Item 1.01 Entry into a Material Definitive Agreement.
Guaranty and Suretyship Agreement
On May 28, 2019, Jaguar Health, Inc. (the Company) entered into a guaranty and suretyship agreement (the Guarantee), pursuant to which it guaranteed payment and performance of all obligations of Napo Pharmaceuticals, Inc. (Napo), the Companys wholly-owned subsidiary, arising under and in connection with approximately $10.5 million outstanding aggregate amount of convertible promissory notes issued by Napo pursuant to the Amended and Restated Note Purchase Agreement, dated March 31, 2017, by and between Napo, Kingdon Associates, M. Kingdon Offshore Master Fund L.P., Kingdon Family Partnership, L.P., and Kingdon Credit Master Fund L.P. (collectively, the Existing Notes). The Existing Notes bear interest at a rate of 10% per annum and mature on December 31, 2019.
Exchange Agreement
On May 28, 2019, the Company and Napo (collectively, the Borrower) entered into an exchange agreement (the Exchange Agreement) with Chicago Venture Partners, L.P. (CVP), the holder of the Existing Notes, pursuant to which CVP exchanged the Existing Notes for a secured promissory note in the original principal amount of $10,535,900.42 the (Exchange Note 1) and a secured promissory note in the original principal amount of $2,296,926.16 (Exchange Note 2 and together with Exchange Note 1, the Exchange Notes). The Exchange Notes bear interest at the rate of 10% per annum and mature on December 31, 2020. The outstanding balance of Exchange Note 2 is equal to the exchange fee that the Company agreed to pay CVP in consideration of certain accommodations granted to the Company and Napo, including but not limited to the extension of the maturity dates of the Existing Notes and the legal and other fees incurred by CVP in connection with the effectuation of the transactions contemplated under the Exchange Agreement.
Under the Exchange Agreement, the Borrower is subject to certain covenants, including the obligations of the Borrower to: (i) timely file all reports required to be filed under Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act) and not terminate the Companys status as an issuer required to file reports under the Exchange Act; (ii) maintain listing of the Companys common stock on a securities exchange; (iii) avoid trading in the Companys common stock from being suspended, halted, chilled, frozen or otherwise ceased; (iv) not issue any variable securities (i.e., Company or Napo securities that (a) have conversion rights of any kind in which the number of shares that may be issued pursuant to the conversion right varies with the market price of the Companys common stock or (b) are or may become convertible into shares of the Companys common stock with a conversion price that varies with the market price of such stock) that generate gross cash proceeds to the Company of less than $1 million without CVPs prior consent; (v) not grant a security interest in any of Borrowers assets without CVPs prior consent; and (vi) not incur any debt other than in the ordinary course of business, and in no event greater than $10,0000, without CVPs prior consent.
The following constitute events of default with respect to the Exchange Notes: (a) the Borrower fails to pay any principal or any interest, fees, charges, or any other amount when due and payable hereunder, which default remains uncured for a period of one (1) business day; (b) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for thirty (30) calendar days or shall not be dismissed or discharged within sixty (60) calendar days; (c) Borrower generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; (d) Borrower makes a general assignment for the benefit of creditors; (e) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); (f) an involuntary bankruptcy proceeding is commenced or filed against Borrower which is not dismissed or discharged within sixty (60) calendar days; (g) Borrower defaults or otherwise fails to observe or perform any covenant, obligation, condition or agreement of Borrower contained in the Exchange Notes, the Exchange Agreement or any other documents or agreements entered into in connection with the Exchange Agreement (collectively, the Exchange Documents), subject to certain limited exceptions, which default continues for a period of thirty (30) calendar days following notice by CVP to Borrower thereof; (h) any representation, warranty or other statement made or furnished by or on behalf of Borrower to CVP herein or in any Exchange Document, is false, incorrect, incomplete or misleading in any material respect when made or furnished; (i) the occurrence of a Fundamental Transaction (as defined in the Exchange Notes) without CVPs prior written consent; (j) Borrower effectuates a reverse split of its common stock without twenty (20) business days prior written notice to CVP (other than such splits effectuated to remain listed with NASDAQ); (k) any money judgment, writ or similar process is entered or filed against Borrower or any subsidiary of Borrower or any of its property or other assets for more than $1,000,000.00, and shall remain unpaid, unvacated, unbonded or unstayed for a period of thirty (30) calendar days unless otherwise consented to by CVP; (l) Borrower fails to observe or perform any covenant set forth in Section 6 of the Exchange Agreement, which default continues for a period of thirty (30) calendar days following the occurrence of the applicable breach; or (m) Borrower breaches any covenant or other term or condition contained in any existing or future agreement or instrument among or by Borrower and CVP or any financing agreement or material agreement that affects Borrowers ongoing business operations (excluding any breach of Section 2.2 of Exchange Note 2),
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which default continues for a period of thirty (30) calendar days following notice by CVP to Borrower thereof (collectively, Events of Default). Upon the occurrence of an Event of Default of an Exchange Note, CVP may multiply the outstanding balance of such Exchange Note as of the date of the Event of Default by 17.5% and accelerate such Exchange Note, with the outstanding balance of such Exchange Note becoming immediately due and payable in cash. In the alternative, CVP may elect to increase the outstanding balance of such Exchange Note by multiplying the outstanding balance by 17.5% without accelerating the outstanding balance shall have the right to be redeemed at the outstanding balance immediately due prior to such Event of Default. In addition, following an Event of Default on an Exchange Note, interest on such Exchange Note will accrue at a rate of 17% per annum.
Security Agreements
CVP also entered into security agreements with the Company (the Jaguar Security Agreement) and Napo (the Napo Security Agreement, and together with the Jaguar Security Agreement, the Security Agreements), pursuant to which CVP will receive (i) a security interest in substantially all of the Companys assets as security for the Companys obligations under Exchange Note 2 and (ii) a security interest in substantially all of Napos assets as security for Napos obligations under Exchange Note 1 and Exchange Note 2. Notwithstanding the foregoing, (a) the amount owing under Exchange Note 2 will not be considered part of the obligations secured by the Napo Security Agreement until such time as Jaguar receives permission from a third party and (b) the security interest granted under the Jaguar Security Agreement will be automatically terminated and released upon Jaguars receipt of the third party Waiver.
Exchange Note 1, Exchange Note 2, the Guaranty and Suretyship Agreement, the Exchange Agreement, the Jaguar Security Agreement and the Napo Security Agreement are filed as Exhibits 4.1, 4.2, 10.1, 10.2, 10.3 and 10.4, respectively, to this Current Report on Form 8-K, and such documents are incorporated herein by reference. The foregoing is only a brief description of the material terms of the Exchange Notes, the Guaranty and Suretyship Agreement, the Exchange Agreement and the Security Agreements, does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to such exhibits.
On June 3, 2019, the Company issued a press release announcing the effectuation of the transactions contemplated under the Exchange Agreement. A copy of the press release is furnished as Exhibit 99.1 of this report.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information contained above in Item 1.01 is hereby incorporated by reference into this Item 2.03 in its entirety.
Item 3.02 Unregistered Sales of Equity Securities.
The information contained above in Item 1.01 is hereby incorporated by reference into this Item 3.02 in its entirety. The issuance of Exchange Notes pursuant to the Exchange Agreement will be effected in reliance upon the exemption from registration under Section 3(a)(9) of the Securities Act of 1933, as amended (the Securities Act).
Item 8.01 Other Events.
Sagard Consent and Waiver to Refinancing of Existing Notes
On May 30, 2019, in consideration for the consent and waiver by Sagard Capital Partners, L.P. (Sagard), the holder of the Companys Series A Convertible Participating Preferred Stock, to the transactions contemplated in the Guarantee, Exchange Agreements and Security Agreements, the Company agreed to pay Sagard a consent fee in an amount equal to (i) $250,000, if paid in cash, or (ii) $400,000, if paid in shares of common stock of the Company, where the number of shares issuable will be equal to $400,000 divided by the closing price of the Companys common stock on the trading day immediately preceding payment. The consent fee is payable five days after the closing of an underwritten public offering of the Companys common stock pursuant to an effective regisration statement on Form S-1, provided that if such offering does not occur before July 31, 2019, the fee will be paid no later than July 31, 2019. The Company also agreed to use commercially reasonable efforts to ensure that the amount owed pursuant to the Exchange Notes does not exceed $10,535,900.42 in the aggregate.
Sagard Participation in Notes Financing
As previously disclosed in the Companys Current Report on Form 8-K filed on March 22, 2019 (the Prior 8-K), the Company began entering into securities purchase agreements with select accredited investors pursuant to which the Company intends to issue up to $5.5 million aggregate principal amount of promissory notes to such investors. On May 29, 2019, the Company entered into a securities purchase agreement with Sagard (the Sagard SPA), pursuant to which the Company issued a promissory note in the principal amount of $500,000 (the Sagard Note) and a 5-year warrant (the Sagard Warrant) to purchase $375,000 in shares of the
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