to GMS Tenshi does not occur, and we enter into any Alternative Transaction through the date that is 12 months following the termination of the Purchase Agreement in accordance with Article VIII thereof, we agreed to pay GMS Tenshi an amount equal to $12,500,000 as liquidated damages, in addition to other expenses as agreed to in the Purchase Agreement.
We intend to use the net proceeds from the Private Placement, primarily for the (i) purpose of developing ONS-3010 and (ii) other purposes set forth in an agreed budget, in each case, in accordance with such approved budget, and not for any other purpose. We are also obligated to pay and reimburse GMS Tenshi for its fees and expenses, regardless of whether the transactions contemplated by the Purchase Agreement are consummated.
The Purchase Agreement contains ordinary and customary provisions for agreements of its nature, such as representations, warranties, covenants and indemnification obligations. In addition to customary termination rights, the Purchase Agreement may be terminated prior to closing the sale of the remaining securities to GMS Tenshi if our stockholders do not approve the transactions contemplated by the Purchase Agreement (as requested in this Proposal 3), or if the second closing shall not have occurred prior to January 31, 2018. Additionally, we may be required to pay GMS Tenshi a termination fee if it terminates the Purchase Agreement under certain circumstances.
The number of shares of common stock GMS Tenshi will receive upon conversion of the Series A Preferred or exercise of the warrants, and the exercise price for such shares, will be adjusted for stock splits, stock dividends, combinations, reclassifications or other recapitalizations affecting our common stock.
The Series A Preferred will be convertible into common stock at any time. Pursuant to the NASDAQ Listing Rules, GMS Tenshi will not be permitted to cast votes as to this Proposal 3 with respect to the 32,628 shares of Series A Preferred acquired on September 11, 2017 pursuant to the Purchase Agreement.
Accordingly, if stockholder approval is received, and we issue to GMS Tenshi all of the securities contemplated by the Purchase Agreement, GMS Tenshi will hold securities giving it the right to acquire an aggregate of 54,545,948 shares of our common stock, will have the right to vote all of its shares of Series A Preferred on an as converted basis, and will beneficially own approximately 68.5% of our common stock (based on 24,676,365 shares issued and outstanding on September 7, 2017).
The Series A Preferred is voting stock, and accordingly, GMS Tenshi would control our company even if it does not convert its shares of Series A Preferred into common stock.
We may also be required to issue additional shares of our common stock pursuant to the terms of the Series A Preferred, as the Series A Preferred are entitled to a quarterly dividend, which accrues at a rate of 10% per annum, and is payable in cash or additional shares of Series A Preferred at our option. Accordingly, we may issue additional shares of Series A Preferred, which would be convertible into shares of our common stock on the same terms as provided in the Certificate of Designation, described below.
Accordingly, we are seeking stockholder approval for (a) the issuance of the additional shares of Series A Preferred (and common stock upon conversion thereof) as contemplated by the Purchase Agreement, (b) the issuance of the Warrants (and common stock upon exercise thereof) as contemplated by the Purchase Agreement, and (c) issuance of additional shares of Series A Preferred (and common stock upon conversion thereof), as contemplated by the terms of the Series A Preferred as reflected in the Certificate of Designation, and described below.
Exchange Agreement
On September 7, 2017, we also entered into the Exchange Agreement with Sabby pursuant to which Sabby agreed to forgive $1.5 million in aggregate outstanding principal, plus unpaid but accrued interest, of our senior secured promissory notes issued in April 2017 pursuant to the Note and Warrant Purchase Agreement dated December 22, 2016, and amended April 13, 2017, as further amended in connection with the Private Placement, in exchange for 1,500,000 shares of our newly-created Series B Non-Voting Convertible Preferred Stock, par value $0.01 per share, or the Series B Preferred. The Series B Preferred will initially be convertible into 2,112,676 shares of our common stock, at the stated conversion rate of $0.71 per share, which conversion rate was lower than the market price of our common stock on September 7, 2017.