COMSTOCK INC. : Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant, Unregistered Sale of Equity Securities, Financial Statements and Exhibits (form 8-K)
Summary
Initially, the Company will be required to deliver 125% of the amount of common shares that would be deliverable to the Investor based on a conversion price of 80% of the closing price of the Companys common stock on the date preceding a conversion notice. After the completion of the Measurement Period and calculation of the conversion price for each conversion, the Company and the Investor will "true up" the number of shares that either the Company is required to issue or the Investor is required to forfeit in order to reconcile the actual number of shares required to be delivered based on the calculated conversion price.If the Convertible Note has not been fully redeemed or converted by the maturity date the Face Value of any remaining Convertible Note will increase by 15%. Upon any event of default, the interest rate increases to 15% and the Face Value increases to 115% of all amounts (principal, plus original issue discount, plus accrued interest, plus late fees or other charges).The Convertible Note also provides adjustments that will result in additional shares issued to the Investor upon the occurrence of certain corporate actions, for example, dividends, reverse stock splits, stock splits, rights offerings, subsequent equity financing transactions, tender offers, etc. The Convertible Note also provides that the Investor is entitled to receive consideration that common shareholders receive in the event of certain "Fundamental Transactions," as defined.The Securities Purchase Agreement included customary representations and covenants for the sale and purchase of securities. In addition, the Securities Purchase Agreement has a covenant of the Investor not to take short positions in the Companys stock while the Convertible Note is outstanding.The foregoing descriptions of the Securities Purchase Agreement and the Convertible Note are qualified in their entirety by the Securities Purchase Agreement and the Convertible Note, which are incorporated herein by reference and is attached hereto as Exhibit 10.1 and Exhibit 10.2, respectively.