and all its officers, directors, employees, attorneys, and agents for loss or damage arising as a result of or related to any breach or alleged breach by Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

 

8.16.                     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 the 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.

 

8.17.                     Investor’s Rights and Remedies Cumulative; Liquidated Damages. All rights, remedies, and powers conferred in this Agreement and the Transaction Documents are cumulative and not exclusive of any other rights or remedies, and shall be in addition to every other right, power, and remedy that Investor may have, whether specifically granted in this Agreement or any other Transaction Document, or existing at law, in equity, or by statute, and any and all such rights and remedies may be exercised from time to time and as often and in such order as Investor may deem expedient. The parties acknowledge and agree that upon Company’s failure to comply with the provisions of the Transaction Documents, Investor’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates and future share prices, Investor’s increased

 

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risk, and the uncertainty of the availability of a suitable substitute investment opportunity for Investor, among other reasons. Accordingly, any fees, charges, and default interest due under the Note and the other Transaction Documents are intended by the parties to be, and shall be deemed, liquidated damages (under Company’s and Investor’s expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period under Rule 144 under the 1933 Act). The parties agree that such liquidated damages are a reasonable estimate of Investor’s actual damages and not a penalty, and shall not be deemed in any way to limit any other right or remedy Investor may have hereunder, at law or in equity. The parties acknowledge and agree that under the circumstances existing at the time this Agreement is entered into, such liquidated damages are fair and reasonable and are not penalties. All fees, charges, and default interest provided for in the Transaction Documents are agreed to by the parties to be based upon the obligations and the risks assumed by the parties as of the Closing Date and are consistent with investments of this type. The liquidated damages provisions of the Transaction Documents shall not limit or preclude a party from pursuing any other remedy available at law or in equity; provided, however, that the liquidated damages provided for in the Transaction Documents are intended to be in lieu of actual damages.

 

8.18.                     [Reserved].

 

8.19.                     Attorneys’ Fees and Cost of Collection. In the event of any arbitration or action at law or in equity to enforce or interpret the terms of this Agreement or any of the other Transaction Documents, the parties agree that the party who is awarded the most money (which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded to any party) shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the reasonable and documented out-of-pocket attorneys’ fees, deposition costs, and expenses paid by such prevailing party in connection with arbitration or litigation without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair an arbitrator’s or a court’s power to award fees and expenses for frivolous or bad faith pleading. If (i) the Note is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Investor otherwise takes action to collect amounts due under the Note or to enforce the provisions of the Note, or (ii) there occurs any bankruptcy, reorganization, receivership of Company or other proceedings affecting Company’s creditors’ rights and involving a claim under the Note; then Company shall pay the costs incurred by Investor for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees, expenses, deposition costs, and disbursements.

 

8.20.                     Waiver. No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

8.21.                     Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY

 

12

 

JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.

 

8.22.                     Time is of the Essence. Time is expressly made of the essence with respect to each and every provision of this Agreement and the other Transaction Documents.

 

8.23.                     Voluntary Agreement. Company has carefully read this Agreement and each of the other Transaction Documents and has asked any questions needed for Company to understand the terms, consequences and binding effect of this Agreement and each of the other Transaction Documents and fully understand them. Company has had the opportunity to seek the advice of an attorney of Company’s choosing, or has waived the right to do so, and is executing this Agreement and each of the other Transaction Documents voluntarily and without any duress or undue influence by Investor or anyone else.

 

8.24.                     Subordination.  This Agreement, the other Transaction Documents and the obligations of the Company thereunder are subject in all respects to the terms of that certain Subordination Agreement by and among the Company, the Investor and Hercules Growth Capital, Inc., a Maryland corporation, dated June 29, 2017 (as amended, modified or supplemented, the “Subordination Agreement”), a copy of which is attached hereto for reference as Exhibit E.

 

[Remainder of page intentionally left blank; signature page follows]

 

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IN WITNESS WHEREOF, the undersigned Investor and Company have caused this Agreement to be duly executed as of the date first above written.

 

SUBSCRIPTION AMOUNT:

 

	
Principal Amount of Note:
    	
$1,090,340.91
    
	
 
    	
 
    
	
Purchase Price:
    	
$750,000.00
    
	
 
    	
 
    
	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
CHICAGO   VENTURE PARTNERS, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Chicago   Venture Management, L.L.C.,
    
	
 
    	
 
    	
its   General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
CVM, Inc.,   its Manager
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
/s/   John M. Fife
    
	
 
    	
 
    	
 
    	
 
    	
John   M. Fife, President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
JAGUAR HEALTH, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Lisa Conte
    
	
 
    	
Printed   Name:
    	
Lisa Conte
    
	
 
    	
Title:
    	
President and CEO
    
								

 

[Signature Page to Securities Purchase Agreement]

 

 

ATTACHED EXHIBITS:

 

Exhibit A                                             Note

Exhibit B                                             Security Agreement

Exhibit C                                             Officer’s Certificate

Exhibit D                                             Secretary’s Certificate

Exhibit E                                              Subordination Agreement

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