NXL 8-K
Nexalin Technology, Inc. (NXL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone
number, including area code:
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
| The |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
| Item 1.01 | Entry into a Material Definitive Agreement. |
Securities Purchase Agreement
On August 19, 2026, Nexalin Technology, Inc. (the “Company”) entered into a securities purchase agreement (the “Purchase Agreement”) with a single institutional investor (the “Investor”), pursuant to which the Company agreed to issue and sell to such Investor in a registered direct offering 2,419,355 shares (the “Shares”) of common stock, par value $0.001 per share (the “Common Stock”), of the Company, at an offering price of $0.31 per share (such registered direct offering, the “Registered Offering”).
Pursuant to the Purchase Agreement, the Company also agreed to issue and sell to such Investor, in a concurrent private placement, common stock warrants (the “Common Warrants”) to purchase up to 1,209,677 shares of Common Stock (the “Common Warrant Shares”), at an exercise price of $0.50 per share. The Common Warrants will be immediately exercisable and will expire one year after the issuance date.
The gross proceeds to the Company from the Registered Offering are expected to be approximately $750,000, before deducting offering expenses payable by the Company. In addition, if the holders of the Common Warrants exercise such warrants in full for cash, the Company would receive additional gross proceeds of approximately $604,839. However, the Company cannot predict when or if Common Warrants will be exercised for cash or exercised at all. The Common Warrants may be exercised only on a cashless basis if, at the time of exercise, there is no effective registration statement registering, or the prospectus contained therein is not available for, the issuance of the Common Warrant Shares to the holder thereof.
The Registered Offering and concurrent private placement (collectively, the “Offerings”) are expected to close on or about August 20, 2026 (the “Closing Date”), subject to the satisfaction of customary closing conditions.
The Purchase Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company, including for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”), other obligations of the parties, and termination provisions. The representations, warranties and covenants contained in the Purchase Agreement were made only for the purposes of such agreement and as of the specific dates, were solely for the benefit of the parties to such agreement and may be subject to limitations agreed upon by the contracting parties.
The Shares were offered by the Company pursuant to its shelf registration statement on Form S-3 (File No. 333-286711), which was declared effective by the Securities and Exchange Commission (the “SEC”) on April 29, 2025, and the base prospectus contained therein, as supplemented by a prospectus supplement, dated August 19, 2026,filed by the Company with the SEC on August 20, 2026.
The Company has agreed to file a registration statement on Form S-1 or Form S-3 providing for the resale of the Common Warrant Shares as soon as practicable, and in any event within 20 business days following the date of the Purchase Agreement, and to use best efforts to cause such registration statement to become effective within 60 days (or 75 days in the event of a “full review” by the SEC) following the filing date thereof, and to keep such registration statement effective until the earlier of (i) the date on which the Investor no longer owns any Common Warrants or Common Warrant Shares and (ii) the date on which no Common Warrants are outstanding and all Common Warrant Shares may be sold pursuant to Rule 144 without regard to volume limitations.
Maxim Group LLC (“Maxim”) acted as the Company’s non-exclusive financial advisor in connection with the Offerings pursuant to a financial advisory agreement, dated August 19, 2026, between the Company and Maxim (the “Financial Advisor Agreement”), pursuant to which the Company agreed to pay Maxim a non-refundable cash advisory fee of $100,000 upon the closing of the Offerings. The Company also agreed to indemnify Maxim against certain liabilities arising out of its engagement. Maxim did not act as an underwriter or placement agent in connection with the Offerings, and no underwriting discounts or commissions were payable in connection therewith.
1
Any Market Purchase Agreement
Additionally, on August 19, 2026, the Company entered into an any market purchase agreement (the “AMPA”) with Alumni Capital LP (the “Purchaser”), which is also the Investor in the Offerings, whereby the Company has the right, but not the obligation, to sell to the Purchaser, and the Purchaser is obligated to purchase, up to an aggregate of $15 million (the “Investment Amount”) of shares (the “AMPA Shares”) of the Common Stock in a series of purchases.
The term of the AMPA commences on the date the Purchaser receives the commitment fee described below and ends on the earliest of (i) the date on which the Common Stock ceases to trade on a principal market, (ii) the date on which the Purchaser shall have purchased AMPA Shares pursuant to the AMPA for an aggregate purchase price equal to the Investment Amount and (iii) December 31, 2027. During the term, and after the Resale Registration Statement (as defined below) has been declared effective by the SEC and the other conditions to the commencement of sales set forth in the AMPA have been satisfied, the Company may at its election cause the Purchaser to make a series of purchases of AMPA Shares, each up to $1 million, or up to $5 million upon mutual written agreement between the Purchaser and the Company; provided that, if the Company elects the second pricing option described below, the applicable purchase is further limited to 30% of the average daily trading volume of the Common Stock on the date the applicable purchase notice is delivered. The closing of each purchase pursuant to the AMPA will occur no later than the business day immediately following (i) three business days after the applicable purchase notice date, if the Company elects the first pricing option, or (ii) one business day after the applicable purchase notice date, if the Company elects the second pricing option. The Company expects to consider market conditions, the trading price of the Common Stock and the availability of other sources of financing when determining whether to make sales under the AMPA.
The issuance of the AMPA Shares, the Commitment Securities and the Pre-Funded Warrants to the Purchaser will be made in reliance upon exemptions from the registration requirements of the Securities Act provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. In consideration for the Purchaser’s execution and delivery of, and performance under, the AMPA, the Company has agreed to pay the Purchaser a commitment fee equal to 2% of the Investment Amount, or $300,000, payable at the Company’s election either in cash or in shares of Common Stock (or, at the Purchaser’s election, Pre-Funded Warrants) (the “Commitment Securities”), which fee increases to 3% of the Investment Amount if the Common Stock ceases to be listed on The Nasdaq Capital Market during the 30 business day period following the date of the AMPA. Pursuant to the AMPA, the Company must file with the SEC, not later than 20 business days following the date of the AMPA, a registration statement on Form S-1 covering the offer and sale by the Purchaser of the AMPA Shares, the Commitment Securities, the shares underlying the Pre-Funded Warrants and the Common Warrant Shares, and must use best efforts to cause such registration statement to be declared effective within 60 days following the date of the AMPA. If the Company fails to timely file such registration statement, or if such registration statement is not declared effective by such deadline, the Company must pay the Purchaser $175,000 as liquidated damages. The Company may not deliver any purchase notice, and no purchases of AMPA Shares will occur, under the AMPA unless and until the Resale Registration Statement has been declared effective by the SEC.
The purchase price of the AMPA Shares that the Company elects to sell to the Purchaser pursuant to the AMPA will be, at the Company’s election in each purchase notice, equal to either (i) the lowest daily volume weighted average price of the Common Stock for the three business days prior to the applicable closing date, multiplied by 92%, or (ii) the lowest traded price of the Common Stock for the business day prior to the applicable closing date, multiplied by 97%.
The number of AMPA Shares to be purchased by the Purchaser at any time under the AMPA shall not exceed the number of such shares of Common Stock that, when aggregated with all other shares of Common Stock beneficially owned by the Purchaser (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended), would result in the Purchaser beneficially owning more than 4.99% of the outstanding Common Stock. The beneficial ownership limitation may be increased by the Purchaser, in its sole discretion upon written notice to the Company, to permit the Purchaser to beneficially own up to 9.99% of the outstanding Common Stock. To the extent that the beneficial ownership limitation would be exceeded in connection with a closing, at the election of the Purchaser, the number of securities issuable to the Purchaser may be reduced or the securities issuable in excess of the beneficial ownership limitation may be issued as pre-funded warrants (the “Pre-Funded Warrants”).
2
In no event may the Company issue to the Purchaser under the AMPA AMPA Shares in an amount greater than the aggregate number of shares of Common Stock that the Company may issue without breaching its obligations under the rules and regulations of The Nasdaq Stock Market LLC, including Nasdaq Listing Rule 5635(d) (the “Exchange Cap”), unless the Company obtains stockholder approval to issue shares of Common Stock in excess of the Exchange Cap or obtains a written opinion from outside counsel that such approval is not required. In any event, the AMPA provides that the Company may not issue or sell any shares of Common Stock under the AMPA if such issuance or sale would breach any applicable rules of The Nasdaq Stock Market LLC.
This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy any of the securities described herein, nor shall there be any offer or sale of such securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.
The foregoing descriptions of the Purchase Agreement, the Common Warrants, the AMPA and the Pre-Funded Warrants do not purport to be complete and are qualified in their entirety by reference to the full text of such agreements, copies of which are filed as Exhibits 10.1, 4.1, 10.2 and 4.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
A copy of the legal opinion and consent of Thompson Hine LLP relating to the Shares is attached hereto as Exhibit 5.1.
| Item 3.02 | Unregistered Sales of Equity Securities. |
The information set forth in Item 1.01 of this Current Report on Form 8-K with respect to the Common Warrants, the Common Warrant Shares, the AMPA Shares, the Commitment Securities, the Pre-Funded Warrants and the shares of Common Stock underlying the Pre-Funded Warrants (the “Pre-Funded Warrant Shares”) is incorporated herein by reference.
The Common Warrants will be issued at the closing of the Offerings, and the AMPA Shares, the Commitment Securities and the Pre-Funded Warrants will be issued, if at all, from time to time under the AMPA, in each case in private placements pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) thereof as transactions not involving a public offering and/or Rule 506(b) of Regulation D promulgated thereunder as sales to an accredited investor. The Purchaser represented that it is an “accredited investor” as defined in Rule 501(a) of Regulation D and that it is acquiring such securities for its own account and not with a view to, or for resale in connection with, any distribution thereof, and such securities were offered, and were or will be sold, without any form of general solicitation or general advertising. The Common Warrant Shares and the Pre-Funded Warrant Shares have not been registered under the Securities Act and will be issued, if at all, pursuant to the same exemptions. The Pre-Funded Warrants, if issued, will have a nominal exercise price of $0.001 per share, will be immediately exercisable and will expire when exercised in full. The number of AMPA Shares, Commitment Securities and Pre-Funded Warrants to be issued is not presently determinable because it depends on the purchase prices determined under the AMPA, subject to the Investment Amount, the beneficial ownership limitation and the Exchange Cap described in Item 1.01. Other than the $100,000 advisory fee payable to Maxim described in Item 1.01, no underwriting discounts or commissions were or will be paid in connection with such issuances.
3
| Item 9.01 | Financial Statements and Exhibits. |
| Exhibit No. | Description | |
| 4.1 | Form of Common Warrant | |
| 4.2 | Form of Pre-Funded Warrant | |
| 5.1 | Opinion of Thompson Hine LLP, dated August 20, 2026 | |
| 10.1* | Securities Purchase Agreement, dated August 19, 2026 | |
| 10.2* | Any Market Purchase Agreement, dated August 19, 2026, by and between Nexalin Technology, Inc. and Alumni Capital LP | |
| 23.1 | Consent of Thompson Hine LLP (included Exhibit 5.1 above) | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
| * | Pursuant to Item 601(b)(10) of Regulation S-K, certain confidential portions of this exhibit have been omitted as (i) the Company has determined the omitted information is not material and (ii) the Company customarily and actually treats the omitted information as private or confidential |
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: August 20, 2026 | NEXALIN TECHNOLOGY, INC. |
| /s/ Mark White | |
| Mark White | |
| Chief Executive Officer |
5
Exhibit 4.1
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
NEXALIN TECHNOLOGY, INC.
| Warrant Shares: | Issue Date: August 19, 2026 |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Alumni Capital LP 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 or times on or after the date hereof (the “Initial Exercise Date”)and on or prior to 5:00 p.m. (New York City time) on the one-year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Nexalin Technology, Inc., a Delaware corporation (the “Company”), up to 1,209,677 shares of common stock, par value $0.001 per share (the “Common Stock”) (as subject to adjustment hereunder, the “Warrant Shares”). 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 August 19, 2026, between the Company and the Holder.
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 PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto as Exhibit A (the “Notice of Exercise”). Within the earlier of (i) one (1) Trading Day 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 number of Warrant 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, at which time, 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 purchasable hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder by the number of Warrant Shares equal to the applicable number of Warrant Shares purchased in connection with such partial exercise. 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) Trading 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 $0.50, subject to adjustment hereunder (the “Exercise Price”).
(c) Cashless Exercise. Notwithstanding anything to the contrary set forth herein, 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 only 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) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) the greater of (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the highest Bid Price of the Common Stock on the Principal Market as reported by Bloomberg L.P. (“Bloomberg”) 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 holding period of the Warrant Shares being issued may be tacked on to the holding period of this Warrant. 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 the Principal Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Principal Market on which the Common Stock is then listed or quoted as reported by Bloomberg (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 Principal Market, the VWAP 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 on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of 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.
“Trading Day” means any day on which the Principal Market is open for trading, including any day on which the Principal Market is open for trading for a period of time less than the customary time.
2
“VWAP” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded), during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, or if the foregoing does not apply, the dollar volume-weighted average price of such security in any principal quotation system operated by OTC Markets Group Inc. or other principal exchange or recognized quotation system which is at the time the principal trading platform or market for such security during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, or, if no dollar volume-weighted average price is reported, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and Holder, in good faith. If the Company and Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 5.9 of the Purchase Agreement. All such determinations shall be appropriately adjusted for any share dividend, share split, share combination, recapitalization, or other similar transaction during such period.
(d) Mechanics of Exercise.
(i) Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted 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 Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 (assuming cashless exercise of the Warrant), and otherwise by physical delivery of the Warrant Shares, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares set forth in the Notice of Exercise to the address specified by the Holder in such Notice of Exercise by the date that is the earliest of (i) one (1) 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 third Trading Day after the Warrant Share Delivery Date) 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 (the “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 Principal Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise. Notwithstanding the foregoing, with respect to any Notice(s) of Exercise delivered on or prior to 9:00 a.m. (New York City time) on the Initial Exercise Date, which may be delivered at any time after the time of execution of the Purchase Agreement, the Company agrees to deliver, or cause to be delivered, the Warrant Shares subject to such notice(s) by 4:00 p.m. (New York City time) on the Initial Exercise Date, and the Initial Exercise Date shall be the Warrant Share Delivery Date for purposes hereunder, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received by such Warrant Share Delivery Date. 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 will be less than the amount stated on the face hereof (until and unless this Warrant is replaced pursuant to Section 2(d)(ii) below).
3
(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 (subject to receipt of the aggregate exercise price for the applicable exercise (other than in the case of a cashless exercise), 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 Warrant Shares 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 shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of Warrants 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 satisfactory to the Company with respect to 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 Warrant Shares upon exercise of the Warrant as required pursuant to the terms hereof.
(v) No Fractional Shares or Scrip. No fractional Warrant Shares or scrip representing fractional Warrant 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 and in lieu of the issuance of such fractional Warrant Share, either (i) pay cash in an amount equal to such fraction multiplied by the Exercise Price or (ii) round up to the next whole Warrant Share.
(vi) Charges, Taxes and Expenses. The issuance and delivery 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, the Notice of Exercise shall be accompanied by the Assignment Form, attached hereto as Exhibit B, 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 and this Warrant shall be surrendered to the Company and, if any portion of this Warrant remains unexercised, a new Warrant in the form hereof shall be delivered to the assignee. 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.
4
(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 all or any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance upon exercise as set forth on the applicable Notice of Exercise, the Holder (together with (i) the Holder’s Affiliates, (ii) any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates, and (iii) any other Persons whose beneficial ownership of the shares of Common Stock would or could be aggregated with the Holder’s for the purposes of Section 13(d) (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 the Warrant Shares 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 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of Warrant Shares 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 Common Stock outstanding immediately after giving effect to the issuance of Warrant Shares 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 be effective on the day 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.
5
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 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 Warrant Shares 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 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 remains 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 reclassification.
(b) [RESERVED.]
(c) 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 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, that, 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).
(d) 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, 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, that, 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).
6
(e) 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 (or any Subsidiary), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of the Company’s 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 greater than 50% of the voting power of the common equity of the Company, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of shares of Common Stock or any compulsory share exchange pursuant to which the shares of Common Stock are 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 greater than 50% of the voting power of the common equity of the Company (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 (or its equivalents) 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. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within thirty (30) days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder, as described below, an amount of consideration equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction, provided, however, that, if the Fundamental Transaction is not within the Company’s control, including not approved by the Company’s Board of Directors, Holder shall only be entitled to receive from the Company or any Successor Entity, as of the date of the consummation of such Fundamental Transaction the same type or form of consideration (and in the same proportion), valued at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided further, that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of Common Stock will be deemed to have received shares of the Successor Entity (which Successor Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement
7
of the applicable contemplated Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365-day annualization factor) as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction, (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date and (E) a zero cost of borrow. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds within five Business Days of the Holder’s election (or, if later, on the effective date of the 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 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.
(f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share of Common Stock, 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.
(g) 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 declares a dividend (or any other distribution in whatever form) on the shares of Common Stock, (B) the Company declares a special nonrecurring cash dividend on or a redemption of the shares of Common Stock, (C) the Company authorizes the granting to all holders of the shares of 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 shareholders of the Company is required in connection with a Fundamental Transaction, or (E) the Company authorizes 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 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.
(h) Voluntary Adjustment By Company. Subject to the rules and regulations of the Principal Market, the Company may at any time while this Warrant is outstanding, 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 in its sole discretion.
8
Section 4. Transfer of Warrant.
(a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof, and to the provisions of Section 4.1 of the Purchase Agreement, 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 as Exhibit B 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.
(d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant is not (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, comply with the provisions of Section 5.7 of the Purchase Agreement.
(e) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempt under the Securities Act.
Section 5. Miscellaneous.
(a) No Rights as Stockholder Until Exercise; No Settlement in Cash. 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. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.
(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.
9
(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 Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.
(d) Authorized Shares. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued shares of Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares underlying 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, and the Warrant Shares, delivered, as provided herein without violation of any applicable law or regulation, or of any requirements of the Principal Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares underlying this Warrant, 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 shares of Common Stock, (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 shares of Common Stock upon the exercise of this Warrant and (iii) use best 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 if the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws, until the Warrant Shares are registered pursuant to an effective registration statement in accordance with the terms of the Purchase Agreement.
10
(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 share of 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)
11
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.
| NEXALIN TECHNOLOGY, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
12
EXHIBIT A
NOTICE OF EXERCISE
A-1
EXHIBIT B
ASSIGNMENT FORM
B-1
Exhibit 4.2
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
PRE-FUNDED COMMON SHARE PURCHASE WARRANT
NEXALIN TECHNOLOGY, INC.
| Warrant Shares: | Initial Exercise Date: August 19, 2026 |
THIS PRE-FUNDED COMMON SHARE PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Alumni Capital LP, a Delaware limited partnership 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”) until this Warrant is exercised in full (the “Termination Date”) but not thereafter, to subscribe for and purchase from Nexalin Technology, Inc., a Delaware corporation (the “Company”), Common Shares (as subject to adjustment hereunder, the “Warrant Shares”). The purchase price of one Common Share 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 the Purchase Agreement (as defined below). In addition to the terms defined elsewhere in this Warrant, the following terms shall have the meanings indicated in this Section 1:
“Attribution Parties” shall have the meaning specified in Section 2(e).
“Alternate Consideration” shall have the meaning specified in Section 3(e).
“Bid Price” shall mean, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Shares are then listed or quoted on a Principal Market, the bid price of the Common Shares for the time in question (or the nearest preceding date) on the Principal Market on which the Common Shares are then listed or quoted as reported by Bloomberg L.P. (based on a Business 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 Principal Market, the volume weighted average price of the Common Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Shares are not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Shares are then reported on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per Common Share so reported, or (d) in all other cases, the fair market value of a Common Share as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“Bloomberg” shall have the meaning specified in Section 2(c).
“Buy-In” shall have the meaning specified in Section 2(d)(iv).
“Company” shall have the meaning specified in the Preamble.
“Distribution” shall have the meaning specified in Section 3(d).
“DWAC” shall have the meaning specified in Section 2(d)(i).
“Exercise Price” shall have the meaning specified in Section 2(b).
“Fundamental Transaction” shall have the meaning specified in Section 3(e).
“Holder” shall have the meaning specified in the Preamble.
“Initial Exercise Date” shall have the meaning specified in the Preamble.
“Notice of Exercise” shall have the meaning specified in the Section 2(a).
“Purchase Agreement” shall mean that Any Market Purchase Agreement, dated August 19, 2026, between the Company and Holder.
“Purchase Rights” shall have the meaning specified in Section 3(c).
“Standard Settlement Period” shall have the meaning specified in Section 2(d)(i).
“Successor Entity” shall have the meaning specified in Section 3(e).
“Termination Date” shall have the meaning specified in the Preamble.
“Warrant” shall have the meaning specified in the Preamble.
“Warrants” shall mean this Warrant and other Pre-Funded Common Share purchase warrants issued by the Company on August 19, 2026 in connection with the Purchase Agreement.
“Warrant Register” shall have the meaning specified in Section 4(c).
“Warrant Shares” shall have the meaning specified in the Preamble.
“Warrant Share Delivery Date” shall have the meaning specified in Section 2(d)(i).
“Warrant Pricing Dispute” shall have the meaning specified in Section 5(e).
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 PDF copy submitted by e-mail (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) Business Days and (ii) the number of Business 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)
2
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 as soon as reasonably practicable following 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 on the 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 aggregate exercise price of this Warrant, except for a nominal exercise price of $0.001 per Warrant Share, was pre-funded to the Company on or prior to the Initial Exercise Date and, consequently, no additional consideration (other than the nominal exercise price of $0.001 per Warrant Share) shall be required to be paid by the Holder to any Person to effect any exercise of this Warrant. The Holder shall not be entitled to the return or refund of all, or any portion, of such pre-paid aggregate exercise price under any circumstance or for any reason whatsoever. The remaining unpaid exercise price per Common Share under this Warrant shall be $0.001, subject to adjustment hereunder (the “Exercise Price”).
(c) Cashless Exercise. 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 Business Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) delivered pursuant to Section 2(a) hereof on a day that is not a Business Day or (2) delivered pursuant to Section 2(a) hereof on a Business Day prior to the opening of “regular trading hours” (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Business Day, (ii) the highest Bid Price of the Common Shares on the Principal Market as reported by Bloomberg L.P. (“Bloomberg”) 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 Business Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Business 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 Business Day and such Notice of Exercise is delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Business 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 characteristics of the Warrants being exercised, and the holding period of the Warrant Shares being issued may be tacked on to the holding period of this Warrant. The Company agrees not to take any position contrary to this Section 2(c).
3
(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) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 (assuming cashless exercise of the Warrants), and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder, its designee, or a transferee holder of this Warrant, as applicable, 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 earlier of (i) one (1) Business Day after the delivery to the Company of the Notice of Exercise and (ii) the number of Business 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) one (1) Business Day and (ii) the number of Business 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 Shares on the date of the applicable Notice of Exercise), $25 per Business Day (increasing to $50 per Business Day on the third (3rd) Business Day after the Warrant Share Delivery Date) for each Business 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 Business Days, on the Company’s Principal Market with respect to the Common Shares as in effect on the date of delivery of the Notice of Exercise. Notwithstanding the foregoing, with respect to any Notice(s) of Exercise delivered on or prior to 4:00 p.m. (New York City time) on the Business Day prior to the Initial Exercise Date, which may be delivered at any time after the time of execution of the Purchase Agreement, the Company agrees to deliver the Warrant Shares subject to such notice(s) by 4:00 p.m. (New York City time) on the Initial Exercise Date and the Initial Exercise Date shall be the Warrant Share Delivery Date for purposes hereunder, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received by such Warrant Share Delivery Date.
(ii) Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of the Holder, its designee, or a transferee holder of this Warrant, as applicable, 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.
4
(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, Common Shares 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 Common Shares 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 Common Shares that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Shares having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of Common Shares 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 with written notice indicating the amounts payable to the Holder with respect to the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit the Holder’s, its designee, or a transferee holder of this Warrant, as applicable, 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 Common Shares 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 such 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.
5
(e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and the Holder, its designee, or a transferee holder of this Warrant, as applicable, 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 in the Purchase Agreement). For purposes of the foregoing sentence, the number of Common Shares beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of Common Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of Common Shares 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 Share 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 Common Shares, the Holder, its designee, or a transferee holder of this Warrant, as applicable, may rely on the number of outstanding Common Shares 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 Common Shares outstanding. Upon the written or oral request of the Holder or a transferee holder of this Warrant, as applicable, the Company shall, within one (1) Business Day, confirm in writing to the Holder the number of Common Shares then outstanding. In any case, the number of outstanding Common Shares 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 Common Shares was reported. 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 contained herein 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 the Common Shares, Common Share Equivalents, any other equity or equity equivalent securities payable in Common Shares (which, for avoidance of doubt, shall not include any Common Shares issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding Common Shares into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding Common Shares into a smaller number of shares, or (iv) issues by reclassification of the Common Shares 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 Common Shares (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of Common Shares 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 equityholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.
6
(b) Intentionally omitted.
(c) 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 Share Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Shares (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 Common Shares 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 Common Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, 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 Common Shares 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).
(d) 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 Common Shares, 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, 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 Common Shares 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 Common Shares are to be determined for the participation in such Distribution (provided, however, that, 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 Common Shares 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).
(e) Fundamental Transaction. If, at any time while this Warrant is outstanding, the Company, directly or indirectly, in one or more related transactions, effects, is, or becomes party to (i) any merger or consolidation of the Company with or into another Person (other than for the purpose of changing the jurisdiction of incorporation or organization of the Company or a holding company for the Company), (ii) any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets, (iii) any purchase offer, tender offer, or exchange offer pursuant to which holders of Common Shares are permitted to sell, tender, or exchange their shares for other securities, cash or property which has been accepted by the holders of greater than 50% of the outstanding Common Stock or greater than 50% of the voting power of the common equity of the Company, (iv) any reclassification, reorganization or recapitalization of the Common Shares or any compulsory share exchange pursuant to which the Common Shares are effectively converted into or exchanged for other securities, cash or property, or (v) 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 greater than fifty percent (50%) of the outstanding Common Shares or greater than fifty percent (50%) of the voting power of the common equity of the Company (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 Common Shares 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 Common Shares
7
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 Common Share 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 Shares 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 other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to, and approved by, the Holder 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 number of Common Shares 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 to such shares of capital stock (but taking into account the relative value of the Common Shares 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 be added to the term “Company” under this Warrant (so that from and after the occurrence or consummation of such Fundamental Transaction, each and every provision of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to each of the Company and the Successor Entity or Successor Entities, jointly and severally), and the Successor Entity or Successor Entities, jointly and severally with the Company, may exercise every right and power of the Company prior thereto and the Successor Entity or Successor Entities shall assume all of the obligations of the Company prior thereto under this Warrant and the other Transaction Documents with the same effect as if the Company and such Successor Entity or Successor Entities, jointly and severally, had been named as the Company herein. For the avoidance of doubt, the Holder shall be entitled to the benefits of the provisions of this Section 3(e) regardless of (i) whether the Company has sufficient number of authorized Common Shares for the issuance of Warrant Shares and/or (ii) whether a Fundamental Transaction occurs prior to the Initial Exercise Date.
(f) 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 Common Shares deemed to be issued and outstanding as of a given date shall be the sum of the number of Common Shares (excluding treasury shares, if any) issued and outstanding.
(g) 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 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.
8
(ii) Notice to Allow Exercise by Holder. If (A) the Company declares a dividend (or any other distribution, regardless of method or form) on the Common Shares, (B) the Company declares a special nonrecurring cash dividend on or a redemption of the Common Shares, (C) the Company authorizes the granting to all holders of the Common Shares 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 equityholders of the Company is or becomes required in connection with any reclassification of the Common Shares, any consolidation or merger to which the Company (or any of its Subsidiaries) is a party, any sale or transfer of all or substantially all of its assets, or any compulsory share exchange whereby the Common Shares are converted into other securities, cash or property, or (E) the Company authorizes 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 email to the Holder at its last email address as it shall appear upon the Warrant Register of the Company, at least twenty (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 Shares 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 Shares of record shall be entitled to exchange their Common Shares for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, as applicable; 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 otherwise expressly set forth herein.
Section 4 Transfer of Warrant.
(a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof, 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) Business 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.
9
(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.
(d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or a transferee holder of this Warrant, as applicable, (A) execute and deliver to the Company a written representation letter, in form and substance reasonably satisfactory to the Company, to the effect that the transferee (1) is an “accredited investor” as defined in Rule 501(a) under the Securities Act, (2) is acquiring this Warrant for its own account, for investment purposes, and not with a view to, or for resale or distribution in connection with, any distribution thereof in violation of the Securities Act or any applicable state securities laws, and (3) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in this Warrant, and (B) if reasonably requested by the Company, furnish to the Company, at the Company’s expense, an opinion of counsel to the Holder or such transferee, reasonably satisfactory to the Company, to the effect that such transfer may be effected without registration under the Securities Act. The Company shall not unreasonably withhold, condition, or delay its determination that the representations, and, if applicable, the opinion, furnished under this Section 4(d) are reasonably satisfactory.
(e) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
Section 5 Miscellaneous.
(a) No Rights as Stockholder Until Exercise; No Settlement in Cash. 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. Without limiting any rights of the Holder or a transferee holder of this Warrant, as applicable, to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.
(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.
10
(d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Shares 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 of the rules or requirements of the Principal Market (including rules or guidance promulgated by the governing body of the Principal Market and the SEC, including, without limitation, threatened or anticipated rules, requirements, or guidance) upon which the Common Shares 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 the Holder or a transferee holder of this Warrant, as applicable, 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, appropriate or beneficial 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 best 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 to the number of Warrant Shares for which this Warrant is exercisable or to 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. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware. The Company and each Holder hereby irrevocably submits to the exclusive jurisdiction of the Chancery Court of the State of Delaware and the United States District Court for the District of Delaware for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action, or proceeding, any claim that is not personally subject to the jurisdiction of such courts or that such courts are improper or inconvenient venues for such proceeding. The Company and each Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action, or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the
11
address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. The Company and each Holder hereby irrevocably waives, to the fullest extent permitted by applicable law, any right to trial by jury in any legal proceeding arising out of or relating to this Warrant or the transactions contemplated hereby. If the Company or any Holder shall commence an action or proceeding to enforce any provisions of this Warrant, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation, and prosecution of such action or proceeding. Notwithstanding the foregoing and any language to the contrary in this Warrant, any dispute, controversy, or claim between the Company and the Holder arising out of or relating to the determination of VWAP, Bid Price, or any other calculation under Section 2(c) or Section 3 of this Warrant, including the apportionment of Alternate Consideration under Section 3(e) (each, a “Warrant Pricing Dispute”), shall be resolved exclusively in accordance with the arbitration procedures set forth in Section 11.17(a) of the Purchase Agreement, mutatis mutandis, as though each reference therein to a “Pricing Dispute” were a reference to a Warrant Pricing Dispute, each reference to the “Company” and the “Investor” were a reference to the Company and the Holder, respectively, and each reference to “this Agreement” were a reference to this Warrant. For the avoidance of doubt, this paragraph does not limit the jurisdiction, venue, or jury trial waiver provisions set forth above in this Section, which shall continue to apply to all disputes other than a Warrant Pricing Dispute.
(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 Section 11.19 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 Shares or as an equityholder 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 and seek all remedies granted by law and in equity, 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, without the necessity of showing economic loss and without any bond or other security being required.
(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, a transferee holder of this Warrant, or a holder of Warrant Shares.
12
(l) Amendment. Other than Section 2(e) and Section 5(a), which may not be amended, modified, or waived, the provisions of this Warrant may be modified, waived or amended by a written instrument signed by the Company, on the one hand, and the Holder, or a transferee holder of this Warrant, as applicable, on the other hand.
(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)
13
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.
| NEXALIN TECHNOLOGY, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
14
NOTICE OF EXERCISE
15
ASSIGNMENT FORM
16
Exhibit 5.1
August 20, 2026
Nexalin Technology, Inc.
1776 Yorktown, Suite 550
Houston, Texas 77056
| Re: | Registration Statement on Form S-3 (File No. 333-286711) |
Ladies and Gentlemen:
We have acted as counsel to Nexalin Technology, Inc., a Delaware corporation (the “Company”), in connection with the offering, pursuant to the Securities Purchase Agreement, dated August 19, 2026 (the “Purchase Agreement”), by and between the Company and the investors identified on the signature pages thereto, of 2,419,355 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at an exercise price of $0.31 per share in a registered direct offering The Shares are registered and to be issued pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-286711), originally filed with the U.S. Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), on April 23, 2025, and declared effective on April 29, 2025 (the “Registration Statement”). The prospectus included in the Registration Statement, including the documents incorporated by reference therein, is referred to herein as the “Base Prospectus.” The prospectus supplement, dated August 19, 2026, to be filed with the Commission pursuant to Rule 424(b)(5) under the Securities Act is referred to herein as the “Prospectus Supplement.” The Base Prospectus and the Prospectus Supplement are collectively referred to as the “Prospectus.”
In connection with this opinion, we have examined the Registration Statement, the Prospectus, the Purchase Agreement, and copies of such agreements, instruments, and documents as we have deemed appropriate to render the opinion hereinafter expressed. In such examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photostatic copies, and the authenticity of the originals of such latter documents. As to certain questions of fact material to this opinion, we have relied upon certificates or comparable documents of officers and representatives of the Company and have not sought to independently verify such facts.
Based on the foregoing, and subject to the assumptions, limitations, and qualifications stated herein, we are of the opinion that the Shares, when issued and delivered pursuant to the terms of the Purchase Agreement against payment of the consideration therefor as provided in the Purchase Agreement, will be validly issued, fully paid and non-assessable.
The opinion expressed herein is limited to the General Corporation Law of the State of Delaware and the laws of the State of New York, in each case as currently in effect, and we express no opinion as to the effect on the matters covered by this opinion of the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption “Legal Matters” in the Prospectus Supplement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ Thompson Hine LLP
Thompson Hine LLP
Exhibit 10.1
SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE SUCH TERMS
ARE
BOTH NOT MATERIAL AND ARE THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR
CONFIDENTIAL. THESE REDACTED TERMS HAVE BEEN MARKED IN
THIS EXHIBIT WITH
THREE ASTERISKS AS [***].
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is dated as of August 19, 2026, between Nexalin Technology, Inc., a Delaware corporation (the “Company”), and Alumni Capital LP, a Delaware limited partnership (including its successors and assigns, a “Purchaser”).
WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to (i) an effective registration statement under the Securities Act (as defined below) as to the Shares and (ii) an exemption from the registration requirements of Section 5 of the Securities Act contained in Section 4(a)(2) thereof as to the Common Warrants and the Common Warrant Shares, the Company desires to issue and sell to the Purchaser, and the Purchaser desires to purchase from the Company, securities of the Company as more fully described in this Agreement. Common Warrants and Common Warrant Shares are defined below.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:
“AAA” shall have the meaning specified in Section 5.9(a)(iii).
“AAA Rules” shall have the meaning specified in Section 5.9(a)(iii).
“Acquiring Person” shall have the meaning ascribed to such term in Section 4.5.
“Action” shall have the meaning ascribed to such term in Section 3.1(k).
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.
“AMPA” means that certain Any Market Purchase Agreement, dated as of the date hereof, between the Company and the Purchaser, as the same may be amended, restated or otherwise modified from time to time.
“Base Prospectus” shall have the meaning ascribed to such term in Section 3.1(f).
“BHCA” shall have the meaning ascribed to such term in Section 3.1(nn).
“Board of Directors” means the board of directors of the Company.
“BSA/PATRIOT Act” shall have the meaning ascribed to such term in Section 3.2 (f).
“Business Day” means any day except Saturday, Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York generally are open for use by customers on such day.
“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.
“Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchaser’s obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived, but in no event later than the first (1st) Trading Day following the date hereof (or the second (2nd) Trading Day following the date hereof if this Agreement is signed on a day that is not a Trading Day or after 4:00 p.m. (New York City time) and before midnight (New York City time) on a Trading Day).
“Code” means the United States Internal Revenue Code of 1986, as amended.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Company Counsel” means Thompson Hine LLP.
“Company Product” shall have the meaning ascribed to such term in Section 3.1(pp).
“Common Warrant Shares” means the shares of Common Stock issuable upon exercise of the Common Warrants.
“Common Warrants” means, collectively, the Common Stock purchase warrants delivered to the Purchaser at the Closing in accordance with Section 2.2(a) hereof, in the form of Exhibit A attached hereto.
“Disclosure Time” means, (i) if this Agreement is signed on a day that is not a Trading Day or after 9:00 a.m. (New York City time) and before midnight (New York City time) on any Trading Day, 9:01 a.m. (New York City time) on the Trading Day immediately following the date hereof and (ii) if this Agreement is signed between midnight (New York City time) and 9:00 a.m. (New York City time) on any Trading Day, no later than 9:01 a.m. (New York City time) on the date hereof.
“Delaware Arbitration Act” shall have the meaning specified in Section 5.9(a)(i).
“Dispute Submission Deadline” shall have the meaning specified in Section 5.9(a)(iv).
“DVP” shall have the meaning ascribed to such term in Section 2.1(a).
“DWAC” shall have the meaning ascribed to such term in Section 2.2(a)(iv).
“Environmental Law” shall have the meaning ascribed to such term in Section 3.1(n).
“ERISA” shall have the meaning ascribed to such term in Section 3.2(h).
“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(t).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
2
“Exempt Issuance” means the issuance of (i) shares of Common Stock, restricted stock units, or options, including the shares of Common Stock underlying the restricted stock units or options, to consultants, employees, officers, directors, or consultants of the Company pursuant to any stock or option plan or arrangement duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose for services rendered to the Company, in each case, adopted and in effect prior to the date of this Agreement, (ii) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price, or conversion price of such securities (other than in connection with stock splits or combinations or anti-dilution provisions contained therein as disclosed in the SEC Reports and the Prospectus) or to extend the term of such securities, (iii) securities issued pursuant to merger, acquisition, or strategic transactions approved by a majority of the disinterested directors of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith during the prohibition period in Section 4.11(a), and provided, further that any such issuance shall only be to a Person that (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company, or an owner of an asset in a business synergistic with the business of the Company and in which the Company receives benefits in addition to any investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, and (iv) shares pursuant to the Stock Purchase Agreement between the Company and GreenLight Ventures LLC on May 14, 2026.
“FAA” shall have the meaning specified in Section 5.9(a)(i).
“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.
“FDA” shall have the meaning ascribed to such term in Section 3.1(pp).
“FDCA” shall have the meaning ascribed to such term in Section 3.1(pp).
“Federal Reserve” shall have the meaning ascribed to such term in Section 3.1(nn).
“Financial Advisor” means Maxim Group LLC.
“Financial Advisor Agreement” means that certain Financial Advisor Agreement by and between the Company and the Financial Advisor, dated as of the date hereof.
“GDPR” shall have the meaning ascribed to such term in Section 3.1(jj).
“Hazardous Materials” shall have the meaning ascribed to such term in Section 3.1(n).
“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(bb).
“Initial Notice” shall have the meaning specified in Section 5.9(a)(ii).
“Intellectual Property” shall have the meaning ascribed to such term in Section 3.1(q).
“IT Systems and Data” shall have the meaning ascribed to such term in Section 3.1(kk).
“Liens” mean a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right, or other restrictions.
“Material Adverse Effect” shall have the meaning ascribed to such term in Section 3.1(b).
3
“Material Permits” shall have the meaning ascribed to such term in Section 3.1(p).
“Money Laundering Laws” shall have the meaning ascribed to such term in Section 3.1(oo).
“Non-cooperative Jurisdiction” shall have the meaning ascribed to such term in Section 3.2(f).
“OFAC” shall have the meaning ascribed to such term in Section 3.1(ll).
“Offering” means the offering of the Securities hereunder.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Personal Data” shall have the meaning ascribed to such term in Section 3.1(jj).
“Per Share Purchase Price” equals $0.31 subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement and before the Closing Date.
“Policies” shall have the meaning ascribed to such term in Section 3.1(jj).
“Pre-Settlement Period” shall have the meaning ascribed to such term in Section 2.1(b).
“Pre-Settlement Securities” shall have the meaning ascribed to such term in Section 2.1(b).
“Pricing Dispute” shall have the meaning specified in Section 5.9(a)(i).
“Principal Market” means any of the national securities exchanges (i.e. NYSE, NYSE American, The Nasdaq Capital Market, The Nasdaq Global Market, or The Nasdaq Global Select Market), or principal quotation systems (i.e. OTCQX, OTCQB, OTC Pink), or other principal exchange or recognized quotation system which is, on the date in question, the principal trading platform or market for the Common Shares.
“Privacy Laws” shall have the meaning ascribed to such term in Section 3.1(jj).
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition) pending or, to the Company’s knowledge, threatened in writing against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign).
“Prospectus” shall have the meaning ascribed to such term in Section 3.1(f).
“Prospectus Supplement” shall have the meaning ascribed to such term in Section 3.1(f).
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.8.
“Purchaser’s Shares” shall have the meaning ascribed to such term in Section 2.2(a)(iv).
“Registration Statement” shall have the meaning ascribed to such term in Section 3.1(f).
“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
“Required Dispute Documentation” shall have the meaning specified in Section 5.9(a)(iv).
4
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Sanctioned Person” shall have the meaning ascribed to such term in Section 3.2(f).
“Sanctions” shall have the meaning ascribed to such term in section 3.2(f).
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
“Securities” means the Shares, the Common Warrants, and the Common Warrant Shares.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Shares” means the shares of Common Stock issued or issuable to the Purchaser pursuant to this Agreement.
“Shell Bank” shall have the meaning ascribed to such term in Section 3.2(f).
“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include locating and/or borrowing shares of Common Stock).
“Subscription Amount” means, as to the Purchaser, the aggregate amount to be paid for the Securities purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.
“Subsidiary” and “Subsidiaries” means any “significant subsidiary” (as such term is defined in Rule 1-02 of Regulation S-X promulgated by the Commission) of the Company.
“Trading Day” means a day on which the Principal Market is open for trading.
“Transaction Documents” means this Agreement, the Common Warrants, and the Financial Advisor Agreement, including all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“Transfer Agent” means Continental Stock Transfer & Trust Company, the current transfer agent of the Company, with a mailing address of 1 State Street, 30th Floor, New York, NY 10004, and any successor transfer agent of the Company.
“U.S. GAAP” means generally accepted accounting principles in the United States.
“Variable Rate Transaction” shall have the meaning ascribed to such term in Section 4.11(b).
“VWAP” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded), during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, or if the foregoing does not apply, the dollar volume-weighted average price of such security in any principal quotation system operated by OTC Markets Group Inc. or other principal exchange or recognized quotation system which is at the time the principal trading platform or market for such security during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, or, if no dollar volume-weighted average price is reported, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Purchaser, in good faith. If the Company and the Purchaser are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 5.9. All such determinations shall be appropriately adjusted for any share dividend, share split, share combination, recapitalization, or other similar transaction during such period.
5
ARTICLE II
PURCHASE AND SALE
2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and the Purchaser agrees to purchase, the Shares and the corresponding Common Warrants subscribed for by such Purchaser. The Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser shall be made available for “Delivery Versus Payment” (“DVP”) settlement with the Company or its designee. The Company and the Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur remotely via the exchange of documents and signatures or such other location as the parties shall mutually agree. Unless otherwise directed by the Financial Advisor, settlement of the Shares shall occur via DVP (i.e., on the Closing Date, the Company shall issue the Shares registered in the Purchaser’s name and address and released by the Transfer Agent directly to the account(s) at the Financial Advisor identified by the Purchaser; upon receipt of such Shares, the Financial Advisor shall promptly electronically deliver such Shares to the applicable Purchaser, and payment therefor shall be made by the Financial Advisor (or its clearing firm) by wire transfer to the Company). Unless otherwise directed by the Financial Advisor, as soon as reasonably practicable after the Closing Date, the Common Warrants shall be issued to the Purchaser in originally signed form.
2.2 Deliveries.
(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to the Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a legal opinion of Company Counsel, in form and substance reasonably satisfactory to the Financial Advisor and the Purchaser, directed to the Financial Advisor and Purchaser;
(iii) the Company’s wire instructions, on Company letterhead and executed by the Chief Executive Officer or Chief Financial Officer;
(iv) subject to the penultimate sentence of Section 2.1, a copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver on an expedited basis via The Depository Trust Company Deposit or Withdrawal at Custodian system (“DWAC”) Shares equal to the Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser (the “Purchaser’s Shares”);
(v) a signed Common Warrant registered in the name of the Purchaser to purchase up to a number of shares of Common Stock equal to 50% of the Purchaser’s Shares, with an exercise price equal to $0.50, subject to adjustment therein; and
(vi) the Prospectus (which may be delivered in accordance with Rule 172 under the Securities Act).
(b) On or prior to the Closing Date, the Purchaser shall deliver or cause to be delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser; and
(ii) such Purchaser’s Subscription Amount, which shall be made available for DVP settlement with the Company or its designees.
6
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Purchaser contained herein (unless such representation or warranty is as of a specific date therein in which case they shall be accurate in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) as of such date);
(ii) all obligations, covenants and agreements of the Purchaser required to be performed at or prior to the Closing Date shall have been performed;
(iii) the conditions set forth in Section 8.1 of the AMPA have been satisfied by the Purchaser;
(iv) all Required Approvals shall have been obtained; and
(v) the delivery by the Purchaser of the items set forth in Section 2.2(b) of this Agreement.
(b) The respective obligations of the Purchaser hereunder in connection with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (unless such representation or warranty is as of a specific date therein in which case they shall be accurate in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) as of such date);
(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;
(iii) all Required Approvals have been obtained;
(iv) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;
(v) the conditions set forth in Section 8.2 of the AMPA have been satisfied by the Company or waived;
(vi) there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and
(vii) from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market, and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Principal Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity (excluding the outbreak of COVID-19 and the SARS-CoV-2 virus) of such magnitude in its effect on, or any material adverse change (excluding volatility) in, any financial market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.
7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in the SEC Reports, the Company hereby makes the following representations and warranties to the Purchaser:
(a) Subsidiaries. All of the Subsidiaries of the Company are set forth in the SEC Reports, except for such Subsidiaries as would not, in the aggregate, constitute a significant subsidiary under Regulation S-X. The Company owns, directly or indirectly, all of its capital stock or other equity interests of each Subsidiary free and clear of any Liens (except for customary liens and pledges in connection with secured credit facilities described in the SEC Reports), and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.
(b) Organization and Qualification. The Company is an entity duly incorporated or otherwise organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company is not in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws, or other organizational or charter documents. The Company is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not have resulted in or reasonably be expected to result in: (i) a material adverse effect on the legality, validity, or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects, or condition (financial or otherwise) of the Company, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii), or (iii), a “Material Adverse Effect”); provided that a change in the market price or trading volume of the Common Stock alone shall not be deemed, in and of itself, to constitute a Material Adverse Effect. No Proceeding has been instituted in any such jurisdiction revoking, limiting, or curtailing or seeking to revoke, limit, or curtail such power and authority or qualification.
(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors, or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which the Company is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(d) No Conflicts. The execution, delivery, and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate of incorporation, bylaws, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or of any Subsidiary, or give to others any rights of termination, amendment, anti-dilution, or similar adjustments, acceleration, or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt, or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or of any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree, or other restriction of any court or governmental authority to which the Company or any Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.
8
(e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state (including state blue sky law), local or other governmental authority or other Person (including the governing body of the Principal Market) in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.4 and Section 4.14 of this Agreement, (ii) filings with the Commission (including the Prospectus Supplement), and (iii) application(s) to each applicable Principal Market for the listing of the Shares and the Common Warrant Shares for trading thereon in the time and manner required thereby (collectively, the “Required Approvals”).
(f) Issuance of the Securities; Qualification; Registration.
(i) The Shares are duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents and shall not be subject to preemptive or similar rights of stockholders. The Common Warrants when paid for and issued in accordance with this Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity. The Common Warrant Shares, when issued in accordance with the terms of the Common Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents and shall not be subject to preemptive or similar rights of stockholders. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement and the Common Warrants (without taking into account any limitations on the exercise of the Common Warrants set forth therein).
(ii) Company meets the general eligibility requirements for the use of Form S-3 under the Securities Act including, but not limited to, General Instruction I.B.6. on Form S-3 and has prepared and filed with the Commission a registration statement under the Securities Act on Form S-3 (File No. 333-286711) on April 23, 2025 providing for the offer and sale, from time to time, of up to $50,000,000 of the Company’s securities (the “Registration Statement”). The Registration Statement, including the exhibits thereto and the documents incorporated by reference therein, was declared effective by the Commission on April 29, 2025. The prospectus included in the Registration Statement at the time it became effective, including documents incorporated therein by reference, is referred to herein as the “Base Prospectus”. The term “Prospectus” means the prospectus supplement (the “Prospectus Supplement”) relating to the Shares filed with the Commission pursuant to Rule 424 of the Rules and Regulations, together with the Base Prospectus, including all documents incorporated therein by reference. No stop order suspending the effectiveness of the Registration Statement has been issued under the Securities Act, no Proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. The Shares are being issued pursuant to the Registration Statement, and the offer and sale of such securities pursuant to this Agreement has been registered by the Company under the Securities Act. Upon receipt of the Securities, and payment of the purchase price therefor, the Purchaser will have good and marketable title to such Securities.
(iii) The Registration Statement complies, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will comply, in all material respects, with the applicable provisions of the Securities Act, and do not, and will not, as of the applicable effective date as to each part of the Registration Statement and as of the applicable filing date as to the Prospectus and any amendment thereof or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(iv) No order preventing or suspending the use of the Prospectus has been issued by the Commission.
9
(g) Capitalization. The equity capitalization of the Company is as set forth in the SEC Reports of the dates and for the periods set forth therein. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options or vesting and settlement of restricted stock units under the Company’s equity incentive plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. All of the issued and outstanding shares of Common Stock are fully paid and non-assessable and have been duly and validly authorized and issued, in compliance with all federal and state securities laws and not in violation of or subject to any preemptive or similar right that entitles any Person to acquire from the Company any shares of Common Stock or other security of the Company or any security convertible into, or exercisable or exchangeable for, shares of Common Stock or any other such security, except for such rights as may have been fully satisfied or waived prior to the date hereof. The Company has no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents other than (i) pursuant to the equity distribution agreement with the Financial Advisor dated April 23, 2025, as amended May 5, 2025 and October 15, 2025 (the “ATM Agreement”), which has been suspended and under which no sales shall occur until permitted pursuant to Section 4.11(b) hereof, (ii) as described in the SEC Reports, and (iii) pursuant to the Transaction Documents. No Person has any right of first refusal, pre-emptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchaser) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. There are no outstanding securities or instruments of the Company with any provision that adjusts the exercise conversion, exchange or reset price of such security or instrument upon an issuance of securities by the Company. There are no outstanding securities or instruments of the Company that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company is or may become bound to redeem a security of the Company. The Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. Except for the Required Approvals, no further approval or authorization of any stockholder of the Company, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.
(h) Reports. The Company has filed all reports, schedules, forms, statements, and other documents required to be filed by the Company under the Securities Act and Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two (2) years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with the Prospectus, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension (or waiver from the Commission) of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
10
(i) Financial Statements. The consolidated financial statements of the Company, including the notes thereto, included or incorporated by reference in the Registration Statement and Prospectus comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by U.S. GAAP, and fairly present in all material respects the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
(j) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest consolidated financial statements included or incorporated by reference into the Registration Statement and the Prospectus, (i) there has been no event, occurrence, or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to U.S. GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed, or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to any officer, director, or Affiliate, except pursuant to existing Company equity compensation plans, or in connection with the prior offerings of the Company’s securities in which certain officers, directors and Affiliates have participated. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence, or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its businesses, prospects, properties, operations, assets, or financial condition that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one (1) Trading Day prior to the date that this representation is made.
(k) Litigation. Except as set forth in the SEC Reports, there is no action, suit, inquiry, notice of violation, Proceeding, or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, or any of its properties before or by any court, arbitrator, governmental, or administrative agency or regulatory authority (federal, state, county, local, or foreign) (collectively, an “Action”) which, if there were an unfavorable decision, would individually or in the aggregate, have resulted in or reasonably be expected to result in a Material Adverse Effect. None of the Actions set forth in the SEC Reports, adversely affects or challenges the legality, validity, or enforceability of any of the Transaction Documents or the Securities. Neither the Company nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the Exchange Act or the Securities Act.
(l) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s employees is a member of a union that relates to such employee’s relationship with the Company, and the Company is not a party to a collective bargaining agreement, and the Company believes that its relationship with their employees are good. To the knowledge of the Company, no executive officer of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure, or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company to any liability with respect to any of the foregoing matters. The Company is in compliance with all applicable U.S. federal, state, local, and foreign laws and regulations relating to employment and employment practices, terms, and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
11
(m) Compliance. The Company: (i) is not in default under or in violation of (and no event has occurred that has not been waived or cured that, with notice or lapse of time or both, or without a cure, would result in a default by the Company under), nor has the Company received notice of a claim that it is in default under or that it is in violation of (nor, similarly, has the Company received notice of an event that has occurred that has not been waived or cured that, with notice or lapse of time or both, or without a cure, would result in a default or violation by the Company under), any indenture, loan, or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is not in violation of any judgment, decree, or order of any court, arbitrator, or other governmental authority, or (iii) is not and has not been in violation of any statute, rule, ordinance, or regulation of any governmental authority, including without limitation all foreign, federal, state, and local laws relating to taxes, environmental protection, occupational health, and safety, product quality, and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.
(n) Environmental Law. To the knowledge of the Company, the Company (i) is in compliance with all applicable federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”); (ii) has received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) is in compliance with all terms and conditions of any such permit, license or approval where in each clause (i), (ii) and (iii), the failure to so comply would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
(o) Title to Assets. The Company does not own any real estate other than in connection with the ordinary course of its business. The Company has good and marketable title in all personal property owned by them that is material to the business of the Company, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and (ii) Liens for the payment of federal, state, or other taxes, for which appropriate reserves have been made therefor in accordance with U.S. GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company are held by them under valid, subsisting, and enforceable leases with which the Company is in compliance, except where the failure to be in compliance would not reasonably be expected to have a Material Adverse Effect.
(p) Regulatory Permits. The Company possesses all certificates, authorizations and permits issued by the appropriate federal, state, local, or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and the Company has not received any notice of proceedings relating to the revocation or modification of any Material Permit.
(q) Intellectual Property. The Company and each of its Subsidiaries (a) owns, possesses, or can acquire on reasonable terms, all Intellectual Property (as defined below) necessary for the conduct of their respective businesses as now conducted or as described in the SEC Reports to be conducted, (b) to the knowledge of the Company, there are no rights of third parties to any such Intellectual Property owned by the Company or any of its Subsidiaries, other than licenses and similar rights granted by the Company or its Subsidiaries in the ordinary course of business or as described in the SEC Reports, and (c) to the knowledge of the Company, there are no unreleased liens or security interests which have been filed against any of the patents owned by the Company or any of its Subsidiaries. Furthermore, (i) to the knowledge of the Company, there is no infringement, misappropriation, or violation by third parties of any such Intellectual Property; (ii) there is no pending or, to the knowledge of the Company, threatened, action, suit, Proceeding, or other claim by others challenging the Company’s or any Subsidiary’s rights in or to any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis
12
for any such claim; (iii) the Intellectual Property owned by the Company and each of the Subsidiaries, and to the knowledge of the Company, the Intellectual Property licensed to the Company and each of its Subsidiaries, has not been adjudged invalid or unenforceable, in whole or in part, and there is no pending or, to the knowledge of the Company, threatened action, suit, Proceeding, or other claim by others challenging the validity or scope of any such Intellectual Property, and the Company is not aware of any facts which would form a reasonable basis for any such claim; (iv) there is no material pending or, to the knowledge of the Company, threatened action, suit, Proceeding, or other claim by others that the Company or any of its Subsidiaries infringes, misappropriates, or otherwise violates any Intellectual Property or other proprietary rights of others, the Company has not received any written notice of such claim and the Company is unaware of any other fact which would form a reasonable basis for any such claim; (v) the Company has complied with the material terms of each agreement pursuant to which Intellectual Property has been licensed to the Company, and all such agreements are in full force and effect; and (vi) to the Company’s knowledge, no employee of the Company is in or has ever been in violation of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement, or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company or any of its Subsidiaries or actions undertaken by the employee while employed with the Company or any of its Subsidiaries. “Intellectual Property” shall mean all patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, domain names, technology, know-how, and other intellectual property.
(r) Insurance. The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company are engaged, including, but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. The Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.
(s) Transactions With Affiliates and Employees. Except as set forth in the SEC Reports, none of the executive officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company (other than for services as employees, executive officers, and directors), including any contract, agreement, or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from any executive officer, director, or such employee or, to the knowledge of the Company, any entity in which any executive officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member, or partner, in each case in excess of One Hundred Twenty Thousand Dollars ($120,000) other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company, and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.
(t) Sarbanes-Oxley; Internal Accounting Controls. Except as provided in the SEC Reports, the Company is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act of 2002, as amended. Except as provided in the SEC Reports, the Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with applicable securities laws and U.S. GAAP and to maintain asset accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accounting for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as provided in the SEC Reports, the Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) of the Company or the Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company.
13
(u) Certain Fees. Except for fees payable to the Financial Advisor, no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor, or consultant, finder, placement agent, investment banker, bank, or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchaser shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 3.1(u) that may be due in connection with the transactions contemplated by the Transaction Documents.
(v) Investment Company. The Company is not, and immediately after receipt of payment for the Securities, will not be an “investment company” within the meaning of the Investment Company Act of 1940, as amended. As long as the Common Warrants remain outstanding, the Company shall use its reasonable best efforts to conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.
(w) Registration Rights. Other than to the Purchaser pursuant to this Agreement, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company.
(x) Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act. The Company has not received any notice from the Commission that it is contemplating terminating such registration. Except as set forth in the SEC Reports, the Company has not, in the twelve (12) months preceding the date hereof, received notice from any Principal Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Principal Market. The Common Stock is currently eligible for electronic transfer through The Depository Trust Company or another established clearing corporation and the Company is current in payment of the fees to The Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer.
(y) Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement), or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents) or the laws of its jurisdiction of incorporation that is or could become applicable to the Purchaser as a result of the Purchaser and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchaser’s ownership of the Securities.
(z) Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed in the Prospectus. The Company understands and confirms that the Purchaser will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchaser regarding the Company, its businesses and the transactions contemplated hereby, including pursuant to the SEC Reports, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve (12) months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that the Purchaser does not make nor has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.
14
(aa) No Integrated Offering. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this Offering of the Securities to be integrated with prior offerings by the Company for purposes of any applicable shareholder approval provisions of any Principal Market on which any of the securities of the Company are listed or designated.
(bb) Solvency. Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements, and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one (1) year from the Closing Date. The Company is not in default with respect to any Indebtedness. For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess of Fifty Thousand Dollars ($50,000) (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements, and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of One Hundred Thousand Dollars ($100,000) due under leases required to be capitalized in accordance with U.S. GAAP.
(cc) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company (i) has made or filed all United States federal, state, and local income and all foreign tax returns, reports, and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports, and declarations, and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports, or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.
(dd) Foreign Corrupt Practices; Criminal Acts. None of the Company, any director or officer thereof or, to the knowledge of the Company, any agent, employee, affiliate, or other Person acting on behalf of the Company is aware of or has taken any action, directly or indirectly, that would result in a violation by such Persons of the FCPA or any applicable anti-corruption laws, rules, or regulation of the U.S. or any other jurisdiction in which the Company conducts business, including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA, and the Company, and, to the knowledge of the Company, the Affiliates of the Company have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith. The Company has not engaged in, nor will engage in, (i) any direct or indirect dealings or transactions in violation of U.S. federal or state criminal laws, including, without limitation, the Controlled Substances Act, the Racketeer Influenced and Corrupt Organizations Act, the Travel Act or any anti-money laundering statute, or (ii) any “aiding and abetting” in any violation of U.S. federal or state criminal laws.
15
(ee) Accountants. The Company’s independent registered public accounting firm is as set forth in the Prospectus. To the knowledge and belief of the Company, such accounting firm is a registered public accounting firm as required by the Exchange Act.
(ff) Acknowledgment Regarding Purchaser’s Purchase of Securities. The Company acknowledges and agrees that the Purchaser is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that the Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by the Purchaser or any of its respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchaser’s purchase of the Securities. The Company further represents to the Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(gg) Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f) and 4.14 hereof), it is understood and acknowledged by the Company that: (i) the Purchaser has not been asked by the Company to agree, nor has the Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term; (ii) past or future open market or other transactions by the Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities; (iii) the Purchaser, and counter-parties in “derivative” transactions to which the Purchaser is a party, directly or indirectly, presently may have a “short” position in the Common Stock, and (iv) the Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (y) the Purchaser may engage in hedging activities (in compliance with applicable laws) at various times during the period that the Securities are outstanding, and (z) such hedging activities (if any) could reduce the value of the existing stockholders’ equity interests in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that such aforementioned activities do not constitute a breach of any of the Transaction Documents.
(hh) Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf (other than the Financial Advisor, as to which no representation is made) has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Financial Advisor in connection with the placement of the Securities.
(ii) Stock Option Plans. Each stock option granted by the Company under the Company’s stock option plan, or as an inducement grant outside of a stock option plan, was granted (i) in accordance with the terms of the Company’s stock option plan or under its terms, respectively, and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under U.S. GAAP and applicable law. No stock option granted under the Company’s stock option plan has been backdated. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its financial results or prospects.
16
(jj) Compliance with Data Privacy Laws. (i) The Company each of its Subsidiaries are, and at all times during the last three (3) years were, in compliance in all material respects with all applicable state, federal and foreign data privacy and security laws and regulations, including, without limitation, the European Union General Data Protection Regulation (“GDPR”) (EU 2016/679) (collectively, “Privacy Laws”), (ii) the Company and the Subsidiaries have in place, comply with, and take appropriate steps reasonably designed to ensure compliance with their policies and procedures relating to data privacy and security and the collection, storage, use, disclosure, handling and analysis of Personal Data (as defined below) (the “Policies”), (iii) the Company provides accurate notice, in all material respects, of its applicable Policies to its customers, employees, third party vendors and representatives as required by the Privacy Laws, and (iv) applicable Policies provide accurate and sufficient notice, in all material respects, of the Company’s then-current privacy practices relating to its subject matter, and do not contain any material omissions of the Company’s then-current privacy practices, as required by Privacy Laws. “Personal Data” means (a) a natural person’s name, street address, telephone number, email address, photograph, social security number, bank information, or customer or account number, (b) any information which would qualify as “personally identifying information” under the Federal Trade Commission Act, as amended, (c) “personal data” as defined by GDPR, and (d) any other piece of information that allows the identification of such natural person, or his or her family, or permits the collection or analysis of any identifiable data related to an identified person’s health or sexual orientation. None of such disclosures made or contained in any of the Policies have been inaccurate, misleading, or deceptive in violation of any Privacy Laws and the execution, delivery and performance of the Transaction Documents will not result in a breach, in any material respect, of any Privacy Laws or Policies. Neither the Company nor the Subsidiaries, to the knowledge of the Company, has received written notice of any actual or potential liability of the Company or the Subsidiaries under, or actual or potential violation by the Company or the Subsidiaries of, any of the Privacy Laws, is currently conducting or paying for, in whole or in part, any investigation, remediation or other corrective action pursuant to any regulatory request or demand pursuant to any Privacy Law, or is a party to any order, decree, or agreement by or with any court or arbitrator or governmental or regulatory authority that imposed any obligation or liability under any Privacy Law.
(kk) Cybersecurity. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i)(x) to the Company’s knowledge there has been no security breach or other compromise of or relating to any of the Company’s information technology and computer systems, networks, hardware, software, data (including the data of its respective customers, employees, suppliers, vendors, and any third party data maintained by or on behalf of it), equipment, or technology (collectively, “IT Systems and Data”) and (y) the Company has not been notified of, and has no knowledge of any event or condition that would reasonably be expected to result in, any security breach or other compromise to its IT Systems and Data that would require notification to any third party, including any governmental or regulatory authority, under applicable law; (ii) the Company is presently in compliance with all applicable laws or statutes and all judgments, orders, rules, and regulations of any court or arbitrator or governmental or regulatory authority, internal policies, and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation, or modification, except as would not, individually or in the aggregate, have a Material Adverse Effect; (iii) the Company has implemented and maintained commercially reasonable safeguards to maintain and protect its material confidential information and the integrity, continuous operation, redundancy, and security of all IT Systems and Data; and (iv) the Company has implemented backup and disaster recovery technology consistent with commercially reasonable industry standards and practices.
(ll) Office of Foreign Assets Control. Neither the Company nor, to the Company’s knowledge, any director, officer, agent, employee, or affiliate of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
(mm) U.S. Real Property Holding Corporation. The Company is not and has never been a United States real property holding corporation within the meaning of Section 897 of the Code, and the Company shall so certify upon Purchaser’s request.
17
(nn) Bank Holding Company Act. The Company is not subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Company does not own or control, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. The Company does not exercise a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
(oo) Money Laundering. The operations of the Company are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no Action or Proceeding by or before any court or governmental agency, authority, or body or any arbitrator involving the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(pp) FDA. As to each product subject to the jurisdiction of the U.S. Food and Drug Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act, as amended, and the regulations thereunder (“FDCA”) that is manufactured, packaged, labeled, tested, distributed, sold, and/or marketed by the Company or any of its Subsidiaries as of the date hereof (each such product, a “Company Product”), such Company Product is being manufactured, packaged, labeled, tested, distributed, sold and/or marketed by the Company in compliance with all applicable requirements under the FDCA and similar laws, rules and regulations relating to establishment registration and device listing, investigational use, premarket notification under Section 510(k) of the FDCA, de novo classification, premarket approval, the Quality System Regulation, good laboratory practices, good clinical practices, labeling, advertising and promotion, record keeping, medical device reporting and filing of reports, except where the failure to be in compliance would not have a Material Adverse Effect. There is no pending, completed or, to the Company’s knowledge, threatened, Action or Proceeding against the Company or any of its Subsidiaries, and none of the Company or any of its Subsidiaries has received any notice, warning letter or other communication from the FDA or any other governmental entity, which (i) contests the premarket clearance, licensure, registration, or approval of, the uses of, the distribution of, the manufacturing or packaging of, the testing of, the sale of, or the labeling and promotion of any Company Product, (ii) withdraws its approval or clearance of, requests the recall, suspension, or seizure of, or withdraws or orders the withdrawal of advertising or sales promotional materials relating to, any Company Product, (iii) imposes a clinical hold on any clinical investigation by the Company or any of its Subsidiaries, (iv) enjoins production at any facility of the Company or any of its Subsidiaries, (v) enters or proposes to enter into a consent decree of permanent injunction with the Company or any of its Subsidiaries, or (vi) otherwise alleges any violation of any laws, rules or regulations by the Company or any of its Subsidiaries, and which, either individually or in the aggregate, would have a Material Adverse Effect. The properties, business and operations of the Company have been and are being conducted in all material respects in accordance with all applicable laws, rules and regulations of the FDA. To the knowledge of the Company, the Company has not received any written communication from the FDA stating that the FDA will prohibit the marketing, sale, license or use in the United States of any Company Product or any product proposed to be developed, produced or marketed by the Company, or that the FDA will deny, rescind or withdraw any clearance or approval with respect to any such product, in each case except as would not have a Material Adverse Effect.
(qq) Reserved.
(rr) Private Placement. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Common Warrants and the Common Warrant Shares by the Company to the Purchaser as contemplated hereby.
(ss) No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered the Common Warrants and the Common Warrant Shares for sale only to the Purchaser as an “accredited investor” within the meaning of Rule 501 under the Securities Act.
18
3.2 Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):
(a) Organization; Authority. The Purchaser is an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by the Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof or thereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(b) Understandings or Arrangements. The Purchaser is acquiring the Securities as principal for its own account and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation and warranty not limiting the Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws). The Purchaser is acquiring the Securities hereunder in the ordinary course of its business. The Purchaser understands that the Common Warrants and the Common Warrant Shares are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell such Securities pursuant to a registration statement or otherwise in compliance with applicable federal and state securities laws).
(c) Purchaser Status. At the time the Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises any Common Warrants, it will be an “accredited investor” as defined in Rule 501(a)under the Securities Act.
(d) Experience of Such Purchaser. The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. The Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
(e) Access to Information. The Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits and schedules thereto) and the SEC Reports, and has been afforded: (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Such Purchaser acknowledges and agrees that neither the Financial Advisor, nor any Affiliate of the Financial Advisor, has provided such Purchaser with any information or advice with respect to the Securities nor is such information or advice necessary or desired. Neither the Financial Advisor nor any Affiliate has made or makes any representation as to the Company or the quality of the Securities and the Financial Advisor and any Affiliate may have acquired non-public information with respect to the Company which such Purchaser agrees need not be provided to it. In connection with the issuance of the Securities to such Purchaser, neither the Financial Advisor, nor any of its Affiliates has acted as a financial advisor or fiduciary to such Purchaser.
19
(f) Sanctioned Persons; BSA/PATRIOT Act. Purchaser is not owned or controlled by or acting on behalf of (in connection with this Agreement), a Sanctioned Person. Purchaser is not an institution that accepts currency for deposit and that (a) has no physical presence in the jurisdiction in which it is incorporated or in which it is operating and (b) is unaffiliated with a regulated financial group that is subject to consolidated supervision (a “Shell Bank”) or providing banking services to a Shell Bank. Purchaser represents that if it is a financial institution subject to the Bank Secrecy Act (31 U.S.C. Section 5311 et seq.), as amended by the USA PATRIOT Act of 2001 and its implementing regulations (collectively, the “BSA/PATRIOT Act”), that Purchaser maintains policies and procedures reasonably designed to comply with applicable obligations under the BSA/PATRIOT Act. Purchaser also represents that, to the extent required by applicable law, it maintains, either directly or through the use of a third-party administrator, policies and procedures reasonably designed for the screening of any investors in the Purchaser against Sanctions-related lists of blocked or restricted persons. Purchaser further represents and warrants that (a) the funds held by Purchaser and used to purchase the Securities were not directly or indirectly derived from or related to any activities that may contravene U.S. federal, state or non-U.S. anti-money laundering, anti-corruption or Sanctions laws and regulations or activities that may otherwise be deemed criminal and (b) any returns from the Purchaser’s investment will not be used to finance any illegal activities. For purposes of this Agreement, “Sanctioned Person” means at any time any person or entity with whom dealings are restricted, prohibited, or sanctionable under any Sanctions (as defined below), including as a result of being: (a) listed on any Sanctions-related list of designated or blocked or restricted persons; (b) that is a national of, the government of, or any agency or instrumentality of the government of, or resident in, or organized under the laws of, a country or territory that is the target of comprehensive Sanctions from time to time (as of the date of this Agreement, Cuba, Iran, North Korea, Syria, and the Crimea region); or (c) a relationship of ownership, control, or agency with any of the foregoing. “Sanctions” means those trade, economic and financial sanctions laws, regulations, embargoes, and restrictive measures (in each case having the force of law) administered, enacted or enforced from time to time by (a) the United States (including without limitation the U.S. Department of the Treasury, Office of Foreign Assets Control, the U.S. Department of State, and the U.S. Department of Commerce), (b) the European Union and enforced by its member states, (c) the United Nations and (d) the United Kingdom.
(g) Non-cooperative Jurisdiction. Purchaser is not owned or controlled by or acting on behalf of (in connection with this Agreement), a person or entity resident in, or whose funds used to purchase the Securities are transferred from or through, a country, territory or entity that (i) has been designated as non-cooperative with international anti-money laundering or counter terrorist financing principles or procedures by the United States or by an intergovernmental group or organization, such as the Financial Action Task Force, of which the United States is a member; (ii) is the subject of an advisory issued by the Financial Crimes Enforcement Network of the U.S. Department of the Treasury; or (iii) has been designated by the Secretary of the Treasury under Section 311 of the USA PATRIOT Act as warranting special measures due to money laundering concerns (any such country or territory, a “Non-cooperative Jurisdiction”), or an entity or individual that resides or has a place of business in, or is organized under the laws of, a Non-cooperative Jurisdiction.
(h) Certain Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, the Purchaser has not, nor has any Person acting on behalf of or pursuant to any understanding with the Purchaser, directly or indirectly executed any purchases or sales, including Short Sales, of the securities of the Company or “derivative” securities based on securities issued by the Company during the period commencing as of the time that the Purchaser first held discussions (written or oral) with the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder and ending immediately prior to execution of this Agreement. Other than to other Persons party to this Agreement or to such Purchaser’s representatives, including, without limitation, its officers, directors, partners, legal and other advisors, employees, agents and Affiliates, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions with respect to the borrowing of, arrangement to borrow, identification of the availability of, and/or securing of, securities of the Company in order for the Purchaser (or its broker or other financial representative) to effect Short Sales or similar transactions following the Closing Date. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.
20
(i) No Governmental Review. Such Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities, nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
(j) General Solicitation. Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or, to the knowledge of such Purchaser, any other general solicitation or general advertisement.
The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect the Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby. Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to locating or borrowing shares in order to effect Short Sales or similar transactions in the future.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Removal of Legends.
(a) The Common Warrants and Common Warrant Shares may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Common Warrants or Common Warrant Shares other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Common Warrant or such Common Warrant Share under the Securities Act.
(b) The Purchaser agrees to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Common Warrants or Common Warrant Shares in the following form:
[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE] [HAS NOT] [HAVE] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. TO THE EXTENT NOT PROHIBITED BY LAW, THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
21
(c) To the extent permissible under applicable law, the Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Common Warrants or Common Warrant Shares to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Common Warrants or Common Warrant Shares to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Common Warrants and Common Warrant Shares may reasonably request in connection with a pledge or transfer of the Common Warrants or Common Warrant Shares.
(d) Certificates (or book entries) evidencing the Common Warrant Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) following any sale of such Common Warrant Shares pursuant to an effective registration statement under the Securities Act; (ii) while a registration statement covering the resale of such security is effective under the Securities Act, (iii) following any sale of such Common Warrant Shares pursuant to Rule 144 (assuming cashless exercise of the Common Warrants), (iv) if such Common Warrant Shares are eligible for sale under Rule 144 without regards to volume or manner of sale restrictions under Rule 144(b)(2), or (v) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent or the Purchaser promptly if required by the Transfer Agent to effect the removal of the legend hereunder, or if requested by the Purchaser, respectively. If all or any portion of a Common Warrant is exercised at a time when there is an effective registration statement to cover the resale of the Common Warrant Shares, if all or any portion of a Common Warrant is exercised at a time when such Common Warrant Shares may be sold under Rule 144 (assuming cashless exercise of the Common Warrants) without restriction under Rule 144(b)(2), or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission), then such Common Warrant Shares shall be issued free of all legends. The Company agrees that following such time as such legend is no longer required under this Section 4.1(d), the Company will, no later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate (or a request in the case of Common Warrant Shares held in book entry) representing Common Warrant Shares, as applicable, issued with a restrictive legend (such date, the “Legend Removal Date”), at the Company’s sole cost, deliver or cause to be delivered to such Purchaser a certificate (or a book-entry statement representing such shares) that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. The Company agrees that no medallion guarantee (or other type of guarantee or notarization) shall be required to remove a legend from any Warrant Shares. Common Warrant Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Principal Market with respect to the Common Stock as in effect on the date of delivery of a certificate (or a request in the case of Common Warrant Shares held in book entry) representing Common Warrant Shares issued with a restrictive legend.
(e) In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, either (i) as partial liquidated damages and not as a penalty, for each $1,000 of Common Warrant Shares (based on the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date until such Common Warrant Shares are delivered without a legend and (ii) if the Company fails to (a) issue and deliver (or cause to be delivered) to a Purchaser by the Legend Removal Date a certificate representing the Securities so delivered to the Company by such Purchaser that is free from all restrictive and other legends or (b) if after the Legend Removal Date such Purchaser purchases (in an open market transaction or otherwise) shares of Common Stock to
22
deliver in satisfaction of a sale by such Purchaser of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, that such Purchaser anticipated receiving from the Company without any restrictive legend, then an amount equal to the excess of such Purchaser’s total purchase price (including brokerage commissions and other reasonable and documented out-of-pocket expenses, if any) for the Common Stock so purchased (including brokerage commissions and other reasonable and documented out-of-pocket expenses, if any) (the “Buy-In Price”) over the product of (A) such number of Common Warrant Shares that the Company was required to deliver to such Purchaser by the Legend Removal Date multiplied by (B) the lowest closing sale price of the Common Stock on any Trading Day during the period commencing on the date of the delivery by such Purchaser to the Company of the applicable Common Warrant Shares (as the case may be) and ending on the date of such delivery and payment under this Section 4.1(e).
(f) The Shares shall be issued free of legends.
4.2 Furnishing of Information. Until the earlier of the time that (i) no Purchaser owns Securities, (ii) the Common Warrants have expired or (iii) the Company ceases to be subject to the reporting requirements of the Exchange Act, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. At any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of the Common Warrant Shares (assuming cashless exercise) may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company (i) shall fail for any reason to satisfy the current public information requirement under Rule 144(c) or (ii) becomes an issuer described in Rule 144(i)(1)(i) in the future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) (a “Public Information Failure”) then, in addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Common Warrant Shares, an amount in cash equal to two percent (2.0%) of the aggregate Exercise Price of such Purchaser’s Common Warrants on the day of a Public Information Failure and on every thirtieth (30th) day (pro rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required for the Purchaser to transfer the Common Warrant Shares pursuant to Rule 144. The payments to which a Purchaser shall be entitled pursuant to this Section 4.2(b) are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3rd) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
4.3 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Principal Market such that it would require stockholder approval prior to the closing of such other transaction unless stockholder approval is obtained before the closing of such subsequent transaction.
4.4 Securities Laws Disclosure; Publicity. The Company shall (a) by the Disclosure Time issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto with the Commission within the time required by the Exchange Act. From and after the issuance of such press release, the Company represents to the Purchaser that it shall have publicly disclosed all material, non-public information delivered to the Purchaser by the Company or any of the Subsidiaries, or any of their respective officers, directors, employees or agents, including, without limitation, the Financial Advisor, in connection with the transactions contemplated by the Transaction Documents. In addition, effective upon the
23
issuance of such press release, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of the Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates on the one hand, and the Purchaser or any of its Affiliates, including, without limitation, the Financial Advisor, on the other hand, shall terminate and be of no further force or effect. The Company understands and confirms that the Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. The Company and the Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of the Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing or submission with or to the Commission or any regulatory agency or Principal Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law in connection with the filing or submission of final Transaction Documents with or to the Commission and (b) to the extent such disclosure is required by law or Principal Market regulations, in which case the Company shall provide the Purchaser with prior notice of such disclosure permitted under this clause (b).
4.5 Stockholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchaser.
4.6 Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, which shall be disclosed pursuant to Section 4.6, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto the Purchaser shall have consented in writing to the receipt of such information and agreed in writing with the Company to keep such information confidential. The Company understands and confirms that the Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates, delivers any material, non-public information to the Purchaser without the Purchaser’s consent, the Company hereby covenants and agrees that the Purchaser shall not have any duty of confidentiality to the Company, any of the Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates, or a duty to the Company, any of the Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates not to trade on the basis of, such material, non-public information, provided that the Purchaser shall remain subject to applicable law. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such material non-public information on with the Commission pursuant to a Current Report on Form 8-K or shall issue a press release containing such material non-public information. The Company understands and confirms that the Purchaser is relying on the foregoing covenant in effecting transactions in securities of the Company. The Company and the Purchaser agree and acknowledge that the provision of the Company to the Purchaser of any notice that the registration statement contemplated by Section 4.15 of this Agreement for the resale of the Common Warrant Shares is temporarily unavailable for use (without referencing the underlying reason for any unavailability) will not constitute a violation of this Section 4.6 and there shall be no obligation for the Company to publicly report the provision of such notice on Form 8-K or press release.
4.7 Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital and general corporate purposes.
24
4.8 Indemnification of the Purchaser. Subject to the provisions of this Section 4.8, (A) the Company will indemnify and hold the Purchaser and its directors, officers, stockholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls the Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, stockholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that result of or relate to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is solely based upon a material breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which is finally judicially determined to constitute fraud, gross negligence or willful misconduct), and (B) the Company will indemnify each Purchaser Party, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses, as incurred, arising out of or relating to (i) any untrue or alleged untrue statement of a material fact contained in any registration statement relating to the Securities sold pursuant to this Agreement, any related prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding such Purchaser Party furnished in writing to the Company by such Purchaser Party expressly for use therein, or (ii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder in connection therewith. If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (x) the employment thereof has been specifically authorized by the Company in writing, (y) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (z) in such action there is, in the reasonable opinion of such Purchaser Party’s counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (1) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (2) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s material breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.9 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.
4.9 Reservation of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue Shares pursuant to this Agreement and Common Warrant Shares pursuant to any exercise of the Common Warrants, if applicable.
25
4.10 Listing of Common Stock. For so long as Purchaser hold any of the Securities, the Company hereby agrees to use best efforts to maintain the listing of the Common Stock on the Principal Market on which it is currently listed, and prior to or concurrently with the Closing, the Company shall apply to list all of the Shares and the Common Warrant Shares on such Principal Market and promptly secure the listing of all of the Shares and the Common Warrant Shares on such Principal Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Principal Market, it will then include in such application all of the Shares and the Common Warrant Shares, and will take such other action as is necessary to cause all of the Shares and the Common Warrant Shares to be listed or quoted on such other Principal Market as promptly as possible. For so long as Purchaser holds any of the Securities, the Company will then take all action reasonably necessary to continue the listing and trading of its Common Stock on a Principal Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market. The Company agrees to maintain the eligibility of the Common Stock for electronic transfer through the Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic transfer.
4.11 Subsequent Equity Sales. Except for an Exempt Issuance:
(a) from the date hereof until thirty (30) days from the Closing Date, the Company shall not (i) issue, enter into any agreement to issue, or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents, or (ii) file any registration statement or amendment or supplement thereto, other than filing the final Prospectus or a registration statement on Form S-8 in connection with any employee benefit plan or the registration statement contemplated by Section 4.15 of this Agreement; and
(b) from the date hereof until six (6) months from the Closing Date, the Company shall be prohibited from effecting or entering into an agreement to effect any issuance by the Company of shares of Common Stock or Common Stock Equivalents (or a combination of units thereof) involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security (other than in connection with a stock split or stock dividend or similar event) or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for shares of Common Stock or (ii) enters into, or effects a transaction under, any agreement, including, but not limited to, an equity line of credit or an “at-the-market offering,” whereby the Company may issue securities at a future determined price, regardless of whether shares pursuant to such agreement have actually been issued and regardless of whether such agreement is subsequently cancelled; provided, however, 90 Business Days following the Closing Date, the Company will be permitted to issue and effect sales of Common Stock pursuant to the ATM Agreement.
(c) Notwithstanding the foregoing, this Section 4.11 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.
4.12 Certain Transactions and Confidentiality. The Purchaser covenants that neither it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6. The Purchaser covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.6, the Purchaser will maintain the confidentiality of the existence and terms of this transaction. Notwithstanding the foregoing, and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) the Purchaser does not make any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the
26
transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6, (ii) the Purchaser shall not be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6 and (iii) the Purchaser shall not have any duty of confidentiality or duty not to trade in the securities of the Company to the Company or the Subsidiaries or any of their respective officers, directors, employees, Affiliates, or agent, including without limitation, the Financial Advisor, after the issuance of the initial press release as described in Section 4.6.
4.13 Exercise Procedures. The form of Notice of Exercise included in the Common Warrants sets forth the totality of the procedures required of the Purchaser in order to exercise the Common Warrants. No additional legal opinion, other information, or instructions shall be required of the Purchaser to exercise their Common Warrants. Without limiting the preceding sentences, 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 form be required in order to exercise the Common Warrants. The Company shall honor exercises of the Common Warrants and shall deliver Common Warrant Shares in accordance with the terms, conditions, and time periods set forth in the Transaction Documents.
4.14 Registration Statement. As soon as practicable (and in any event within 20 Business Days following the date of this Agreement), the Company shall file a registration statement on Form S-1 or Form S-3 providing for the resale by the Purchaser of the Common Warrant Shares issued and issuable upon exercise of the Common Warrants. The Company shall use best efforts to cause such registration to become effective within 60 days (75 days in the event the Commission elects to review such registration statement) following the filing date of such registration statement and to keep such registration statement effective at all times until the earlier of (i) the date that the Purchaser no longer owns any Common Warrants or Common Warrant Shares issuable upon exercise thereof and (ii) the date on which no Common Warrants are outstanding and all Common Warrant Shares may be sold pursuant to Rule 144 without regard to volume limitations. The Purchaser agrees to properly notify the Company if it no longer owns any Common Warrants or Common Warrant Shares issuable upon exercise thereof. The requirements set forth in this Section 4.17 shall be subject to the Purchaser’s cooperation with the Company, including furnishing to the Company such reasonable information as may be necessary in connection with the matters set forth herein.
ARTICLE V
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by the Purchaser upon written notice to the Company, if the Closing has not been consummated on or before the fifth (5th) Trading Day following the date hereof; provided, however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties).
5.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchaser. Any amount payable by the Company to the Purchaser pursuant to the Transaction Documents or the transactions contemplated hereby or thereby that is not paid when due shall accrue interest from the due date until paid in full at a rate equal to the lesser of eight percent (8%) per annum and the maximum rate permitted by applicable law.
5.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules hereto, the Prospectus and the Prospectus Supplement contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
27
5.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via email attachment at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via email attachment at the email address as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K or by issuing a press release containing such material non-public information.
5.5 Amendments; Waivers. No provision of this Agreement may be amended other than by a written instrument signed by both Parties hereto and no provision of this Agreement may be waived other than in a written instrument signed by the Party against whom enforcement of such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
5.6 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser (other than an assignment by operation of law in connection with a merger, provided that the Company provides the Purchaser no less than thirty (30) days’ prior written notice of any such assignment). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchaser.”
5.8 Third-Party Beneficiaries. The Financial Advisor shall be the third-party beneficiary of the representations and warranties of the Company in Section 3.1 and the representations and warranties of the Purchaser in Section 3.2. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.9 and this Section 5.8.
5.9 Dispute Resolution.
(a) Buy-In Price or VWAP.
(i) Any dispute, controversy, or claim between the Company and the Purchaser arising out of or relating to the determination of the Buy-In Price or VWAP under this Agreement (a “Pricing Dispute”) shall be finally and exclusively resolved in accordance with Section 5.9(a). Section 5.9(a) is a written agreement to arbitrate within the meaning of the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (the “FAA”), and Section 5701, et seq., of Title 10 of the Delaware Code (the “Delaware Arbitration Act”), and both the FAA and the Delaware Arbitration Act shall govern the interpretation and enforcement of Section 5.9(a), the conduct of the arbitration, and any proceeding to compel arbitration, appoint an arbitrator, or confirm, correct, or vacate an award hereunder. Both the Company and the Purchaser are authorized to apply for an order compelling arbitration pursuant to Section 5703 of the Delaware Arbitration Act or Section 4 of the FAA, as applicable, to compel compliance with Section 5.9(a). The seat of the arbitration shall be Wilmington, Delaware, and the Chancery Court of the State of Delaware and the U.S. District Court for the District of Delaware shall each have jurisdiction to act as the supervisory court for such purposes, notwithstanding Section 5.9(b).
28
(ii) In the case of a Pricing Dispute, the Company or the Purchaser (as the case may be) shall submit the dispute to the other Party via email within five (5) Business Days after the Party learned of the circumstances giving rise to such dispute (the “Initial Notice”).
(iii) If the Purchaser and the Company are unable to resolve a Pricing Dispute directly before the fifth (5th) Business Day following the Initial Notice, the Company and the Purchaser shall attempt, in good faith, to select as arbitrator an independent, reputable investment bank or other financial institution with no material relationship to either Party. If the Parties agree upon such an investment bank or financial institution within ten (10) Business Days of the Initial Notice, such investment bank or financial institution shall serve as arbitrator of the Pricing Dispute. If the Parties are unable to so agree within such ten (10) Business Day period, then, in the sole and absolute discretion of the Purchaser (exercisable for any reason or no reason, and without any obligation of good faith, reasonableness, or fair dealing in making such election), the Pricing Dispute shall instead be resolved pursuant to (a) the terms of Section 5.9(b) hereof or (b) binding arbitration before a single arbitrator appointed by the American Arbitration Association (the “AAA”) in accordance with the Expedited Procedures under the AAA’s Commercial Arbitration Rules then in effect (the “AAA Rules”), except as modified by Section 5.9(a)(iv) through (viii). Notwithstanding anything in the AAA Rules (including AAA Commercial Rule 7 or any successor rule) to the contrary, all questions of arbitrability, including the existence, validity, scope, and interpretation of the Purchaser’s election under this Section 5.9(a)(iii), shall be determined exclusively by the courts identified in Section 5.9(b)), and not by the Arbitrator (defined below). The Purchaser shall exercise its election described in the preceding sentence by written notice to the Company delivered within five (5) Business Days following expiration of the ten (10) Business Day period referenced above (an “Election Notice”). If the Purchaser fails to timely deliver an Election Notice, the Pricing Dispute shall be resolved by binding arbitration before the AAA pursuant to clause (b) above. Any arbitrator so appointed shall have substantial professional experience in investment banking, securities valuation, or financial markets, and the AAA shall be requested to appoint an arbitrator meeting such qualifications, to the extent reasonably available on its roster. The investment bank, financial institution, or individual so selected or appointed pursuant to this Section 5.9(a)(iii) is referred to herein as the “Arbitrator.” For the avoidance of doubt, the Parties’ inability to agree upon an investment bank or financial institution shall not relieve either Party of its obligation to arbitrate the Pricing Dispute under this Section 5.9(a), except pursuant to the Purchaser’s election under this Section 5.9(a)(iii).
(iv) The Purchaser and the Company shall each deliver to the Arbitrator (A) a copy of the Initial Notice and (B) written documentation supporting its position with respect to the Pricing Dispute, in each case no later than 5:00 p.m. New York time on the fifth (5th) Business Day immediately following the date on which the Arbitrator is selected or appointed (the “Dispute Submission Deadline”) (the documents referred to in clauses (A) and (B) set forth in this sentence, collectively, the “Required Dispute Documentation”). If either Party fails to deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, that Party shall no longer be entitled to (and hereby waives its right to) deliver or submit any further written documentation or support to the Arbitrator with respect to such Pricing Dispute, and the Arbitrator shall resolve the dispute based solely on the Required Dispute Documentation timely delivered. Unless otherwise agreed in writing by both Parties or requested by the Arbitrator, the proceeding shall be conducted solely on the basis of the Required Dispute Documentation, without a hearing and without discovery of any kind; provided, that the Arbitrator may, in its discretion, request a telephonic or virtual hearing, additional documentation, or written responses to specific questions if the Arbitrator determines that doing so is reasonably necessary to resolve the Pricing Dispute.
(v) The terms of this Agreement, the other applicable Transaction Documents, and the Required Dispute Documentation shall serve as the basis for the Arbitrator’s resolution of the Pricing Dispute. The Arbitrator’s authority shall be limited to determining the correct Buy-In Price or VWAP (as applicable) and any payment obligation of the Parties directly resulting from such determination; the Arbitrator shall have no authority to award damages of any kind (including consequential, punitive, or exemplary damages), rescission, specific performance, or any other form of relief, or to resolve any dispute other than the Pricing Dispute submitted to it. The Arbitrator is expressly authorized to make all findings and determinations reasonably necessary to resolve the Pricing Dispute in accordance with the foregoing.
29
(vi) The Arbitrator shall determine the resolution of the Pricing Dispute and deliver a written award to the Company and the Purchaser, together with a brief statement of the basis for the award, no later than seven (7) Business Days immediately following the Dispute Submission Deadline. The award shall be final and binding upon the Parties, shall not be subject to appeal, and judgment on the award may be entered in any court of competent jurisdiction. The Party against whom the award is rendered shall pay any amount due under the award within three (3) Business Days after the date of the award, and any amount not timely paid shall accrue interest in accordance with Section 5.2. The fees and expenses of the Arbitrator, and, if applicable, the AAA’s administrative fees, shall be borne by the Party against whom the award is rendered. The Party against whom the award is rendered shall also reimburse the other Party for its reasonable and documented attorneys’ fees and other out-of-pocket expenses incurred in connection with the arbitration, payable within the same three (3) Business Day period referred to above, and any amount not timely paid shall likewise accrue interest in accordance with Section 5.2. If the Purchaser elects to resolve the Pricing Dispute pursuant to Section 5.9(b), the prevailing party in such proceeding shall be entitled to recover its reasonable and documented attorneys’ fees and out-of-pocket expenses from the non-prevailing party, consistent with this Section 5.9(a)(vi).
(vii) The existence of a Pricing Dispute, the Required Dispute Documentation, the arbitration proceedings, and the award shall be kept confidential by the Parties and the Arbitrator, except (A) as necessary to enforce or confirm the award in a court of competent jurisdiction, (B) as required by applicable law, rule, or regulation (including disclosure obligations under the Exchange Act or the rules of the Principal Market), or (C) as otherwise agreed in writing by the Parties.
(viii) Notwithstanding the agreement to arbitrate in Section 5.9(a), either Party may seek from a court identified in Section 5.9(a)(i) any interim, provisional, or emergency injunctive relief necessary to protect its rights or property pending constitution of the Arbitrator and resolution of the Pricing Dispute and doing so shall not be deemed a waiver of the agreement to arbitrate.
(b) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts or choice of law that would result in the application of the laws of another jurisdiction other than the State of Delaware. Each party agrees that all legal Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, stockholders, partners, members, employees or agents) shall be submitted to the exclusive jurisdiction of the Chancery Court of the State of Delaware and the U.S. District Court for the District of Delaware for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Action or Proceeding is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party shall commence an Action or Proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.8, the prevailing party in such Action or Proceeding shall be reimbursed by the non-prevailing party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. The Company and the Purchaser agree that all proceedings in accordance with this section may be conducted in a virtual setting.
5.10 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities for the applicable statute of limitations.
30
5.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
5.12 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever the Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then the Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights provided, however, that in the case of a rescission of an exercise of a Common Warrant, the Purchaser shall be required to return any shares of Common Stock subject to any such rescinded exercise notice concurrently (if such shares were delivered to the applicable Purchaser) with the return to the Purchaser of the aggregate exercise price paid to the Company for such shares and the restoration of the Purchaser’s right to acquire such shares pursuant to the Purchaser’s Common Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).
5.14 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
5.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Purchaser and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
5.16 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
31
5.17 Liquidated Damages. The Company’s obligations to pay any liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such liquidated damages or other amounts are due and payable shall have been canceled. The parties hereto acknowledge that the actual damages likely to result from the Company’s breach of the provisions of this Agreement pursuant to which liquidated damages are payable are difficult to ascertain with precision, such that the amount set forth in such sections represent the parties’ reasonable good-faith estimate of such damages and not a penalty; provided, however, that any liquidated damages paid by the Company in respect of a breach shall be credited against any other damages or amounts otherwise payable by the Company in respect of the same breach for the same period.
5.18 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.
5.19 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.
5.20 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
32
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
| NEXALIN TECHNOLOGY, INC. | Address for Notice: | ||||
|---|---|---|---|---|---|
| 1776 Yorktown, Suite 550 | |||||
| By: | /s/ Mark White | Houston, TX 77056 | |||
| Name: | Mark White | ||||
| Title: | Chief Executive Officer | E-mail: | [***] | ||
| Attention: Mark White, Chief Executive Officer | |||||
| With a copy to (which shall not constitute notice): | Thompson Hine LLP |
| Attention: Faith Charles | |
| 300 Madison Avenue, 27th Floor | |
| New York, NY 10017 | |
| [***] |
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
33
[PURCHASER SIGNATURE PAGES TO
SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
| Name of Purchaser: | Alumni Capital LP |
| Signature of Authorized Signatory of Purchaser: | /s/ [***] |
| Name of Authorized Signatory: | [***] |
| Title of Authorized Signatory: | [***] |
| Email Address of Authorized Signatory: | [***] |
| Facsimile Number of Authorized Signatory: | [***] |
| Address for Notice to Purchaser: | [***] |
| Address for Delivery of Shares to Purchaser (if not same as address for notice): | [***] |
| Subscription Amount: | $750,000 |
| Shares: | 2,419,355 |
| EIN: | [***] |
| Common Warrant Shares: 2,419,355 | Beneficial Ownership Blocker ☐ 4.99% or ☒ 9.99% |
| ☐ | Notwithstanding anything contained in this Agreement to the contrary, by checking this box (i) the obligations of the above-signed to purchase the securities set forth in this Agreement to be purchased from the Company by the above-signed, and the obligations of the Company to sell such securities to the above-signed, shall be unconditional and all conditions to Closing shall be disregarded, (ii) the Closing shall occur on the First(1st) Trading Day following the date of this Agreement and (iii) any condition to Closing contemplated by this Agreement (but prior to being disregarded by clause (i) above) that required delivery by the Company or the above-signed of any agreement, instrument, certificate or the like or purchase price (as applicable) shall no longer be a condition and shall instead be an unconditional obligation of the Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate or the like or purchase price (as applicable) to such other party on the Closing Date. |
34
EXHIBIT A
Form of Common Warrant
(See attached)
A-1
Exhibit 10.2
SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE SUCH TERMS ARE
BOTH NOT MATERIAL AND ARE THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR
CONFIDENTIAL. THESE REDACTED TERMS HAVE BEEN MARKED IN THIS EXHIBIT WITH
THREE ASTERISKS AS [***].
ANY MARKET PURCHASE AGREEMENT
This Any Market Purchase Agreement (this “Agreement”), dated as of August 19, 2026 (the “Execution Date”), by and between Nexalin Technology, Inc., a Delaware corporation (the “Company”), and Alumni Capital LP, a Delaware limited partnership (the “Investor”, together with the Company, the “Parties”, and each a “Party”).
RECITALS
WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company wishes to sell to the Investor, and the Investor wishes to buy from the Company, up to $15,000,000 of shares of common stock, $0.001 par value per share, of the Company (“Common Shares”).
WHEREAS, the offer and sale of the Securities issuable hereunder will be made in reliance upon Section 4(a)(2) and Regulation D under the Securities Act and the rules and regulations promulgated thereunder, or upon such other exemption from the registration requirements of the Securities Act as may be available with respect to any or all of the transactions to be made hereunder.
NOW THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings specified or indicated (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
“AAA” shall have the meaning specified in Section 11.17(a)(iii).
“AAA Rules” shall have the meaning specified in Section 11.17(a)(iii).
“Affiliate” shall mean, with respect to a Party, any individual, a corporation or any other legal entity, directly or indirectly, controlling, controlled by or under common control with such Party. For purpose of this definition, the term “control,” as used with respect to any corporation or other entity, means (a) direct or indirect ownership of fifty percent (50%) or more of the securities or other ownership interests representing the equity voting stock or general partnership or membership interest of such corporation or other entity or (b) the power to direct or cause the direction of the management or policies of such corporation or other entity, whether through the ownership of voting securities, by contract or otherwise.
“Agreement” shall have the meaning specified in the preamble hereof.
“Applicable Maximum Amount” shall have the meaning specified in Section 11.18.
“Average Daily Trading Volume” shall mean the average daily trading volume of the Common Shares on the Principal Market over the applicable measurement period.
“Bankruptcy Law” shall mean Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.
“Beneficial Ownership Limitation” shall have the meaning specified in Section 8.2(f).
“Bloomberg” shall mean Bloomberg, L.P.
“Business Day” shall mean a day on which the Principal Market is open for business.
“Buy-In” shall have the meaning specified in Section 2.4.
“Clearing Costs” shall mean all of the Investor’s broker and Transfer Agent costs with respect to the deposit of the Purchase Notice Securities.
“Closing” shall mean any one of the closings of a purchase and sale of Purchase Notice Securities pursuant to Section 2.3(c).
“Closing Date” shall mean the date on which a Closing occurs, to be no later than the Business Day immediately following either (i) three (3) Business Days after the Purchase Notice Date with respect to a Purchase Notice electing Purchase Price Option 1 or (ii) one (1) Business Day after the Purchase Notice Date with respect to a Purchase Notice electing Purchase Price Option 2.
“Commitment Amount” shall mean $15,000,000.
“Commitment Fee” shall have the meaning specified in Section 6.3.
“Commitment Payment” shall have the meaning specified in Section 6.3.
“Commitment Period” shall mean the period commencing on the date on which the Investor receives the Commitment Securities or the Commitment Payment, as applicable, and ending on the earlier of (i) the date on which the Common Shares cease trading on a Principal Market, (ii) the date on which the Investor shall have received such number of Securities pursuant to this Agreement (excluding the Commitment Securities) for aggregate consideration equal to the Commitment Amount, or (iii) December 31, 2027.
“Commitment Securities” shall have the meaning specified in Section 6.3.
“Common Share Equivalents” shall mean any securities of the Company or its Subsidiaries which would entitle the holder thereof to acquire at any time Common Shares, including, without limitation, any debt, preferred stock, right, option, restricted stock award, restricted stock unit, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Shares.
“Common Shares” shall have the meaning specified in the Recitals.
“Common Warrant” shall mean, collectively, the Common Stock purchase warrants delivered to the Investor in accordance with the RDO Agreement, which Common Warrants shall be exercisable immediately and shall expire when exercised in full, in the form attached to the RDO Agreement.
“Common Warrant Shares” shall mean the Common Shares issuable upon exercise of the Common Warrants.
“Company” shall have the meaning specified in the preamble hereof.
“Company Covered Person” shall mean any Person described in Rule 506(d)(1) under the Securities Act with respect to the Company.
2
“Company Equity Plan” shall mean any share incentive plan or other benefit plan approved by the board of directors of the Company that provides for the grant of Common Shares or Common Share Equivalents to any employee, officer or director for services provided to the Company in their capacity as such and in effect prior to the date hereof.
“Company Party” shall have the meaning specified in Section 6.4(a).
“Company Termination Notice” shall have the meaning specified in Section 11.5.
“Control Period” shall mean a period of thirty (30) days following the Execution Date, except for the purposes of Prohibited VRTs, in which case it shall mean a period of six (6) months following the Execution Date.
“Controlled Transaction” shall have the meaning specified in Section 6.4.
“Cure Period” shall mean, with respect to any change described in clause (iii) of the definition of Material Adverse Effect, the period commencing on the date of such change and ending on the earliest of (i) the date, if any, on which the effect described in clauses (A) through (D) of such definition has been avoided, remedied, or cured through the implementation of an alternative structure or course of action reasonably acceptable to the Investor, (ii) the date on which the Company notifies the Investor in writing that it does not intend to pursue, or has ceased pursuing, such a cure, and (iii) the thirtieth (30th) day following the date of such change; provided, that throughout the Cure Period the Company shall use its best efforts, diligently and in good faith, to identify and implement such an alternative structure or course of action, and shall keep the Investor reasonably informed of its efforts to do so.
“Covered Sections” shall have the meaning specified in Section 11.18.
“Current Report” shall have the meaning specified in Section 6.2.
“Custodian” shall mean any receiver, trustee, assignee, liquidator, or similar official under any Bankruptcy Law.
“Damages” shall mean any loss, claim, damage, liability, cost, contingency, obligation and expense (including, without limitation, judgments, amounts paid in settlement, court costs, reasonable attorneys’ fees and disbursements and costs and expenses of expert witnesses and investigation).
“Delaware Arbitration Act” shall have the meaning specified in Section 11.17(a)(i).
“Delisting Adjustment” shall have the meaning specified in Section 6.3.
“Delisting Event” shall have the meaning specified in Section 6.3.
“Dispute Submission Deadline” shall have the meaning specified in Section 11.17(a)(iv).
“Disqualifying Event” shall mean the disqualifying events described in Rule 506(d)(1)(i) through (viii) under the Securities Act.
“DRS” shall mean the DTC’s Direct Registration System.
“DRS Eligible” shall mean that (a) the Common Shares are eligible at DTC for full services pursuant to DTC’s operational arrangements, including, without limitation, transfer through DTC’s DRS system, (b) the Company has been approved (without revocation) by the DTC’s underwriting department, (c) the Transfer Agent is approved as an agent in the DTC/FAST Program, (d) the Purchase Notice Securities and Commitment Securities are otherwise eligible for delivery via DRS, and (e) the Transfer Agent does not have a policy prohibiting or limiting delivery of the Purchase Notice Securities and Commitment Securities, as applicable, via DRS.
3
“DRS Shares” shall mean Common Shares that are (i) issued in electronic form, (ii) freely tradable and transferable and without restriction on resale, and (iii) timely credited by the Company to the Investor’s or its designee’s specified DRS account with DTC under the DTC/FAST Program, or any similar program hereafter adopted by DTC performing substantially the same function.
“DTC” shall mean The Depository Trust Company, or any successor performing substantially the same function for the Company.
“DTC/FAST Program” shall mean the DTC’s Fast Automated Securities Transfer Program.
“DWAC” shall mean Deposit Withdrawal at Custodian as defined by DTC.
“DWAC Eligible” shall mean that (a) the Common Shares are eligible at DTC for full services pursuant to DTC’s operational arrangements, including, without limitation, transfer through DTC’s DWAC system, (b) the Company has been approved (without revocation) by the DTC’s underwriting department, (c) the Transfer Agent is approved as an agent in the DTC/FAST Program, (d) the Purchase Notice Securities and Commitment Securities are otherwise eligible for delivery via DWAC, and (e) the Transfer Agent does not have a policy prohibiting or limiting delivery of the Purchase Notice Securities and Commitment Securities, as applicable, via DWAC.
“DWAC Shares” shall mean Common Shares that are (i) issued in electronic form, (ii) freely tradable and transferable and without restriction on resale, and (iii) timely credited by the Company to the Investor’s or its designee’s specified DWAC account with DTC under the DTC/FAST Program, or any similar program hereafter adopted by DTC performing substantially the same function.
“Effectiveness Date” shall mean the date on which the Initial Registration Statement is declared effective by the SEC.
“Eligible Market” shall mean the NYSE, the NYSE American, The Nasdaq Capital Market, The Nasdaq Global Market, or The Nasdaq Global Select Market (or any nationally recognized successor to any of the foregoing).
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exchange Cap” shall have the meaning specified in Section 8.2(g).
“Execution Date” shall mean the date set forth in the preamble hereof.
“FAA” shall have the meaning specified in Section 11.17(a)(i).
“FINRA” shall mean the Financial Industry Regulatory Authority, Inc.
“Future SEC Documents” shall have the meaning specified in Section 8.2(k).
“GAAP” shall mean the U.S. generally accepted accounting principles, as promulgated by the Financial Accounting Standards Board and amended from time to time.
“Indemnified Party” shall have the meaning specified in Section 10.1.
“Initial Notice” shall have the meaning specified in Section 11.17(a)(ii).
“Initial Registration Statement” shall have the meaning specified in Section 7.1(a).
4
“Investor” shall have the meaning specified in the preamble hereof.
“Legend Removal Date” shall have the meaning specified in Section 9.1.
“Lien” shall mean any lien, charge, mortgage, imperfection of title, pledge, security interest, encumbrance, right of first offer or refusal, preemptive right, claim, encumbrance, or other restriction.
“Material Adverse Effect” shall mean any (i) effect on the business, operations, properties, or financial condition of the Company that is material and adverse to the Company, including, but not limited to, delisting from the Principal Market, any (ii) condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to enter into and perform its obligations under any Transaction Document, or any (iii) change, after the Execution Date, in (or in the interpretation, administration, or enforcement of) any applicable securities laws (including, without limitation, the Securities Act, the Exchange Act, and the rules and regulations of the SEC promulgated thereunder) or the rules, regulations, or listing standards of the Principal Market, that materially and adversely affects, or would reasonably be expected to materially and adversely affect, (A) the availability of any exemption from the registration requirements of the Securities Act relied upon for the offer or sale of the Securities, (B) the ability of the Company to file, or to maintain the effectiveness of, any Registration Statement, or the availability of Rule 415 for the registration of the resale of the Registrable Securities on a continuous basis, (C) the ability of the Investor to resell the Registrable Securities in accordance with the plan of distribution set forth in the applicable Registration Statement or pursuant to Rule 144, or (D) the ability of the Company or the Investor to perform its respective obligations under, or to consummate the transactions contemplated by, the Transaction Documents in the manner contemplated hereby as of the Execution Date; provided, however, that no such change shall constitute a Material Adverse Effect under this clause (iii) unless the effect described in clauses (A) through (D) above remains uncured upon expiration of the applicable Cure Period.
“Nasdaq” shall mean the Nasdaq Stock Market LLC.
“New Registration Statement” shall have the meaning specified in Section 7.1(b).
“NYSE” shall mean the New York Stock Exchange.
“NYSE American” shall mean NYSE American LLC.
“Party” shall have the meaning specified in the preamble hereof.
“Person” shall mean an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
“Pre-Funded Warrant” shall mean, collectively, the Pre-Funded Common Stock purchase warrants delivered to the Investor in accordance with Section 6.3 hereof, which Pre-Funded Warrants shall be exercisable immediately and shall expire when exercised in full, in the form of Exhibit B attached hereto.
“Pre-Funded Warrant Shares” shall mean the Common Shares issuable upon exercise of the Pre-Funded Warrants.
“Pricing Dispute” shall have the meaning specified in Section 11.17(a)(i).
“Principal Market” shall mean any of the national securities exchanges (i.e. NYSE, NYSE American, The Nasdaq Capital Market, The Nasdaq Global Market, or The Nasdaq Global Select Market), or principal quotation systems (i.e. OTCQX, OTCQB, OTC Pink), or other principal exchange or recognized quotation system which is, on the date in question, the principal trading platform or market for the Common Shares.
5
“Prohibited VRT” shall mean any transaction pursuant to which the Company (i) issues or sells any equity or debt securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional Common Shares either (A) at a conversion price, exercise price, exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the Common Shares at any time after the initial issuance of such equity or debt securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such equity or debt security (other than in connection with a stock split or stock dividend or similar event) or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Shares, or (ii) enters into, or effects a transaction under, any agreement, including, but not limited to, an equity line of credit or an “at-the-market offering,” whereby the Company may issue securities at a future determined price, regardless of whether shares pursuant to such agreement have actually been issued and regardless of whether such agreement is subsequently cancelled.
“Purchase Notice Amount” shall mean the product of the number of Purchase Notice Securities referenced in the Purchase Notice multiplied by the applicable Purchase Price in accordance with Section 2.1.
“Purchase Notice” shall mean a written notice from Company, substantially in the form of Exhibit A hereto, to the Investor setting forth the Purchase Notice Securities which the Company requires the Investor to purchase pursuant to the terms of this Agreement.
“Purchase Notice Date” shall have the meaning specified in Section 2.3(a).
“Purchase Notice Limitation” shall mean either Purchase Notice Limitation 1 for a Purchase Notice electing Purchase Price Option 1 or Purchase Notice Limitation 2 for a Purchase Notice electing Purchase Price Option 2.
“Purchase Notice Limitation 1” shall mean $1,000,000, unless the Company and the Investor mutually agree in writing to increase the Purchase Notice Limitation 1 to an amount not to exceed $5,000,000.
“Purchase Notice Limitation 2” shall mean the lesser of (i) $1,000,000 (unless the Company and the Investor mutually agree in writing to increase the Purchase Notice Limitation 2 to an amount not to exceed $5,000,000) or (ii) 30% of the Average Daily Trading Volume on the Purchase Notice Date.
“Purchase Notice Securities” shall mean all Common Shares that the Company shall be entitled to issue as set forth in all Purchase Notices in accordance with the terms and conditions of this Agreement.
“Purchase Price” shall mean either Purchase Price Option 1 or Purchase Price Option 2, as elected by the Company on each Purchase Notice.
“Purchase Price Option 1” shall mean the lowest daily VWAP for the Common Shares for the three (3) Business Days prior to the Closing Date with respect to a Purchase Notice, multiplied by ninety-two percent (92.0%). Any Purchase Notice setting forth the Purchase Price Option 1 will be subject to the Purchase Notice Limitation 1.
“Purchase Price Option 2” shall mean the lowest traded price of the Common Shares for the Business Day prior to the Closing Date with respect to a Purchase Notice, multiplied by ninety-seven percent (97.0%). Any Purchase Notice setting forth the Purchase Price Option 2 will be subject to the Purchase Notice Limitation 2.
“RDO Agreement” shall mean that certain Securities Purchase Agreement, dated as of August 19, 2026, by and between the Parties.
6
“Registration Expenses” shall mean all expenses incurred in effecting any registration pursuant to this Agreement, including, without limitation, all registration, qualification and filing fees (including fees with respect to filings required to be made with FINRA, and any fees of the securities exchange or automated quotation system on which the Common Shares are then listed or quoted), printing expenses, escrow fees, fees and disbursements of counsel for the Company, fees and disbursements of counsel for the Investor, blue sky fees and expenses (including reasonable fees and disbursements of counsel for the Investor in connection with blue sky compliance) and any fees and disbursements of accountants retained by the Company incident to or required by any such registration.
“Registration Statement” shall have the meaning specified in Section 7.1(c).
“Registrable Securities” shall mean (i) the Purchase Notice Securities, (ii) the Commitment Securities, (iii) the Pre-Funded Warrant Shares, (iv) the Common Warrant Shares and (v) any other equity security of the Company issued or issuable with respect to any of the foregoing by way of a stock dividend or stock split or in connection with a combination of shares, capitalization, merger, consolidation or reorganization; provided, however, that, as to any particular Registrable Security, such securities shall cease to be Registrable Securities when: (1) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of, or exchanged in accordance with such registration statement; (2) such securities shall have ceased to be outstanding; (3) such securities have been sold pursuant to Section 4(a)(1) of the Securities Act, including sales made pursuant to Rule 144; or (4) such securities have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities transaction.
“Regulation D” shall mean Regulation D promulgated under the Securities Act.
“Required Dispute Documentation” shall have the meaning specified in Section 11.17(a)(iv).
“Rule 144” shall mean Rule 144 under the Securities Act or any similar provision then in force under the Securities Act.
“SEC” shall mean the U.S. Securities and Exchange Commission.
“SEC Documents” shall have the meaning specified in Section 4.5.
“Securities” shall mean the Purchase Notice Securities, the Commitment Securities, the Pre-Funded Warrants, the Pre-Funded Warrant Shares, the Common Warrants, and the Common Warrant Shares, collectively.
“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Subsidiary” shall mean any Person that the Company wholly owns or controls, or in which the Company, directly or indirectly, owns a majority of the voting stock or similar voting interest, in each case that would be disclosable pursuant to Item 601(b)(21) of Regulation S-K promulgated under the Securities Act.
“Surviving Obligations” shall have the meaning specified in Section 11.1.
“Transaction Documents” shall mean this Agreement, the Pre-Funded Warrant, the RDO Agreement, the Common Warrant and all other agreements entered into by the Parties in connection with the transaction contemplated by this Agreement, along with any exhibits, appendices, and attachments hereto and thereto, as applicable.
“Transfer Agent” shall mean the current transfer agent of the Company, and any successor transfer agent of the Company.
“U.S.” shall mean the United States of America.
7
“VWAP” shall mean, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded), during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, or if the foregoing does not apply, the dollar volume-weighted average price of such security in any principal quotation system operated by OTC Markets Group Inc. or other principal exchange or recognized quotation system which is at the time the principal trading platform or market for such security during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, or, if no dollar volume-weighted average price is reported, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Investor, in good faith. If the Company and the Investor are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 11.17. All such determinations shall be appropriately adjusted for any share dividend, share split, share combination, recapitalization, or other similar transaction during such period.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
Section 2.1 Purchase Notices. Subject to the applicable conditions set forth herein, at any time during the Commitment Period, the Company shall have the right, but not the obligation, to direct the Investor, by its delivery to the Investor of a Purchase Notice from time to time, to purchase, and the Investor shall have the obligation to purchase from the Company, the number of Purchase Notice Securities set forth on the Purchase Notice at the Purchase Price, provided that the amount of Purchase Notice Securities shall not exceed the Purchase Notice Limitation applicable to such Purchase Notice or the Beneficial Ownership Limitation set forth in Section 8.2(f). The Company may not deliver a subsequent Purchase Notice until the Closing of an active Purchase Notice, unless waived by the Investor in writing. The Company shall not issue more than three (3) Purchase Notices electing Purchase Price Option 2 on any Business Day without the prior written consent of the Investor.
Section 2.2 Purchase Price Election. For each Purchase Notice, the Company shall have the right to select Purchase Price Option 1 or Purchase Price Option 2 at which to sell the Purchase Notice Securities subject to such Purchase Notice; provided, however, that if the principal trading platform or market for the Common Shares is not an Eligible Market on a Purchase Notice Date, or if the principal trading platform or market for the Common Shares will not be an Eligible Market on the Closing Date, the Company may not issue any Purchase Notices.
Section 2.3 Deliveries; Closing.
(a) Purchase Notice Delivery. In accordance with Section 2.1 and subject to the satisfaction of the conditions set forth in Section 8.2, the Company shall deliver each Purchase Notice by email to the Investor’s email address in accordance with Section 11.19, and shall, alongside each such delivery of a Purchase Notice, deliver the applicable Purchase Notice Securities as DWAC Shares or DRS Shares to the Investor in accordance with Section 2.3(b). A Purchase Notice shall be deemed delivered on (i) the Business Day on which both the Purchase Notice and the applicable Purchase Notice Securities are received by the Investor, if both occur on or prior to 8:00 a.m. New York time on such Business Day, or (ii) the next Business Day, if the either occurs after 8:00 a.m. New York time on such Business Day or at any time on a day which is not a Business Day (the “Purchase Notice Date”).
(b) Delivery of Purchase Notice Securities. The Company shall deliver the applicable Purchase Notice Securities as DWAC Shares or DRS Shares to the Investor by no later than 8:00 a.m. New York time on the applicable day on which the Company delivers a Purchase Notice in compliance with Section 2.3(a).
8
(c) Closing. The Investor shall pay to the Company the Purchase Notice Amount with respect to the applicable Purchase Notice as full payment for such Purchase Notice Securities purchased by the Investor under the applicable Purchase Notice via wire transfer of immediately available funds as set forth below on the Closing Date. The Company shall not issue any fraction of a Common Share under any Purchase Notice. If the issuance would result in the issuance of a fraction of a Common Share, the Company shall round such fraction of a Common Share up to the nearest whole Common Share. All payments made under this Agreement shall be made in lawful money of the U.S. by wire transfer of immediately available funds to such account as the Company may from time to time designate by written notice in accordance with the provisions of this Agreement. Whenever any amount or issuance of Common Shares expressed to be due by the terms of this Agreement is due on any day that is not a Business Day, the same shall instead be due on the next succeeding day that is a Business Day.
Section 2.4 Buy-In. In addition to any other rights and remedies available to the Investor, if, in connection with a Purchase Notice where the Company selects Purchase Price Option 2, the Company fails to cause the Transfer Agent to transmit to the Investor the Purchase Notice Securities in accordance with Section 2.3(b) by the deadline required thereunder with respect to a Purchase Notice, and where such failure is not cured within one (1) Business Day and the Investor is then required by its broker to purchase (in an open market transaction or otherwise), or the Investor’s brokerage firm otherwise purchases, Common Shares to deliver in satisfaction of a sale by the Investor of the Purchase Notice Securities which the Investor anticipated receiving pursuant to such Purchase Notice (a “Buy-In”), then the Company shall (A) pay in cash to the Investor the amount, if any, by which (x) the Investor’s total purchase price (including brokerage commissions, if any) for the Common Shares so purchased exceeds (y) the amount obtained by multiplying (1) the number of Purchase Notice Securities that the Company was required to deliver to the Investor in connection with the Purchase Notice at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) promptly deliver to the Investor the number of Purchase Notice Securities that would have been delivered had the Company timely complied with its delivery obligations under Section 2.3(b). For example, if the Investor purchases Common Shares having a total purchase price of $11,000 to cover a Buy-In with respect to a sale of Purchase Notice Securities 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 Investor $1,000. The Investor shall provide the Company with written notice indicating the amounts payable to the Investor with respect to the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit the Investor’s right to pursue any other remedies available to it 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 Purchase Notice Securities as required Section 2.3(b). For the avoidance of doubt, the Company’s obligation to deliver, and the Investor’s obligation to pay for, the Purchase Notice Securities subject to the applicable Purchase Notice shall remain in full force and effect notwithstanding a Buy-In, and no Buy-In shall relieve the Company of its delivery obligations hereunder or the Investor of its payment obligations with respect thereto. Furthermore, the Company’s obligations under this Section shall not be excused, delayed, or reduced by any act, omission, delay, or failure of the Transfer Agent, and the Company shall remain fully liable hereunder regardless of whether such act, omission, delay, or failure was within the Company’s control.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants the following to the Company:
Section 3.1 Organization and Standing. The Investor is an entity duly formed, validly existing, and in good standing under the laws of the State of Delaware with full right and limited partnership or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents.
9
Section 3.2 Authority. The Investor has the requisite power and authority to enter into and perform its obligations under the Transaction Documents and to consummate the transactions contemplated hereby and thereby. The execution and delivery of the Transaction Documents and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized and no further consent or authorization of the Investor is required. The Transaction Documents to which it is a party have been duly executed by the Investor, and when delivered by the Investor in accordance with the terms hereof, will constitute the valid and binding obligation of the Investor enforceable against it in accordance with their terms, subject to applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.
Section 3.3 Accredited Investor. The Investor is an “accredited investor” (as such term is defined in Rule 501(a)(3) of Regulation D), and the Investor has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities. The Investor acknowledges that an investment in the Securities is speculative and involves a high degree of risk.
Section 3.4 Not An Affiliate. The Investor is not an officer, director, or “affiliate” (as defined in Rule 405 of the Securities Act) of the Company.
Section 3.5 Intent. The Investor is entering into this Agreement and purchasing the Securities for its own account, and not as nominee or agent, for investment purposes and not with a view towards, or for a sale in connection with, a “distribution” (as such term is defined in the Securities Act), and the Investor has no present arrangement (whether or not legally binding) at any time to sell the Securities to or through any Person in violation of the Securities Act or any applicable state securities laws; provided, however, that the Investor reserves the right to dispose of the Securities at any time in accordance with federal and state securities laws applicable to such disposition.
Section 3.6 No Legal Advice From The Company. The Investor acknowledges that it has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with its own legal counsel and investment and tax advisors. The Investor is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax, or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction.
Section 3.7 Absence of Conflicts. The execution and delivery of the Transaction Documents and the consummation of the transactions contemplated hereby and thereby and compliance with the requirements hereof and thereof, will not, to the Investor’s knowledge, (a) materially violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Investor, (b) materially violate any provision of any indenture, instrument or agreement to which the Investor is a party or is subject, or by which the Investor or any of its assets is bound, or conflict with or constitute a material default thereunder, (c) result in the creation or imposition of any material Lien pursuant to the terms of any such indenture, instrument or agreement, or constitute a breach of any fiduciary duty owed by the Investor to any third-party, or (d) require the approval of any third-party (that has not been obtained) pursuant to any material contract, instrument, agreement, relationship or legal obligation to which the Investor is subject or to which any of its assets, operations or management may be subject.
Section 3.8 Disclosure; Access to Information. The Investor has had an opportunity to review copies of the SEC Documents (as defined in Section 4.5) filed on behalf of the Company and has had access to all publicly available information with respect to the Company. The Investor understands that its investment in the Securities involves a high degree of risk. The Investor can bear the economic risk of an investment in the Securities, including a total loss. The Investor has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities. The Investor understands that no U.S. federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
10
Section 3.9 Manner of Sale. At no time was the Investor presented with or solicited by or through any leaflet, public promotional meeting, television advertisement or any other form of general solicitation or advertising.
Section 3.10 No Prior Short Selling. At no time prior to the date of this Agreement has any of the Investor, its agents, representatives or Affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any (i) “short sale” (as such term is defined in Section 242.200 of Regulation SHO of the Exchange Act) of the Securities or (ii) hedging transaction, which establishes a net short position with respect to the Securities or any other securities of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the SEC Documents, the Company represents and warrants the following to the Investor, as of the Execution Date:
Section 4.1 Organization of the Company. The Company and each of its Subsidiaries is an entity duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own, operate, lease and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor its Subsidiaries are in violation or default of any of the provisions of its organizational or charter documents. The Company and each of its Subsidiaries is duly qualified or licensed, as applicable, to conduct business and is in good standing in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified, licensed, or in good standing, as applicable, has not nor could reasonably be expected to result in a Material Adverse Effect and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
Section 4.2 Authority. The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement. The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further consent or authorization of the Company, its board of directors or its equityholders is required. This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application and (ii) to the extent the enforceability of any provisions for indemnification may be limited by public policy.
Section 4.3 Capitalization. As of the date hereof, the Company is authorized to issue 100,000,000 Common Shares, of which 22,462,632 shares are issued and outstanding. The Company has not issued any securities since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of stock options under the Company Equity Plan, the issuance of securities pursuant to the Company Equity Plan and pursuant to the conversion and/or exercise of Common Share Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has elected to use any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as set forth in the SEC Documents, the ATM Agreement (as defined in the RDO Agreement) and this Agreement, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any securities, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional securities or Common Share Equivalents. Except as set forth in the SEC Documents and this Agreement, the issuance and sale of the Securities will not obligate the Company to issue other securities to any Person (other than the Investor) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities, except to the extent that the exercise or conversion price of such securities are calculated based on the market price of the Common Shares on the applicable exercise or conversion date. Except as disclosed in the SEC Documents, there are no stockholders’ or equityholders’ agreements, voting agreements, or other similar agreements with respect to the Company’s Common Shares to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s equityholders.
11
Section 4.4 Listing and Maintenance Requirements. The Common Shares are registered pursuant to Section 12(b) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Shares under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such registration. Except as disclosed in the SEC Documents, the Company has not, in the twelve (12) months preceding the date hereof, received notice from, or is aware of any threatened or potential notice from, the SEC or the governing body of the Principal Market on which the Common Shares are or have been listed or quoted to the effect that the Company is not in compliance with applicable securities laws or with the listing or maintenance requirements of the Principal Market. Except as disclosed in the SEC Documents, the Company is in compliance with all such listing and maintenance requirements and has no reason to believe that it will not continue to be in compliance with all such listing and maintenance requirements in the foreseeable future.
Section 4.5 SEC Documents; Disclosure. The Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) thereof, for the twelve (12) months preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Documents”). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and other federal laws, rules, and regulations applicable to such SEC Documents, and none of the SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except (a) as may be otherwise indicated in such financial statements or the notes thereto or (b) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments). Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided the Investor or its agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Investor will rely on the foregoing representation in effecting transactions in securities of the Company.
Section 4.6 Valid Issuances. The Securities are duly authorized, and when issued and paid for in accordance with the applicable Transaction Documents, such Securities will be duly and validly issued, fully paid, and non-assessable, free and clear of all Liens other than restrictions on transfer provided for in the Transaction Documents and applicable federal and state securities laws and regulations. When the Pre-Funded Warrants and the Common Warrants are issued in accordance with the applicable Transaction Documents, the Pre-Funded Warrants and the Common Warrants will constitute the valid and binding obligation of the Company, enforceable against the Company in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application, free and clear of all Liens other than restrictions on transfer provided for in the Transaction Documents and applicable federal and state securities laws and regulations. Assuming the accuracy of the representations of the Investor in ARTICLE III of this Agreement and subject to the filings described in the last sentence of Section 4.7 of this Agreement, the Securities will be issued in compliance with all applicable federal and state securities laws.
12
Section 4.7 No Conflicts. The execution, delivery, and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Purchase Notice Securities and Commitment Securities, do not and will not (a) result in a violation of the Company’s articles of incorporation, by-laws or other organizational or charter documents, (b) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, result in the creation of any Lien upon any of the properties or assets of the Company, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, instrument or any “lock-up” or similar provision of any agreement to which the Company is a party, or (c) result in a violation, breach of or noncompliance with any federal, state or local law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations, as well as the rules and regulations of the Principal Market) applicable to the Company or by which any property or asset of the Company is bound or affected, nor is the Company otherwise in violation of, conflict with, or in default under any of the foregoing (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except for possible violations that either singly or in the aggregate do not and will not have a material effect on the Company. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under the Transaction Documents (other than (i) any SEC, state or local securities filings that may be required to be made by the Company in connection with the execution of this Agreement or the issuance of Securities pursuant hereto, or (ii) the filing of a Listing of Additional Shares Notification Form with the Principal Market, which, in each case, have been made or will be made in a timely manner); provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of the Investor herein.
Section 4.8 Litigation and Other Proceedings. Except as disclosed in the SEC Documents, there are no material actions, suits, investigations, SEC inquiries, FINRA inquiries, inquiries by the governing body of the Principal Market (including NASDAQ inquiries), or similar proceedings (however any governmental agency may name them) pending, threatened or imminent against or affecting the Company or its assets, nor has the Company received any written or oral notice of any such action, suit, proceeding, SEC inquiry, FINRA inquiry, inquiry by the governing body of the Principal Market (including a NASDAQ inquiry) or investigation, which would have a Material Adverse Effect. No judgment, order, writ, injunction or decree or award against the Company has been issued by or, to the actual knowledge of the Company, requested of any court, arbitrator or governmental agency which would have a Material Adverse Effect. There has not been, and to the actual knowledge of the Company, there is no pending investigation by the SEC involving the Company or any current officer or director of the Company.
Section 4.9 Acknowledgment Regarding Investor’s Purchase of Securities. Based solely on the Investor’s representations and warranties, the Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby and thereby and that the Investor is not (i) an officer or director of the Company, or (ii) an “affiliate” (as defined in Rule 144) of the Company. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and thereby, and any advice given by the Investor or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby and thereby is merely incidental to the Investor’s purchase of the Purchase Notice Securities. The Company further represents to the Investor that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation by the Company and its representatives.
Section 4.10 No General Solicitation. Neither the Company, nor any Person acting on its behalf, has engaged in any form of general solicitation or general advertising (as defined in Reg D) in connection with the offer or sale of the Securities.
13
Section 4.11 No Integrated Offering. None of the Company, its Affiliates, and any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings for purposes of any applicable equityholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated, but excluding equityholder consents required to authorize and issue the Securities or waive any anti-dilution provisions in connection therewith.
Section 4.12 Dilutive Effect. The Company acknowledges that issuance of Securities pursuant to this Agreement could cause dilution to existing shareholders and could significantly increase the number of outstanding Common Shares. The Company further acknowledges that its issuance of Commitment Securities, if the Commitment Fee is elected to be paid by issuing Commitment Securities pursuant to this Agreement, and the issuance of the Purchase Notice Securities pursuant to the terms of a Purchase Notice in accordance with this Agreement is, in each case, absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
Section 4.13 Exempt Offering. Assuming the accuracy of the representations and warranties of the Investor, the offer, issue, and sale of the Securities hereunder are and will be exempt from the registration and prospectus delivery requirements of the Securities Act and are exempt from registration and qualification under the registration, permit, or qualification requirements of all applicable state securities laws.
Section 4.14 Placement Agent; Other Covered Persons. The Company has not engaged any Person to act as a placement agent, underwriter, broker, dealer, or finder in connection with the sale of the Securities hereunder. The Company is not aware of any Person that has been or will be paid (directly or indirectly) remuneration for solicitation of the Investor in connection with the sale of any Securities.
Section 4.15 No Disqualifying Events. Neither the Company nor, to the Company’s knowledge, any other Company Covered Person is subject to any Disqualifying Event, except for a Disqualifying Event (a) covered by Rule 506(d)(2) under the Securities Act, or (b) described in Rule 506(d)(3) under the Securities Act, provided that, with respect to any Disqualifying Event described in (b), the Company has furnished, or will furnish prior to the applicable Closing, the disclosure required by Rule 506(e) under the Securities Act with respect thereto. The Company has exercised reasonable care to determine whether any Company Covered Person is subject to a Disqualifying Event.
Section 4.16 Registration Statement. At the time of the filing of any Registration Statement or any amendment thereto, and again when any such Registration Statement or any amendment thereto become effective, there shall be no untrue statement of a material fact in such Registration Statement or omission of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and, at the time any prospectus that is part of such Registration Statement, or any amendment or supplement to such prospectus, is issued, there shall be no untrue statement of a material fact in such prospectus, amendment, or supplement or omission of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
ARTICLE V
COVENANTS OF INVESTOR
Section 5.1 Short Sales and Confidentiality. During the period from the Execution Date to the end of the Commitment Period, neither the Investor, nor any Affiliate of the Investor acting on its behalf, shall execute (i) any “short sale” (as such term is defined in Section 242.200 of Regulation SHO of the Exchange Act) of the Securities or (ii) hedging transaction which establishes a net short position with respect to the Securities or any other securities of the Company. For the purposes hereof, and in accordance with Regulation SHO, the sale after delivery of the Purchase Notice of such number of Securities reasonably expected to be purchased under the Purchase Notice shall not be deemed a short sale. The Investor shall, until such time as the transactions contemplated by the Transaction Documents are publicly disclosed by the Company in accordance with the terms of the Transaction Documents, maintain the confidentiality of the existence and terms of this transaction and the information included in the Transaction Documents.
14
Section 5.2 Compliance with Law; Trading in Securities. The Investor’s trading activities with respect to the Securities shall be in compliance with all applicable state and federal securities laws and regulations and the rules and regulations of the Principal Market.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Listing of Shares. The Company shall use its best efforts to continue the listing or quotation and trading of the Common Shares on the Principal Market (including, without limitation, maintaining sufficient net tangible assets, if required) and will comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market and applicable securities laws.
Section 6.2 Filing of Report of Current Report. The Company agrees that it shall file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the SEC within the time required by the Exchange Act, relating to the execution of the transactions contemplated by, and describing the material terms and conditions of, the Transaction Documents (the “Current Report”). The Company shall permit the Investor to review and comment upon the final pre-filing draft version of the Current Report at least one (1) Business Days prior to its filing with the SEC, and the Company shall give reasonable consideration to all such comments.
Section 6.3 Issuance of Commitment Securities. In consideration for the Investor’s execution, delivery, and performance under this Agreement, the Company shall pay to the Investor a commitment fee (the “Commitment Fee”) equal to two percent (2%) of the Commitment Amount payable, at the election of the Company, by either (a) within three (3) Business Days from the Effectiveness Date, issuing and delivering to the Investor (or causing the Transfer Agent to issue and deliver) a number of Common Shares (provided, however, that, to the extent that the Investor determines, in its sole discretion, that the Investor (together with the Investor’s Affiliates, and any Person acting as a group together with the Investor or any of the Investor’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation, or as the Investor may otherwise choose, in lieu of Common Shares, to receive Pre-Funded Warrants in such manner to result in the same number of Common Shares as the Investor would otherwise be eligible to receive) (the “Commitment Securities”) equal to two percent (2%) of the Commitment Amount in book entry format, or (b) within three (3) Business Days from the Execution Date, paying two percent (2%) of the Commitment Amount (the “Commitment Payment”) in lawful money of the U.S. by wire transfer of immediately available funds to such account as the Investor may from time to time designate by written notice in accordance with Section 11.19. If the Company elects to issue the Commitment Securities, the number of shares to be issued as Commitment Securities shall be determined by dividing (x) two percent (2%) of the Commitment Amount by (y) the average VWAP of the Company’s Common Shares for the five (5) Business Days immediately preceding the Effectiveness Date. Notwithstanding the foregoing, if the Common Shares cease to be listed on The Nasdaq Capital Market (the “Delisting Event”) during the thirty (30) Business Day period following the Execution Date, the Commitment Fee shall automatically increase from two percent (2%) of the Commitment Amount payable to three percent (3%) of the Commitment Amount payable (the “Delisting Adjustment”). The increased Commitment Fee payable pursuant to the Delisting Adjustment shall be paid within three (3) Business Days of the Delisting Event.
Section 6.4 Controlled Transactions.
(a) From the Execution Date until the end of the applicable Control Period, the Company and its Subsidiaries (each, a “Company Party”) shall be prohibited from issuing or selling any Common Shares or entering into any Prohibited VRT (each, a “Controlled Transaction”); provided that a Controlled Transaction shall not include (i) an at-the-market offering program conducted through a registered broker-dealer pursuant to Rule 415(a)(4) of the Securities Act, (ii) any Company Equity Plan, (iii) any registered follow-on offering, (iv) the Company’s sale of Common Shares pursuant to the ATM Agreement (as defined in the RDO Agreement) that occur ninety (90) Business Days after the Execution DateSection 6.4(b), or (v) an Exempt Issuance (as defined in the RDO Agreement); provided, further, that no Prohibited VRT shall constitute an Exempt Issuance for purposes of this Section 6.4.
15
(b) The Investor shall be entitled to seek specific performance and/or injunctive relief, whether preliminary or permanent, against the applicable Company Party to preclude any actual or threatened Controlled Transaction, which remedy shall be in addition to, and not in lieu of, any right to collect damages. The Company acknowledges and agrees that any breach or threatened breach of Section 6.4(a) would cause the Investor irreparable harm for which monetary damages would not be an adequate remedy. Accordingly, the Company agrees to waive, and not to assert, any defense in an action for specific performance or injunctive relief that a remedy at law would be adequate, in each case without the necessity of showing economic loss and without any bond or other security being required.
(c) Notwithstanding anything to the contrary in this Section 6.4, and for the avoidance of doubt, nothing in this Section 6.4 shall restrict, prohibit, condition, or otherwise limit the ability of the Company to enter into, consummate, perform under, or issue Common Shares or any other securities pursuant to any financing, offering, issuance, or transaction of any kind or nature whatsoever, other than a Controlled Transaction.
Section 6.5 [Reserved].
Section 6.6 Notice of Disqualifying Events. During the Commitment Period, the Company shall promptly notify the Investor in writing, and in any event within two (2) Business Days, after any executive officer, member of the Company’s board of directors, or other “c-suite” level executive of the Company becomes aware that (a) any Company Covered Person has become subject to a Disqualifying Event, or (b) any event or circumstance has occurred that would reasonably be expected to result in the representations set forth in Section 4.15 being untrue or incorrect in any respect if made as of the date of such notice. Such notice shall describe the applicable Disqualifying Event (or potential Disqualifying Event) in reasonable detail, including whether and how the Company intends to seek to avail itself of any exception described in Section 4.15 or otherwise to cure or remediate such Disqualifying Event, and the Company shall keep the Investor reasonably informed of material developments with respect thereto until such Disqualifying Event has been cured, waived, or otherwise ceases to affect the availability of the exemption from registration under the Securities Act relied upon for the offer and sale of the Securities.
ARTICLE VII
REGISTRATION RIGHTS
Section 7.1 Registration.
(a) The Company shall, not later than twenty (20) Business Days following the Execution Date, prepare and file or confidentially submit, at the Company’s option, to the SEC a registration statement on Form S-1, and take all such other actions as are reasonably necessary to ensure that there is an effective registration statement containing a prospectus that remains current covering (and to qualify under required U.S. state securities laws, if any) the offer and sale of all Registrable Securities by the Investor on a continuous basis pursuant to Rule 415 (the “Initial Registration Statement”). The Company shall use its best efforts to (i) cause the SEC to declare the Initial Registration Statement effective as soon as possible thereafter, but in any event within sixty (60) days following the Execution Date, and (ii) for such Initial Registration Statement to remain effective and the prospectus contained therein to remain current until the Investor ceases to hold any Registrable Securities. The Initial Registration Statement shall provide for any method or combination of methods of resale of Registrable Securities legally available to, and requested by, the Investor, and shall comply with the relevant provisions of the Securities Act and Exchange Act. The Company shall undertake to register the Registrable Securities on Form S-3 as soon as such form is available to the Company, provided that the Company shall maintain the effectiveness of the Initial Registration Statement then in effect until such time as a registration statement on Form S-3 covering the Registrable Securities has been declared effective by the SEC.
16
(b) Notwithstanding the registration obligations set forth in Section 7.1(a), if the SEC informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform the Investor and use its best efforts to file amendments to the Initial Registration Statement or a new registration statement (a “New Registration Statement”) as required by the SEC, covering the maximum number of Registrable Securities permitted to be registered by the SEC, on Form S-1 or such other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Section 7.1(a); provided, however, that prior to filing such amendment, the Company shall be obligated to use its best efforts to advocate with the SEC for the registration of all of the Registrable Securities in accordance with the Securities Act, the rules and regulations promulgated thereunder, publicly-available written or oral guidance of the SEC staff, and any comments, requirements, or requests of the SEC staff.
(c) If the Company amends the Initial Registration Statement or files a New Registration Statement, as the case may be, in accordance with Section 7.1(b) above, the Company will use its best efforts to file with the SEC, as promptly as possible, one or more registration statements on Form S-1 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement or the New Registration Statement, as applicable and each as amended. The Initial Registration Statement, a New Registration Statement, and any other registration statements pursuant to which the Company seeks to register for resale any Registrable Securities shall each be referred to herein as a “Registration Statement” and collectively as the “Registration Statements.”
(d) The Investor acknowledges that it will be disclosed as an “underwriter” and a “selling shareholder” in each Registration Statement and in any prospectus contained therein to the extent required by applicable law.
(e) The Parties acknowledge that the actual damages likely to result from the Company’s failure to timely file the Initial Registration Statement or obtain effectiveness thereof, including the resulting illiquidity of the Registrable Securities and lost opportunity to resell during the period of such failure, are difficult to ascertain with precision, such that the amounts set forth in this Section 7.1(e) represent the Parties’ reasonable good-faith estimate of such damages and not a penalty. If the Company (i) fails to file the Initial Registration Statement by the deadline set forth in Section 7.1(a) or (ii) the SEC does not declare the Initial Registration Statement effective by the deadline set forth in Section 7.1(a), then the Company shall pay to the Investor $175,000, as liquidated damages and not a penalty, where such liquidated damages shall be payable in the manner described in Section 6.3 (i.e., at the Company’s election, payable either with Commitment Securities or the lawful money of the U.S. by wire transfer of immediately available funds to such account as the Investor may designate from time to time) within three (3) Business Days of the failure of clauses (i) or (ii) set forth herein, as applicable. If the Company fails to satisfy both clauses (i) and (ii) set forth herein with respect to the Initial Registration Statement, only a single liquidated damages payment of $175,000 shall be due under this Section 7.1(e) with respect to such failures. The Company shall notify the Investor in writing within one (1) Business Day of becoming aware of any failure described in clauses (i) or (ii) of this Section 7.1(e). The payment by the Company of these liquidated damages shall be in addition to all other obligations of the Company set forth in the Transaction Documents to which the Company is a party, and shall similarly be in addition to all the rights and remedies enjoyed by the Investor in the Transaction Documents, and shall not serve to waive, limit, proscribe, mitigate, reduce or in any way impede any other rights or remedies enjoyed by the Investor.
Section 7.2 Expenses of Registration. All Registration Expenses incurred in connection with registration pursuant to this ARTICLE VII shall be borne by the Company.
Section 7.3 Registration Procedures. In the case of each registration of Registrable Securities effected by the Company pursuant to this ARTICLE VII, the Company will keep the Investor advised in writing as to the initiation of each registration and as to the completion thereof. The Company will, at its sole expense, do the following:
17
(a) Prepare each Registration Statement, including all exhibits and financial statements required under the Securities Act to be filed therewith, and any prospectus or any amendments or supplements thereto. Prior to filing any such Registration Statement, prospectus or amendments or supplements thereto, the Company shall permit the Investor and its counsel to review and comment upon all documents prepared to be filed at least three (3) Business Days prior to such filing with the SEC, and the Company shall give reasonable consideration to all such comments.
(b) As soon as practicable, and in no event later than by the deadline set forth in Section 7.1(a), file with the SEC the Registration Statement relating to the Registrable Securities, including all exhibits and financial statements required by the SEC to be filed therewith, and use its best efforts to cause such Registration Statement to become effective under the Securities Act as soon as practicable;
(c) Prepare and file with the SEC such amendments, post-effective amendments, and supplements to such Registration Statement and the prospectus used in connection with such Registration Statement as may be requested by the Investor or as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Registration Statement;
(d) Notify the Investor, in compliance with Section 11.19, and provide copies of all relevant documents, as soon as practicable after notice thereof is received by the Company (i) when the applicable Registration Statement or any amendment thereto has been filed or becomes effective, and when the applicable prospectus or any amendment or supplement to such prospectus has been filed, (ii) of any written comments by the SEC or any request by the SEC or any other federal or state governmental authority for amendments or supplements to such Registration Statement, prospectus or for additional information (whether before or after the effective date of the Registration Statement), (iii) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or any order by the SEC or any other regulatory authority preventing or suspending the use of any preliminary or final prospectus or the initiation or threatening of any proceedings for such purposes, and (iv) of the receipt by the Company of any notification with respect to the suspension of any Registrable Securities for offering or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose;
(e) Furnish such number of prospectuses, including any preliminary prospectuses, and other documents incident thereto, including any amendment of or supplement to the prospectus, as the Investor (or its counsel) from time to time may reasonably request;
(f) Register and qualify the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions in the U.S. as shall be reasonably requested by the Investor; provided, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions where it would not otherwise be required to qualify or when it is not then otherwise subject to service of process;
(g) Notify the Investor with respect to its Registrable Securities covered by such Registration Statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act in connection with the happening of any event as a result of which the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances under which they were made, and following such notification promptly prepare and file a post-effective amendment to such Registration Statement or a supplement to the related prospectus or any document incorporated therein by reference, and file any other required document that would be incorporated by reference into such Registration Statement and prospectus, so that such Registration Statement, prospectus, supplement or other document, as applicable, does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and, in the case of a post-effective amendment to a Registration Statement, use its commercially reasonable efforts to cause it to be declared effective as promptly as possible, and give written notice to the Investor of such amendment or supplement, and, subsequently, the effectiveness thereof. Upon receipt of such notice of the Company’s filing of such an amendment or supplement, as applicable, the Investor agrees not to sell any Registrable Securities pursuant to such Registration Statement until the Investor receives copies of the supplemented or amended prospectus or until the Investor receives further written notice from the Company that such sales may re-commence;
18
(h) Use its best efforts to prevent, or obtain the withdrawal of, any order suspending the effectiveness of any Registration Statement (and promptly notify in writing the Investor covered by such Registration Statement of the withdrawal of any such order);
(i) Provide a transfer agent and registrar for all Registrable Securities registered pursuant to such Registration Statement and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;
(j) If requested, cooperate with the Investor to facilitate the timely preparation and delivery of certificates or establishment of book entry notations representing Registrable Securities to be sold and not bearing any restrictive legends, including without limitation, procuring and delivering any opinions of counsel, certificates, or agreements as may be necessary to cause such Registrable Securities to be so delivered;
(k) Cause all such Registrable Securities registered hereunder to be listed on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed;
(l) Promptly identify to the Investor any underwriter(s) participating in any disposition pursuant to such Registration Statement and any attorney or accountant or other agent retained by any such underwriter or selected by the Investor, make available for inspection by the Investor all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such Registration Statement and to conduct appropriate due diligence in connection therewith;
(m) Fully cooperate, and cause each of its principal executive officer, principal financial officer, principal accounting officer, and all other officers and members of the management to fully cooperate in any offering of Registrable Securities hereunder, which cooperation shall include, without limitation, assisting with the preparation of any Registration Statement or amendment thereto with respect to such offering and all other offering materials and related documents, and participation in meetings with underwriters, attorneys, accountants, and potential equityholders;
(n) Otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the SEC and make available to its equityholders an earnings statement (in a form that satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 under the Securities Act or any successor rule thereto) no later than thirty (30) days after the end of the 12-month period beginning with the first day of the Company’s first full fiscal quarter after the effective date of such Registration Statement, which earnings statement shall cover said 12-month period, and which requirement will be deemed to be satisfied if the Company timely files complete and accurate information on Forms 10-K, 10-Q, and 8-K under the Exchange Act and otherwise complies with Rule 158 under the Securities Act or any successor rule thereto;
(o) If requested by the Investor, the Company shall as soon as practicable (i) incorporate in a prospectus supplement or post-effective amendment such information as the Investor requests to be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering; (ii) make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration Statement;
(p) Take all reasonable action to ensure that any “free writing prospectus” (as defined in the Securities Act) utilized in connection with any registration covered by this ARTICLE VII complies in all material respects with the Securities Act, is filed in accordance with the Securities Act to the extent required thereby, is retained in accordance with the Securities Act to the extent required thereby and, when taken together with the related prospectus, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and
19
(q) Take all such other reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of such Registrable Securities.
Section 7.4 Information by the Investor. The Investor shall furnish to the Company such information regarding the Investor and the distribution proposed by the Investor as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification, or compliance referred to in this ARTICLE VII.
Section 7.5 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the SEC that may permit the sale of the Securities to the public without registration, the Company shall:
(a) Make and keep adequate current public information with respect to the Company available in accordance with Rule 144 under the Securities Act;
(b) File with the SEC in a timely manner all reports and other documents required of the Company under the Exchange Act; and
(c) So long as the Investor owns any Securities, promptly furnish to the Investor, upon written request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and of the Exchange Act, or that it qualifies as registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as the Investor may reasonably request in availing itself of any rule or regulation of the SEC allowing the Investor to sell any such securities without registration. The Company further covenants that it shall take such further action as the Investor may reasonably request to enable the Investor to sell from time to time Securities held by the Investor without registration under the Securities Act within the limitation of the exemptions provided by Rule 144, including providing any legal opinions.
Section 7.6 No Inconsistent Agreements. The Company has not entered, as of the date hereof, nor shall the Company, on or after the date of this Agreement, enter into any agreement that would have the effect of impairing the rights granted to the Investor or otherwise conflict with the provisions hereof.
ARTICLE VIII
CONDITIONS TO DELIVERY OF
PURCHASE NOTICE AND CONDITIONS TO CLOSING
Section 8.1 Conditions Precedent to the Obligation of the Company to Issue and Sell Purchase Notice Securities. The obligation of the Company hereunder to issue and sell the Purchase Notice Securities to the Investor is subject to the satisfaction of each of the conditions set forth below:
(a) Accuracy of the Investor’s Representations and Warranties. The representations and warranties of the Investor shall be true and correct in all material respects as of the Execution Date and as of the date of each Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall have performed, satisfied, and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied, or complied with by the Investor at or prior to each Closing.
(c) Principal Market Regulation. The Company shall have no obligation to issue any Purchase Notice Securities, and the Investor shall have no right to receive any Purchase Notice Securities, if the issuance of such Purchase Notice Securities would exceed the aggregate number of Securities which the Company may issue without breaching the Company’s obligations under the rules or regulations of the Principal Market.
20
Section 8.2 Conditions Precedent to the Obligation of the Investor to Purchase the Purchase Notice Securities. The obligation of the Investor hereunder to purchase the Purchase Notice Securities is subject to the satisfaction of each of the following conditions:
(a) Effective Registration Statement. The Registration Statement, and any amendment or supplement thereto, shall have been declared effective and shall remain effective for the sale of the Registrable Securities (including reoffers by the Investor, affiliated purchasers, and selling agents of the Investor) at all times until the Closing with respect to the subject Purchase Notice, the Company shall not have received notice that the SEC has issued or intends to issue a stop order with respect to such Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or permanently, or intends or has threatened to do so, and no other suspension of the use of, or withdrawal of the effectiveness of, such Registration Statement, any prospectus contained therein, or any prospectus supplement thereto shall exist. The Investor shall not have received any notice from the Company that the prospectus contained in the Registration Statement and/or any prospectus supplement or amendment thereto fails to meet the requirements of Section 5(b) or Section 10 of the Securities Act.
(b) Accuracy of the Company’s Representations and Warranties. The representations and warranties of the Company shall be true and correct in all material respects as of the Execution Date and as of the date of each Closing (except for representations and warranties specifically made as of a particular date).
(c) Performance by the Company. The Company shall have performed, satisfied, and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied, or complied with by the Company at or prior to such Closing.
(d) No Injunction. No statute, rule, regulation, executive order, decree, ruling, or injunction shall have been enacted, entered, promulgated, or adopted by any court or governmental authority of competent jurisdiction that prohibits or directly and materially adversely affects any of the transactions contemplated by the Transaction Documents, and no proceeding shall have been commenced that may have the effect of prohibiting or materially adversely affecting any of the transactions contemplated by the Transaction Documents.
(e) No Suspension of Trading in or Delisting of Shares. The trading of the Common Shares shall not have been suspended by the SEC or the governing body of the Principal Market, or otherwise halted for any reason, and the Common Shares shall have been approved for listing or quotation on and shall not have been delisted from, or threatened or anticipated to be delisted from, or no longer be quoted on, the Principal Market. In the event of a suspension, delisting, or halting (or threatened or anticipated suspension, delisting or halting) for any reason, of the trading of the Common Shares as contemplated by this Section 8.2(e) following delivery of a Purchase Notice and prior to the Closing for the Purchase Notice Securities for such Purchase Notice, the Investor shall, subject to applicable securities laws, have the right to return to the Company any amount of Purchase Notice Securities that the Investor continues to hold, and the Purchase Notice Amount with respect to such Purchase Notice Securities, if therefore paid by the Investor, shall be refunded accordingly.
(f) Beneficial Ownership Limitation. The number of Purchase Notice Securities to be purchased by the Investor at any time under this Agreement shall not exceed the number of such Common Shares that, when aggregated with all other Common Shares then beneficially owned (as such term is defined under the Exchange Act) by the Investor, would result in the Investor beneficially owning more than the Beneficial Ownership Limitation (as defined below), as determined in accordance with Section 13 of the Exchange Act and the rules promulgated thereunder. For purposes of this Section 8.2(f), if the amount of Common Shares outstanding is different on a Closing Date than on the date on which the Purchase Notice associated with such Closing Date is given, the amount of Common Shares outstanding on such Closing Date shall govern for purposes of determining whether the Investor, when aggregating all purchases of Common Shares made pursuant to this Agreement, would beneficially own more than the Beneficial Ownership Limitation following a purchase on any such Closing Date. If the Investor claims that compliance with a Purchase Notice would result in the Investor owning more than the Beneficial Ownership Limitation, upon request of the Company, the Investor will provide the Company with evidence of the Investor’s
21
then existing Common Shares beneficially owned; provided, that, the Company will accompany such request with a written confirmation of the number of Common Shares then outstanding. The “Beneficial Ownership Limitation” shall be 4.99% of the number of Common Shares outstanding immediately prior to the issuance of Common Shares issuable pursuant to a Purchase Notice; provided, that, the Investor may, in its sole discretion upon written notice to the Company, elect to increase the Beneficial Ownership Limitation to permit the Investor to beneficially own up to 9.99% of the outstanding Common Shares. To the extent that the Beneficial Ownership Limitation would be exceeded in connection with a Closing, at the election of the Investor, (i) the number of Securities issuable to the Investor shall be reduced so the Investor’s ownership of the Common Shares does not exceed the Beneficial Ownership Limitation or (ii) the number of Securities issuable to the Investor in excess of the Beneficial Ownership Limitation shall be issued to it as Pre-Funded Warrants in such manner to result in the same number of Securities as the Investor would otherwise be eligible to be issued.
(g) Material Adverse Effect. Since the Execution Date, there has been no event, occurrence or development that has or that could reasonably be expected to result in or constitute a Material Adverse Effect.
(h) Principal Market Regulation. The Company shall have no right to issue and the Investor shall have no obligation to purchase any Purchase Notice Securities if the issuance of such shares of Purchase Notice Securities would exceed the aggregate number of Common Shares (taken together with the issuance of all Commitment Securities) which the Company may issue pursuant to this Agreement without breaching the Company’s obligations under the rules and regulations of the Principal Market (the number of shares which may be issued without violating such rules and regulations, including rules related to the aggregate offerings under NASDAQ Listing Rule 5635(d), the “Exchange Cap”), except that such limitation shall not apply if the Company (1) obtains the approval of its equityholders as required by the applicable rules and regulations of the Principal Market for issuances of Common Shares in excess of such amount or (2) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the Investor. The Exchange Cap shall be appropriately adjusted for any stock dividend, stock split, reverse stock split, or similar transaction.
(i) No Knowledge. The Company shall have no knowledge of any event more likely than not to have the effect of causing the effectiveness of the Registration Statement to be suspended or the prospectus contained in the Registration Statement or any prospectus supplement thereto failing to meet the requirement of Sections 5(b) or 10 of the Securities Act (which event is more likely than not to occur within the fifteen (15) Business Days following the Business Day on which such Purchase Notice is deemed delivered).
(j) DWAC or DRS Eligible. The Securities must be (i) DWAC Eligible or DRS Eligible and (ii) not subject to a “DTC chill.”
(k) SEC Documents. All reports, schedules, registrations, forms, statements, information and other documents required to have been filed by the Company with the SEC pursuant to the reporting requirements of the Securities Act and the Exchange Act after the Execution Date (the “Future SEC Documents”) (1) shall have been filed with the SEC within the applicable time periods prescribed for such filings under the Exchange Act, and (2) as of their respective dates, such Future SEC Documents shall have complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and other federal laws, rules and regulations applicable to such Future SEC Documents, and none of such Future SEC Documents contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
(l) Officer’s Certificate. At each Closing, the Company shall have delivered to the Investor a certificate of an officer of the Company certifying that the Company has satisfied the conditions set forth in Section 8.2.
22
ARTICLE IX
LEGENDS
Section 9.1 No Restrictive Legend. Certificates evidencing the Purchase Notice Securities, the Commitment Securities, the Pre-Funded Warrant Shares and the Common Warrant Shares shall not contain any legend (i) while a Registration Statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Purchase Notice Securities, Commitment Securities, Pre-Funded Warrant Shares or Common Warrant Shares pursuant to Rule 144, (iii) if such Purchase Notice Securities, Commitment Securities, Pre-Funded Warrant Shares or Common Warrant Shares are eligible for sale or may be sold under Rule 144 without volume or manner-of-sale restrictions, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent if required by the Transfer Agent to effect the removal of the legend hereunder. If there is an effective Registration Statement to cover the resale of the Purchase Notice Securities, Commitment Securities, Pre-Funded Warrant Shares or Common Warrant Shares, if the Purchase Notice Securities, Commitment Securities, Pre-Funded Warrant Shares or Common Warrant Shares may be sold under Rule 144 without volume or manner-of-sale restrictions and the Company is then in compliance with the current public information required under Rule 144, or if the Purchase Notice Securities, Commitment Securities, Pre-Funded Warrant Shares or Common Warrant Shares may be sold under Rule 144 without volume or manner-of-sale restrictions and without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Purchase Notice Securities, Commitment Securities, Pre-Funded Warrant Shares or Common Warrant Shares or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission), then such Purchase Notice Securities, Commitment Securities, Pre-Funded Warrant Shares or Common Warrant Shares shall be issued free of all legends. The Company agrees that following the Effectiveness Date or at such time as such legend is no longer required under this Section 9.1, it will, no later than two (2) Business Days following the delivery by the Investor to the Company or the Transfer Agent of a certificate (or book-entry notation) representing the Purchase Notice Securities, the Commitment Securities, the Pre-Funded Warrant Shares and the Common Warrant Shares, issued with a restrictive legend (such date, the “Legend Removal Date”), at the Company’s sole cost, deliver or cause to be delivered (i) to the Investor a certificate representing such securities that is free from all restrictive and other legends and (ii) if reasonably requested by the Transfer Agent, a customary opinion of counsel to the Investor. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 9.1. The Company agrees that no medallion guarantee (or other type of guarantee or notarization) shall be required to remove a legend from any Purchase Notice Securities, the Commitment Securities, the Pre-Funded Warrant Shares and the Common Warrant Shares. Certificates for Securities subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Investor by crediting the account of the Investor’s prime broker with the DTC system as directed by the Investor.
Section 9.2 Investor’s Compliance. Nothing in this ARTICLE IX shall affect in any way the Investor’s obligations hereunder to comply with all applicable securities laws upon the sale of the Securities.
23
ARTICLE X
indemnification
Section 10.1 Indemnification.
(a) In consideration of the Investor’s execution and delivery of this Agreement and acquiring the Securities hereunder and in addition to all of the Company’s other obligations under the Transaction Documents to which it is a party, subject to the terms of this ARTICLE X, the Company shall indemnify and hold harmless the Investor, each of its directors, officers, shareholders, members, partners, employees, representatives, agents and advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title), each Person, if any, who controls the Investor (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act), and the respective directors, officers, shareholders, members, partners, employees, representatives, agents and advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title) of such controlling Persons (each, an “Indemnified Party”) from and against all Damages that any Indemnified Party may suffer or incur as a result of or relating to (i) any breach of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents to which it is a party, (ii) any action, suit, claim or proceeding (including for these purposes a derivative action brought on behalf of the Company) instituted against such Indemnified Party arising out of or resulting from the execution, delivery, performance or enforcement of the Transaction Documents, (iii) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any post-effective amendment thereof or prospectus contained therein or prospectus supplement thereto, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, (iv) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in the light of the circumstances under which the statements therein were made, not misleading, or (v) any violation by the Company of the Securities Act, the Exchange Act, the rules and regulations of the Principal Market, any state securities law or any rule or regulation under the Securities Act, the Exchange Act or any state securities law, as such Damages are incurred by the Indemnified Party except to the extent that such Damages result primarily from the Indemnified Party’s gross negligence, recklessness or willful misconduct; provided, however, that the foregoing indemnity agreement shall not apply to any Damages of the Investor solely attributable to any untrue statement, alleged untrue statement, omission, or alleged omission made or failed to be made, as applicable, by the Company in reliance upon and in conformity with the information furnished to the Company by the Investor for use in the Registration Statement, any post-effective amendment thereof, prospectus contained therein, or prospectus supplement thereto, or any preliminary prospectus or final prospectus (as amended or supplemented). The Investor shall indemnify and hold harmless the Company, each of its directors, officers, shareholders, employees, representatives, agents and advisors from and against all Damages that any of them may suffer or incur as a result of or relating to (x) any breach of the representations, warranties, covenants or agreements made by the Investor in this Agreement or in the other Transaction Documents to which it is a party, (y) any untrue statement or omission of a material fact made in reliance upon and in conformity with information furnished to the Company by the Investor expressly for use in any Registration Statement, any prospectus contained therein, or any amendment or supplement thereto, or (z) any violation by the Investor of the Securities Act, the Exchange Act, the rules and regulations of the Principal Market, or any state securities law in connection with the offer or resale of the Securities by the Investor; provided, that the Investor’s aggregate liability under this Article X shall not exceed the aggregate Purchase Price actually paid by the Investor under this Agreement, except in the case of fraud or willful misconduct by the Investor.
(b) The Company shall reimburse any Indemnified Party promptly upon demand (with accompanying presentation of documentary evidence) for all legal and other costs and expenses reasonably incurred by such Indemnified Party in connection with (i) any action, suit, claim or proceeding, whether at law or in equity, to enforce compliance by the Company with any provision of the Transaction Documents or (ii) any other action, suit, claim or proceeding, whether at law or in equity, with respect to which it is entitled to indemnification under this Section 10.1; provided that the Investor shall promptly reimburse the Company for all such legal and other costs and expenses to the extent a court of competent jurisdiction determines that any Indemnified Party was not entitled to such reimbursement.
24
(c) An Indemnified Party’s right to indemnification or other remedies based upon the representations, warranties, covenants and agreements of the Company set forth in the Transaction Documents shall not in any way be affected by any investigation or knowledge of such Indemnified Party. Such representations, warranties, covenants and agreements shall not be affected or deemed waived by reason of the fact that an Indemnified Party knew or should have known that any representation or warranty might be inaccurate or that the Company failed to comply with any agreement or covenant. Any investigation by such Indemnified Party shall be for its own protection only and shall not affect or impair any right or remedy hereunder.
Section 10.2 Indemnification Procedures. Each Indemnified Party shall (i) give notice to the Company promptly after such Indemnified Party has actual knowledge of any claim or the commencement of any action for which indemnification may be sought (provided, that any delay or failure to so notify the Company shall relieve the Company of its obligations hereunder only to the extent, if at all, that it is actually and materially prejudiced by reason of such delay or failure), and (ii) permit the Company to (though the Company shall not be required to) assume the defense of such claim or any litigation resulting therefrom; provided that counsel for the Company, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably conditioned, delayed or withheld), and the Indemnified Party may participate in such defense at such party’s expense unless (w) the Company has agreed in writing to pay such fees or expenses, (x) the Company shall have failed to assume the defense of such claim within a reasonable time after receipt of notice of such claim from the Indemnified Party hereunder and employ counsel reasonably satisfactory to the Indemnified Party, (y) the Indemnified Party has reasonably concluded (based upon advice of its counsel) that there are material legal defenses available to it or other Indemnified Parties that are different from or in addition to those available to the Company or if such counsel determines that it would be inappropriate under the applicable rules of professional responsibility for the same counsel to represent both the Company and such Indemnified Party, or (z) in the reasonable judgment of any Person (based upon advice of its counsel) a conflict of interest may exist between such Person and the Company with respect to such claims (in which case, if the person notifies the Company in writing that such person elects to employ separate counsel at the expense of the Company, the Company shall not have the right to assume the defense of such claim on behalf of such person). The Company may not, in the defense of any such claim or litigation, except with the consent of each Indemnified Party (not to be unreasonably withheld, conditioned or delayed), consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as the Company may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom.
Section 10.3 Contribution. If the indemnification provided for in this ARTICLE X is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage, or expense referred to herein, then the Company, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the finding of relative fault of the Company on the one hand and of the Indemnified Party on the other by such court of competent jurisdiction in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the Company and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Company or by the Indemnified Party and the Parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. The Investor will not be required under this ARTICLE X to contribute any amount in excess of the aggregate Purchase Price actually paid by the Investor under this Agreement, except in the case of fraud or willful misconduct by the Investor. No person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.
Section 10.4 Limitation of Liability. Notwithstanding the foregoing or anything to the contrary herein, no Party shall be entitled to recover from the other Party for punitive damages, except to the extent actually awarded to a third-party.
25
ARTICLE XI
MISCELLANEOUS
Section 11.1 Force Majeure. No Party shall be liable for any failure to fulfill its obligations hereunder due to causes beyond its reasonable control, including but not limited to acts of God, epidemic or pandemic, natural disaster, labor disturbances, terrorist attack, riots or wars, and any action taken, or restrictions or limitations imposed, by government or public authorities. Notwithstanding the foregoing, this Section 11.1 shall not excuse or delay either Party’s obligations pursuant to Section 2.3, Section 2.4, Section 6.3, Section 6.4, Section 7.1, ARTICLE X, Section 11.5(b), Section 11.8, and Section 11.15. (the “Surviving Obligations”).
Section 11.2 Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware without giving effect to the principles of conflicts or choice of law that would result in the application of the laws of another jurisdiction other than the State of Delaware.
Section 11.3 Assignment. The Transaction Documents shall be binding upon and inure to the benefit of the Company and the Investor and their respective successors. Neither any of the Transaction Documents nor any rights of the Investor or the Company hereunder may be assigned or delegated by either Party to any other Person, except as otherwise mutually agreed to in writing by the Parties.
Section 11.4 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the Company and the Investor and their respective successors, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as contemplated in ARTICLE X.
Section 11.5 Termination.
(a) This Agreement shall automatically terminate without further action by either Party on the earlier of (i) the end of the Commitment Period, or (ii) the date that, pursuant to or within the meaning of any Bankruptcy Law, the Company commences a voluntary case or any Person commences a proceeding against the Company, a Custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors.
(b) The Company may terminate this Agreement at any time after the Execution Date effective upon at least five (5) Business Days’ prior written notice to the Investor (such notice, a “Company Termination Notice”); provided, however, that (i) the Company has paid the Commitment Fee to the Investor in accordance with Section 6.3 and (ii) if the Company delivers a Purchase Notice to the Investor following delivery of a Company Termination Notice, then the termination of this Agreement pursuant to such Company Termination Notice shall be postponed an additional seven (7) Business Days following the applicable Purchase Notice Date.
(c) The Investor may terminate this Agreement upon at least five (5) Business Days’ prior written notice to the Company if (i) the Company fails to timely file the Initial Registration Statement by the deadline set forth in Section 7.1 (or the Initial Registration is not declared effective by the deadline set forth in Section 7.1), (ii) a Material Adverse Effect shall have occurred, (iii) the Company breaches Section 6.4 and such breach, if capable of cure, is not cured or waived by the Investor within five (5) Business Days after written notice thereof to the Company, or (iv) a Buy-In occurs with respect to three (3) or more separate Purchase Notices within any rolling ninety (90)-day period.
Section 11.6 Survival. The obligations of the Company under ARTICLE X shall survive the completion of any offering of Registrable Securities in a registration under ARTICLE VII and otherwise shall survive the termination of this Agreement until the later of their satisfaction by the Company or the expiration of the applicable statute of limitations period. The obligations of the Company pursuant to the Surviving Obligations shall survive the termination of this Agreement until the later of their satisfaction by the Company or the expiration of the applicable statute of limitations period. The remedies provided for in ARTICLE X and pursuant to the Surviving Obligations are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Party at law or in equity.
26
Section 11.7 Entire Agreement. The Transaction Documents, together with the exhibits thereto, contain the entire understanding of the Company and the Investor with respect to the matters covered herein and therein and supersede all prior agreements and understandings, oral or written, with respect to such matters. If the terms of any Transaction Document conflict with the terms of this Agreement, the terms of this Agreement shall control, and such conflicting terms in the applicable Transaction Document shall be null and void, ab initio.
Section 11.8 Fees and Expenses. Each Party shall bear the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such Party incidental to the negotiation, preparation, execution, delivery, and performance of the Transaction Documents. Any amount payable by the Company to the Investor pursuant to the Transaction Documents or the transactions contemplated hereby or thereby that is not paid when due shall accrue interest from the due date until paid in full at a rate equal to the lesser of eight percent (8%) per annum and the maximum rate permitted by applicable law.
Section 11.9 Clearing Costs. The Company shall pay the Clearing Costs associated with each Closing, and any Transfer Agent fees (including any fees required for same-day processing of any instruction letter delivered by the Company), stamp taxes, and other taxes, fees and duties levied in connection with the delivery of any Securities to the Investor.
Section 11.10 Counterparts and Execution. The Transaction Documents may be executed in multiple counterparts, each of which may be executed by less than all of the Parties, all of which together will constitute one instrument, will be deemed to be an original, and will be enforceable against the Parties. The Transaction Documents may be delivered to the other Party hereto by email of a copy of the Transaction Documents bearing the signature of the Party so delivering the Transaction Documents. The Parties agree that this Agreement shall be considered signed when the signature of a Party is delivered by .PDF, DocuSign or other generally accepted electronic signature. Such .PDF, DocuSign, or other generally accepted electronic signature shall be treated in all respects as having the same effect as an original signature. The signatories to this Agreement each represent and warrant that they are duly authorized by the Parties with the power and authority to bind the Parties to the terms and conditions thereof.
Section 11.11 Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be illegal, invalid, unenforceable, or void, (a) such provision shall be deemed modified, and shall be enforced, to the minimum extent necessary to render it legal, valid, and enforceable, giving effect to the original intent of the Parties to the fullest extent permitted by applicable law, and (b) the remainder of this Agreement shall continue in full force and effect. Without limiting the foregoing, if any liquidated damages, fee, or obligation pursuant to the Surviving Obligations is or are determined by a court of competent jurisdiction to be unenforceable, in whole or in part, as a penalty or on similar grounds, such provision shall not be void in its entirety but shall instead be enforced up to the maximum amount, and to the maximum extent, permissible under applicable law. If any provision cannot be so modified consistent with applicable law, the Parties shall negotiate in good faith to agree upon a substitute provision that most closely achieves the original economic intent of the Parties with respect to such provision, and, pending such agreement, the remainder of this Agreement shall remain in full force and effect.
Section 11.12 Further Assurances. Each Party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments, and documents, as the other Party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
Section 11.13 Agreement Not to be Construed Against Drafter. The Parties acknowledge that they have had an adequate opportunity to review each and every provision contained in this Agreement and to submit the same to legal counsel for review and comment. The Parties agree with each and every provision contained in this Agreement and agree that the rule of construction that a contract be construed against the drafter, if any, shall not be applied in the interpretation and construction of this Agreement.
Section 11.14 Titles and Subtitles. The titles and subtitles used in this Agreement are used for the convenience of reference and are not to be considered in construing or interpreting this Agreement.
27
Section 11.15 Amendments; Waivers. No provision of this Agreement may be amended other than by a written instrument signed by both Parties hereto and no provision of this Agreement may be waived other than in a written instrument signed by the Party against whom enforcement of such waiver is sought. No failure or delay in the exercise of any power, right, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right, or privilege preclude other or further exercise thereof or of any other power, right, or privilege.
Section 11.16 Publicity. The Company and the Investor shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no Party shall issue any such press release or otherwise make any such public statement, other than as required by law or for legal compliance, without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which case the disclosing Party shall provide the other Party with prior notice of such public statement. The Investor acknowledges that the Transaction Documents may be deemed to be “material contracts,” as that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the Securities Act or the Exchange Act. The Investor further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel.
Section 11.17 Dispute Resolution.
(a) Purchase Price, Purchase Notice Limit, or VWAP.
(i) Any dispute, controversy, or claim between the Company and the Investor arising out of or relating to the determination of the Purchase Price, the Purchase Notice Limitation, or VWAP under this Agreement (a “Pricing Dispute”) shall be finally and exclusively resolved in accordance with Section 11.17(a). Section 11.17(a) is a written agreement to arbitrate within the meaning of the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (the “FAA”), and Section 5701, et seq., of Title 10 of the Delaware Code (the “Delaware Arbitration Act”), and both the FAA and the Delaware Arbitration Act shall govern the interpretation and enforcement of Section 11.17(a), the conduct of the arbitration, and any proceeding to compel arbitration, appoint an arbitrator, or confirm, correct, or vacate an award hereunder. Both the Company and the Investor are authorized to apply for an order compelling arbitration pursuant to Section 5703 of the Delaware Arbitration Act or Section 4 of the FAA, as applicable, to compel compliance with Section 11.17(a). The seat of the arbitration shall be Wilmington, Delaware, and the Chancery Court of the State of Delaware and the U.S. District Court for the District of Delaware shall each have jurisdiction to act as the supervisory court for such purposes, notwithstanding Section 11.17(b).
(ii) In the case of a Pricing Dispute, the Company or the Investor (as the case may be) shall submit the dispute to the other Party via email within five (5) Business Days after the Party learned of the circumstances giving rise to such dispute (the “Initial Notice”).
(iii) If the Investor and the Company are unable to resolve a Pricing Dispute directly before the fifth (5th) Business Day following the Initial Notice, the Company and the Investor shall attempt, in good faith, to select as arbitrator an independent, reputable investment bank or other financial institution with no material relationship to either Party. If the Parties agree upon such an investment bank or financial institution within ten (10) Business Days of the Initial Notice, such investment bank or financial institution shall serve as arbitrator of the Pricing Dispute. If the Parties are unable to so agree within such ten (10) Business Day period, then, in the sole and absolute discretion of the Investor (exercisable for any reason or no reason, and without any obligation of good faith, reasonableness, or fair dealing in making such election), the Pricing Dispute shall instead be resolved pursuant to (a) the terms of Section 11.2 and Section 11.17(b) hereof or (b) binding arbitration before a single arbitrator appointed by the American Arbitration Association (the “AAA”) in accordance with the Expedited Procedures under the AAA’s Commercial Arbitration Rules then in effect (the “AAA Rules”), except as modified by Section 11.17(a)(iv) through Section 11.17(a)(viii) Section 11.17(a). Notwithstanding anything in the AAA Rules (including AAA Commercial Rule 7 or any successor rule) to the contrary, all questions of arbitrability, including the existence,
28
validity, scope, and interpretation of the Investor’s election under this Section 11.17(a)(iii), shall be determined exclusively by the courts identified in Section 11.17(b)), and not by the Arbitrator (defined below). The Investor shall exercise its election described in the preceding sentence by written notice to the Company delivered within five (5) Business Days following expiration of the ten (10) Business Day period referenced above (an “Election Notice”). If the Investor fails to timely deliver an Election Notice, the Pricing Dispute shall be resolved by binding arbitration before the AAA pursuant to clause (b) above. Any arbitrator so appointed shall have substantial professional experience in investment banking, securities valuation, or financial markets, and the AAA shall be requested to appoint an arbitrator meeting such qualifications, to the extent reasonably available on its roster. The investment bank, financial institution, or individual so selected or appointed pursuant to this Section 11.17(a)(iii) is referred to herein as the “Arbitrator.” For the avoidance of doubt, the Parties’ inability to agree upon an investment bank or financial institution shall not relieve either Party of its obligation to arbitrate the Pricing Dispute under this Section 11.17(a), except pursuant to the Investor’s election under this Section 11.17(a)(iii).
(iv) The Investor and the Company shall each deliver to the Arbitrator (A) a copy of the Initial Notice and (B) written documentation supporting its position with respect to the Pricing Dispute, in each case no later than 5:00 p.m. New York time on the fifth (5th) Business Day immediately following the date on which the Arbitrator is selected or appointed (the “Dispute Submission Deadline”) (the documents referred to in clauses (A) and (B) set forth in this sentence, collectively, the “Required Dispute Documentation”). If either Party fails to deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, that Party shall no longer be entitled to (and hereby waives its right to) deliver or submit any further written documentation or support to the Arbitrator with respect to such Pricing Dispute, and the Arbitrator shall resolve the dispute based solely on the Required Dispute Documentation timely delivered. Unless otherwise agreed in writing by both Parties or requested by the Arbitrator, the proceeding shall be conducted solely on the basis of the Required Dispute Documentation, without a hearing and without discovery of any kind; provided, that the Arbitrator may, in its discretion, request a telephonic or virtual hearing, additional documentation, or written responses to specific questions if the Arbitrator determines that doing so is reasonably necessary to resolve the Pricing Dispute.
(v) The terms of this Agreement, the other applicable Transaction Documents, and the Required Dispute Documentation shall serve as the basis for the Arbitrator’s resolution of the Pricing Dispute. The Arbitrator’s authority shall be limited to determining the correct Purchase Price, Purchase Notice Limitation, or VWAP (as applicable) and any payment obligation of the Parties directly resulting from such determination; the Arbitrator shall have no authority to award damages of any kind (including consequential, punitive, or exemplary damages), rescission, specific performance, or any other form of relief, or to resolve any dispute other than the Pricing Dispute submitted to it. The Arbitrator is expressly authorized to make all findings and determinations reasonably necessary to resolve the Pricing Dispute in accordance with the foregoing.
(vi) The Arbitrator shall determine the resolution of the Pricing Dispute and deliver a written award to the Company and the Investor, together with a brief statement of the basis for the award, no later than seven (7) Business Days immediately following the Dispute Submission Deadline. The award shall be final and binding upon the Parties, shall not be subject to appeal, and judgment on the award may be entered in any court of competent jurisdiction. The Party against whom the award is rendered shall pay any amount due under the award within three (3) Business Days after the date of the award, and any amount not timely paid shall accrue interest in accordance with Section 11.8. The fees and expenses of the Arbitrator, and, if applicable, the AAA’s administrative fees, shall be borne by the Party against whom the award is rendered. The Party against whom the award is rendered shall also reimburse the other Party for its reasonable and documented attorneys’ fees and other out-of-pocket expenses incurred in connection with the arbitration, payable within the same three (3) Business Day period referred to above, and any amount not timely paid shall likewise accrue interest in accordance with Section 11.8. If the Investor elects to resolve the Pricing Dispute pursuant to Section 11.2 and Section 11.17(b), the prevailing party in such proceeding shall be entitled to recover its reasonable and documented attorneys’ fees and out-of-pocket expenses from the non-prevailing party, consistent with this Section 11.17(a)(vi).
29
(vii) The existence of a Pricing Dispute, the Required Dispute Documentation, the arbitration proceedings, and the award shall be kept confidential by the Parties and the Arbitrator, except (A) as necessary to enforce or confirm the award in a court of competent jurisdiction, (B) as required by applicable law, rule, or regulation (including disclosure obligations under the Exchange Act or the rules of the Principal Market), or (C) as otherwise agreed in writing by the Parties.
(viii) Notwithstanding the agreement to arbitrate in Section 11.17(a), either Party may seek from a court identified in Section 11.17(a)(i) any interim, provisional, or emergency injunctive relief necessary to protect its rights or property pending constitution of the Arbitrator and resolution of the Pricing Dispute and doing so shall not be deemed a waiver of the agreement to arbitrate.
(b) Jurisdiction. Subject to Section 11.17(a), each Party hereby irrevocably submits that any dispute, controversy, or claim arising out of or relating to this Agreement or any Transaction Document (including whether any such dispute is arbitrable pursuant to Section 11.17(a), and including any dispute regarding the validity or timeliness of the Investor’s election under Section 11.17(a)(iii)), shall be submitted to the exclusive jurisdiction of the Chancery Court of the State of Delaware and the U.S. District Court for the District of Delaware. Each Party hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each Party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such Party at the address set forth in Section 11.19, as changed from time to time, and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT, THE TRANSACTION DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. The Company and the Investor agree that all dispute resolution proceedings in accordance with this Section 11.17 may be conducted in a virtual setting.
Section 11.18 Coordination of Covered Sections.
(a) Notwithstanding anything to the contrary in Error! Reference source not found., Section 7.1(e), or Section 11.5(b) (each, a “Covered Section” and, collectively, the “Covered Sections”), if two or more Covered Sections are triggered by events, acts, or circumstances that are the same or related, or that arise out of the same or a related set of facts or course of conduct, and such events, acts, or circumstances occur within any rolling thirty (30)-day period (it being understood that such thirty (30)-day period shall be measured from, and shall be extended to run thirty (30) days following, the date of the most recent such triggering event, act, or circumstance), then:
(i) the Company shall be obligated to pay, in the aggregate in respect of all such triggering events, acts, and circumstances occurring within such period, only the highest single amount that is or becomes payable under any one of the applicable Covered Sections in respect thereof (the “Applicable Maximum Amount”), and not the sum of the amounts otherwise payable under more than one Covered Section;
(ii) any amount actually paid by the Company under a Covered Section in respect of such period shall be credited against, and shall reduce on a dollar-for-dollar basis, any subsequently-accruing obligation to pay a higher amount under any other Covered Section in respect of such period, such that the Company shall be obligated to pay only the positive difference, if any, between the Applicable Maximum Amount and amounts previously paid in respect of such period; and
(iii) no additional amount shall be payable under any Covered Section triggered within such period if the amount otherwise payable thereunder does not exceed the amount already paid by the Company under this Section 11.18 in respect of such period.
30
(b) Notwithstanding anything to the contrary in this Section 11.18 or elsewhere in this Agreement, (i) the Company’s obligation to pay any amount payable under a Covered Section shall arise automatically upon the occurrence of the breach or event giving rise to such obligation, shall constitute a direct payment obligation of the Company due and payable as set forth in the applicable Covered Section, and shall not be conditioned upon, or require, the Investor’s commencement or prosecution of, or success in, any action, suit, or proceeding, and (ii) if the breach giving rise to an amount payable under a Covered Section is willful or in bad faith, the Investor may, at its election, in lieu of the amount otherwise payable under such Covered Section, waive its right to such amount and instead pursue its actual damages arising from such breach, in which case the limitations on the Company’s liability set forth in this Section 11.18 and in the applicable Covered Section shall not apply with respect to such breach; provided, that the Investor shall be entitled to recover, with respect to any single breach giving rise to a payment obligation under a Covered Section, only one of (x) the amount otherwise payable under such Covered Section or (y) its actual damages therefor, and not both. For the avoidance of doubt, an election by the Investor to pursue actual damages pursuant to clause (ii) of this Section 11.18(b) with respect to a particular breach shall not be treated as an amount payable under a Covered Section for purposes of Section 11.18.
(c) For the avoidance of doubt: (i) this Section 11.18 applies solely to amounts payable under the Covered Sections, and shall not apply to, limit, reduce, offset, or otherwise affect any other right or remedy of the Investor under this Agreement or any other Transaction Document, including, without limitation, any amount payable under Section 2.4, any indemnification obligation under ARTICLE X, any fee or reimbursement payable under Section 11.8, or any right to injunctive relief or specific performance; (ii) this Section 11.18 shall not apply to, and shall not reduce the amount otherwise payable in respect of, any two or more triggering events, acts, or circumstances that are not the same or related and do not arise out of the same or a related set of facts or course of conduct, regardless of whether they occur within the same thirty (30)-day period; and (iii) nothing in this Section 11.18 shall be construed to reduce the amount payable in respect of any triggering event, act, or circumstance below the highest amount that would otherwise be payable under any single applicable Covered Section absent this Section 11.18.
Section 11.19 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (a) personally served, (b) delivered by reputable air courier service with charges prepaid for next Business Day delivery, or (c) transmitted by hand delivery, or email as a PDF (with read receipt or a written confirmation of delivery or receipt), addressed as set forth below or to such other address as such Party shall have specified most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective upon hand delivery or delivery by email at the address designated below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received).
The addresses for such communications shall be:
If to the Company:
Attention: Mark White, Chief Executive Officer
Address: 1776 Yorktown, Suite 550, Houston, TX 77056
Telephone: (832) 260-0222
E-mail: [***]
If to the Investor:
Attention: Operations; General Counsel
Address: [***]
Telephone: [***]
E-mail: [***]; [***]
31
With copies (which shall not constitute notice but shall be required for valid notice) to:
Attention: Marc Indeglia
Address: 10250 Constellation Blvd., 19th Floor, Los Angeles, CA 90067
Telephone: 310.282.6245
E-mail: [***]
Either Party may from time to time change its address or email for notices under this Section 11.19 by giving prior written notice of such changed address to the other Party.
[Signature Page Follows]
32
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the Execution Date.
| NEXALIN TECHNOLOGY, INC. | ||
| By: | /s/ Mark White | |
| Name: | Mark White | |
| Title: | Chief Executive Officer | |
| Date: | August 19, 2026 | |
| ALUMNI CAPITAL LP | ||
| By: ALUMNI CAPITAL GP LLC | ||
| By: | /s/ [***] | |
| Name: | [***] | |
| Title: | [***] | |
| Date: | August 19, 2026 | |
33
EXHIBIT A
FORM OF PURCHASE NOTICE
A-1