On December 24, 2018, Propanc Biopharma, Inc. (the "Company") reported that it entered into a securities purchase agreement (the "Eagle Purchase Agreement") with Eagle Equities, LLC ("Eagle Equities"), pursuant to which Eagle Equities purchased a convertible promissory note (the "December 2018 Eagle Note") from the Company in the aggregate principal amount of $126,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option of Eagle Equities any time after the six month anniversary of the December 2018 Eagle Note (Filing, 8-K, Propanc, DEC 28, 2018, View Source [SID1234532307]). The transactions contemplated by the Eagle Purchase Agreement closed on December 24, 2018. Pursuant to the terms of the Eagle Purchase Agreement, Eagle Equities deducted $6,000 from the principal payment due under the December 2018 Eagle Note, at the time of closing, to be applied to its legal expenses. The Company used the net proceeds from the December 2018 Eagle Note to repay an outstanding convertible promissory note before such note became convertible.
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The maturity date of the December 2018 Eagle Note is December 24, 2019. The December 2018 Eagle Note shall bear interest at a rate of 8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of common stock upon receipt of a notice of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the December 2018 Eagle Note.
Additionally, Eagle Equities has the option to convert all or any amount of the principal amount of the December 2018 Eagle Note, at any time, for shares of the Company’s common stock at a price equal to 61% of the lowest closing bid price (the "Closing Bid Price") of the Company’s common stock as reported on the OTC Markets Group, Inc. quotation system for the ten prior trading days, including the day upon which the Company receives a notice of conversion from Eagle Equities (the "Conversion Price"). However, in the event that the Company’s common stock is restricted by the Depository Trust Company for any reason, the Conversion Price shall be lowered to 51% of the lowest Closing Bid Price for the duration of such restriction. If the Company fails to maintain a reserve of shares of its common stock at least two and a half times the number of shares issuable upon conversion of the December 2018 Eagle Note for at least 60 days after the issuance of the December 2018 Eagle Note, the conversion discount shall be increased by 10%. Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock (which may be increased up to 9.9% upon 60 days’ prior written notice by Eagle Equities to the Company).
The December 2018 Eagle Note may be prepaid until June 22, 2019. If the December 2018 Eagle Note is prepaid within 90 days of the issuance date, then the prepayment premium shall be 115% of the principal amount plus any accrued interest; and if the December 2018 Eagle Note is prepaid after 90 days from the issuance date, but less than 181days from the issuance date, then the prepayment premium shall be 125% of the principal amount plus any accrued interest.
Upon a transfer of all or substantially all of the assets of the Company, or certain reorganization, merger or consolidation events, Eagle Equities may either request that the Company redeem the December 2018 Eagle Note in cash for 150% of the principal amount, plus any accrued but unpaid interest through the date of redemption, or convert the unpaid principal amount plus any accrued but unpaid interest into shares of the Company’s common stock at the Conversion Price.
The December 2018 Eagle Note contains certain events of default, including failure to timely issue shares upon receipt of a notice of conversion, as well as certain customary events of default, including, among others, a breach of the covenants, insolvency, bankruptcy and failure by the Company to pay the principal and interest due under the December 2018 Eagle Note.
Upon an event of default, interest on the outstanding principal shall accrue at a default interest rate of 24% per annum or at the highest rate permitted by law. In the event that the Company fails to deliver to Eagle Equities shares of common stock issuable upon conversion of principal or interest under the December 2018 Eagle Note within three business days of a notice of conversion by Eagle Equities (which includes an opinion of counsel), the Company shall incur liquidated damages of $250 per day the shares are not issued from the fourth to ninth business day after the notice is delivered to the Company and on the tenth day and thereafter, the liquidated damages shall increase to $500 per day.
Additional default penalties include: (i) in the event that the Company loses a bid price for its stock on its marketplace, the outstanding principal under the December 2018 Eagle Note shall increase by 20%; (ii) in the event that the Company’s common stock is delisted from any exchange or quotation system, or if its trading is suspending for more than ten consecutive days, or if the Company fails to meet its required reporting obligations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the outstanding principal under the December 2018 Eagle Note shall increase by 50%; and (iii) in the event that the Company is delinquent in filing its periodic reports under the Exchange Act and such delinquency continues after the six month anniversary of the issuance date of the December 2018 Eagle Note, then Eagle Equities shall be entitled to use the lowest close bid price during the delinquency period as a base price for the conversion.