Document:

ex_220012.htm

 

 Exhibit 4.1

 

FORM OF COMMON STOCK PURCHASE WARRANT

 

ATOSSA THERAPEUTICS, INC.

 

Warrant Shares: [_______]                    Initial Exercise Date: [______], 2021

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _____________ or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on [_____], 20251 (the “Termination Date”) but not thereafter, to subscribe for and purchase from Atossa Therapeutics, Inc., a company incorporated under the laws of the State of Delaware (the “Company”), up to [___] shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated January 5, 2021, among the Company and the purchasers signatory thereto.

 

Section 2. Exercise.

 

a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy or PDF copy submitted by email (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $1.055, subject to adjustment hereunder (the “Exercise Price”).

 

c) Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing ((A-B)(X)) by (A), where:

 

(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;

 

(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

 

(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).

 

“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

 

d) Mechanics of Exercise.

 

i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.

 

ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

 

vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties.  Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any Warrants, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

Section 3. Certain Adjustments.

 

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

c) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, merger, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

d) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

e) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

f) Notice to Holder.

 

i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

g) Voluntary Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of this Warrant, subject to the prior written consent of the Holder, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company.

 

Section 4. Transfer of Warrant.

 

a) Transferability. This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

Section 5. Miscellaneous.

 

a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.

 

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

 

d) Authorized Shares.

 

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

 

f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

 

g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

 

i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

 

********************

 

 

(Signature Page Follows)

 

 

 

 

 

 

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

 

	
			ATOSSA THERAPEUTICS, INC.

			 

			
	
			By:__________________________________________

			     Name:

			     Title:

			

 

 

NOTICE OF EXERCISE

 

To: ATOSSA THERAPEUTICS, INC.

 

(1) ()The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2) ()Payment shall take the form of (check applicable box):

 

[ ] in lawful money of the United States; or

 

[ ] if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3) ()Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

_______________________________

 

The Warrant Shares shall be delivered to the following DWAC Account Number:

 

_______________________________

_______________________________

_______________________________

 

 

[SIGNATURE OF HOLDER]

Name of Investing Entity: ________________________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: ________________________________________________________________________________________

 

 

 

 

 

 

 

 

ASSIGNMENT FORM

 

(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

	
			Name:

				 
	 	
			(Please Print)

			
	
			Address:

				 
	
			 

			Phone Number:

			Email Address:  

				
			(Please Print)

			______________________________________

			______________________________________

			
	
			Dated: _______________ __, ______

				 
	
			Holder’s Signature:

				 
	
			Holder’s Address:

				 

 

 

 

1 Insert the date that is the 4.5 year anniversary of the Initial Exercise Date; provided, however, that, if such date is not a Trading Day, insert the immediately following Trading Day.Exhibit 10.1

 

Addendum

 

to the Employment Agreement

 

This Addendum (the “Addendum”)
by and between Sonoma Pharmaceuticals, Inc. and Amy Trombly is effective December 31, 2020 (the “Effective Date”),
and amends the employment agreement dated December 26, 2019 (the “Employment Agreement”) between the same parties.
All capitalized terms shall have the same meaning as in the Employment Agreement or this Addendum. This Addendum amends the terms
of the Employment Agreement to the extent provided herein, all other terms and conditions of the Employment Agreement shall remain
in effect. To the extent there is a conflict between the Employment Agreement and this Addendum, this Addendum will control.

 

1.             
Extension of Employment Agreement. The parties agree to extend the Term of the Employment Agreement until March 31,
2021, subject to mutual extension by both parties.

 

2.             
Annual Bonus. For the avoidance of doubt, the parties agree that the Annual Bonus shall remain on the existing schedule.

 

		3.	Termination of Employment Agreement

 

		3.1.	Termination for Cause.

 

(a) “Cause”
shall mean:

 

(i)      the Executive’s
willful failure to perform her duties (other than any such failure resulting from incapacity due to physical or mental illness);

 

(ii)      the
Executive’s willful failure to comply with any valid and legal directive of the Board communicated to Executive in writing;

 

(iii)    the
Executive’s willful engagement in dishonesty, illegal conduct or gross misconduct, which is, in each case, materially injurious
to the Company or its affiliates;

 

(iv)    the
Executive’s embezzlement, misappropriation or fraud, whether or not related to the Executive’s employment with the
Corporation;

 

(v)     the Executive’s
conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent)
or a crime that constitutes a misdemeanor involving moral turpitude;

 

(vi)    the
Executive’s violation of a material policy of the Corporation that has been provided to Executive (documents made public
on the Corporation’s website or through filings with the U.S. Securities and Exchange Commission are deemed provide to the
Executive);

 

(vii)   the Executive’s
willful unauthorized disclosure of Confidential Information (as defined in the Employment Agreement);

 

(viii)   the
Executive’s material breach of any material obligation under this Agreement or any other written agreement between the Executive
and the Corporation; or

 

(ix)     any
material failure by the Executive to comply with the Corporation’s written policies or rules, as they may be in effect from
time to time during the Employment Term, if such failure causes material, reputational or financial harm to the Corporation.

 

 

 

    	 	1	 

     

    

 

For purposes of this
provision, no act or failure to act on the part of the Executive shall be considered “willful” unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was
in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board or upon the advice of counsel for the Corporation shall be conclusively presumed to be done, or omitted to be done,
by the Executive in good faith and in the best interests of the Corporation. In all cases the Corporation shall notify the Executive
in writing of the basis for any for Cause termination by providing a detailed description of the alleged facts and circumstances
giving rise to Cause. In addition, with respect to clauses (i), (ii), (vi), (viii) and (ix) Executive shall be given a period of
at least 30 days to cure and only if Executive fails to cure within such time period will a termination be for Cause.

 

(b)               
In case of termination for Cause, Executive shall be entitled to the Accrued Amounts.

 

3.2. Termination
without Cause. In case of termination without Cause by the Corporation, Executive shall be entitled to:

 

		(i)	the Accrued Amounts;

 

(ii)           
subject to Executive’s compliance with Sections 6 through 9 of the Employment Agreement and the execution of
the Release and such Release becoming effective within the applicable time period set forth in the Release (the “Release
Execution Period”), Executive shall be entitled to a lump sum payment equal to six (6) months of Base Salary, payable
within thirty (30) days following the Release Execution Period;

 

(iii)         
upon determination by the Corporation’s Board of Directors or Compensation Committee, as appropriate, to be made in
its sole discretion as to whether to grant a bonus, and if such bonus is granted, the amount, form and payment schedule. For the
avoidance of doubt, Executive shall not be entitled to any bonus solely for reason of termination, unless the Board of Directors
or the Compensation Committee, as appropriate, in its sole discretion awards a bonus to Executive;

 

(iv)          
If the Executive timely and properly elects health continuation coverage under the Consolidated Omnibus Budget Reconciliation
Act of 1985 (“COBRA”), the Corporation shall reimburse the Executive for the monthly COBRA premium paid by the
Executive for herself and her dependents. Such reimbursement shall be paid to the Executive on the 10th day of the month immediately
following the month in which the Executive timely remits the premium payment (“COBRA Premium Reimbursements”).
The Executive shall be eligible to receive such COBRA Premium Reimbursement until the earliest of: (i) the twelve-month anniversary
of the Termination Date; (ii) the date the Executive is no longer eligible to receive COBRA continuation coverage; and (iii) the
date on which the Executive becomes eligible to receive substantially similar coverage from another employer or other source. Notwithstanding
the foregoing, if the Company’s making payments under this Section would violate the nondiscrimination rules applicable to
non-grandfathered plans under the Affordable Care Act (the “ACA”), or result in the imposition of penalties
under the ACA and the related regulations and guidance promulgated thereunder), the parties agree to reform this Section in a manner
as is necessary to comply with the ACA;

 

(v)            
Consistent with the terms of any equity incentive plan of the Corporation, as approved by the stockholders, as applicable:

 

(i)   all
outstanding time-based equity-based compensation awards granted to the Executive during the Term of Employment shall become fully
vested; and

 

(ii)   all
outstanding performance-based equity compensation awards granted to the Executive during the Term of Employment shall remain outstanding
and shall vest or be forfeited in accordance with the terms of the applicable award agreements, if the applicable performance goals
are satisfied. The determination whether such performance goals are satisfied shall be in the sole discretion of the Compensation
Committee or the Board, as the case may be.

 

 

 

    	 	2	 

     

    

 

3.3. Termination
upon Change in Control.

 

		(a)	“Change in Control” shall mean the occurrence of any of the following after
the Effective Date:

 

(i)  one person
(or more than one person acting as a group) acquires ownership of stock of the Company that, together with the stock held by such
person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such corporation;
provided that, a Change in Control shall not occur if any person (or more than one person acting as a group) owns more than 50%
of the total fair market value or total voting power of the Company’s stock and acquires additional stock;

 

(ii)     a majority
of the members of the Board are replaced during any twelve-month period by directors whose appointment or election is not endorsed
by a majority of the Board before the date of appointment or election; or

 

(iii)    the sale of all
or substantially all of the Company’s assets.

 

Notwithstanding the
foregoing, a Change in Control shall not occur unless such transaction constitutes a change in the ownership of the Company, a
change in effective control of the Company, or a change in the ownership of a substantial portion of the Company’s assets
under Section 409A.

 

For purposes of the
definition of “Change of Control”, the following definitions shall be applicable:

 

(i)      The term “person”
shall mean any individual, corporation or other entity and any group as such term is used in Section 13(d) (3) or 14(d) (2) of
the Exchange Act.

 

(ii)     Any
person shall be deemed to be the beneficial owner of any shares of capital stock of the Corporation:

 

a. which that person owns directly
whether or not of record, or

 

b. which that person has the
right to acquire pursuant to any agreement or understanding or upon exercise of conversion rights, warrants, or options, or otherwise,
or

 

c. which are beneficially owned,
directly or indirectly (including shares deemed owned through application of clause (b) above, by an “affiliate” or
“associate” (as defined in the rules of the Securities and Exchange Commission under the Securities Act of 1933, as
amended) of that person, or

 

d. which are beneficially owned,
directly or indirectly (including shares deemed owned through application of clause (b) above), by any other person with which
that person or her “affiliate” or “associate” (defined as aforesaid) has any agreement, arrangement, or
understanding for the purpose of acquiring, holding, voting or disposing of capital stock of the Corporation.

  

(iii)    The
outstanding shares of capital stock of the Corporation shall include shares deemed owned through application of clause (ii) (b),
(c), and (d) above, but shall not include any other shares which may be issuable pursuant to any agreement or upon exercise of
conversion rights, warrants or options, or otherwise, but which are not actually outstanding.

 

 

 

    	 	3	 

     

    

 

(b)            Notwithstanding
any other provision contained herein, if the Executive’s employment hereunder is terminated or her responsibilities are reduced
or the location of employment is moved more than 25 miles within three (3) months prior to or twelve (12) months following a Change
in Control, the Executive shall be entitled to receive the Accrued Amounts and subject to the Executive’s compliance with Section
6, Section 7, Section 8, and Section 9 of the Employment Agreement and her execution
of a Release which becomes effective by the end of the Release Execution Period, the Executive shall be entitled to receive a lump
sum payment equal to one time the sum of the Executive’s Base Salary, which shall be paid within 30 days following the Release
Execution Period.

 

(c)          If the
Executive timely and properly elects health continuation coverage under COBRA, the Corporation shall reimburse the Executive for
the monthly COBRA premium paid by the Executive for herself and her dependents. Such reimbursement shall be paid to the Executive
on the 10th day of the month immediately following the month in which the Executive timely remits the premium payment.
The Executive shall be eligible to receive such reimbursement until the earliest of: (i) the twelve-month anniversary of the Termination
Date; (ii) the date the Executive is no longer eligible to receive COBRA continuation coverage; and (iii) the date on which the
Executive becomes eligible to receive substantially similar coverage from another employer or other source. Notwithstanding the
foregoing, if the Corporation’s making payments under this Section would violate the nondiscrimination rules applicable
to non-grandfathered plans under the ACA, or result in the imposition of penalties under the ACA, the parties agree to reform this Section in
a manner as is necessary to comply with the ACA.

 

(d)          Consistent
with the terms of any equity incentive plan of the Corporation, as approved by the stockholders, as applicable:

 

(i)      all
outstanding time-based equity-based compensation awards granted to the Executive during the Term of Employment shall become fully
vested; and

 

(ii)     all
outstanding performance-based equity compensation awards granted to the Executive during the Term of Employment shall remain outstanding
and shall vest or be forfeited in accordance with the terms of the applicable award agreements, if the applicable performance goals
are satisfied. The determination whether such performance goals are satisfied shall be in the sole discretion of the Compensation
Committee or the Board, as the case may be.

 

3.4            Release;
Exclusive Remedy.

 

(a)            The Executive agrees
that the payments contemplated by Section 5 of the Employment Agreement as amended by this Addendum shall constitute
the exclusive and sole remedy for any termination of her employment and the Executive covenants not to assert or to pursue any
other remedies, at law or in equity, with respect to any termination of employment. The Corporation and Executive acknowledge and
agree that there is no duty of the Executive to mitigate damages under the Employment Agreement. All amounts paid to the Executive
pursuant to Section 5 shall be paid without regard to whether the Executive has taken or takes actions to mitigate
damages.

 

(b)           As used herein,
“Release” shall mean a written release, discharge and covenant not to sue entered into by the Executive in favor
of the Corporation in the form as in Exhibit A hereto.

 

3.5.          Equity.
Upon termination for any reason, Executive’s outstanding and vested equity awards shall remain exercisable for 18 months
following termination, subject to the provisions of the Corporation’s equity incentive plans.

 

4.             
Governing Law. The Employment Agreement and this Addendum, and all questions relating to its validity, interpretation,
performance and enforcement, as well as the legal relations hereby created between the parties hereto, shall be governed by and
construed under, and interpreted and enforced in accordance with, the laws of the State of Colorado, notwithstanding any Colorado
or other conflict of law provision to the contrary. This Agreement is intended to comply with Section 409A of the Internal Revenue
Code of 1986 and the regulations promulgated thereunder. Any action or proceeding by either of the parties to enforce this Agreement
shall be brought only in a state or federal court located in the State of Colorado, Boulder County. The parties hereby irrevocably
submit to the exclusive jurisdiction of such courts and waive the defense of inconvenient forum to the maintenance of any such
action or proceeding in such venue.

 

 

 

    	 	4	 

     

    

 

5.             
Miscellaneous.

 

(a)           Entire Agreement.
This Agreement embodies the entire agreement of the parties hereto respecting the matters within its scope. Any prior negotiations,
correspondence, agreements, proposals or understandings relating to the subject matter hereof shall be deemed to have been merged
into this Agreement, and to the extent inconsistent herewith, such negotiations, correspondence, agreements, proposals, or understandings
shall be deemed to be of no force or effect. There are no representations, warranties, or agreements, whether express or implied,
or oral or written, with respect to the subject matter hereof, except as expressly set forth herein.

 

(b)           Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose
signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected
hereon as the signatories. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

 

[Signature page follows.]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	5	 

     

    

 

IN WITNESS WHEREOF, the Corporation
and Executive have executed this Addendum to the Employment Agreement as of the Effective Date.

  

	 	CORPORATION
	 	 
	 	Sonoma Pharmaceuticals, Inc.,
	 	a Delaware corporation
	 	 
	 	By:	/s/ Jerry McLaughlin
	 	
        Name:

        Title:
	Jerry McLaughlin

Lead Independent Director of
	 	 	Sonoma Pharmaceuticals, Inc.
	 	 	 
	 	 	 
	 	EXECUTIVE
	 	 	 
	 	By:	/s/ Amy Trombly
	 	Name:	Amy Trombly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	6	 

     

    

 

EXHIBIT A — RELEASE

 

1. Definitions.
I intend all words used in this Release to have their plain meanings in ordinary English. Technical legal words are not needed
to describe what I mean. Specific terms I use in this Release have the following meanings:

 

A. “I,”
“me,” and “my” include me, Amy Trombly, and anyone who has or obtains any legal rights or claims through
me, including my heirs and estate, and each of my descendants, dependents, executors, administrators, assigns and successors.

 

B. “Employer,”
as used in this Release, shall at all times mean Sonoma Pharmaceuticals, Inc. and “Released Party” or “Released
Parties”, individual and collectively, means the Employer and the Employer’s parent, past or present subsidiaries,
affiliates, each of any present or former officers, directors, shareholders, employees, agents or attorneys, trustees, insurers,
successors, predecessors, assigns, or personal representatives.

 

C. “My Claims”
mean actions or causes of action, suits, claims, charges, complaints, contracts (whether oral or written, express or implied from
any source), and promises, whatsoever, in law or equity, that I ever had, may now have or hereafter can, shall or may have against
the Employer or other Released Party as of the date of the execution of this Release, including all unknown, undisclosed and unanticipated
losses, wrongs, injuries, debts, claims or damages to me for, upon, or by reason of any matter, cause or thing whatsoever, that
are in any way related to my employment with or separation (termination of employment) from the Employer.

 

By signing this Release,
I am agreeing to release any actual and potential claim, known or unknown, I have or may potentially have, in law or in equity,
either as an individual or standing in the shoes of the government, under any federal, state or local law, administrative regulation
or legal principle (except as provided in Paragraph 4 of this Release). The following listing of laws and types of claims is not
meant to, and shall not be interpreted to, exclude any particular law or type of claim, law, regulation or legal principle not
listed. I understand I am releasing all my Claims, including, but not limited to, claims for invasion of privacy; breach of written
or oral, express or implied, contract; fraud or misrepresentation; and any claim under Section 1981 of the Civil Rights Act of
1866, Title VII of the Civil Rights Act of 1964, Age Discrimination in Employment Act of 1967 (“ADEA”), 29 U.S.C. §
626, as amended, the Older Workers Benefit Protection Act of 1990 (“OWBPA”), 29 U.S.C. 626(f), Title VII of the Civil
Rights Act of 1964 (“Title VII”), 42 U.S.C. § 2000e, et seq., the Americans with Disabilities Act Amendments Act
(“ADAAA”), 29 U.S.C. § 2101, et seq., the Family and Medical Leave Act (“FMLA”), 29 U.S.C. §
2601 et seq., the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, 29 U.S.C. §§ 1001,
et seq., Equal Pay Act (“EPA”), 29 U.S.C. § 206(d), the Worker Adjustment and Retraining Notification Act (“WARN”),
29 U.S.C. § 2101 et seq., the False Claims Act, 31 U.S.C. § 3729 et seq., the Colorado Fair Employment Practices Act,
the Colorado Anti-Discrimination Act, any other state human rights or fair employment practices act, and any other federal, state,
or local statute, law, rule, regulation, ordinance or order. This includes, but is not limited to, claims for violation of any
civil rights laws based on protected class status; claims for assault, battery, defamation, intentional or negligent infliction
of emotional distress, breach of the covenant of good faith and fair dealing, promissory estoppel, negligence, negligent hiring,
retention or supervision, retaliation, constructive discharge, violation of whistleblower protection laws, unjust enrichment, payment
of any kind, including any other claim for severance pay, bonus or incentive pay, sick leave, holiday pay, vacation pay, life insurance,
health or medical insurance or any other fringe benefit, medical expenses, or disability, violation of public policy, and all other
claims for unlawful employment practices, and all other common law or statutory claims. To the maximum extent permitted by law,
I agree that I will not seek and waive any right to accept any relief or award from any charge or action against the Employer before
any federal, state, or local administrative agency or federal state or local court whether filed by me or on my behalf with respect
to any claim or right covered by this Release.

 

 

 

    	 	7	 

     

    

 

2. Agreement to
Release My Claims. Except as stated in Paragraph 4, I agree to give up all My Claims, waive any rights thereunder, and forever
discharge the Employer and all Released Parties of and from any and all liability to me for actions or causes of action, suits,
or Claims. To the maximum extent permitted by law, I agree that I will not seek and I waive any right to accept any relief or award
from any charge or action against the Employer or other Released Party before any federal, state, or local administrative agency
or federal state or local court whether filed by me or on my behalf with respect to any claim or right covered by this Release.
I also agree to withdraw any and all of my charges and lawsuits against Employer or other Released Party, except that I may, but
am not required to, withdraw or dismiss, or attempt to withdraw or dismiss, any charges that I may have pending against the Employer
or other Released Party with the EEOC or other civil rights enforcement agency.

 

I represent and warrant
that I have not transferred or otherwise assigned my Claims, or parts thereof, to any person or entity, other than the Employer.
I will defend, indemnify and hold harmless the Employer from and against any claim (including the payment of attorneys’ fees
and costs actually incurred whether or not litigation is commenced) that is directly or indirectly based on or in connection with
or arising out of any such assignment or transfer made, purported or claimed.

 

In exchange for my
agreement to release my Claims, I am receiving satisfactory Consideration (compensation) from the Employer to which I am not otherwise
entitled by law, contract, or under any Employer policy. The consideration I am receiving is a full and fair payment for the release
of all my Claims. The Employer and the Released Parties do not owe me anything in addition to what I will be receiving.

 

3. Older Workers
Benefit Protection Act. [This section may be revised if Executive terminates employment as part of a “group” termination.]
The Older Workers Benefit Protection Act (“OWBPA”) applies to individuals age 40 and older and sets forth certain criteria
for such individuals to waive their rights under the Age Discrimination in Employment Act (“ADEA”) in connection with
an exit incentive program or other employment termination program. I understand and have been advised that this Release of My Claims
is subject to the terms of the OWBPA. The OWBPA provides that an individual cannot waive a right or claim under the ADEA unless
the waiver is knowing and voluntary. I have been advised of this law, and I agree that I am signing this Release voluntarily, and
with full knowledge of its consequences. I understand that the Employer is giving me at least twenty-one (21) calendar days from
the date I received a copy of this Release to decide whether I want to sign it. I acknowledge that I have been advised to use this
time to consult with an attorney about the effect of this Release. If I sign this Release before the end of the twenty-one (21)
day period it will be my personal, voluntary decision to do so, and will be done with full knowledge of my legal rights. I agree
that material and/or immaterial changes to the Separation Agreement or this Release will not restart the running of this consideration
period.

 

4. Exclusions from
Release. My Claims do not include my rights, if any, to claim the following: unemployment insurance or workers compensation
benefits; claims for my vested post-termination benefits under any 401(k) or similar tax-qualified retirement benefit plan; my
COBRA rights; and my rights to enforce the terms of this Release.

 

A. Nothing in this
Release interferes with my right to file a charge with the Equal Employment Opportunity Commission (“EEOC”) or other
local civil rights enforcement agency, or participate in any manner in an EEOC investigation or proceeding under Title VII, the
ADA, the ADEA, or the EPA. I, however, understand that I am waiving my right to recover individual relief including, but not limited
to, back pay, front pay, reinstatement, attorneys’ fees, and/or punitive damages, in any administrative or legal action whether
brought by the EEOC or other civil rights enforcement agency, me or any other party.

 

B. Nothing in this
Release interferes with my right to challenge the knowing and voluntary nature of this Release under the ADEA and/or OWBPA, if
I have rights under such laws.

 

C. I agree that the
Employer and the Released Parties reserve any and all defenses, which any of them has or might have against any claims brought
by me. This includes, but is not limited to, the Employer’s or other Released Party’s right to seek available costs
and attorneys’ fees, and to have any monetary award granted to me, if any, reduced by the amount of money that I received
in consideration for this Release.

 

 

 

    	 	8	 

     

    

 

D. Nothing in this
Release releases any claims for indemnification by Executive pursuant to any indemnification agreement, statute or otherwise or
claims for coverage under any D&O or other similar insurance policy.

 

5. Effective Date;
Right to Rescind or Revoke. I understand that insofar as this Release relates to my rights under the Age Discrimination in
Employment Act (“ADEA”), it shall not become effective or enforceable until seven (7) calendar days after I sign it.
I also have the right to rescind (or revoke) this Release insofar as it extends to potential claims under the ADEA by written notice
to Employer within seven (7) calendar days following my signing this Release (the “Rescission Period”). Any such rescission
(or revocation) must be in writing and hand-delivered to Employer or, if sent by mail, postmarked within the applicable time period,
sent by certified mail, return receipt requested, and addressed as follows:

 

A. post-marked within
the seven (7) calendar day Rescission Period;

 

B. properly addressed
to

 

[INSERT NAME AND ADDRESS];
and

 

C. sent by certified
mail, return receipt requested.

 

6. I Understand
the Terms of this Release. I have had the opportunity to read this Release carefully and understand all its terms. I have had
the opportunity to review this Release with my own attorney. In agreeing to sign this Release, I have not relied on any statements
or explanations made by the Employer or its attorneys. I understand and agree that this Release and the attached Agreement contain
all the agreements between the Employer (and any other Released Party) and me. We have no other written or oral agreements. I understand
this Release is a very important legal document and I agree to be bound by the terms of this Release.

 

	 	 	 
	 	Dated: ____________, 20__	__________________________________
	 	 	Amy Trombly
	 	 	 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	 	9

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