TRUG 8-K
TruGolf Holdings, Inc. (TRUG)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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| Item 1.01. | Entry into a Material Definitive Agreement. |
Polymath Acquisition
Summary of Acquisition Agreement
On August 17, 2026, TruGolf Holdings, Inc., a Nevada corporation (the “Company”), entered into an Acquisition Agreement (the “Acquisition Agreement”) with 18141991 Canada Inc., a corporation incorporated under the federal laws of Canada and a wholly owned subsidiary of the Company (“SubCo”), and Polymath Research Inc., a corporation incorporated under the federal laws of Canada (“Polymath”).
Pursuant to the Acquisition Agreement, Polymath and SubCo will amalgamate under the Canada Business Corporations Act and continue as one corporation (“Amalco”). Upon completion of the amalgamation, each of Polymath and SubCo will cease to exist as a separate entity, the assets and liabilities of each will continue as assets and liabilities of Amalco, and Amalco will become a wholly owned subsidiary of the Company.
At the effective time of the amalgamation, Polymath shareholders will receive, on a pro rata basis, shares of the Company’s Class A common stock and shares of newly designated Series C convertible preferred stock (the “Series C preferred stock”). The Class A common stock consideration will equal 19.9% of the Company’s issued and outstanding Class A common stock immediately before the effective time, and the Series C preferred stock consideration will be determined under a formula based on a $140,000,000 reference amount minus the value of the Class A common stock being issued to the Polymath shareholders.
Each outstanding option to purchase Polymath shares, whether vested or unvested, will be assumed by the Company and converted into an option to purchase shares of the Company’s Class A common stock on substantially the same terms and conditions, including applicable vesting, forfeiture and post-termination exercise provisions. The number of shares subject to each replacement option and the exercise price of each replacement option will be adjusted based on the exchange ratio, subject to applicable tax rules, and the replacement options will be governed by the Company’s 2026 Equity Incentive Plan.
In connection with the transactions contemplated by the Acquisition Agreement, the Company has agreed to enter into a waiver and exchange agreement relating to a concurrent financing (the “Concurrent Financing”) in which the Company will issue Series B convertible preferred stock. The Acquisition Agreement contemplates aggregate gross proceeds of up to $5,000,000 from the Concurrent Financing, with an initial tranche of stated value of up to $3,000,000 required to close within the timeframes set forth in the waiver and exchange agreement. The parties’ obligation to consummate the transaction is conditioned, among other things, on the Company entering into an irrevocable purchase agreement in connection with the Concurrent Financing providing for gross proceeds of stated value of not less than $3,000,000 to be received within the timeframe set forth in the waiver and exchange agreement.
Following the closing, the Company is required to prepare and file with the Securities and Exchange Commission a proxy statement for a meeting of its stockholders to consider and vote on, among other matters, the conversion of the Company’s Series C preferred stock issued in the transaction into shares of Class A common stock in accordance with Nasdaq Listing Rules, the conversion of the Series B preferred stock issued in the Concurrent Financing into shares of Class A common stock, the adoption of the 2026 Equity Incentive Plan and any necessary charter amendment or related stockholder matters (the “Shareholder Approval”).
The Acquisition Agreement provides for certain post-closing capital allocation arrangements. From and after the effective date, the Company must reserve $2,500,000 from its working capital for the operation of Polymath’s business, the Company’s public company compliance costs and Polymath’s transaction expenses, with the remaining working capital reserved for operation of the Company’s golf-related business. The Company also agreed to allocate 20% of proceeds from future equity financings, excluding funds raised in the initial $3,000,000 tranche of the Concurrent Financing, to golf-related operations, subject to a cap and other limitations set forth in the Acquisition Agreement. In addition, within six months after closing, the Company must use commercially reasonable efforts to complete financings totaling $500,000 to be applied toward golf-related operations from specified financing sources.
The parties also agreed to use reasonable commercial efforts to complete the amalgamation by September 30, 2026, to obtain required approvals and filings, and to refrain from taking actions that would interfere with or be inconsistent with completion of the transaction, subject to the terms of the Acquisition Agreement. Completion of the transaction is subject to customary closing conditions. Polymath’s obligations are also subject to satisfaction, or waiver, of the Concurrent Financing, continued Nasdaq compliance, and maintenance of a minimum market value of listed securities of at least $10,000,000 for at least ten consecutive trading days.
The foregoing description of the Acquisition Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Acquisition Agreement, a copy of which will be filed as Exhibit 2.1 to this Current Report on Form 8-K. The Acquisition Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other factual information about the Company, SubCo, or Polymath. The representations, warranties, and covenants contained in the Acquisition Agreement were made only for the purposes of the Acquisition Agreement as of the specific dates therein, were solely for the benefit of the parties to the Acquisition Agreement, and may be subject to limitations agreed upon by the contracting parties.
Summary of Series C Preferred Stock
As discussed above, in connection with the Acquisition Agreement, the Company will issue Series C preferred stock to certain Polymath shareholders. Each share of Series C preferred stock has a stated value of $1,000 per share. The Series C preferred stock is convertible into shares of the Company’s Class A common stock at a conversion ratio equal to the stated value divided by the conversion price of $0.9695 per share, subject to adjustment as set forth in the certificate of designation for the Series C preferred stock. Effective as of 5:00 p.m. Eastern time on the second business day after the Company has obtained stockholder approval for the conversion of the Series C preferred stock for purposes of Nasdaq Rules 5635(a) and 5635(b) and, if required, has obtained Nasdaq approval of a new listing application filed after completion of the acquisition contemplated by the Acquisition Agreement, each outstanding share of Series C preferred stock will automatically convert into a number of shares of Class A common stock equal to the conversion ratio. Following stockholder approval, and subject to the beneficial ownership and other limitations set forth in the certificate of designation, holders may also elect to convert shares of Series C preferred stock into Class A common stock at the conversion ratio by delivering a notice of conversion to the Company.
Until Nasdaq approval has been obtained, if required, the Company may not effect, and a holder may not convert, any portion of the Series C preferred stock to the extent that, after giving effect to the conversion, the aggregate ownership of all holders would exceed 19.99% of the number of shares of Class A common stock outstanding immediately after giving effect to the conversion. Any shares issued in excess of this limitation will be deemed null and void and cancelled ab initio, and the applicable holder will not have the power to vote or transfer those excess shares. The beneficial ownership limitation may not be waived and applies to successor holders of the Series C preferred stock. No shares of Series C preferred stock may convert into Class A common stock before the required stockholder approval and Nasdaq approval have been obtained, if required.
Holders of Series C preferred stock are entitled to receive dividends on an as-converted basis, without regard to the beneficial ownership limitation, equal to and in the same form and manner as dividends actually paid on shares of Company Class A common stock. Except as provided in the certificate of designation, no other dividends are payable on the Series C preferred stock, and the Company may not pay dividends on Class A common stock, other than dividends payable in Class A common stock, unless it simultaneously pays the corresponding dividend on the Series C preferred stock.
The Series C preferred stock has no voting rights, except as otherwise provided in the certificate of designation or required by the Nevada Revised Statutes. So long as any shares of Series C preferred stock are outstanding, the Company may not take certain actions without the affirmative vote or written consent of holders of a majority of the outstanding shares of Series C preferred stock, including adversely changing the rights of the Series C preferred stock, issuing additional Series C preferred stock or changing the authorized number of shares of Series C preferred stock other than by conversion, consummating certain fundamental transactions or other business combinations, issuing Class A common stock or securities that convert into Class A common stock other than as contemplated by the Acquisition Agreement, or entering into any agreement with respect to the foregoing.
With respect to distributions of assets upon liquidation, dissolution or winding up, the Series C preferred stock ranks senior to any class or series of capital stock created after the designation of the Series C preferred stock that expressly ranks junior to the Series C preferred stock, on parity with the Class A and Class B common stock and any class or series of capital stock created after such designation that expressly ranks on parity with the Series C preferred stock, and junior to the Company’s Series A preferred stock and any class or series of capital stock created after such designation that expressly ranks senior to the Series C preferred stock. Upon a liquidation, dissolution or winding up of the Company, and subject to the prior and superior rights of any senior securities, each holder of Series C preferred stock is entitled to receive, before any distribution to holders of junior securities, the amount that would be paid on the shares of Class A common stock underlying the Series C preferred stock on an as-converted basis, without regard to the beneficial ownership limitation, plus any declared but unpaid dividends.
The conversion price of the Series C preferred stock is subject to adjustment for stock dividends, stock splits, combinations and similar events affecting the Class A common stock. In the event of certain fundamental transactions, holders of Series C preferred stock will be entitled, upon subsequent conversion, to receive the securities, cash or other property that the holders would have received had the Series C preferred stock been converted immediately before the fundamental transaction, without regard to the beneficial ownership limitation.
So long as any shares of Series C preferred stock remain outstanding, the Company and its subsidiaries are subject to certain negative covenants absent the affirmative vote of holders of a majority of the outstanding shares of Series C preferred stock, including restrictions on incurring or guaranteeing indebtedness, permitting liens, repaying indebtedness, redeeming or repurchasing capital stock or paying cash dividends or distributions, disposing of assets outside the ordinary course or as otherwise contemplated by the Acquisition Agreement, engaging in materially different lines of business, and entering into certain affiliate transactions.
Concurrent Financing Agreements
On August 17, 2026, the Company entered into a Second Amendment, Waiver and Exchange Agreement (“Waiver and Exchange Agreement”) with certain holders of the Company’s Series A preferred stock (the “Series A preferred stock”), pursuant to which the Company agreed to issue new warrants (the “Series B preferred warrants”) to purchase shares of the Company’s newly designated Series B preferred stock in exchange for outstanding warrants to purchase shares of Series A preferred stock. The closing of the exchange is subject to the conditions set forth in the Waiver and Exchange Agreement, including, among other things, the completion of the acquisition of Polymath.
The Waiver and Exchange Agreement also provides for certain one-time waivers and consents in connection with the Company’s proposed acquisition of Polymath, including waivers and consents necessary to permit the Polymath acquisition and related issuances. The Waiver and Exchange Agreement also includes (i) a reset of the Series A conversion price to $1.00 per share as of the market closing on the trading day immediately preceding the date of the Waiver and Exchange Agreement and (ii) a reset under which, if the conversion price exceeds the Minimum Price (as defined in the Nasdaq Marketplace Rules) on the date the Company provides notice of an election to force an exercise under Section 1(d)(ii)(2) Series B preferred warrants (such date, the “SA Forced Exercise Notice Date”), the conversion price automatically lowers to the applicable reset price. The Waiver and Exchange Agreement further requires the Company to seek stockholder approval for the issuance of all of the new securities in compliance with Nasdaq rules within the specified time periods.
The exchange will be effected in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended. Upon issuance of the new Series B preferred warrants, the exchanged Series A preferred warrants will be cancelled, and the new Series B preferred warrants will be immediately exercisable for shares of Series B preferred stock, which will be convertible into shares of the Company’s Class A common stock at the holder’s option following issuance, subject to the beneficial ownership limitation and the applicable Nasdaq Exchange Cap described below.
In connection with the exchange, the Company will enter into a Registration Rights Agreement at closing of the exchange, pursuant to which the Company will agree to file a resale registration statement covering the shares of Class A common stock issuable upon conversion of the Series B preferred stock issued or issuable upon exercise of the new Series B preferred warrants. The Registration Rights Agreement requires the Company to file the initial registration statement within 30 calendar days after the closing date of the acquisition of Polymath and to use reasonable best efforts to cause it to become effective by the applicable effectiveness deadline.
Description of the Series B Warrants
Each Series B preferred warrant will be exercisable for the number of shares of Series B preferred stock set forth in the applicable warrant at an exercise price of $900 per share of Series B preferred stock, subject to adjustment. Each share of Series B preferred stock has a stated value of $1,000. The Series B preferred warrants expiration date is the 18-month anniversary of the stockholder approval date, unless extended by written consent of the Company and the holder.
The Series B preferred warrants also provide for potential forced exercises in three tranches. First, after the closing of the acquisition of Polymath, the Company may require all holders of Series B preferred warrants to exercise a portion of their warrants for Series B preferred stock with a stated value of up to $1.5 million; provided either (1) the Company’s market capitalization is at least $7.5 million for three consecutive trading days immediately before the notice of exercise, unless waived, or (2) the Conversion Amount (as set out in the Exchange Agreement), excluding any Make-Whole Amount, of the Series A preferred shares outstanding is less than 42% of the aggregate stated value as of the date of the Waiver and Exchange Agreement. Second, on or after the later of (i) the consummation of the Polymath acquisition, (ii) the 25th calendar day following the initial forced exercise, and (iii) the date on which the Company obtains the Shareholder Approval, the Company may require all holders of Series B preferred warrants to exercise an additional portion of their warrants for Series B preferred stock with a stated value of up to $1.5 million (the “SA forced exercise”). Third, on or after the later of (i) the 25th calendar day following the SA forced exercise and (ii) the date on which all shares of the Company’s Series C preferred stock have been converted into Class A common stock, the Company may require all holders of Series B preferred warrants to exercise an additional portion of their warrants for Series B preferred stock with a stated value of up to $2.0 million. Any forced exercise of the second or third amounts is subject to specified conditions, including certain market capitalization requirements, that there be no equity conditions failure, and that no triggering event has occurred.
The exercise price and number of shares issuable upon exercise are subject to customary adjustment for stock dividends, stock splits, recapitalizations, combinations and similar events affecting the Series B preferred stock, and the Company may voluntarily reduce the exercise price with the prior written consent of the holder.
Description of the Series B Preferred Stock
In connection with the closing of the exchange, the Company will file a Certificate of Designation establishing the Series B preferred stock (the “Series B COD”). Each share of Series B preferred stock will have a stated value of $1,000, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions, and similar events.
The Series B preferred stock will rank junior to any senior preferred stock (other than the Series A Preferred Stock), pari passu with any parity stock, and senior to the Company’s junior stock with respect to dividends, distributions, and payments upon liquidation, dissolution, or winding up. The Series B COD restricts the Company from authorizing or issuing senior preferred stock, parity stock, or certain junior stock with a redemption or repayment date before the second anniversary of the initial issuance date, unless the required holders consent.
The Series B preferred stock will accrue dividends from the initial issuance date at a rate of 10% per annum, computed on the basis of a 360-day year and twelve 30-day months. If dividends are paid in shares of Class A common stock, the dividends are recalculated at a deemed rate of 12.5% per annum. Dividends are payable in arrears on the first trading day of each fiscal quarter and may be paid, subject to the terms of the Series B COD, in shares of Class A common stock, in cash, in a combination of cash and shares, or by increasing the stated value of the Series B preferred stock.
Each share of Series B preferred stock will be convertible, at the holder’s option, into shares of Class A common stock at any time after the initial issuance date, provided that no holder may convert to the extent that, after giving effect to the conversion, the aggregate ownership of shares of Class A common stock acquired upon conversion of the Series B preferred stock of all the holders of Series B preferred stock would exceed 19.9% of the number of shares of Class A common stock outstanding immediately after giving effect to the conversion. The number of shares of Class A common stock issuable upon conversion will generally be determined by dividing the applicable conversion amount by the conversion price. The initial conversion price is $1.00 per share, subject to adjustment under the Series B COD. The conversion amount includes the stated value, any additional amount, any make-whole amount, and any other amounts owed to the holder under the Series B COD or the other exchange documents. The make-whole amount generally equals the additional dividends that would accrue on the converted, redeemed, or repaid Series B preferred stock through the five-year anniversary of the applicable issuance date.
The Series B COD includes a beneficial ownership limitation that prohibits the Company from effecting a conversion to the extent that, after giving effect to the conversion, the holder and its attribution parties would beneficially own more than 4.99% of the outstanding shares of common stock. A holder may increase or decrease its beneficial ownership limitation by notice to the Company, but any increase may not exceed 9.99% and will not become effective until the 61st day after delivery of the notice. The beneficial ownership limitation may not be waived and applies to successor holders of the shares of Series B preferred stock.
The Series B COD contains anti-dilution and adjustment provisions. If the Company issues or is deemed to issue common stock below the then-applicable conversion price, subject to specified exclusions, the conversion price will be reduced to the new issuance price. The conversion price is also subject to proportional adjustment for stock splits, stock dividends, stock combinations, recapitalizations, and similar transactions. If the Company issues variable price securities, holders may have the right to substitute the variable price for the conversion price for purposes of a particular conversion. The Series B COD also includes (i) a 12-month reset under which, if the conversion price exceeds the 30-trading-day average VWAP ending immediately before the reset date, the conversion price automatically lowers to that reset price and (ii) a reset under which, if the conversion price exceeds the Minimum Price (as defined in the Nasdaq Marketplace Rules) on the SA Forced Exercise Notice Date, the conversion price automatically lowers to that reset price.
The Series B COD provides for multiple triggering events, including failures to pay dividends or other amounts when due, certain failures to reserve sufficient authorized shares, breaches of transaction documents, failure to comply with specified covenants, any Series B preferred stock remaining outstanding on or after January 8, 2030, certain changes of control without required holder consent, and the occurrence of a material adverse effect. Upon a triggering event, holders may have alternate conversion rights using an alternate conversion price, and the alternate conversion mechanics include a required premium component in the conversion amount.
The Series B COD includes covenants restricting the Company and its subsidiaries from, among other things, incurring non-permitted indebtedness, redeeming or repurchasing capital stock or paying cash dividends on capital stock, transferring assets outside permitted categories, and changing the nature of the business.
The holders of the Series B preferred stock generally will have no voting rights, except as required by Nevada law and as otherwise provided in the Series B COD.
The foregoing descriptions of the Waiver and Exchange Agreement, the Series B preferred stock Certificate of Designation, the Series B warrant, and the Registration Rights Agreement do not purport to be complete and are qualified in their entirety by reference to the Waiver and Exchange Agreement, the Series B preferred stock Certificate of Designation, the Series B warrant, and the Registration Rights Agreement, copies of which are filed as Exhibits 10.1, 3.1, 3.2 and 10.2 to this Current Report on Form 8-K and are incorporated herein by reference.
| Item 3.02. | Unregistered Sales of Equity Securities. |
The disclosure set forth under Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02.
The issuance of the securities pursuant to the Acquisition Agreement and the issuance of the new Series B preferred warrants pursuant to the Waiver and Exchange Agreement, will be made pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended. The shares of Series B preferred stock issuable upon exercise of the new Series B preferred warrants, and the shares of Class A common stock issuable upon conversion of such Series B preferred stock, have not been registered under the Securities Act and will be issued pursuant to applicable exemptions from registration under the Securities Act of 1933.
| Item 8.01. | Other Events. |
On August 18, 2026, TruGolf and Polymath issued a joint press release announcing that they had entered into the Acquisition Agreement. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference into this Item 8.01.
Forward-Looking Statements
This Current Report on Form 8-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, but are not limited to, statements regarding the expected completion of the Polymath acquisition, the anticipated benefits of the transaction, the expected timing of the closing, the ability to satisfy closing conditions, and the anticipated financing arrangements. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.
Factors that could cause or contribute to such differences include, but are not limited to: the risk that the Polymath acquisition may not be consummated in a timely manner or at all; the failure to obtain required stockholder or regulatory approvals; the failure to satisfy other closing conditions; the occurrence of any event, change, or circumstance that could give rise to the termination of the Acquisition Agreement; the risk that the anticipated benefits of the transaction may not be realized; the risk that the Concurrent Financing may not be completed on expected terms or at all; risks related to the integration of Polymath’s business with the Company’s existing operations; general economic, market, and business conditions; and other risks described in the Company’s filings with the SEC. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| No. | Description | |
| 2.1* | Acquisition Agreement, dated as of August 17, 2026, by and among TruGolf Holdings, Inc.,18141991 Canada Inc. and Polymath Research Inc. | |
| 3.1 | Form of Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock of TruGolf Holdings, Inc. | |
| 3.2 | Form of Series B Preferred Warrant | |
| 10.1 | Form of Second Amendment, Waiver and Exchange Agreement | |
| 10.2 | Form of Registration Rights Agreement | |
| 99.1 | Press Release dated August 18, 2026. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
*Schedules and exhibits have been omitted pursuant to Item 601(a)(4) and (a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the SEC upon request.
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 18, 2026 | TRUGOLF HOLDINGS, INC. | |
| By: | /s/ Steven Passey | |
| Name: | Steven Passey | |
| Title: | Chief Financial Officer | |
Exhibit 2.1
ACQUISITION AGREEMENT
by and among
TRUGOLF HOLDINGS, INC.
and
18141991 CANADA INC.
and
POLYMATH RESEARCH INC.
Dated as of August 17, 2026
TABLE OF CONTENTS
| Page | |||
| Article I INTERPRETATION | 2 | ||
| Section 1.1 | Definitions | 2 | |
| Section 1.2 | Interpretation | 13 | |
| Article II THE AMALGAMATION | 14 | ||
| Section 2.1 | Agreement to Amalgamate | 14 | |
| Section 2.2 | Effect of Amalgamation | 14 | |
| Section 2.3 | Name | 14 | |
| Section 2.4 | Registered Office | 14 | |
| Section 2.5 | Authorized Capital and Restrictions on Share Transfers | 14 | |
| Section 2.6 | Fiscal Year | 14 | |
| Section 2.7 | Business | 14 | |
| Section 2.8 | Initial Directors of Amalco | 14 | |
| Section 2.9 | Initial Officers of Amalco | 14 | |
| Section 2.10 | Directors and Officers of the Parent Post-Closing. | 15 | |
| Section 2.11 | Exchange of SubCo Shares and Polymath Shares | 15 | |
| Section 2.12 | Convertible Securities. | 16 | |
| Section 2.13 | Dissenting Shareholders | 17 | |
| Section 2.14 | Completion of the Amalgamation and Effective Date | 17 | |
| Section 2.15 | Acknowledgment of Resale Restrictions. | 17 | |
| Section 2.16 | Amended Exchange Agreement and Concurrent Financing | 18 | |
| Article III THE AMALGAMATION CLOSING | 18 | ||
| Section 3.1 | Closing | 18 | |
| Article IV EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT COMPANIES; EXCHANGE OF CERTIFICATES | 18 | ||
| Section 4.1 | Withholding Rights | 18 | |
| Section 4.2 | Dissenters Rights | 18 | |
| Article V REPRESENTATIONS AND WARRANTIES OF THE COMPANY | 19 | ||
| Section 5.1 | Organization, Standing and Power. | 19 | |
| Section 5.2 | Capital Stock | 19 | |
| Section 5.3 | Subsidiaries | 20 | |
| Section 5.4 | Authority. | 20 | |
| Section 5.5 | No Conflict; Consents and Approvals. | 21 | |
| Section 5.6 | Financial Statements. | 22 | |
| Section 5.7 | No Undisclosed Liabilities | 23 | |
| Section 5.8 | Absence of Certain Changes or Events | 23 | |
| Section 5.9 | Litigation | 24 | |
| Section 5.10 | Compliance with Applicable Laws | 24 | |
| Section 5.11 | Cybersecurity | 25 | |
| Section 5.12 | Benefit Plans. | 25 | |
| i |
| Page | |||
| Section 5.13 | Labor and Employment Matters. | 27 | |
| Section 5.14 | Environmental Matters | 29 | |
| Section 5.15 | Taxes. | 30 | |
| Section 5.16 | Contracts | 33 | |
| Section 5.17 | Insurance | 35 | |
| Section 5.18 | Properties. | 35 | |
| Section 5.19 | Intellectual Property. | 36 | |
| Section 5.20 | Takeover Statutes | 38 | |
| Section 5.21 | No Rights Plan | 39 | |
| Section 5.22 | Related Party Transactions | 39 | |
| Section 5.23 | Certain Payments | 39 | |
| Section 5.24 | Brokers | 39 | |
| Section 5.25 | No Other Representations or Warranties | 39 | |
| Article VI REPRESENTATIONS AND WARRANTIES OF THE PARENT AND SUBCO | 40 | ||
| Section 6.1 | Organization, Standing and Power. | 40 | |
| Section 6.2 | Capital Stock and Working Capital. | 41 | |
| Section 6.3 | Subsidiaries | 42 | |
| Section 6.4 | Authority. | 42 | |
| Section 6.5 | No Conflict; Consents and Approvals. | 43 | |
| Section 6.6 | SEC Reports; Financial Statements. | 44 | |
| Section 6.7 | No Undisclosed Liabilities | 46 | |
| Section 6.8 | Absence of Certain Changes or Events | 46 | |
| Section 6.9 | Litigation | 47 | |
| Section 6.10 | Compliance with Applicable Laws | 47 | |
| Section 6.11 | Cybersecurity | 47 | |
| Section 6.12 | Benefit Plans. | 48 | |
| Section 6.13 | Labor and Employment Matters. | 50 | |
| Section 6.14 | Environmental Matters | 52 | |
| Section 6.15 | Taxes. | 52 | |
| Section 6.16 | Contracts. | 54 | |
| Section 6.17 | Insurance | 55 | |
| Section 6.18 | Properties. | 55 | |
| Section 6.19 | Intellectual Property. | 56 | |
| Section 6.20 | Related Party Transactions | 58 | |
| Section 6.21 | Certain Payments | 58 | |
| Section 6.22 | Brokers | 59 | |
| Section 6.23 | SubCo | 59 | |
| Section 6.24 | No Other Representations or Warranties | 59 | |
| ii |
| Page | |||
| Article VII COVENANTS | 59 | ||
| Section 7.1 | Proxy Statement. | 59 | |
| Section 7.2 | Stockholders’ Meeting. | 60 | |
| Section 7.3 | Working Capital Allocation | 61 | |
| Section 7.4 | Future Financings | 61 | |
| Section 7.5 | Indemnification, Exculpation and Insurance. | 62 | |
| Section 7.6 | Employee Matters | 63 | |
| Section 7.7 | Tax Matters. | 64 | |
| Section 7.8 | Obligations of SubCo | 64 | |
| Section 7.9 | Confidentiality | 64 | |
| Section 7.10 | Conduct of Business by the Company Pending Closing | 64 | |
| Section 7.11 | Conduct of Business by the Parent Pending Closing | 65 | |
| Section 7.12 | Mutual Covenants | 65 | |
| Section 7.13 | Additional Covenants of the Parent and SubCo | 67 | |
| Section 7.14 | Additional Covenants of the Company | 68 | |
| Article VIII CONDITIONS PRECEDENT | 68 | ||
| Section 8.1 | Conditions to Each Party’s Obligation to Effect the Transaction | 68 | |
| Section 8.2 | Conditions to the Parent’s and SubCo’s Obligation to Effect the Transaction | 69 | |
| Section 8.3 | Conditions to the Company’s Obligation to Effect the Transaction | 70 | |
| Article IX TERMINATION | 71 | ||
| Section 9.1 | Termination | 71 | |
| Section 9.2 | Effect of Termination | 72 | |
| Article X AMENDMENTS | 72 | ||
| Section 10.1 | Amendments | 72 | |
| Article XI GENERAL PROVISIONS | 72 | ||
| Section 11.1 | Non-survival of Representations and Warranties | 72 | |
| Section 11.2 | Publicity | 72 | |
| Section 11.3 | Waiver | 73 | |
| Section 11.4 | Fees and Expenses | 73 | |
| Section 11.5 | Notices | 73 | |
| Section 11.6 | Entire Agreement | 74 | |
| Section 11.7 | No Third-Party Beneficiaries. | 74 | |
| Section 11.8 | Governing Law | 74 | |
| Section 11.9 | Submission to Jurisdiction | 75 | |
| Section 11.10 | Assignment; Successor | 75 | |
| Section 11.11 | Specific Performance | 75 | |
| Section 11.12 | Severability | 76 | |
| Section 11.13 | Waiver of Jury Trial | 76 | |
| Section 11.14 | Counterparts | 76 | |
| Section 11.15 | Electronic Signature | 76 | |
| Section 11.16 | No Presumption against Drafting Party | 76 | |
| iii |
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (this “Agreement”), dated as of August 17, 2026, by and among TruGolf Holdings, Inc., a Nevada corporation (the Parent”), 18141991 Canada Inc., a corporation incorporated under the federal laws of Canada (“SubCo”), and Polymath Research Inc., a corporation incorporated under the federal laws of Canada (the “Company”).
RECITALS
WHEREAS:
| A. | It is intended that the Company and SubCo, a wholly-owned subsidiary of the Parent, will amalgamate (the “Amalgamation”) and form one corporation (“Amalco”) under the provisions of the Canada Business Corporations Act (the “CBCA”); |
| B. | The Parent has shares of its Class A common stock (the “Parent Series A Common Stock”) listed on the Nasdaq Capital Market LLC (“Nasdaq”); |
| C. | Upon the Amalgamation taking effect, Polymath Shareholders will receive such number of shares of Parent Common Stock and such number of shares of Parent Series C Convertible Preferred Stock of the Parent (the “Parent Convertible Preferred Stock”) and holders of Polymath Options will receive Replacement Options, in each case in the proportion and to the extent set out herein; |
| D. | The Board of Directors (the “Company Board”) of the Company has deemed it advisable and in the best interests of the Company and the Polymath Shareholders that the Company engage in the Amalgamation and the transactions contemplated by this Agreement; |
| E. | The Company Board has unanimously approved this Agreement upon the terms and subject to the conditions set forth in this Agreement; |
| F. | The Parent Board and the SubCo Board have each deemed it advisable and in the best interests of each and each of its shareholders that the Parent and SubCo engage in the Amalgamation and the transactions contemplated by this Agreement; |
| G. | Each of the Parent Board and the SubCo Board have unanimously approved this Agreement upon the terms and subject to the conditions set forth in this Agreement; |
| H. | The Parent, SubCo and the Company each desire to make certain representations, warranties, covenants and agreements in connection with the Amalgamation and the Transaction and to prescribe certain conditions to the Amalgamation and the Transaction as specified herein; and |
| I. | In connection with the transactions contemplated in this Agreement, the Parent has agreed to enter into the Amended Exchange Agreement on the Closing Date pursuant to which the Parent will raise, in one or more tranches to be consummated on or after the Closing Date, an aggregate of up to $5,000,000 in stated value (the “Concurrent Financing”). |
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AGREEMENT
NOW THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, each of the Parent, SubCo and the Company hereby agree as follows:
Article I
interpretation
Section 1.1 Definitions. In this Agreement, the following defined terms have the meanings hereinafter set forth:
(a) “Action” means, with respect to any Person, any litigation, legal action, lawsuit, claim, audit, arbitration or other proceeding (whether civil, administrative, quasi-criminal or criminal) before any Governmental Entity against such Person or its business or affecting any of its assets;
(b) “Advisor Agreement” has the meaning ascribed to such term in Section 8.3(o);
(c) “Affiliate” has the meaning ascribed to such term in the CBCA;
(d) “Agreement” means this Acquisition Agreement as supplemented, modified or amended, and not to any particular article, section, schedule, exhibit or other portion hereof;
(e) “Allocated Capital” has the meaning ascribed to such term Section 7.3;
(f) “Amalco” has the meaning ascribed to such term in the recitals;
(g) “Amalco Shares” means the common shares in the capital of Amalco;
(h) “Amalgamation” has the meaning ascribed to such term in the recitals;
(i) “Amended Exchange Agreement” has the meaning ascribed to such term in Section 2.16(a);
(j) “Applicable Laws” means, in the context that refers to one or more Persons, any domestic or foreign, federal, state, provincial or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Entity, and any terms and conditions of any grant of approval, permission, authority or license of any Governmental Entity, that is binding upon or applicable to such Person or Persons or its or their business, undertaking, property or securities and emanate from a Person having jurisdiction over the Person or Persons or its or their business, undertaking, property or securities;
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(k) “Articles of Amalgamation” means the Form 9 Articles of Amalgamation with respect to the Amalgamation, to be sent to the Director, as contemplated by the CBCA, in the form to be mutually agreed upon by the Parties;
(l) “Board Agreements” means the agreements to be entered into by the Parent and each of the directors of the Parent Board;
(m) “Business Day” means a day other than a Saturday, Sunday or a day on which banks in the State of Nevada or the Province of Ontario are authorized or required by Applicable Laws to be closed;
(n) “By-Laws” means the by-laws of Amalco to be in the form to be mutually agreed upon by the Parties;
(o) “CBCA” has the meaning ascribed to such term in the recitals;
(p) “Certificate of Amalgamation” means the certificate issued under the CBCA certifying the filing of Amalco’s Articles of Amalgamation;
(q) “Certificate of Designation” means a certificate of designation for the Parent Convertible Preferred Stock in the form to be mutually agreed upon by the Parties;
(r) “Charter Amendment Proposal” has the meaning ascribed to such term in Section 7.2(a);
(s) “Closing” has the meaning ascribed to such term in Section 3.1;
(t) “Closing Date” has the meaning ascribed to such term in Section 3.1;
(u) “Closing Shares of Parent Common Stock” means the number of shares of Parent Series A Common Stock as is equal to 19.9% of the total issued and outstanding shares of Parent Series A Common Stock immediately before the Effective Time;
(v) “Closing Shares of Parent Convertible Preferred Stock” means the number of shares of Parent Convertible Preferred Stock that is equal to:
($140,000,000 minus (the product of the Closing Shares of Parent Common Stock multiplied by the Parent Closing Price)) —————————————————————— (divided by) the number of issued and outstanding Polymath Shares immediately before the Effective Date;
(w) “Code” has the meaning ascribed to such term in Section 4.1;
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(x) “Company” has the meaning ascribed to such term in the recitals;
(y) “Company Balance Sheet” has the meaning ascribed to such term in Section 5.7;
(z) “Company Board” has the meaning ascribed to such term in the recitals;
(aa) “Company Bring-Down Certificate” has the meaning ascribed to such term in Section 8.1(e);
(bb) “Company Business” means building security token technology for capital raising and investor management for the private market ecosystem;
(cc) “Company Capital Stock” has the meaning ascribed to such term in Section 5.2;
(dd) “Company Constating Documents” has the meaning ascribed to such term in Section 5.1(b);
(ee) “Company Disclosure Letter” has the meaning ascribed to such term in Article V;
(ff) “Company Financial Statements” means the audited consolidated annual financial statements of the Company for the years ended December 31, 2025 and 2024, and the unaudited consolidated interim financial statements of the Company for the three month period ended March 31, 2026 (each prepared in accordance with GAAP);
(gg) “Company Material Adverse Effect” means any event, change, circumstance, occurrence, effect or state of facts that (A) is or would reasonably be expected to be materially adverse to the business, assets, liabilities, financial condition, or results of operations of the Company and its Subsidiaries, taken as a whole, or (B) materially impairs the ability of the Company to consummate the Amalgamation or any of the other transactions contemplated by this Agreement; provided, however, that in the case of clause (A) only, a Company Material Adverse Effect shall not include any event, change, circumstance, occurrence, effect or state of facts to the extent resulting from (1) changes or conditions generally affecting the industries in which the Company and its Subsidiaries operate, or the economy or the financial, debt, banking, capital, credit or securities markets, in the United States, including effects on such industries, economy or markets resulting from any regulatory and political conditions or developments in general, (2) the outbreak or escalation of war or acts of terrorism or any natural disasters, acts of God or comparable events, epidemic, pandemic or disease outbreak or any worsening of the foregoing, or any declaration of martial law, quarantine or similar directive, policy or guidance or Applicable Law or other action by any Governmental Entity in response thereto, (3) changes in Applicable Law or GAAP, or the interpretation or enforcement thereof, (4) the public announcement of this Agreement, or (5) any specific action taken (or omitted to be taken) by the Company at or with the express written consent of the Parent; provided, that, with respect to clauses (1), (2) and (3), the impact of such event, change, circumstance, occurrence, effect or state of facts is not disproportionately adverse to the Company and its Subsidiaries, taken as a whole, as compared to other participants in the industries in which the Company and its Subsidiaries operate;
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(hh) “Company Owned IP” means all Intellectual Property owned by the Company or any of its Subsidiaries in whole or in part;
(ii) “Company Registered IP” has the meaning ascribed to such term in Section 5.19(a);
(jj) “Company Shareholder Approval” has the meaning ascribed to such term in Section 5.4(c);
(kk) “Concurrent Financing” has the meaning ascribed to such term in the recitals;
(ll) “Confidentiality Agreement” has the meaning ascribed to such term in Section 7.9;
(mm) “Contract” means any contract, covenant, plan, undertaking, concession, agreement, agreement in principle, franchise, instrument, license, sublicense, lease, sublease, note, bond, indenture, deed of trust, mortgage, Lien, loan agreement, instrument of Indebtedness or other understanding, commitment or arrangement, whether written or oral;
(nn) “Control” (including the terms “controlled,” “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise;
(oo) “Conversion Proposal” has the meaning ascribed to such term in Section 7.2(a);
(pp) “Covered Person” has the meaning ascribed to such term in Section 6.2(d);
(qq) “D&O Indemnified Parties” has the meaning ascribed to such term in Section 7.5(a);
(rr) “Delivered Returns” has the meaning ascribed to such term in Section 5.15(h);
(ss) “Director” means the director appointed under Section 260 of the CBCA;
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(tt) “Disqualifying Event” has the meaning ascribed to such term in Section 6.2(d);
(uu) “Dissenting Shareholder” means a registered holder of Polymath Shares who has validly exercised dissent rights in respect of the Amalgamation and transactions related thereto under the applicable and in accordance with the provisions of the CBCA;
(vv) “Dissenting Shares” has the meaning ascribed to such term in Section 4.2;
(ww) “Effective Date” means the effective date of the Amalgamation as set forth in the Articles of Amalgamation;
(xx) “Effective Time” means 12:01 a.m. (Eastern Standard time) on the Effective Date, or such other time as the Parties agree to in writing before the Effective Date;
(yy) “Employee Plans” has the meaning ascribed to such term in Section 5.12(i);
(zz) “Environmental Laws” has the meaning ascribed to such term in Section 5.14;
(aaa) “Equity Incentive Plan” means mean the Parent’s 2026 Equity Incentive Plan;
(bbb) “Exchange Act” has the meaning ascribed to such term in Section 5.5(b);
(ccc) “Exchange Agreement” has the meaning ascribed to such term in Section 2.16(a);
(ddd) “Exchange Ratio” means the total of (i) the Closing Shares of Parent Common Stock and (ii) the number of shares of Parent Series A Common Stock if the Closing Shares of Parent Convertible Preferred Stock were converted on the Effective Date, divided by (iii) the number of issued and outstanding Polymath Shares immediately before the Effective Date;
(eee) “Foreign Plan” has the meaning ascribed to such term in Section 5.12(i);
(fff) “GAAP” means generally accepted accounting principles in the United States, consistently applied;
(ggg) “Government Contract” has the meaning ascribed to such term in Section 5.16(n);
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(hhh) “Governmental Entity” has the meaning ascribed to such term in Section 5.5(b);
(iii) “Hazardous Materials” has the meaning ascribed to such term in Section 5.14;
(jjj) “Holders” has the meaning ascribed to such term in Section 2.16(a);
(kkk) “IFRS” means International Financial Reporting Standards applicable as of the date of the financial statements, document or event in question;
(lll) “Indebtedness” means (a) any indebtedness or other obligation for borrowed money; (b) any obligation incurred for all or any part of the purchase price of property or other assets (including earnout, milestone, royalty, seller note, installment payment, contingency payments and similar obligations) or for the cost of property or other assets constructed or of improvements thereto, other than accounts payable included in current liabilities and incurred in respect of property purchased in the Ordinary Course of Business; (c) the face amount of all letters of credit issued for the account of such Person; (d) obligations (whether or not such Person has assumed or become liable for the payment of such obligation) secured by Liens; (e) capitalized lease obligations; (f) all guarantees and similar obligations of such Person; (g) deferred revenue Liabilities of such Person; (h) all accrued interest, fees and charges in respect of any indebtedness; (i) obligations relating to interest rate protection, swap agreements and collar agreements, in each case, to the extent payable if such agreements are terminated at the Closing; (j) obligations pursuant to conditional sale or other title retention agreements; (k) all bankers acceptances and overdrafts; and (l) all interest, prepayment premiums and penalties, and any other fees, expenses, indemnities and other amounts payable as a result of the prepayment or discharge of any indebtedness.
(mmm) “Indemnification Agreement” has the meaning ascribed to such term in Section 8.3(o);
(nnn) “Intellectual Property” means all intellectual property rights of any kind or nature in any jurisdiction throughout the world, including all of the following to the extent protected by Applicable Law: (i) trademarks or service marks (whether registered or unregistered), trade names, domain names, social media user names, social media addresses, logos, slogans, and trade dress, including applications to register any of the foregoing, together with the goodwill symbolized by any of the foregoing; (ii) patents, utility models and any similar or equivalent statutory rights with respect to the protection of inventions, and all applications for any of the foregoing, together with all re-issuances, continuations, continuations-in-part, divisionals, revisions, extensions and reexaminations thereof; (iii) copyrights (registered and unregistered) and applications for registration; (iv) trade secrets and customer lists, in each case to the extent any of the foregoing derive economic value (actual or potential) from not being generally known to other Persons who can obtain economic value from their disclosure or use, and other confidential information (“Trade Secrets”); and (v) any other proprietary or intellectual property rights of any kind or nature;
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(ooo) “ITA” means the Income Tax Act (Canada), as amended, including the regulations promulgated thereunder, as amended from time to time;
(ppp) “IT Systems” meaning ascribed to such term in Section 5.19(g);
(qqq) “IT Systems and Data” meaning ascribed to such term in Section 5.11;
(rrr) “Knowledge” of any party means the actual knowledge of any executive officer of such Party or other officer having primary responsibility for the relevant matter;
(sss) “Liens” has the meaning ascribed to such term in Section 5.5(a);
(ttt) “Material Contracts” has the meaning ascribed to such term in Section 5.16;
(uuu) “Nasdaq” means the Nasdaq Capital Market, LLC;
(vvv) “Ordinary Course of Business” means the ordinary course of business consistent with past custom and practice (including with respect to frequency and amount);
(www) “Parent” has the meaning ascribed to such term in the recitals;
(xxx) “Parent Balance Sheet” means the audited balance sheet of the Parent as of December 31, 2025, included in the Parent’s Report on Form 10-K for the year ended December 31, 2025, and the interim balance sheet of the Parent for the three months ended March 31, 2026, included in the Parent’s Form 10-Q for the three months ended March 31, 2025, each as filed with the SEC;
(yyy) “Parent Board” has the meaning ascribed to such term in Section 6.1(b);
(zzz) “Parent Bring-Down Certificate” has the meaning ascribed to such term in Section 8.1(f);
(aaaa) “Parent Capital Stock” means the Parent Common Stock, the Parent Convertible Preferred Stock and any other stock that has or may be issued by the Parent;
(bbbb) “Parent Capital Stock Issuance” has the meaning ascribed to such term in Section 6.4(a);
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(cccc) “Parent Closing Price” means the closing price of one (1) share of Parent Common Stock on the Nasdaq on the trading day immediately preceding the Closing Date;
(dddd) “Parent Common Stock” means the Parent Series A Common Stock and the Parent Series B Common Stock;
(eeee) “Parent Convertible Preferred Stock” has the meaning ascribed to such term in the recitals;
(ffff) “Parent Disclosure Letter” meaning ascribed to such term in Article VI;
(gggg) “Parent IT Systems” has the meaning ascribed to such term in Section 6.19(g);
(hhhh) “Parent Material Adverse Effect” means any event, change, circumstance, occurrence, effect or state of facts that (A) is or would reasonably be expected to be materially adverse to the business, assets, liabilities, financial condition, or results of operations of the Parent and its Subsidiaries, taken as a whole, or (B) materially impairs the ability of the Parent or SubCo to consummate the Amalgamation or any of the other transactions contemplated by this Agreement; provided, however, that in the case of clause (A) only, a Parent Material Adverse Effect shall not include any event, change, circumstance, occurrence, effect or state of facts to the extent resulting from (1) changes or conditions generally affecting the industries in which the Parent and its Subsidiaries operate, or the economy or the financial, debt, banking, capital, credit or securities markets, in the United States, including effects on such industries, economy or markets resulting from any regulatory and political conditions or developments in general, (2) the outbreak or escalation of war or acts of terrorism or any natural disasters, acts of God or comparable events, epidemic, pandemic or disease outbreak or any worsening of the foregoing, or any declaration of martial law, quarantine or similar directive, policy or guidance or Applicable Law or other action by any Governmental Entity in response thereto, (3) changes in Applicable Law or GAAP, or the interpretation or enforcement thereof, (4) the public announcement of this Agreement, or (5) any specific action taken (or omitted to be taken) by the Parent at or with the express written consent of the Company; provided, that, with respect to clauses (1), (2) and (3), the impact of such event, change, circumstance, occurrence, effect or state of facts is not disproportionately adverse to the Parent and its Subsidiaries, taken as a whole, as compared to other participants in the industries in which the Parent and its Subsidiaries operate;
(iiii) “Parent Material Contracts” has the meaning ascribed to such term in Section 6.16(a);
(jjjj) “Parent Options” means stock options granted by the Parent;
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(kkkk) “Parent Owned IP” means all Intellectual Property owned by the Parent or any of its Subsidiaries in whole or in part;
(llll) “Parent Plans” has the meaning ascribed to such term in Section 6.12(a);
(mmmm) “Parent Preferred Stock” means any class of preferred stock in the capital of the Parent;
(nnnn) “Parent Registered IP” has the meaning ascribed to such term in Section 6.19(a);
(oooo) “Parent SEC Documents” has the meaning ascribed to such term in Section 6.6(a);
(pppp) “Parent Series A Common Stock” means the Class A common stock in the capital of the Parent;
(qqqq) “Parent Series B Common Stock” means the Class B common stock in the capital of the Parent;
(rrrr) “Parent Series A Convertible Preferred Stock” means the series A convertible preferred stock in the capital of the Parent;
(ssss) “Parent Series B Convertible Preferred Stock” means the series B convertible preferred stock in the capital of the Parent, to be created and designated in connection with the Concurrent Financing;
(tttt) “Parent Series C Convertible Preferred Stock” means the series C convertible preferred stock in the capital of the Parent, to be created and designated in connection with the Amalgamation;
(uuuu) “Parent Stockholder Approval” has the meaning ascribed to such term in Section 6.4(a);
(vvvv) “Parent Stockholder Matters” has the meaning ascribed to such term in Section 7.2(a);
(wwww) “Parent Stockholder Meeting” has the meaning ascribed to such term in Section 7.2(a);
(xxxx) “Parent Warrants” means any share purchase warrants issued by the Parent to acquire any shares of Parent Capital Stock;
(yyyy) “Parties” means the Parent, SubCo and the Company and “Party” means any one of them;
(zzzz) “Permits” meaning ascribed to such term in Section 5.10;
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(aaaaa) “Permitted Liens” meaning ascribed to such term in Section 5.18(a);
(bbbbb) “Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including any Governmental Entity;
(ccccc) “Personal Information” means any information that alone or in combination with other information can be used to identify an individual;
(ddddd) “Polymath Options” means options to acquire Polymath Shares;
(eeeee) “Polymath Preferred Shares” means the Class B preferred shares and the Class C preferred shares in the capital of the Company;
(fffff) “Polymath Shareholders” means the holders of Polymath Shares;
(ggggg) “Polymath Shares” means common shares in the capital of the Company;
(hhhhh) “Pre-Closing Period” has the meaning ascribed to such term in Section 7.10;
(iiiii) “Privacy Laws” meaning ascribed to such term in Section 5.19(h);
(jjjjj) “Proxy Statement” has the meaning ascribed to such term in Section 7.1(a);
(kkkkk) “Replacement Option” has the meaning ascribed to such term in Section 2.12(a);
(lllll) “Representative” means, with respect to a Party, such Party’s directors, officers, employees, investment bankers, financial advisors, attorneys, accountants or other advisors, agents or representatives;
(mmmmm) “Sarbanes-Oxley Act” has the meaning ascribed to such term in Section 6.6(a);
(nnnnn) “SEC” means the Securities and Exchange Commission;
(ooooo) “Securities Act” has the meaning ascribed to such term in Section 5.5(b);
(ppppp) “Special Resolution” has the meaning ascribed to such term in the CBCA;
(qqqqq) “SubCo” has the meaning ascribed to such term in the recitals;
(rrrrr) “SubCo Board” means the board of directors of SubCo;
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(sssss) “SubCo Share” means common shares in the capital of SubCo;
(ttttt) “Subsidiary” means, with respect to any Person, any other Person of which stock or other equity interests having ordinary voting power to elect more than 50% of the board of directors or other governing body are owned, directly or indirectly, by such first Person;
(uuuuu) “Takeover Laws” meaning ascribed to such term in Section 5.20;
(vvvvv) “Tax Return” means any return, declaration, report, election, claim for refund, information return, or statement filed or supplied or required to be filed or supplied to any Governmental Entity or any other Person with respect to Taxes, including any schedule, attachment or supplement thereto, and including any amendment thereof;
(wwwww) “Taxes” means (i) all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, stock, ad valorem, transfer, transaction, franchise, profits, gains, registration, license, wages, lease, service, service use, employee and other withholding, social security, unemployment, welfare, disability, payroll, employment, excise, severance, stamp, occupation, workers’ compensation, premium, real property, personal property, escheat or unclaimed property, windfall profits, net worth, capital, value-added, alternative or add-on minimum, customs duties, estimated and other taxes of any kind whatsoever (whether imposed directly or through withholding and including taxes of any third party in respect of which a Person may have a duty to collect or withhold and remit and any amounts resulting from the failure to file any Tax Return), whether disputed or not, together with any interest and any penalties, additions to tax or additional amounts with respect thereto and (ii) any liability for payment of amounts described in clause (i) whether as a result of transferee or successor liability, of being a member of an affiliated, consolidated, combined or unitary group for any period, pursuant to a Contract, through operation of Applicable Law or otherwise;
(xxxxx) “Tax Returns” means any return (including any information return), report, statement, information statement, schedule, notice, form, declaration, claim for refund, election, designation or any other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Entity in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any legal requirement relating to any Tax, including supporting schedules, records and statements required to be filed with respect to Taxes;
(yyyyy) “Taxes Payable” means any and all unpaid and payable income, franchise, goods and service, harmonized sales or sales Taxes of the Company as of the Closing Date;
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(zzzzz) “Taxing Authority” means any Governmental Entity responsible for the administration, assessment, reassessment, determination, collection, enforcement, or imposition of any Tax, including the Canada Revenue Agency;
(aaaaaa) “Transaction” means the acquisition by the Parent of all the securities of the Company together with all of the other matters to be consummated pursuant to this Agreement;
(bbbbbb) “Transaction Expenses” means the aggregate amount (without duplication) of all costs, fees and expenses incurred by the Parent or any of its Subsidiaries (including SubCo), or for which the Parent or any of its Subsidiaries are liable in connection with the transactions contemplated hereby and the negotiation, preparation and execution of this Agreement, including (a) any fees and expenses of legal counsel and accountants, the maximum amount of fees and expenses payable to financial advisors, investment bankers, brokers, consultants, tax advisors, transfer agents, proxy solicitor and other advisors of the Parent and (b) any single-trigger bonuses, retention payments, severance, change-in-control payments or similar payment obligations (including payments with “single-trigger” provisions triggered at and as of the consummation of the transactions contemplated hereby) that are due and payable to any director, officer, employee or consultant solely as a result of the consummation of the transactions contemplated hereby, together with any payroll Taxes associated therewith;
(cccccc) “Trade Secrets” has the meaning ascribed to such term in Section 1.1(nnn);
(dddddd) “WARN Act” has the meaning ascribed to such term in Section 5.13(d);
(eeeeee) “Withholding Agent” has the meaning ascribed to such term in Section 4.1; and
(ffffff) “Working Capital” has the meaning ascribed to such term Section 6.2(e).
Section 1.2 Interpretation. For the purposes of this Agreement, except as otherwise expressly provided:
(a) the division of this Agreement into articles, sections and subsections is for convenience of reference only and does not affect the construction or interpretation of this Agreement. The terms “this Agreement”, “hereto”, “herein” and “hereunder” and similar expressions refer to this Agreement and not to any particular article, Section or other portion hereof and include any agreement or instrument supplementary or ancillary hereto;
(b) words importing the singular number include the plural and vice versa, and words importing the use of any gender include all genders;
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(c) the word “including”, when following any general statement or term, is not to be construed as limiting the general statement or term to the specific items or matters set forth or to similar items or matters, but rather as permitting the general statement or term to refer to all other items or matters that could reasonably fall within its broadest possible scope;
(d) if any date on which any action is required to be taken hereunder by any of the Parties is not a Business Day in the place where an action is required to be taken, such action is required to be taken on the next succeeding day which is a Business Day in such place;
(e) any reference in this Agreement to any statute or any Section thereof shall, unless otherwise expressly stated, be deemed to be a reference to such statute or Section as amended, restated or re-enacted from time to time, and to any regulations promulgated thereunder. References to any agreement or document shall be to such agreement or document, as it may have been or may hereafter be amended, supplemented, replaced or restated from time to time;
(f) all references to “dollars” or “$” or “US$” in this Agreement refer to United States dollars, which is the currency used for all purposes in this Agreement;
(g) all representations, warranties, covenants and opinions in or contemplated by this Agreement as to the enforceability of any covenant, agreement or document are subject to enforceability being limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other Applicable Laws relating to or affecting creditors’ rights generally, and the discretionary nature of certain remedies (including specific performance and injunctive relief and general principals of equity); and
(h) the Parties hereto acknowledge that their respective legal counsel have reviewed and participated in settling the terms of this Agreement, and the Parties agree that any rule of construction to the effect that any ambiguity is to be resolved against the drafting Party will not be applicable in the interpretation of this Agreement.
Article II
THE AMALGAMATION
Section 2.1 Agreement to Amalgamate. The Parties agree that SubCo and the Company shall amalgamate by way of statutory amalgamation pursuant to the provisions of the CBCA as of the Effective Date and continue as one corporation on the terms and conditions set out in this Agreement.
Section 2.2 Effect of Amalgamation. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time:
(a) the Company and SubCo shall be amalgamated and continue as one corporation;
(b) each of the Company and SubCo shall cease to exist as entities separate from Amalco;
(c) the property and assets of each of SubCo and the Company shall continue to be the property and assets of Amalco;
(d) Amalco shall continue to be liable for the liabilities and obligations of each of SubCo and the Company;
(e) Amalco will be a wholly-owned subsidiary of the Parent; and
(f) the Articles of Amalgamation shall be the articles of incorporation of Amalco, and the Certificate of Amalgamation will be deemed to be the certificate of incorporation of Amalco.
Section 2.3 Name. The name of Amalco shall be “Polymath Research Inc.” or such other name as determined by the directors of the Company.
Section 2.4 Registered Office. The registered office of Amalco shall be First Canadian Place, 100 King Street West, Suite 5700, Toronto, ON M5X 1C7.
Section 2.5 Authorized Capital and Restrictions on Share Transfers. The authorized capital of Amalco shall consist of an unlimited number of common shares without par value, which shall have the rights, privileges, restrictions and conditions set out in the Articles of Amalgamation. No shares of Amalco may be transferred except in compliance with the restrictions set out in the Articles.
Section 2.6 Fiscal Year. The fiscal year end of Amalco shall be December 31 of each calendar year.
Section 2.7 Business. There shall be no restriction on the business which Amalco is authorized to carry on.
Section 2.8 Initial Directors of Amalco. The first director of Amalco shall be the person whose name appear below or such other person(s) as the Parent may determine:
| Name | ||
| Natalie Hirsch |
Such director shall hold office until the first annual meeting of shareholders of Amalco or until her successor is elected or appointed.
Section 2.9 Initial Officers of Amalco. The first officers of Amalco shall be the persons whose names and positions appear below or such other person(s) as the Parent may determine:
| Name | Position | |
| Natalie Hirsch | Chief Executive Officer, Chief Financial Officer/Chief Operating Officer |
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Section 2.10 Directors and Officers of the Parent Post-Closing.
(a) At or prior to the Effective Date, the Parties shall take all action:
| (i) | (including, to the extent necessary, procuring the resignation of any director on the Parent Board) so that, as of immediately after the Effective Time, such Parent Board consist of the individuals listed in Section 2.10(a)(i) of the Parent Disclosure Letter; | |
| (ii) | (including, to the extent necessary, procuring the resignation or removal of any officers of the Parent immediately prior to the Effective Time) so that, as of the Effective Time, the Parent officers shall initially consist of the Persons listed in Section 2.10(a)(ii) of the Parent Disclosure Letter; and | |
| (iii) | as applicable to cause the Persons listed in Section 2.10(a)(i) of the Parent Disclosure Letter to resign without payment by or any liability to the Company or the Parent, including any change in control or bonus payments and commitments. |
(b) The Company and the Parent shall enter into mutual releases with all former directors and officers of the Parent, in a form acceptable to the Parent and the Company, acting reasonably, at the Effective Time.
Section 2.11 Exchange of SubCo Shares and Polymath Shares. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time:
(a) the Polymath Shareholders will receive on a pro-rata basis:
| (i) | the Closing Shares of Parent Common Stock; and | |
| (ii) | the Closing Shares of Parent Convertible Preferred Stock, |
all as set forth in Section 2.11(a) of the Parent Disclosure Letter and the Polymath Shares will be cancelled;
(b) each Parent Convertible Preferred Stock held by the Company, if any, shall be cancelled for no additional consideration therefore;
(c) the Parent will receive one (1) Amalco Share in exchange for each SubCo Share held by it and the SubCo Share held by the Parent will be cancelled;
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(d) in consideration for the Parent’s issuance of the Parent Convertible Preferred Stock referenced in Section 2.11(a), Amalco shall issue to the Parent one Amalco Share for each Parent Convertible Preferred Stock issued by the Parent under Section 2.11(a); and
(e) no fractional Parent Common Stock or Parent Convertible Preferred Stock will be issued pursuant to this Agreement. In the event that a Polymath Shareholder would otherwise be entitled to a fractional security hereunder, the number of securities issued to such Polymath Shareholder shall be rounded up to the next greater whole number of shares if the fractional entitlement is equal to or greater than 0.5 and shall, without any additional compensation, be rounded down to the next lesser whole number of shares if the fractional entitlement is less than 0.5. In calculating such fractional interests, all Polymath Shares registered in the name of or beneficially held by such Polymath Shareholder or their nominee shall be aggregated.
Section 2.12 Convertible Securities.
(a) At the Effective Time, each outstanding Polymath Option to purchase shares of Polymath Shares granted under the Company’s Stock Option Plan, whether vested or unvested, that is outstanding immediately prior to the Effective Time shall, at the Effective Time, cease to represent a right to acquire Polymath Shares and shall be assumed and converted, at the Effective Time, into an option to purchase shares of Parent Common Stock (each, a “Replacement Option”), on the same terms and conditions (including any vesting or forfeiture and post-termination exercise provisions as were applicable to such Polymath Option as of immediately prior to the Effective Time). For purposes of clarification, (x) no Polymath Option shall be amended to waive any acceleration of vesting in connection with the Amalgamation, and (y) all Replacement Options will continue to vest in accordance with the terms of the Polymath Options upon closing of the Amalgamation to the extent the agreements governing the Polymath Options so provide. The number of shares of Parent Common Stock subject to each such Replacement Option shall be equal to (i) the number of Polymath Shares subject to each Polymath Option immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio, rounded up, if necessary, to the nearest whole share of Parent Common Stock, and such Replacement Option shall have an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per Polymath Share otherwise purchasable pursuant to such Polymath Option divided by (B) the Exchange Ratio; provided, that in the case of any Polymath Option to which Section 421 of the Code applies as of the Effective Time (taking into account the effect of any accelerated vesting thereof, if applicable) by reason of its qualification under Section 422 of the Code, the exercise price, the number of shares of Parent Common Stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 424(a) of the Code; provided further, that in the case of any Polymath Option to which Section 409A of the Code applies as of the Effective Time, the exercise price, the number of shares of Parent Common Stock subject to such option and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Section 409A of the Code in order to avoid the imposition of any additional Taxes thereunder.
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(b) The Replacement Options shall be governed by the terms and conditions of the Equity Incentive Plan.
(c) The Parent shall take all action necessary to issue the Replacement Options as contemplated in Section 2.12(a) and Section 2.12(b).
Section 2.13 Dissenting Shareholders. Registered Polymath Shareholders will be entitled to exercise dissent rights with respect to their Polymath Shares in connection with the Amalgamation pursuant to and in the manner set forth in the CBCA. The Company shall give the Parent notice of any written notice of a dissent, withdrawal of such notice, and any other instruments served pursuant to such dissent rights and received by the Company and shall provide the Parent with copies of such notices and written objections. Polymath Shares which are held by a Dissenting Shareholder shall not be exchanged for Parent Convertible Preferred Stock pursuant to the Amalgamation. However, if a Dissenting Shareholder fails to perfect or effectively withdraws such Dissenting Shareholder’s claim under the CBCA or forfeits such Dissenting Shareholder’s right to make a claim under the CBCA, or if such Dissenting Shareholder’s rights as a Polymath Shareholder are otherwise reinstated, such Polymath Shareholder’s Polymath Shares shall thereupon be deemed to have been exchanged for Parent Convertible Preferred Stock as of the Effective Time as prescribed herein.
Section 2.14 Completion of the Amalgamation and Effective Date. Upon the satisfaction or waiver of the conditions herein contained in favor of each Party, the Company and SubCo shall deliver to the Director the Articles of Amalgamation and such other documents as may be required to give effect to the Amalgamation. The Amalgamation shall become effective at the Effective Time.
Section 2.15 Acknowledgment of Resale Restrictions.
(a) In addition to any other resale restrictions that may be imposed, Polymath Shareholders will receive Parent Convertible Preferred Stock in exchange for such Polymath Shareholder’s Polymath Shares which will bear a legend substantially in the following form:
“THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE AND HAVE BEEN ISSUED 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 SECURITIES LAWS.”
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Section 2.16 Amended Exchange Agreement and Concurrent Financing
(a) The Parties acknowledge that the Parent will enter into an amendment and exchange agreement (the “Amended Exchange Agreement”) to the Amendment and Exchange Agreement dated April 22, 2025, as amended on May 28, 2025 and July 21, 2025, among the Parent and the holders of the Company Series A Preferred Stock (the “Holders”), (together, the “Exchange Agreement”) in respect of the Concurrent Financing pursuant to which the Parent will issue warrants to acquire Series B Convertible Preferred Stock, and any other documents ancillary to the Concurrent Financing, as applicable.
(b) The Parent shall complete the Concurrent Financing in one or more tranches, with the initial tranche of up to $3,000,000 required to close within the timeframes set forth in the Amended Exchange Agreement.
Article III
THE AMALGAMATION Closing
Section 3.1 Closing. The closing of the Amalgamation (the “Closing”) shall take place on such date, time or place as agreed to in writing by the Parent and the Company, following the satisfaction or, to the extent permitted by Applicable Law, waiver of the conditions set forth in Article VIII (subject to the satisfaction or, to the extent permitted by Applicable Law, waiver of those conditions), remotely by electronic exchange of documents. The date on which the Closing occurs is referred to in this Agreement as the “Closing Date.”
Article IV
EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT COMPANIES; EXCHANGE OF CERTIFICATES
Section 4.1 Withholding Rights. The Parent (the “Withholding Agent”) shall be entitled to deduct and withhold, or cause to be deducted and withheld, from the consideration otherwise payable to any holder of Polymath Shares or otherwise pursuant to this Agreement such amounts as the Parent reasonably determines it is required to deduct and withheld under the Internal Revenue Code of 1986, as amended (the “Code”), or any provision of state, local or foreign Tax Law (including through the use of proceeds from the sale of the shares of Parent Capital Stock); provided that if a Withholding Agent determines that any payment to any shareholder of the Company hereunder is subject to deduction and/or withholding, then, except with respect to compensatory payments or as a result of a failure to deliver the certificate described in Section 7.7, such Withholding Agent shall (i) provide notice to such shareholder as soon as reasonably practicable after such determination and (ii) use commercially reasonable efforts to cooperate with such shareholder prior to Closing to reduce or eliminate any such deduction and/or withholding. To the extent that amounts are so deducted and withheld and are remitted to the applicable taxing authority, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of whom such deduction and withholding was made.
Section 4.2 Dissenters Rights. Notwithstanding anything in this Agreement to the contrary, each Polymath Share outstanding immediately prior to the Effective Time and held by a holder who is entitled to demand and has properly demanded appraisal for such shares of the Polymath Shares in accordance with Section 190 of the CBCA (the “Dissenting Shares”) shall not be converted into or be exchangeable for the right to receive a portion of the Parent Convertible Preferred Stock unless and until such holder fails to perfect or withdraws or otherwise loses such holder’s right to appraisal and payment under the CBCA. If, after the Effective Time, any such holder fails to perfect or withdraws or loses such holder’s right to appraisal, such Dissenting Shares shall thereupon be treated as if they had been converted as of the Effective Time into the right to receive the portion of the Parent Convertible Preferred Stock, if any, to which such holder is entitled, without interest. The Company shall give the Parent (a) prompt notice of any demands received by the Company for appraisal of any Polymath Shares issued and outstanding immediately prior to the Effective Time, attempted written withdrawals of such demands, and any other instruments served pursuant to the CBCA and received by the Company relating to shareholders’ rights to appraisal with respect to the Amalgamation and (b) the opportunity to participate in all negotiations and proceedings with respect to any exercise of such appraisal rights under the CBCA. The Company shall not, except with the prior written consent of the Parent, which shall not be unreasonably withheld, conditioned or delayed, voluntarily make any payment with respect to any demands for payment of fair value for capital stock of the Company, offer to settle or settle any such demands or approve any withdrawal of any such demands.
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Article V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding section or subsection of the disclosure letter delivered by the Company to the Parent immediately prior to the execution of this Agreement (the “Company Disclosure Letter”) (it being agreed that the disclosure of any information in a particular section or subsection of the Company Disclosure Letter shall be deemed disclosure of such information with respect to any other section or subsection of this Agreement to which the relevance of such information is readily apparent on its face), the Company represents and warrants to the Parent and SubCo as follows:
Section 5.1 Organization, Standing and Power.
(a) The Company (i) is an entity duly organized, validly existing and in good standing under the Applicable Laws of the jurisdiction of its organization, (ii) has all requisite corporate or similar power and authority to own, lease and operate its properties and to carry on its business as now being conducted and (iii) is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except in the case of clause (iii), where the failure to be so qualified or licensed or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect.
(b) The Company has previously made available to the Parent true and complete copies of the constating documents of the Company (the “Company Constating Documents”) and for each of Company’s Subsidiaries, in each case as amended to the date of this Agreement, and each as so delivered is in full force and effect. The Company is not in violation of any provision of the Company Constating Documents and none of Company’s Subsidiaries are in violation of any provision of their applicable constating documents. Except with respect to the extent relating to the transactions contemplated by this Agreement or in draft form and except as may be redacted to preserve a privilege (including attorney-client privilege), the Company has made available to the Parent true and complete copies of the minutes of all meetings of the Company’s shareholders, the Company Board and each committee of the Company Board held since January 1, 2024.
Section 5.2 Capital Stock. The authorized capital stock of the Company consists of an unlimited number of Polymath Shares, an unlimited number of non-voting common shares of the Company, an unlimited number of Class B preferred shares and an unlimited number of Class C preferred shares (collectively, the “Company Capital Stock”). As of the date hereof, (i) 10,506,129 Polymath Shares (excluding treasury shares) are issued and outstanding, (ii) no Polymath Shares are held by the Company in its treasury, (iii) no Polymath Preferred Shares issued and outstanding (iv) no Polymath Preferred Shares are held by the Company in its treasury, (v) the Polymath Options are set forth in Section 5.2 of the Company Disclosure Letter, and (vi) no Polymath Warrants are issued and outstanding. All outstanding shares of capital stock of the Company are, and all shares reserved for issuance will be, when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to any preemptive rights. The Company does not have outstanding any bonds, debentures, notes or other obligations having the right to vote (or convertible into, or exchangeable or exercisable for, securities having the right to vote) with the shareholders of the Company on any matter. Except as set forth above in this Section 5.2 and Section 5.2 of the Company Disclosure Letter, there are no outstanding (A) shares of Company Capital Stock or other voting securities or equity interests of the Company, (B) securities of the Company or its Subsidiaries, convertible into or exchangeable or exercisable for shares of Company Capital Stock or other voting securities or equity interests of the Company, (C) stock appreciation rights, “phantom” stock rights, performance units, interests in or rights to the ownership or earnings of the Company or other equity equivalent or equity-based awards or rights, (D) subscriptions, options, warrants, calls, commitments, Contracts or other rights to acquire from the Company, or obligations of the Company to issue, any shares of Company Capital Stock, voting securities, equity interests or securities convertible into or exchangeable or exercisable for capital stock or other voting securities or equity interests of the Company or rights or interests described in the preceding clause (C), or (E) obligations of the Company to repurchase, redeem or otherwise acquire any such securities or to issue, grant, deliver or sell, or cause to be issued, granted, delivered or sold, any such securities. Except as set forth in Section 5.2 of the Company Disclosure Letter, there are no shareholder agreements, voting trusts or other agreements or understandings to which the Company, or any of Company’s Subsidiaries, is a party or of which the Company has Knowledge with respect to the holding, voting, registration, redemption, repurchase or disposition of, or that restrict the transfer of, any capital stock or other voting securities or equity interests of the Company.
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Section 5.3 Subsidiaries. Section 5.3 of the Company Disclosure Letter sets forth a true and complete list of each Subsidiary of Company, including its jurisdiction of incorporation or formation. Each of Company’s Subsidiaries (i) is an entity duly organized, validly existing and in good standing under the Applicable Laws of the jurisdiction of its organization, (ii) has all requisite corporate or similar power and authority to own, lease and operate its properties and to carry on its business as now being conducted and (iii) is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except in the case of clause (iii), where the failure to be so qualified or licensed or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. Section 5.3 of the Company Disclosure Letter lists all outstanding shares of capital stock and other voting securities or equity interests of each such Subsidiary and identifies the owner of such shares of capital stock and other voting securities or equity interests. All such shares of capital stock of each Subsidiary are owned, directly or indirectly, by the Company, free and clear of all Liens other than Permitted Liens of Company and its Subsidiaries. Except for the capital stock of, or other equity or voting interests in, its Subsidiaries and as set forth in Section 5.3 of the Company Disclosure Letter, the Company does not own, directly or indirectly, any equity, membership interest, partnership interest, joint venture interest, or other equity or voting interest in, or any interest convertible into, exercisable or exchangeable for any of the foregoing, nor is it under any current or prospective obligation to form or participate in, provide funds to, make any loan, capital contribution, guarantee, credit enhancement or other investment in, or assume any liability or obligation of, any Person.
Section 5.4 Authority.
(a) The Company has all necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to approve this Agreement or to consummate the Amalgamation and the other transactions contemplated hereby, subject, in the case of the consummation of the Amalgamation, to the Company Shareholder Approval. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by the Parent and SubCo, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms (except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Applicable Laws affecting the enforcement of creditors’ rights generally or by general principles of equity).
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(b) The Company Board, at a meeting duly called and held at which all directors of the Company were present, duly and unanimously adopted resolutions (i) determining that the terms of this Agreement, the Amalgamation and the other transactions contemplated hereby are fair to and in the best interests of the Company’s shareholders, (ii) approving and declaring advisable this Agreement and the transactions contemplated hereby, including the Amalgamation, (iii) directing that the Amalgamation be submitted to the shareholders of the Company for approval, and (iv) resolving to recommend that the Company’s shareholders vote in favor of the approval of the Amalgamation, which resolutions have not been subsequently rescinded, modified or withdrawn in any way.
(c) The Special Resolution of the holders of the Polymath Shares outstanding (collectively, the “Company Shareholder Approval”) is the only approval of the holders of any class or series of the Company Capital Stock or other securities required in connection with the consummation of the Amalgamation and the other transactions contemplated hereby. Other than the Company Shareholder Approval, no vote of the holders of any class or series of the Company’s capital stock or other securities is required in connection with the consummation of any of the transactions contemplated hereby to be consummated by the Company.
Section 5.5 No Conflict; Consents and Approvals.
(a) The execution, delivery and performance of this Agreement by the Company does not, and the consummation of the Amalgamation and the other transactions contemplated hereby and compliance by the Company with the provisions hereof will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, cancellation, modification or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any pledge, claim, lien, charge, option, right of first refusal, encumbrance or security interest of any kind or nature whatsoever (including any limitation on voting, sale, transfer or other disposition or exercise of any other attribute of ownership) (collectively, “Liens”) in or upon any of the properties, assets or rights of the Company under, or give rise to any increased, additional, accelerated or guaranteed rights or entitlements under, or require any consent, waiver or approval of any Person pursuant to, any provision of (i) the Company Constating Documents, (ii) any Contract to which the Company is a party or by which the Company or any of its properties or assets may be bound or (iii) subject to the governmental filings and other matters referred to in Section 5.5(b), any Applicable Law or by which the Company or any of its properties or assets may be bound, except as, in the case of clause (ii) as would not be, or would not reasonably be expected to be, material.
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(b) Except as set forth in Section 5.5(b) of the Company Disclosure Letter, no consent, approval, order or authorization of, or registration, declaration, filing with or notice to, any federal, state, provincial, local or foreign government or subdivision thereof or any other governmental, administrative, judicial, arbitral, legislative, executive, regulatory or self-regulatory authority, stock exchange, instrumentality, agency, commission or body (each, a “Governmental Entity”) is required by or with respect to the Company in connection with the execution, delivery and performance of this Agreement by the Company or the consummation by the Company of the Amalgamation and the other transactions contemplated hereby or compliance with the provisions hereof, except for (i) the filing with the SEC of such reports under Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as may be required in connection with this Agreement and the transactions contemplated hereby, (ii) such other filings and reports as may be required pursuant to the applicable requirements of the Securities Act of 1933, as amended (the “Securities Act”), the Exchange Act and any other applicable state or federal securities, takeover and “blue sky” laws, and (iii) the filing of the Article of Amalgamation as required by the CBCA.
Section 5.6 Financial Statements.
(a) True and complete copies of the Company Financial Statements are attached hereto as Section 5.6(a) of the Company Disclosure Letter. The Company Financial Statements (i) are correct and complete in all material respects and have been prepared in accordance with the books and records of the Company; (ii) as to the fiscal year ended December 31, 2025 have been prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto); and (iii) fairly present, in all material respects, the financial position, results of operations and cash flows of the Company as at the respective dates thereof and for the respective periods indicated therein.
(b) The books of account and financial records of the Company and its Subsidiaries are true and correct and have been prepared and are maintained in accordance with sound accounting practice.
(c) The Company, and each of the Company’s Subsidiaries, maintains a system of internal accounting controls consistent with the practices of similarly situated private companies designed to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of the financial statements of the Company, and each of Company’s Subsidiaries, and to maintain accountability of the Company’s, and each of Company’s Subsidiaries’, assets, (iii) access to the Company’s, and each of Company’s Subsidiaries’, assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for the Company’s, and each of Company’s Subsidiaries’, assets is compared with the existing assets at regular intervals and appropriate action is taken with respect to any differences. The Company, and each of Company’s Subsidiaries, maintains internal control over financial reporting that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external.
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(d) Except as set forth in Section 5.6(d) of the Company Disclosure Letter, since January 1, 2024, neither the Company nor its independent auditors have identified (i) any significant deficiency or material weakness in the design or operation of the system of internal accounting controls utilized by the Company and each of Company’s Subsidiaries, (ii) any fraud, whether or not material, that involves the Company, the Company’s Subsidiaries, the management of the Company or the Company’s Subsidiaries or other employees who have a role in the preparation of financial statements or the internal accounting controls utilized by the Company and the Company’s Subsidiaries or (iii) any claim or allegation regarding any of the foregoing.
Section 5.7 No Undisclosed Liabilities. Except as set forth in Section 5.7 of the Company Disclosure Letter, neither the Company, nor any of the Company’s Subsidiaries, have any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, known or unknown, whether due or to become due and whether or not required to be recorded or reflected on a balance sheet, except (a) to the extent accrued or reserved against in the audited balance sheet of the Company as of December 31, 2025 (such balance sheet, the “Company Balance Sheet”), and (b) for liabilities and obligations incurred in the Ordinary Course of Business consistent with past practice since the date of the Company Balance Sheet that are not, individually or in the aggregate, material to the Company and its Subsidiaries, taken as a whole.
Section 5.8 Absence of Certain Changes or Events. Since the date of the Company Balance Sheet and except as set forth in Section 5.8 of the Company Disclosure Letter: (x) except in connection with the execution of this Agreement and the consummation of the transactions contemplated hereby, the Company and its Subsidiaries have conducted their business only in the Ordinary Course of Business consistent with past practice; (y) there has not been any change, event or development or prospective change, event or development that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect; and (z) the Company and its Subsidiaries have not:
(a) (i) declared, set aside or paid any dividends on, or made any other distributions (whether in cash, stock or property) in respect of, any of its capital stock or other equity interests, (ii) purchased, redeemed or otherwise acquired shares of capital stock or other equity interests of the Company or any Subsidiary or any options, warrants, or rights to acquire any such shares or other equity interests, or (iii) split, combined, reclassified or otherwise amended the terms of any of the Company Capital Stock or other equity interests or issued or authorized the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or other equity interests (other than the issuance of Polymath Shares upon the exercise of Polymath Options, in accordance with their terms);
(b) amended or otherwise changed, or authorized or proposed to amend or otherwise change, its certificate of formation or by-laws (or similar organizational documents);
(c) adopted or entered into a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or reorganization;
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(d) created, incurred or assumed any Indebtedness; assumed, guaranteed, endorsed or otherwise became liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person; or made, cancelled or forgave any loans, advances or capital contributions to, or investments in, any other Person;
(e) hired any new officers or, except in the Ordinary Course of Business, any new employees or consultants;
(f) (i) merged or consolidated with any Person; or (ii) acquired, sold, leased, licensed or disposed of any assets or property (including any shares or other equity interests in or securities of any Subsidiary or any other corporation, partnership, association or other business organization or division thereof), other than sales of assets to customers in the Ordinary Course of Business;
(g) mortgaged or pledged any of its property or assets or subject any such property or assets to any Lien;
(h) failed to take any action necessary to preserve the validity of any Company Intellectual Property or Permit;
(i) instituted or settled any Action;
(j) changed its financial or Tax accounting methods, principles or practices, except insofar as may have been required by a change in GAAP or Applicable Law, or revalued any of its material assets; or
(k) agreed in writing or otherwise to take any of the foregoing actions.
Section 5.9 Litigation. Except as set forth in Section 5.9 of the Company Disclosure Letter, there is no Action (or basis therefor) pending or, to the Knowledge of the Company, threatened against or affecting the Company or its Subsidiaries, its properties or assets, or any present or former officer, director or employee of the Company or Subsidiaries in such individual’s capacity as such. Neither the Company nor any of its Subsidiaries, or their respective properties or assets is subject to any outstanding judgment, order, injunction, rule or decree of any Governmental Entity. There is no Action pending or, to the Knowledge of the Company, threatened seeking to prevent, hinder, modify, delay or challenge the Amalgamation or any of the other transactions contemplated by this Agreement.
Section 5.10 Compliance with Applicable Laws. The Company and each of its Subsidiaries is and has been in compliance in all material respects with all Applicable Laws applicable to its businesses, operations, properties or assets. None of the Company or any of its Subsidiaries has received, since January 1, 2024, a notice or other written communication alleging or relating to a possible material violation of any Applicable Law applicable to its businesses, operations, properties, assets or Company Products (as defined below). The Company and each of its Subsidiaries have in effect all material permits, licenses, variances, exemptions, applications, approvals, clearances, authorizations, registrations, formulary listings, consents, operating certificates, franchises, orders and approvals (collectively, the “Permits”) of all Governmental Entities necessary or advisable for it to own, lease or operate its properties and assets and to carry on its businesses and operations as now conducted, and there has occurred no violation of, default (with or without notice or lapse of time or both) under or event giving to others any right of revocation, non-renewal, adverse modification or cancellation of, with or without notice or lapse of time or both, any such Permit, nor would any such revocation, nonrenewal, adverse modification or cancellation result from the consummation of the transactions contemplated hereby.
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Section 5.11 Cybersecurity. There has been no security breach or other compromise of or relating to any of the Company’s or any of its Subsidiaries’ 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 and the Subsidiaries have 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; (ii) the Company and its Subsidiaries are presently in compliance in all material respects, with all Applicable Laws, 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 Company Material Adverse Effect; (iii) the Company and the Subsidiaries have 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 and the Subsidiaries have implemented backup and disaster recovery technology consistent with industry standards and practices.
Section 5.12 Benefit Plans.
(a) Section 5.12(a) of the Company Disclosure Letter sets forth a complete list of the Employee Plans in respect of any present or former employees, directors, officers, members, consultants, or independent contractors of the Company that are sponsored or maintained by the Company or with respect to which the Company has made or is required to make payments, transfers, or contributions. The Company does not have any liability with respect to any plan, arrangement, or practice of the type described in the preceding sentence other than the Employee Plans.
(b) True, correct, and complete copies of the following materials have been delivered or made available to the Parent: (i) all current plan documents for each Employee Plan or, in the case of an unwritten Employee Plan, a written description thereof, (ii) all current summary plan descriptions, summaries of material modifications, annual reports, and summary annual reports with respect to the Employee Plans, (iii) all current trust agreements, insurance contracts, and other documents relating to the funding or payment of benefits under any Employee Plan, and (iv) any other documents, forms, or other instruments relating to any Employee Plan requested by the Parent.
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(c) Each Employee Plan has been maintained, funded, operated, and administered in compliance in all material respects with its terms and any related documents or agreements and in compliance with all Applicable Laws. There have been no prohibited transactions or breaches of any of the duties imposed on fiduciaries or under Applicable Law with respect to the Employee Plans that would result in any liability being imposed on the Company. All contributions, transfers, and payments in respect of any Employee Plan have been or are fully deductible and will have been paid prior to or on the Closing Date. There is no pending or, to the Company’s Knowledge, threatened assessment, Action, complaint, proceeding, or investigation of any kind in any court or before any Governmental Entity with respect to any Employee Plan (other than routine claims for benefits), nor is there any basis for one. The Company has reserved all rights necessary to amend or terminate each of the Employee Plans in accordance with its terms, to the extent applicable.
(d) None of the Employee Plans is a defined benefit plan or a multiemployer plan as defined in Applicable Law.
(e) All (i) taxes, contributions, fees or insurance premiums required to be paid with respect to, (ii) benefits, expenses, and other amounts due and payable under, and (iii) contributions, transfers, or payments required to be made to, any Employee Plan prior to the Closing Date will have been paid, made, or accrued on or before the Closing Date. With respect to any insurance policy providing funding for benefits under any Employee Plan, to the Company’s Knowledge, no insurance company issuing any such policy is in receivership, conservatorship, liquidation, or similar proceeding and, to the Company’s Knowledge, no such proceedings with respect to any insurer are imminent.
(f) No Employee Plan provides benefits, including death or medical benefits, beyond termination of service or retirement other than coverage mandated by Applicable Law. No Employee Plan provides benefits to any individual who is not a current or former employee of the Company, or to the dependents or other beneficiaries of any former employee.
(g) Except as disclosed in Section 5.12(g) of the Company Disclosure Letter, the execution and performance of this Agreement will not (i) constitute a stated triggering event under any Employee Plan that will result in any payment (whether of severance pay or otherwise) becoming due from the Company to any current or former officer, employee, director, or consultant (or dependents of such Persons), or (ii) accelerate the time of payment or vesting, or increase the amount of compensation due to any current or former officer, employee, director, or consultant (or dependents of such Persons) of the Company.
(h) To the Company’s Knowledge, all Employee Plans comply in both form and operation with Applicable Law. The Company does not have any obligation to any Person to provide any “gross-up” or similar payment to any Person in the event any such Employee Plan fails to comply with Applicable Law.
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(i) The term “Employee Plan” and “Employee Plans” shall mean each compensation, deferred compensation, bonus, and each incentive compensation, stock, share or unit purchase, stock, share or unit option and other equity compensation plan, program, agreement or arrangement; severance or termination pay, vacation pay, medical, health, surgical, hospitalization, life or other insurance, dental, eye care, disability (both long term and short-term), salary continuation, supplemental unemployment benefits, mortgage assistance, employee loan, employee discount, employee assistance, counselling, pension, retirement or supplemental retirement benefit plan, arrangement or agreement, including each defined benefit or defined contribution pension plan and group registered retirement savings plan, and each other similar employee benefit plan, arrangement or agreement, whether oral or written, funded or unfunded, excluding any public statutory plans that the Company is required to comply with (including the Canada pension plan and plans administered under applicable provincial health tax, workers’ compensation and employment insurance legislation). The term “Foreign Plan” means any Employee Plan that is maintained outside of Canada.
Section 5.13 Labor and Employment Matters.
(a) The Company and its Subsidiaries are and since January 1, 2023 have been in compliance in all material respects with all Applicable Laws relating to labor and employment, including those relating to employment practices, terms and conditions of employment, collective bargaining, disability, immigration, health and safety, wages, hours and benefits, nondiscrimination in employment, workers’ compensation, the collection and payment of withholding and/or payroll Taxes and similar Taxes, unemployment compensation, equal employment opportunity, discrimination, harassment, employee and contractor classification, information privacy and security, and continuation coverage with respect to group health plans. Except as set forth in Section 5.13(a) of the Company Disclosure Letter, during the preceding three years, there has not been, and as of the date of this Agreement there is not pending or, to the Knowledge of the Company, threatened, any labor dispute, work stoppage, labor strike or lockout against the Company or any of its Subsidiaries by employees. Neither the Company nor any Subsidiary has any material actual or contingent liability with respect to (i) any misclassification of any person as an independent contractor rather than as an employee, as an employee rather than as an independent contractor, or as a non-employee when in fact employed, (ii) any employee or contractor leased from or staffed by another employer, or (iii) any person currently or formerly classified as exempt from, or otherwise not paid where, required, overtime and minimum or other wages.
(b) No employee of the Company or any of its Subsidiaries is covered by an effective or pending collective bargaining agreement or similar labor agreement. To the Knowledge of the Company, there has not been any activity on behalf of any labor union, labor organization or similar employee group to organize any employees of the Company or any of its Subsidiaries. There are no (i) unfair labor practice charges or complaints against the Company or any of its Subsidiaries pending before the National Labor Relations Board or any other labor relations tribunal or authority and to the Knowledge of the Company no such representations, claims or petitions are threatened, (ii) representation claims or petitions pending before the National Labor Relations Board or any other labor relations tribunal or authority or (iii) grievances or pending arbitration proceedings against the Company or any of its Subsidiaries that arose out of or under any collective bargaining agreement.
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(c) Section 5.13(c) of the Company Disclosure Letter contains a list of all current employees of the Company or any of its Subsidiaries (by employee identification number), along with the employer, position, date of hire, annual rate of compensation (or, where applicable, the hourly or per diem rate of compensation, or, if by commissions, a description of or cross-reference to the applicable terms), estimated or target annual incentive compensation of each such person, employee status of each such person (including whether the person is on leave of absence and the dates of such leave), part-time or full-time status, weekly working hours where not full-time, status as exempt or non-exempt from overtime, assigned work location, and remote work location. To the Knowledge of the Company, no current employee or officer of the Company or any of its Subsidiaries intends, or is expected, to terminate his or her employment relationship with such entity in connection with or as a result of the transactions contemplated hereby.
(d) During the preceding three years, (i) neither the Company nor any Subsidiary has effectuated a “plant closing” (as defined in the Worker Adjustment Retraining and Notification Act of 1988, as amended (the “WARN Act”)) affecting any site of employment or one or more facilities or operating units within any site of employment or facility, (ii) there has not occurred a “mass layoff” (as defined in the WARN Act) in connection with the Company or any Subsidiary affecting any site of employment or one or more facilities or operating units within any site of employment or facility and (iii) neither Company nor any Subsidiary has engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign law. The Company and its Subsidiaries currently properly classify and for the past three (3) years have properly classified its and their employees as exempt or nonexempt in accordance with applicable overtime Applicable Laws, and no person treated as an independent contractor or consultant by the Company or any Subsidiary within the past three (3) years should have been properly classified as an employee under Applicable Law.
(e) All Persons treated as independent contractors rather than as employees have been properly so treated, and any compensation paid to them has been reported on IRS Form 1099 or other applicable Tax form. Except as disclosed in Section 5.13(e) of the Company Disclosure Letter, each such consultant or independent contractor is a party to a written agreement or Contract directly with the Company or the applicable Subsidiary or is engaged through written agreements between the Company or applicable Subsidiary and staffing agencies that treat such consultant or independent contractor as employees of the agency.
(f) Except as set forth in Section 5.13(f) of the Company Disclosure Letter, with respect to any current or former employee, officer, consultant or other service provider of the Company or any of its Subsidiaries, there are no Actions against the Company or any of its Subsidiaries pending, or to the Company’s Knowledge, threatened to be brought or filed, in connection with the employment or engagement of any current or former employee, officer, consultant or other service provider of the Company or any of its Subsidiaries, including, without limitation, any claim relating to employment discrimination, harassment, retaliation, equal pay, employment classification or any other employment-related matter arising under Applicable Laws, except where such action would not, individually or in the aggregate, result in the Company or any of its Subsidiaries incurring a material liability.
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(g) Except with respect to any Company Plan (which subject is addressed in Section 5.12 above), the execution of this Agreement and the consummation of the transactions set forth in or contemplated by this Agreement will not result in any breach or violation of, or cause any payment to be made under, any Applicable Laws respecting labor and employment or any collective bargaining agreement to which the Company or any of its Subsidiaries is a party.
(h) (i) Except as set forth in Section 5.13(h) of the Company Disclosure Letter, no allegations of workplace sexual harassment, discrimination or other misconduct have been made, initiated, filed or, to the Knowledge of the Company, threatened against the Company, any of its Subsidiaries, or any of their respective current or former directors, officers or senior-level management employees, (ii) to the Knowledge of the Company, no incidents of any such workplace sexual harassment, discrimination or other misconduct have occurred, and (iii) the Company has not entered into any settlement agreement related to allegations of sexual harassment, discrimination or other misconduct by any of its directors, officers or employees described in clause (i) hereof or any independent contractor.
Section 5.14 Environmental Matters. The Company and its Subsidiaries (i) are in compliance with all Applicable Laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including Applicable 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 (collectively, the “Environmental Laws”); (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are 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 could be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect.
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Section 5.15 Taxes.
(a) Except as disclosed in Section 5.15(a) of the Company Disclosure Letter, the Company has duly and on a timely basis prepared and filed all material Tax Returns required to be filed by it with the appropriate Taxing Authority and such Tax Returns are complete and correct in all material respects.
(b) The Company has paid, collected, withheld and remitted all Taxes which are due and payable, collectible, required to be withheld, or remittable, as applicable, by it (whether or not shown on a Company Tax Return) on or before the date hereof.
(c) Except as disclosed in Section 5.15(c) of the Company Disclosure Letter, the Company has not received any notice from any Taxing Authority that it is taking steps to assess additional Taxes against the Company for any period for which Tax Returns have been filed and, there are no actual or, to the Company’s Knowledge, pending audit investigations or other actions of or against the Company relating to Taxes.
(d) Except as disclosed in Section 5.15(d) of the Company Disclosure Letter, no tax return of the Company has been audited by any Taxing Authority during the past five years.
(e) The Company has no outstanding waiver of any statute of limitations in respect of Taxes or agreement to any extension of time within which to file any Tax Return or within which it is required to pay Taxes or within which any Taxing Authority may assess or collect Taxes for which the Company may be liable.
(f) There are no Liens for Taxes upon any of the assets or properties of the Company, except for Permitted Liens.
(g) There are no Actions now pending, made or threatened against the Company in respect of Taxes. As of the date hereof, there are no issued or pending private letter rulings, advance pricing agreements or similar agreements with any Taxing Authority that would bind the Company.
(h) The Company has delivered to the Parent true, correct and complete copies of all Tax Returns filed by or with respect to it with respect to all taxable years remaining open under the applicable statute of limitations (the “Delivered Returns”), and has delivered or made available to the Parent all relevant documents and information with respect thereto, including work papers, records, audit and examination reports, and statements of deficiencies proposed or assessed against or agreed to by the Company.
(i) There are no elections with respect to Taxes affecting the Company that were not made in the Delivered Returns.
(j) The Company Financial Statements properly and adequately accrue or reserve for Tax liabilities.
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(k) The Company is not subject to any joint venture, partnership or other arrangement or contract that is treated as a partnership for income tax purposes in any jurisdiction.
(l) The Company is not party to or bound by any tax sharing agreement, tax indemnity obligation in favor of any Person or similar agreement in favor of any Person with respect to Taxes (including any advance pricing agreement or other similar agreement relating to Taxes with any Taxing Authority).
(m) The Company has not claimed a deduction or reserve under the ITA ;or any similar provision of a provincial taxing statute in computing its income in a taxation year for any Pre-Closing Period which may be included in a taxation year ending after the Closing Date.
(n) No circumstances exist which would make the Company subject to the application of any of Sections 79 to 80.04 of the ITA or the similar provisions of a provincial taxing statute.
(o) The Company has never been deemed for the purposes of the ITA or any Applicable Law of any Governmental Entity to have acquired or had the use of property for proceeds greater than the fair market value thereof from, or disposed of property for proceeds less than the fair market value thereof to, or received or performed services for amounts other than the fair market value from or to, or paid or received interest or any other amount other than at a fair market value rate to or from, any person inside or outside Canada with whom it does not deal at arm’s length within the meaning of the ITA.
(p) The Company has not made an “excessive eligible dividend election” as defined in subsection 89(1) of the ITA in respect of any dividend paid, or deemed by any provision of the ITA to have been paid on any class of shares in its capital.
(q) Prior to the Closing Date, the Company has not made an election under subsection 83(2) of the ITA to deem a dividend to be a capital dividend for purposes of the ITA in an amount which exceeds the amount of the Company’s capital dividend account at the time of such election.
(r) The Company has not participated in a reorganization transaction in which a dividend was received to which subsection 55(2) of the ITA would apply, but for paragraph 55(3)(a) or paragraph 55(3)(b) of the ITA.
(s) The Company is registered for GST/HST purposes under Part IX of the Excise ITA (Canada) under registration number 78153 5711 RT0001.
(t) No Taxing Authority of a jurisdiction in which the Company has not filed a Tax Return has made any claim that the Company is or may be subject to Tax or required to file a Tax Return therein, and there is no reasonable basis for any such Taxing Authority to make any such claim.
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(u) No Taxing Authority other than a Taxing Authority of Canada or of a jurisdiction listed in Section 5.15(u) of the Company Disclosure Letter asserts taxing jurisdiction over the Company.
(v) Section 5.15(v) of the Company Disclosure Letter contains a list of all jurisdictions (whether foreign or domestic) to which any income or other Tax is properly payable by the Company.
(w) Except as disclosed in Section 5.15(w) of the Company Disclosure Letter, the Company does not have any liabilities for unpaid Taxes with respect to the income, property, and operations of the Company that relate to any Pre-Closing Periods, except for Tax liabilities reflected in the Company Financial Statements or that have arisen after the date of the Company Financial Statements in the Ordinary Course of Business.
(x) The Company does not have, and has never had, a permanent establishment in any foreign country other than the country in which the Company is organized and does not and has not engaged in a trade or business in any foreign country other than the country in which the Company is organized.
(y) The Company is not a party to any agreement with any Taxing Authority outside the Ordinary Course of Business, the principal purpose of which is to provide a Tax incentive, Tax rebate, Tax holiday or similar arrangement with respect to the Company.
(z) Notwithstanding anything to the contrary contained in this Agreement, no representations or warranties are made as to the amount or availability of any net operating losses, or Tax credits in any taxable period (or portion thereof) ending on or after the Closing Date.
(aa) For all transactions between the Company and any Person not resident in Canada for purposes of the ITA with whom the Company was not dealing at arm’s length, the Company has made or obtained records or documents that meet the requirements of sections 247(4)(a) to (c) of the ITA. There are no transactions to which section 247(2) or (3) of the ITA may reasonably be expected to apply except as may be set forth in Section 5.15 of the Company Disclosure Letter.
(bb) The tax attributes of the assets of the Company were, in respect of the relevant point in time, accurately reflected in the Tax Returns of the Company, as applicable, and have not, in a manner that would be material to the Company, changed since the date of such Tax Returns, except to the extent that such attributes have been used in the Ordinary Course of Business or as a result of completion of any transaction contemplated by this Agreement.
(cc) The Company has not participated in any “reportable transactions” within the meaning of Section 237.3 of the ITA.
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(dd) The Company is not liable for the Taxes of any Person under subsection 160(1) of the ITA or any similar provision of state, provincial, local or foreign Applicable Law.
(ee) The Company is not a non-resident of Canada for purposes of the ITA.
For purposes of this Section 5.15, where the context permits, each reference (i) to the Company shall also apply to any Company Subsidiary and (ii) to the Company or any of its Subsidiaries shall include a reference to any person for whose Taxes the Company or any of its Subsidiaries is liable under Applicable Law.
Section 5.16 Contracts. Section 5.16 of the Company Disclosure Letter lists the following Contracts (each a “Material Contract”) to which the Company or any Subsidiary is a party:
(a) any Contract (or group of related Contracts) for the purchase of products or for the furnishing or receipt of services (A) which calls for performance over a period of more than one year, (B) which involves more than the sum of $250,000, or (C) in which the Company or any Subsidiary has granted manufacturing rights, “most favored nation” pricing provisions or marketing or distribution rights relating to any services, products or territory or has agreed to purchase a minimum quantity of goods or services or has agreed to purchase goods or services exclusively from a certain party;
(b) any Contract providing for any royalty, milestone or similar payments by the Company or any Subsidiary;
(c) any Contract concerning the establishment or operation of a partnership, joint venture or limited liability company;
(d) any Contract (or group of related Contracts) under which the Company or any Subsidiary has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) Indebtedness (including capitalized lease obligations) or under which it has imposed (or may impose) a Lien on any of its assets, tangible or intangible;
(e) any Contract providing for “off-balance sheet arrangements” (as defined in Item 303(a)(4) of Regulation S-K of the SEC) effected by the Company or any Subsidiary;
(f) any Contract for the disposition of any significant portion of the assets or business of the Company or any Subsidiary (other than sales of products in the Ordinary Course of Business) or any Contract for the acquisition of the assets or business of any other Person (other than purchases of supplies or components in the Ordinary Course of Business);
(g) any (A) employment Contract and (B) independent contractor or consulting Contract that, in the case of this clause (B), involves payments in excess of $150,000 within any twelve (12) month period;
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(h) any Contract, plan, policy or program providing for severance, retention, change in control payments or transaction-based payments or benefits (including, without limitation, the accelerated vesting or timing of payment of any payments or benefits);
(i) any settlement Contract or settlement-related Contract (including any Contract in connection with which any employment-related claim is settled);
(j) any Contract involving any current or former officer, director or stockholder of the Company or any Affiliate thereof;
(k) any Contract under which the consequences of a default or termination would reasonably be expected to have a Company Material Adverse Effect;
(l) any agency, distributor, sales representative, franchise or similar Contracts to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound;
(m) any Contract that could reasonably be expected to have the effect of prohibiting or impairing the conduct of the business of the Company or any of the Subsidiaries or the Parent or any of its Affiliates as currently conducted and as currently proposed to be conducted;
(n) any Contract with any Governmental Entity or any subcontract with a higher-tier government contractor for the provision of goods or services to a Governmental Entity (a “Government Contract”);
(o) any Contract involving standstill or similar arrangements;
(p) any Contract that would entitle any third party to receive a license or any other right to Intellectual Property of the Parent or any of the Parent’s Affiliates (excluding the Company and the Subsidiaries) following the Closing; and
(q) any other Contract (or group of related Contracts) either involving more than $250,000 or not entered into in the Ordinary Course of Business.
(r) (i) Each Material Contract is valid and binding on the Company and any of its Subsidiaries to the extent such Subsidiary is a party thereto, as applicable, and to the Knowledge of the Company, each other party thereto, and is in full force and effect and enforceable in accordance with its terms; (ii) the Company and each of its Subsidiaries, and, to the Knowledge of the Company, each other party thereto, has performed all material obligations required to be performed by it under each Material Contract; and (iii) there is no material default under any Material Contract by the Company or any of its Subsidiaries or, to the Knowledge of the Company, any other party thereto, and no event or condition has occurred that constitutes, or, after notice or lapse of time or both, would constitute, a material default on the part of the Company or any of its Subsidiaries or, to the Knowledge of the Company, any other party thereto under any such Material Contract, nor has the Company or any of its Subsidiaries received any notice of any such material default, event or condition. The Company has made available to the Parent true and complete copies of all Material Contracts, including all amendments thereto.
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Section 5.17 Insurance. Each of Company and its Subsidiaries is covered by valid and currently effective insurance policies issued in favor of the Company or one or more of its Subsidiaries that are customary and adequate for companies of similar size in the industries and locations in which the Company operates. Section 5.17 of the Company Disclosure Letter sets forth, as of the date hereof, a true and complete list of all material insurance policies issued in favor of the Company or any of its Subsidiaries, or pursuant to which the Company or any of its Subsidiaries is a named insured or otherwise a beneficiary, as well as any historic incurrence-based policies still in force. With respect to each such insurance policy, (a) such policy is in full force and effect and all premiums due thereon have been paid, (b) neither Company nor any of its Subsidiaries is in breach or default, and has not taken any action or failed to take any action which (with or without notice or lapse of time, or both) would constitute such a breach or default, or would permit termination or modification of, any such policy and (c) to the Knowledge of the Company, no insurer issuing any such policy has been declared insolvent or placed in receivership, conservatorship or liquidation. No notice of cancellation or termination has been received with respect to any such policy, nor will any such cancellation or termination result from the consummation of the transactions contemplated hereby.
Section 5.18 Properties.
(a) The Company or one of its Subsidiaries has good and valid title to, or in the case of leased property and leased tangible assets, a valid leasehold interest in, all of its real properties and tangible assets that are necessary for the Company and its Subsidiaries to conduct their respective business as currently conducted, free and clear of all Liens other than (i) Liens for current Taxes and assessments not yet past due or the amount or validity of which is being contested in good faith by appropriate proceedings, (ii) mechanics’, workmen’s, repairmen’s, warehousemen’s and carriers’ Liens arising in the Ordinary Course of Business consistent with past practice and (iii) any such matters of record, Liens and other imperfections of title that do not, individually or in the aggregate, materially impair the continued ownership, use and operation of the assets to which they relate in the business of the Company as currently conducted (the “Permitted Liens”). Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the tangible personal property currently used in the operation of the business of the Company and its Subsidiaries is in good working order (reasonable wear and tear excepted).
(b) Each of Company and its Subsidiaries has complied with the terms of all leases to which it is a party, and all such leases are in full force and effect, except for any such noncompliance or failure to be in full force and effect that, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. The Company and its Subsidiaries enjoy peaceful and undisturbed possession under all such leases, except for any such failure to do so that, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect
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(c) Section 5.18(c) of the Company Disclosure Letter sets forth a true and complete list of (i) all real property owned by the Company or any of its Subsidiaries and (ii) all real property leased for the benefit of the Company or any of its Subsidiaries.
(d) This Section 5.18 does not relate to Intellectual Property, which is the subject of Section 5.19.
Section 5.19 Intellectual Property.
(a) Section 5.19(a) of the Company Disclosure Letter sets forth a true and complete list of all (i) patents and pending patent applications; (ii) trademark registrations and applications; (iii) copyright registrations and applications; and (iv) domain names of the Company or its Subsidiaries, in each case owned by, controlled by or exclusively licensed to the Company and its Subsidiaries (collectively, “Company Registered IP”), and in each case enumerating specifically the applicable filing or registration number, title, jurisdiction in which filing was made or from which registration issued, date of filing and issuance, names of all current applicant(s) and registered owners(s), as applicable. All of the Company Registered IP is subsisting and, in the case of any Company Registered IP that is registered or issued to the Company, valid and enforceable and all issuance, renewal, maintenance and other payments that are or have become due with respect thereto have been timely paid by or on behalf of the Company. No Company Registered IP is involved in any interference, reissue, derivation, reexamination, opposition, cancellation or similar proceeding and, to the Knowledge of the Company, no such action is threatened with respect to any of the Company Registered IP. The Company or its Subsidiaries own exclusively, free and clear of any and all Liens (other than Permitted Liens), all Company Owned IP, including all Intellectual Property created on behalf of the Company or its Subsidiaries by employees or independent contractors and the Company has the right to bring actions for the infringement of such Company Owned IP.
(b) Section 5.19(b) of the Company Disclosure Letter accurately identifies (i) all contracts pursuant to which any Company Registered IP is licensed to the Company or its Subsidiaries (other than (A) any non-customized software that (1) is so licensed solely in executable or object code form pursuant to a nonexclusive, internal-use software license and other Intellectual Property associated with such software and (2) is not incorporated into, or material to the development, manufacturing, or distribution of, any of the Company’s or its Subsidiaries’ products or services, (B) any Intellectual Property licensed on a nonexclusive basis ancillary to the purchase or use of equipment, reagents or other materials, (C) any confidential information provided under confidentiality agreements and (D) agreements between Company and any of its Subsidiaries and their employees in Company’s standard form thereof), (ii) the corresponding Company contract pursuant to which such Company Registered IP is licensed to the Company or any of its Subsidiaries and (iii) whether the license or licenses granted to the Company or its Subsidiaries are exclusive or nonexclusive.
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(c) Section 5.19(c) of the Company Disclosure Letter accurately identifies each Company contract pursuant to which any Person has been granted any license or covenant not to sue under, or otherwise has received or acquired any right (whether or not currently exercisable) or interest in, any Company Registered IP (other than (i) any confidential information provided under confidentiality agreements and (ii) any Company Registered IP nonexclusively licensed to suppliers or service providers for the sole purpose of enabling such supplier or service providers to provide services for Company’s benefit).
(d) Except as included in Section 5.19(d) of the Company Disclosure Letter, no facilities of a university, college, other educational institution, or research center, or funding received by Company from any of the foregoing, have been used to develop Company Registered IP in such a way as to affect Company’s rights in the Company Registered IP. No Person who was involved in, or who contributed to, the creation or development of the Company Registered IP has performed services for a university, college, or other educational institution or research center in a manner that would affect the Company’s rights in the Company Registered IP.
(e) The Company and its Subsidiaries have taken all commercially reasonable measures to maintain the confidentiality of and protect the proprietary nature of each item of Company Registered IP and otherwise protect and enforce its rights in all information that constitutes a Trade Secret of the Company or its Subsidiaries, including requiring all Persons who have or have had access thereto to execute written nondisclosure agreements or other binding obligations to maintain confidentiality of such information. To the Knowledge of the Company, no Person is infringing, violating or misappropriating any of the Company Registered IP.
(f) (i) To the Knowledge of the Company, the conduct of the businesses of the Company and its Subsidiaries, including the manufacture, marketing, offering for sale, sale, importation, use or intended use or other disposal of any product as currently sold or under development by the Company or its Subsidiaries, has not infringed, misappropriated or diluted, and does not infringe, misappropriate or dilute, any Intellectual Property of any Person, (ii) neither the Company nor any of its Subsidiaries has received any written notice or claim asserting or suggesting that any such infringement, misappropriation, or dilution is or may be occurring or has or may have occurred and (iii) to the Knowledge of the Company, no Person (including any current or former employee, independent contractor, officer or director of the Company or its Subsidiaries) is infringing, misappropriating, or diluting in any material respect any Company Registered IP.
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(g) (i) The Company and its Subsidiaries have taken commercially reasonable steps to protect the confidentiality and security of the computer and information technology systems used by the Company and its Subsidiaries (the “IT Systems”) and the information and transactions stored or contained therein or transmitted thereby, (ii) to the Knowledge of the Company, since January 1, 2024, there has been no unauthorized or improper use, loss, access, transmittal, modification or corruption of any such information or data and (iii) since January 1, 2024, there have been no material failures, crashes, viruses, or security breaches (including any unauthorized access to any personally identifiable information), affecting the IT Systems.
(h) (i) To the Knowledge of the Company, the Company and its Subsidiaries have at all times complied in all material respects with all Applicable Laws relating to privacy, data protection, and the collection, retention, protection, and use of Personal Information (collectively, “Privacy Laws”) collected, used, or held for use by the Company, (ii) since January 1, 2023 no claims have been asserted or, to the Knowledge of the Company, threatened in writing against the Company alleging a violation of any Person’s privacy or Personal Information, (iii) neither this Agreement nor the consummation of the transactions contemplated hereby will breach or otherwise violate any applicable Privacy Laws and (iv) the Company and its Subsidiaries have taken commercially reasonable steps to protect the Personal Information collected, used or held for use by the Company or its Subsidiaries against loss and unauthorized access, use, modification, disclosure or other misuse.
(i) The execution, delivery and performance by the Company of this Agreement, and the consummation of the transactions contemplated hereby, will not result in the loss of, or give rise to any right of any third party to terminate or modify any of the Company’s or any of its Subsidiaries’ rights or obligations under any agreement under which the Company or any of its Subsidiaries grants to any Person, or any Person grants to the Company or any of its Subsidiaries, a license or right under or with respect to any Intellectual Property that is material to any of the businesses of the Company or any of its Subsidiaries.
(j) The Company Owned constitutes all Intellectual Property necessary for Company to conduct its business as currently conducted.
(k) No government funding, facilities or resources of a university, college, other educational institution or research center or funding from third parties was used in the development of the Company Owned IP, to the Knowledge of the Company, exclusively licensed to the Company, and no Governmental Entity, university, college, other educational institution or research center has, to the Knowledge of the Company, any claim or right in or to any Company Owned IP.
Section 5.20 Takeover Statutes. As of the date hereof and at all times on or prior to the Effective Time, the Company Board has taken all actions so that any restrictions applicable to business combinations are, and will be, inapplicable to the execution, delivery and performance of this Agreement and the timely consummation of the Amalgamation and the other transactions contemplated hereby and will not restrict, impair or delay the ability of the Parent or SubCo, after the Effective Time, to vote or otherwise exercise all rights as a shareholder of the Company. No other “moratorium,” “fair price,” “business combination,” “control share acquisition” or similar provision of any state anti-takeover Applicable Law (collectively, “Takeover Laws”) or any similar anti-takeover provision in the Company Constating Documents is, or at the Effective Time will be, applicable to this Agreement, the Amalgamation or any of the other transactions contemplated hereby.
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Section 5.21 No Rights Plan. There is no shareholder rights plan, “poison pill” anti-takeover plan or other similar device in effect to which the Company is a party or is otherwise bound.
Section 5.22 Related Party Transactions. Except as set forth in Section 5.22 of the Company Disclosure Letter, since January 1, 2023 through the date of this Agreement, there have been no transactions, agreements, arrangements or understandings between the Company or its Subsidiaries, on the one hand, and the Affiliates of the Company or a Subsidiary of the Company, on the other hand, that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act (assuming the Company or Subsidiary was subject to the requirements of the Exchange Act).
Section 5.23 Certain Payments. Neither the Company, its Subsidiaries, nor, to the Knowledge of the Company, any of their respective directors, executives, representatives, agents or employees (a) has used or is using any corporate funds for any illegal contributions, gifts, entertainment or other unlawful expenses relating to political activity, (b) has used or is using any corporate funds for any direct or indirect unlawful payments to any foreign or domestic governmental officials or employees, (c) has violated or is violating any provision of the Foreign Corrupt Practices Act of 1977, (d) has established or maintained, or is maintaining, any unlawful fund of corporate monies or other properties, or (e) has made any bribe, unlawful rebate, payoff, influence payment, kickback or other unlawful payment of any nature.
Section 5.24 Brokers. No broker, investment banker, financial advisor or other Person, other than as set forth on Section 5.24 of the Company Disclosure Letter, the fees and expenses of which will be paid by the Company or any Subsidiary, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company or any of its Affiliates. The Company has furnished to the Parent a true and complete copy of any Contract between the Company, or its Subsidiaries, and any Person identified on Section 5.24 of the Company Disclosure Letter pursuant to which such Person could be entitled to any payment from the Company relating to the transactions contemplated hereby.
Section 5.25 No Other Representations or Warranties. Except for the representations and warranties contained in Article V, the Company acknowledges and agrees that none of the Parent or SubCo makes any other express or implied representation or warranty whatsoever, and specifically (but without limiting the generality of the foregoing) that none of the Parent, its Subsidiaries or any other Person on behalf of the Parent or SubCo makes any representation or warranty with respect to any projections or forecasts delivered or made available to the Company, its Subsidiaries or any of their respective Representatives of future revenues, results of operations (or any component thereof), cash flows or financial condition (or any component thereof) of the Parent (including any such projections or forecasts made available to the Company, its Subsidiaries, or any of their respective Representatives in certain “data rooms” or management presentations in expectation of the transactions contemplated by this Agreement), and the Company has not relied on any such information or any representation or warranty not set forth in Article VI.
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Article
VI
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND SUBCO
Except as set forth in the corresponding section or subsection of the disclosure letter delivered by the Parent to the Company immediately prior to the execution of this Agreement (the “Parent Disclosure Letter”) (it being agreed that the disclosure of any information in a particular section or subsection of the Parent Disclosure Letter shall be deemed disclosure of such information with respect to any other section or subsection of this Agreement to which the relevance of such information is readily apparent on its face), each of the Parent and SubCo represents and warrants to the Company as follows:
Section 6.1 Organization, Standing and Power.
(a) Each of the Parent and SubCo is a corporation duly organized, validly existing and in good standing under the Applicable Laws of the jurisdiction of its incorporation. Each of the Parent and SubCo (i) has all requisite corporate or similar power and authority to own, lease and operate its properties and to carry on its business as now being conducted and (ii) is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except in the case of clause (ii), where the failure to be so qualified or licensed or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(b) The Parent has previously made available to the Company true and complete copies of the Certificate of Incorporation and Bylaws (or comparable organizational documents) of each of the Parent and SubCo, and the Certificate of Incorporation and Bylaws (or comparable organizational documents) of each other Subsidiary of the Parent, in each case, as amended to the date of this Agreement, and each as so delivered is in full force and effect. None of the Parent, its Subsidiary or SubCo is in violation of any provision of its respective Certificate of Incorporation or Bylaws or comparable organizational documents. Except with respect to the extent relating to the transactions contemplated by this Agreement or in draft form and except as may be redacted to preserve a privilege (including attorney-client privilege), the Parent has made available to the Company true and complete copies of the minutes of all meetings of the Parent’s stockholders, the Board of Directors of the Parent (the “Parent Board”) and each committee of the Parent Board held since January 1, 2024.
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Section 6.2 Capital Stock and Working Capital.
(a) The authorized capital stock of the Parent consists of 1,010,000 shares of Parent Common Stock and 10,000,000 shares of Parent Preferred Stock. As of the close of business on August 12, 2026, (i) 1,903,708 shares of Series A Parent Common Stock and 19,999 shares of Series B Parent Common Stock (excluding treasury shares) were issued and outstanding, (ii) nil shares of Series A Parent Common Stock and nil Series B Parent Common Stock were held by the Parent in its treasury, (iii) 2,678 shares of Parent Series A Convertible Preferred Stock were issued and outstanding, (iv) no shares of Parent Preferred Stock were held by the Parent in its treasury, and (v) 2,262 shares of Parent Common Stock were subject to outstanding options to purchase shares of Parent Common Stock under the Equity Incentive Plan, as amended. Neither the Parent nor any of its Subsidiaries has outstanding any bonds, debentures, notes or other obligations having the right to vote (or convertible into, or exchangeable or exercisable for, securities having the right to vote) with the stockholders of the Parent or such Subsidiary on any matter. Except as set forth above in this Section 6.2(a), there are no outstanding (A) shares of capital stock or other voting securities or equity interests of the Parent, (B) securities of the Parent or any of its Subsidiaries convertible into or exchangeable or exercisable for shares of capital stock of the Parent or other voting securities or equity interests of the Parent or its Subsidiaries, (C) stock appreciation rights, “phantom” stock rights, performance units, interests in or rights to the ownership or earnings of the Parent or its Subsidiaries or other equity-equivalent or equity-based awards or rights, (D) subscriptions, options, warrants, calls, commitments, Contracts or other rights to acquire from the Parent or its Subsidiaries, or obligations of the Parent or any of its Subsidiaries to issue, any shares of capital stock of the Parent or any of its Subsidiaries, voting securities, equity interests or securities convertible into or exchangeable or exercisable for capital stock or other voting securities or equity interests of the Parent or its Subsidiaries or rights or interests described in the preceding clause (C), or (E) obligations of the Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire any such securities or to issue, grant, deliver or sell, or cause to be issued, granted, delivered or sold, any such securities. Except as set forth in Section 6.2(a) of the Parent Disclosure Letter, there are no stockholder agreements, voting trusts or other agreements or understandings to which the Parent or any of its Subsidiaries, is a party or of which the Parent has Knowledge with respect to the holding, voting, registration, redemption, repurchase or disposition of, or that restrict the transfer of, any capital stock or other voting securities or equity interests of the Parent.
(b) The authorized capital stock of SubCo consists of an unlimited number shares of common stock of which 100 shares are issued and outstanding, all of which shares are beneficially owned by the Parent.
(c) The shares of Parent Convertible Preferred Stock to be issued pursuant to the Amalgamation will be duly authorized, validly issued, fully paid and nonassessable and not subject to any preemptive rights.
(d) To the Knowledge of the Parent as of the date of this Agreement and as of the Closing, no “bad actor” disqualifying event described in Rule 506(d) (1)(i)-(viii) of the Securities Act (a “Disqualifying Event”) is applicable to the Parent or, to the Parent’s Knowledge, any Covered Person, except for a Disqualifying Event as to which Rule 506(d)(2)(ii-iv) or (d)(3) of the Securities Act is applicable. “Covered Person” means, with respect to the Parent as an “issuer” for purposes of Rule 506 promulgated under the Securities Act, any person listed in the first paragraph of Rule 506(d)(1).
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(e) As of the date of this Agreement, the Parent has not less than $5,128,000 (the “Working Capital”) in unrestricted and unencumbered cash that is immediately available for use and such funds are not subject to any Liens, pledges, security interest, setoffs, escrow arrangements, or other restrictions or obligations that would impar their availability or reduce the Company’s ability to use the Working Capital. Except as otherwise disclosed in Section 6.2(e) of the Parent Disclosure Letter and for the Allocated Capital, no portion of the Working Capital has been designated, reserved, committed, or otherwise allocated for any specific purpose, liability, obligation, expenditure, or use.
Section 6.3 Subsidiaries. Section 6.3 of the Parent Disclosure Letter sets forth a true and complete list of each Subsidiary of the Parent, including its jurisdiction of incorporation or formation. Each of the Parent’s Subsidiaries (i) is an entity duly organized, validly existing and in good standing under the Applicable Laws of the jurisdiction of its organization, (ii) has all requisite corporate or similar power and authority to own, lease and operate its properties and to carry on its business as now being conducted and (iii) is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except in the case of clause (iii), where the failure to be so qualified or licensed or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect. All outstanding shares of capital stock and other voting securities or equity interests of each such Subsidiary are owned, directly or indirectly, by the Parent, free and clear of all Liens other than Permitted Liens of the Parent and its Subsidiaries. Except for the capital stock of, or other equity or voting interests in, its Subsidiaries, the Parent does not own, directly or indirectly, any equity, membership interest, partnership interest, joint venture interest, or other equity or voting interest in, or any interest convertible into, exercisable or exchangeable for any of the foregoing, nor is it under any current or prospective obligation to form or participate in, provide funds to, make any loan, capital contribution, guarantee, credit enhancement or other investment in, or assume any liability or obligation of, any Person.
Section 6.4 Authority.
(a) Each of the Parent and SubCo has all necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the Amalgamation and the other transactions contemplated hereby, including the issuance of the shares of Parent Convertible Preferred Stock to the holders of Polymath Shares as the consideration for the acquisition of the securities of the Company (the “Parent Capital Stock Issuance”). The execution, delivery and performance of this Agreement by the Parent and SubCo and the consummation by the Parent and SubCo of the Amalgamation and the other transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Parent and SubCo and, except for approval by the Nasdaq, no other corporate proceedings on the part of the Parent or SubCo are necessary to approve this Agreement or to consummate the Amalgamation and the other transactions contemplated hereby, subject, in the case of the Conversion Proposal and the Charter Amendment Proposal, to the approval by the holders of Parent Common Stock (the “Parent Stockholder Approval”). This Agreement has been duly executed and delivered by the Parent and SubCo and, assuming the due authorization, execution and delivery by the Company, constitutes a valid and binding obligation of each of the Parent and SubCo, enforceable against each of the Parent and SubCo in accordance with its terms (except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Applicable Laws affecting the enforcement of creditors’ rights generally or by general principles of equity).
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(b) The Parent Board, at a meeting duly called and held at which all directors of the Parent were present, duly adopted resolutions (i) determining that the terms of this Agreement, the Amalgamation and the other transactions contemplated hereby are fair to and in the best interests of the Parent and its stockholders, and (ii) approving and declaring advisable this Agreement and the transactions contemplated hereby, including the Amalgamation, which resolutions have not been subsequently rescinded, modified or withdrawn in any way.
(c) The Parent Stockholder Approval is the only vote of the holders of any class or series of the Parent capital stock or other securities required in connection with the consummation of the Amalgamation and the other transactions contemplated hereby, including the Parent Capital Stock Issuance. Other than the Parent Stockholder Approval, no vote of the holders of any class or series of the Parent’s capital stock or other securities is required in connection with the consummation of any of the transactions contemplated hereby to be consummated by the Parent.
Section 6.5 No Conflict; Consents and Approvals.
(a) The execution, delivery and performance of this Agreement by each of the Parent and SubCo do not, and the consummation of the Amalgamation and the other transactions contemplated hereby and compliance by each of the Parent and SubCo with the provisions hereof will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, cancellation, modification or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties, assets or rights of the Parent or SubCo under, or give rise to any increased, additional, accelerated or guaranteed rights or entitlements under, or require any consent, waiver or approval of any Person pursuant to, any provision of (i) the Certificate of Incorporation or Bylaws of the Parent or SubCo, (ii) any Contract to which the Parent, any Subsidiary or SubCo is a party by which the Parent, any Subsidiary or SubCo or any of their respective properties or assets may be bound, or (iii) subject to the governmental filings and other matters referred to in Section 6.5(b), any Applicable Law or any rule or regulation of Nasdaq applicable to the Parent or SubCo or by which the Parent, any Subsidiary, SubCo or any of their respective properties or assets may be bound, except as, in the case of clauses (ii) and (iii), as individually or in the aggregate, has not had and would not reasonably be expected to be material.
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(b) No consent, approval, order or authorization of, or registration, declaration, filing with or notice to, any Governmental Entity is required by or with respect to the Parent, any Subsidiary or SubCo in connection with the execution, delivery and performance of this Agreement by the Parent or SubCo or the consummation by the Parent or SubCo of the Amalgamation and the other transactions contemplated hereby or compliance with the provisions hereof, except for (i) the filing with the SEC of such reports under Section 13(a) or 15(d) of the Exchange Act, as may be required in connection with this Agreement and the transactions contemplated hereby, (ii) such other filings and reports as may be required pursuant to the applicable requirements of the Securities Act, the Exchange Act and any other applicable state or federal securities, takeover and “blue sky” laws, and (iii) the filing of the Articles of Amalgamation as required by the CBCA.
(c) The Parent Board and the board of directors of SubCo have taken and will take all actions necessary to ensure that the restrictions applicable to business combinations contained in Section 78.411 to 78.444 of the Nevada Revised Statutes are, and will be, inapplicable to the execution, delivery and performance of this Agreement and to the consummation of the transactions contemplated by this Agreement. No other state takeover statute or similar Applicable Law applies or purports to apply to the Amalgamation, this Agreement or any of the other transactions contemplated by this Agreement.
Section 6.6 SEC Reports; Financial Statements.
(a) The Parent has filed with or furnished to the SEC on a timely basis true and complete copies of all forms, reports, schedules, statements and other documents required to be filed with or furnished to the SEC by the Parent since January 1, 2024 (all such documents, together with all exhibits and schedules to the foregoing materials and all information incorporated therein by reference, the “Parent SEC Documents”). As of their respective filing dates (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), the Parent SEC Documents complied in all material respects with the applicable requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), as the case may be, including, in each case, the rules and regulations promulgated thereunder, and none of the Parent SEC Documents 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.
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(b) The financial statements (including the related notes and schedules thereto) included (or incorporated by reference) in the Parent SEC Documents (i) have been prepared in a manner consistent with the books and records of Parent and its Subsidiaries, (ii) have been prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto), (iii) comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto and (iv) fairly present in all material respects the consolidated financial position of the Parent and its Subsidiaries as of the dates thereof and their respective consolidated results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal and recurring year-end audit adjustments that were not, or are not expected to be, material in amount), all in accordance with GAAP and the applicable rules and regulations promulgated by the SEC. Since January 1, 2024, the Parent has not made any change in the accounting practices or policies applied in the preparation of its financial statements, except as required by GAAP, SEC rule or policy or Applicable Law. The books and records of the Parent and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP (to the extent applicable) and any other applicable legal and accounting requirements and reflect only actual transactions.
(c) Since January 1, 2024, (i) neither the Parent nor any of its Subsidiaries nor, to the Knowledge of the Parent, any director, officer, employee, auditor, accountant or representative of the Parent or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Parent or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that the Parent or any of its Subsidiaries has engaged in questionable accounting or auditing practices and (ii) no attorney representing the Parent or any of its Subsidiaries, whether or not employed by the Parent or any of its Subsidiaries, has reported evidence of a material violation of any Applicable Laws, breach of fiduciary duty or similar violation by the Parent or any of its Subsidiaries or any of their respective officers, directors, employees or agents to the Parent Board or any committee thereof or to any director or officer of the Parent or any of its Subsidiaries.
(d) As of the date of this Agreement, there are no outstanding or unresolved comments in the comment letters received from the SEC staff with respect to the Parent SEC Documents. To the Knowledge of the Parent, none of the Parent SEC Documents is subject to ongoing review or outstanding SEC comment or investigation.
(e) Neither the Parent nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract (including any Contract or arrangement relating to any transaction or relationship between or among the Parent and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special-purpose or limited-purpose entity or Person, on the other hand, or any “off balance sheet arrangements” (as defined in Item 303(a) of Regulation S K under the Exchange Act)), where the result, purpose or intended effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, the Parent or any of its Subsidiaries in the Parent’s or such Subsidiary’s published financial statements or other Parent SEC Documents.
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Section 6.7 No Undisclosed Liabilities. Neither the Parent nor any of its Subsidiaries has any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, known or unknown, whether due or to become due and whether or not required to be recorded or reflected on a balance sheet under GAAP, except (a) to the extent accrued or reserved against in the audited consolidated balance sheet of the Parent and its Subsidiaries as at December 31, 2025 included in the Report on Form 10-K/A filed by the Parent with the SEC on April 30, 2026 (without giving effect to any amendment thereto filed on or after the date hereof) and (b) for liabilities and obligations incurred in the Ordinary Course of Business consistent with past practice since December 31, 2025 that are not material to the Parent and its Subsidiaries, taken as a whole.
Section 6.8 Absence of Certain Changes or Events. Since January 1, 2025, except in connection with the execution of this Agreement and the consummation of the transactions contemplated hereby, (x) the Parent and its Subsidiaries have conducted their business only in the Ordinary Course of Business consistent with past practice; (y) there has not been any change, event or development or prospective change, event or development that, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect; and (z) neither the Parent nor any of its Subsidiaries have:
(a) (i) declared, set aside or paid any dividends on, or made any other distributions (whether in cash, stock or property) in respect of, any of its capital stock or other equity interests, except for dividends by a wholly-owned Subsidiary of the Parent to its parent, (ii) purchased, redeemed or otherwise acquired shares of capital stock or other equity interests of the Parent or its Subsidiary or any options, warrants, or rights to acquire any such shares or other equity interests (except for acquisitions of Parent Common Stock in satisfaction by holders of Parent Options of the applicable exercise price or in satisfaction by holders of a Parent equity award of withholding Taxes applicable to such award), or (iii) split, combined, reclassified or otherwise amended the terms of any of its capital stock or other equity interests or issued or authorized the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or other equity interests (other than the issuance of shares of the Parent Common Stock upon the exercise of Parent Options or Parent Warrants, or the settlement of other Parent equity awards, in each case, in accordance with their terms);
(b) amended or otherwise changed, or authorized or proposed to amend or otherwise change, its certificate of incorporation or by-laws (or similar organizational documents);
(c) adopted or entered into a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or reorganization; or
(d) changed its financial or Tax accounting methods, principles or practices, except insofar as may have been required by a change in GAAP or Applicable Law, or revalued any of its material assets.
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Section 6.9 Litigation. Except as otherwise disclosed on Section 6.9 of the Parent Disclosure Letter, there is no Action (or basis therefor) pending or, to the Knowledge of the Parent, threatened against or affecting the Parent or any of its Subsidiaries, any of their respective properties or assets, or any present or former officer, director or employee of the Parent or any of its Subsidiaries in such individual’s capacity as such. Neither the Parent nor any of its Subsidiaries nor any of their respective properties or assets is subject to any outstanding Action, judgment, order, injunction, rule or decree of any Governmental Entity. There is no Action pending or, to the Knowledge of the Parent, threatened, seeking to prevent, hinder, modify, delay or challenge the Amalgamation or any of the other transactions contemplated by this Agreement.
Section 6.10 Compliance with Applicable Laws. The Parent and each of its Subsidiaries are and have been in compliance in all material respects with all Applicable Laws applicable to their businesses, operations, properties or assets. None of the Parent or any of its Subsidiaries has received, since January 1, 2024, a notice or other written communication alleging or relating to a possible material violation of any Applicable Law applicable to their businesses, operations, properties, assets or products of the Parent. The Parent and each of its Subsidiaries have in effect all material Permits of all Governmental Entities necessary or advisable for them to own, lease or operate their properties and assets and to carry on their businesses and operations as now conducted, and there has occurred no violation of, default (with or without notice or lapse of time or both) under or event giving to others any right of revocation, nonrenewal, adverse modification or cancellation of, with or without notice or lapse of time or both, any such Permit, nor would any such revocation, nonrenewal, adverse modification or cancellation result from the consummation of the transactions contemplated hereby.
Section 6.11 Cybersecurity. Except for a non-material breach that did not rise to the level requiring disclosure on Form 8-K, there has been no security breach or other compromise of or relating to any of the Parent’s or any Subsidiary’s IT Systems and Data and (y) the Parent and the Subsidiaries have 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; (ii) the Parent and the Subsidiaries are presently in compliance in all material respects, with all Applicable Laws and all judgments, orders, rules and regulations of any Governmental Entity, 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 Parent and the Subsidiaries have 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 Parent and the Subsidiaries have implemented backup and disaster recovery technology consistent with industry standards and practices.
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Section 6.12 Benefit Plans.
(a) Section 6.12(a) of the Parent Disclosure Letter contains a true and complete list of each “employee benefit plan” (within the meaning of Section 3(3) of ERISA, whether or not subject to ERISA), “multiemployer plan” (within the meaning of ERISA Section 3(37)), and all stock purchase, stock option, phantom stock or other equity-based plan, severance, employment, collective bargaining, change-in-control, fringe benefit, bonus, incentive, deferred compensation, supplemental retirement, health, life, or disability insurance, dependent care and all other employee benefit and compensation plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the transactions contemplated by this Agreement or otherwise), whether formal or informal, written or oral, legally binding or not, under which any current or former employee, director or consultant of the Parent or its Subsidiaries (or any of their dependents) has any present or future right to compensation or benefits or the Parent or any of its Subsidiaries sponsors or maintains, is making contributions to or has any present or future liability or obligation (contingent or otherwise) or with respect to which it is otherwise bound. All such plans, agreements, programs, policies and arrangements shall be collectively referred to as the “Parent Plans”. The Parent has provided or made available to the Company a current, accurate and complete copy of each Parent Plan, or if such Parent Plan is not in written form, a written summary of all of the material terms of such Parent Plan. With respect to each Parent Plan, the Parent has furnished or made available to the Company a current, accurate and complete copy of, to the extent applicable: (i) any related trust agreement or other funding instrument, (ii) the most recent determination letter of the IRS, (iii) any summary plan description, summary of material modifications, and other similar material written communications (or a written description of any material oral communications) to the employees of the Parent or its Subsidiaries concerning the extent of the benefits provided under a Parent Plan, and (iv) for the three most recent years and as applicable (A) the Form 5500 and attached schedules, (B) audited financial statements and (C) actuarial valuation reports.
(b) Neither the Parent, its Subsidiaries or any member of their Controlled Group (defined as any organization which is a member of a controlled, affiliated or otherwise related group of entities within the meaning of Code Section 414(b), (c), (m) or (o)) has ever sponsored, maintained, contributed to or been required to contribute to or incurred any liability (contingent or otherwise) with respect to: (i) a “multiemployer plan” (within the meaning of ERISA Section 3(37)), (ii) a Pension Plan that is subject to Title IV of ERISA or Section 412 of the Code, (iii) a Pension Plan which is a “multiple employer plan” as defined in Section 413 of the Code, or (iv) a “funded welfare plan” within the meaning of Section 419 of the Code.
(c) With respect to the Parent Plans:
| (i) | each Parent Plan complies in all material respects with its terms and materially complies in form and in operation with the applicable provisions of ERISA and the Code and all other applicable legal requirements; |
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| (ii) | each Parent Plan intended to be qualified under Section 401(a) of the Code has received a favorable determination, advisory and/or opinion letter, as applicable, from the IRS that the form of such plan is so qualified and nothing has occurred to the Knowledge of the Parent since the date of such letter that would reasonably be expected to cause the loss of the sponsor’s ability to rely upon such letter, and nothing has occurred to the Knowledge of the Parent that would reasonably be expected to result in the loss of the qualified status of such Parent Plan; | |
| (iii) | there is no material Action (including any investigation, audit or other administrative proceeding) by the Department of Labor, the PBGC, the IRS or any other Governmental Entity or by any plan participant or beneficiary pending, or to the Knowledge of the Parent, threatened, relating to the Parent Plans, any fiduciaries thereof with respect to their duties to Parent Plans or the assets of any of the trusts under any of Parent Plans (other than routine claims for benefits); | |
| (iv) | none of the Parent Plans currently provides, or reflects or represents any liability to provide post-termination or retiree welfare benefits to any person for any reason, except as may be required by COBRA, and none of the Parent, its Subsidiaries or any members of their Controlled Group has any liability to provide post-termination or retiree welfare benefits to any person, or ever represented, promised or contracted to any employee or former employee of the Parent (either individually or to Parent employees as a group) or any other person that such employee(s) or other person would be provided with post-termination or retiree welfare benefits, except to the extent required by statute or except with respect to a contractual obligation to reimburse any premiums such person may pay in order to obtain health coverage under COBRA; | |
| (v) | each Parent Plan is subject exclusively to United States Law; and | |
| (vi) | the execution and delivery of this Agreement and the consummation of the Amalgamation will not, either alone or in combination with any other event, (A) entitle any current or former employee, officer, director or consultant of the Parent or any Subsidiary to severance pay, unemployment compensation or any other similar termination payment, or (B) accelerate the time of payment or vesting, or increase the amount of or otherwise enhance any benefit due to any such employee, officer, director or consultant. |
(d) Neither the Parent nor any Subsidiary is a party to any agreement, contract, arrangement or plan (including any Parent Plan) that may reasonably be expected to result, separately or in the aggregate, in connection with the transactions contemplated by this Agreement (either alone or in combination with any other events), in the payment of any “parachute payments” within the meaning of Section 280G of the Code (without regard to Sections 280G(b)(4) and 280G(b)(5) of the Code. There is no agreement, plan or other arrangement to which any of the Parent or any Subsidiary is a party or by which any of them is otherwise bound to gross-up or indemnify any person in respect of Taxes or other liabilities incurred with respect to Section 409A or 4999 of the Code.
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(e) Each Parent Plan that is a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code (or any comparable or similar provision of state, local, or foreign Applicable Law) complies in both form and operation in all material respects with the requirements of Section 409A of the Code (or any comparable or similar provision of state, local, or foreign Applicable Law) and all applicable IRS guidance issued with respect thereto (and has so complied for the entire period during which Section 409A of the Code has applied to such Parent Plan) so that no amount paid or payable pursuant to any such Parent Plan is subject to any additional Tax or interest under Section 409A of the Code (or any comparable or similar provision of state, local, or foreign Applicable Law).
Section 6.13 Labor and Employment Matters.
(a) The Parent and its Subsidiaries are and since January 1, 2024 have been in compliance in all material respects with all Applicable Laws relating to labor and employment, including those relating to employment practices, terms and conditions of employment, collective bargaining, disability, immigration, health and safety, wages, hours and benefits, non-discrimination in employment, workers’ compensation, the collection and payment of withholding and/or payroll Taxes and similar Taxes, unemployment compensation, equal employment opportunity, discrimination, harassment, employee and contractor classification, information privacy and security, and continuation coverage with respect to group health plans. During the preceding three years, there has not been, and as of the date of this Agreement there is not pending or, to the Knowledge of the Parent, threatened, any labor dispute, work stoppage, labor strike or lockout against the Parent or any of its Subsidiaries by employees. Neither the Parent nor any Subsidiary has any material actual or contingent liability with respect to (i) any misclassification of any person as an independent contractor rather than as an employee, as an employee rather than as an independent contractor, or as a non-employee when in fact employed, (ii) any employee or contractor leased from or staffed by another employer, or (iii) any person currently or formerly classified as exempt from, or otherwise not paid where required, overtime and minimum or other wages.
(b) No employee of the Parent or any of its Subsidiaries is covered by an effective or pending collective bargaining agreement or similar labor agreement. To the Knowledge of the Parent, there has not been any activity on behalf of any labor union, labor organization or similar employee group to organize any employees of the Parent or any of its Subsidiaries. There are no (i) unfair labor practice charges or complaints against the Parent or any of its Subsidiaries pending before the National Labor Relations Board or any other labor relations tribunal or authority and to the Knowledge of the Parent no such representations, claims or petitions are threatened, (ii) representation claims or petitions pending before the National Labor Relations Board or any other labor relations tribunal or authority or (iii) grievances or pending arbitration proceedings against the Parent or any of its Subsidiaries that arose out of or under any collective bargaining agreement.
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(c) Section 6.13(c) of the Parent Disclosure Letter contains a list of all current employees of the Parent or any of its Subsidiaries (by employee identification number), along with the employer, position, date of hire, annual rate of compensation (or, where applicable, the hourly or per diem rate of compensation, or, if by commissions, a description of or cross-reference to the applicable terms), estimated or target annual incentive compensation of each such person, employee status of each such person (including whether the person is on leave of absence and the dates of such leave), part-time or full-time status, weekly working hours where not full-time, status as exempt or non-exempt from overtime, assigned work location, and remote work location. To the Knowledge of the Parent, no current key employee or officer of the Parent or any of its Subsidiaries intends, or is expected, to terminate his or her employment relationship with such entity in connection with or as a result of the transactions contemplated hereby.
(d) During the preceding three years, (i) neither the Parent nor any Subsidiary has effectuated a “plant closing” (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility, (ii) there has not occurred a “mass layoff’ (as defined in the WARN Act) in connection with the Parent or any Subsidiary affecting any site of employment or one or more facilities or operating units within any site of employment or facility and (iii) neither the Parent nor any Subsidiary has engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign Applicable Law. The Parent and its Subsidiaries currently properly classify and for the past three (3) years have properly classified its and their employees as exempt or nonexempt in accordance with applicable overtime Applicable Laws, and no person treated as an independent contractor or consultant by the Parent or any Subsidiary within the past three (3) years should have been properly classified as an employee under Applicable Law.
(e) All Persons treated as independent contractors rather than as employees have been properly so treated, and any compensation paid to them has been reported on IRS Form 1099 or other applicable Tax form. Each such consultant or independent contractor is a party to a written agreement or Contract directly with the Parent or the applicable Subsidiary or is engaged through written agreements between the Parent or applicable Subsidiary and staffing agencies that treat such consultant or independent contractor as employees of the agency.
(f) With respect to any current or former employee, officer, consultant or other service provider of the Parent or any of its Subsidiaries, there are no Actions against the Parent or any of its Subsidiaries pending, or to the Parent’s Knowledge, threatened to be brought or filed, in connection with the employment or engagement of any current or former employee, officer, consultant or other service provider of the Parent or any of its Subsidiaries, including, without limitation, any claim relating to employment discrimination, harassment, retaliation, equal pay, employment classification or any other employment related matter arising under Applicable Laws, except where such action would not, individually or in the aggregate, result in the Parent or any of its Subsidiaries incurring a material liability.
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(g) Except with respect to any Parent Plan (which subject is addressed in Section 6.12 above), the execution of this Agreement and the consummation of the transactions set forth in or contemplated by this Agreement will not result in any breach or violation of, or cause any payment to be made under, any Applicable Laws respecting labor and employment or any collective bargaining agreement to which the Parent or any of its Subsidiaries is a party.
(h) Since January 1, 2020, (i) no allegations of workplace sexual harassment, discrimination or other misconduct have been made, initiated, filed or, to the Knowledge of the Parent, threatened against the Parent, any of its Subsidiaries or any of their respective current or former directors, officers or senior-level management employees, (ii) to the Knowledge of the Parent, no incidents of any such workplace sexual harassment, discrimination or other misconduct have occurred, and (iii) the Parent has not entered into any settlement agreement related to allegations of sexual harassment, discrimination or other misconduct by any of its directors, officers or employees described in clause (i) hereof or any independent contractor.
Section 6.14 Environmental Matters. The Parent and its Subsidiaries (i) are in compliance with all Environmental Laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including Applicable Laws relating to Hazardous Materials; (ii) have received all Permits required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such Permits where in each clause (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 6.15 Taxes.
(a) The Parent and each of its Subsidiaries have (i) filed all material Tax Returns required to be filed by or on behalf of themselves (taking into account any applicable extensions thereof) and all such Tax Returns are true, accurate and complete in all material respects; and (ii) paid in full (or caused to be timely paid in full) all material Taxes that are required to be paid by or with respect to it, whether or not such Taxes were shown as due on such Tax Returns.
(b) All material Taxes not yet due and payable by the Parent or any of its Subsidiaries as of the date of the Parent Balance Sheet have been, in all respects, properly accrued in accordance with GAAP on the financial statements (including the related notes and schedules thereto) included (or incorporated by reference) in the Parent SEC Documents, and such financial statements (including the related notes and schedules thereto) included (or incorporated by reference) in the Parent SEC Documents reflect an adequate reserve (in accordance with GAAP) for all material Taxes accrued but unpaid by the Parent and each of its Subsidiaries through the date of such financial statements. Since the date of the Parent Balance Sheet, neither the Parent nor any of its Subsidiaries has incurred, individually or in the aggregate, any liability for Taxes outside the Ordinary Course of Business.
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(c) Neither the Parent nor any of its Subsidiaries has executed any waiver of any statute of limitations on, or extended the period for the assessment or collection of, any material amount of Tax, in each case that has not since expired.
(d) No material Tax Actions with respect to Taxes or any Tax Return of the Parent or any of its Subsidiaries are presently in progress or have been asserted, threatened or proposed in writing. No deficiencies or claims for a material amount of Taxes have been claimed, proposed, assessed or asserted in writing against the Parent or any of its Subsidiaries by a Governmental Entity, other than any such claim, proposal, assessment or assertion that has been satisfied by payment in full, settled or withdrawn.
(e) Subject to exceptions as would not be material, the Parent and each of its Subsidiaries has timely withheld all Taxes required to have been withheld from payments made (or deemed made) to its employees, independent contractors, creditors, shareholders and other third parties and, to the extent required, such Taxes have been timely paid to the relevant Governmental Entity.
(f) Neither the Parent nor any of its Subsidiaries has engaged in a “reportable transaction” as set forth in Treasury Regulations § 1.6011-4(b).
(g) Neither the Parent nor any of its Subsidiaries (i) is a party to or bound by, or has any liability pursuant to, any Tax sharing, allocation, indemnification or similar agreement or obligation other than any Ordinary Course Agreement; (ii) is or has ever been a member of a group (other than a group the common parent of which is the Parent) filing a consolidated, combined, affiliated, unitary or similar income Tax Return; (iii) has any liability for the Taxes of any Person (other than the Parent) pursuant to Treasury Regulations § 1.1502-6 (or any similar provision of state, local or non-United States Law) as a transferee or successor, by Contract (other than Ordinary Course Agreements), or otherwise by operation of Applicable Law; or (iv) is or has ever been treated as a resident for any income Tax purpose, or as subject to Tax by virtue of having a permanent establishment, an office or fixed place of business, in any country other than the country in which it was or is organized.
(h) No private-letter rulings, technical advice memoranda, or similar material agreements or rulings have been requested in writing, entered into or issued by any Taxing Authority with respect to the Parent or any of its Subsidiaries which rulings remain in effect.
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(i) Neither the Parent nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of (i) a change in, or use of improper, method of accounting requested or initiated on or prior to the Closing Date, (ii) a “closing agreement” as described in Section 7121 of the Code (or any similar provision of Applicable Law) executed on or prior to the Closing Date, (iii) an installment sale or open-transaction disposition made on or prior to the Closing Date, (iv) any deferred intercompany gain or excess-loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law), (v) an election under Section 965 of the Code, or (vi) the application of Section 951 or 951A of the Code with respect to income earned or recognized or payments received prior to the Closing.
(j) There are no Liens for Taxes upon any of the assets of the Parent or any of its Subsidiaries other than Liens described in clause (i) of the definition of Permitted Liens.
(k) Neither the Parent nor any of its Subsidiaries has distributed stock of another Person or has had its stock distributed by another Person, in a transaction (or series of transactions) that was purported or intended to be governed in whole or in part by Section 355 or 361 of the Code.
(l) The Parent has not been a United States real property holding corporation, as defined in Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(m) No material claim has been made in writing by any Governmental Entity in a jurisdiction where the Parent or any of its Subsidiaries does not currently file or has not filed a Tax Return that the Parent or any of its Subsidiaries is or may be subject to taxation by such jurisdiction.
(n) Section 6.15(n) of the Parent Disclosure Letter sets forth the entity classification of the Parent and each of its Subsidiaries for U.S. federal income Tax purposes. Neither the Parent nor any of its Subsidiaries has made an election or taken any other action to change its federal and state income Tax classification from such classification.
For purposes of this Section 6.15, where the context permits, each reference to the Parent or any of its Subsidiaries shall include a reference to any person for whose Taxes the Parent or any of its Subsidiaries is liable under Applicable Law.
Section 6.16 Contracts.
(a) Except as set forth in Section 6.16(a) of the Parent Disclosure Letter and except as disclosed in the Parent SEC Documents, neither the Parent nor any of its Subsidiaries is a party to or is bound by any “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K under the Securities Act, excluding, however, any Parent Plans) (all such Contracts “Parent Material Contracts”).
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(b) (i) Each of the Parent Material Contracts is valid and binding on the Parent and any of its Subsidiaries to the extent such Subsidiary is a party thereto, as applicable, and to the Knowledge of the Parent, each other party thereto, and is in full force and effect and enforceable in accordance with its terms; (ii) the Parent and each of its Subsidiaries, and, to the Knowledge of the Parent, each other party thereto, has performed all material obligations required to be performed by it under each Parent Material Contract; and (iii) there is no material default under any Parent Material Contract by the Parent or any of its Subsidiaries or, to the Knowledge of the Parent, any other party thereto, and no event or condition has occurred that constitutes, or, after notice or lapse of time or both, would constitute, a material default on the part of the Parent or any of its Subsidiaries or, to the Knowledge of the Parent, any other party thereto under any such Parent Material Contract, nor has the Parent or any of its Subsidiaries received any notice of any such material default, event or condition. The Parent has made available to the Company true and complete copies of all Parent Material Contracts, including all amendments thereto.
Section 6.17 Insurance. Each of the Parent and its Subsidiaries is covered by valid and currently effective insurance policies issued in favor of the Parent or one or more of its Subsidiaries that are customary and adequate for companies of similar size in the industries and locations in which the Parent operates. Section 6.17 of the Parent Disclosure Letter sets forth, as of the date hereof, a true and complete list of all material insurance policies issued in favor of the Parent or any of its Subsidiaries, or pursuant to which the Parent or any of its Subsidiaries is a named insured or otherwise a beneficiary, as well as any historic incurrence-based policies still in force. With respect to each such insurance policy, (a) such policy is in full force and effect and all premiums due thereon have been paid, (b) neither the Parent nor any of its Subsidiaries is in breach or default, and has not taken any action or failed to take any action which (with or without notice or lapse of time, or both) would constitute such a breach or default, or would permit termination or modification of, any such policy and (c) to the Knowledge of the Parent, no insurer issuing any such policy has been declared insolvent or placed in receivership, conservatorship or liquidation. No notice of cancellation or termination has been received with respect to any such policy, nor will any such cancellation or termination result from the consummation of the transactions contemplated hereby. The transactions contemplated in this Agreement are not deemed to be a change of control under the Parent’s existing directors’ and officers’ liability insurance policy.
Section 6.18 Properties.
(a) The Parent or one of its Subsidiaries has good and valid title to, or in the case of leased property and leased tangible assets, a valid leasehold interest in, all of its real properties and tangible assets that are necessary for the Parent and its Subsidiaries to conduct their respective businesses as currently conducted, free and clear of all Liens other than Permitted Liens. Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, the tangible personal property currently used in the operation of the business of the Parent and its Subsidiaries is in good working order (reasonable wear and tear excepted).
(b) Each of the Parent and its Subsidiaries has complied with the terms of all leases to which it is a party, and all such leases are in full force and effect, except for any such noncompliance or failure to be in full force and effect that, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect. Each of the Parent and its Subsidiaries enjoys peaceful and undisturbed possession under all such leases, except for any such failure to do so that, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect.
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(c) Section 6.18(c) of the Parent Disclosure Letter sets forth a true and complete list of (i) all real property owned by the Parent or any of its Subsidiaries and (ii) all real property leased for the benefit of the Parent or any of its Subsidiaries.
(d) This Section 6.18 does not relate to intellectual property, which is the subject of Section 6.19.
Section 6.19 Intellectual Property.
(a) Section 6.19(a) of the Parent Disclosure Letter sets forth a true and complete list of all (i) patents and patent applications; (ii) trademark registrations and applications; (iii) copyright registrations and applications; and (iv) domain names of the Parent and its Subsidiaries, in each case owned by, controlled by or exclusively licensed to the Parent and its Subsidiaries (collectively, “Parent Registered IP”) and, in each case enumerating specifically the applicable filing or registration number, title, jurisdiction in which filing was made or from which registration issued, date of filing and issuance, names of all current applicant(s) and registered owners(s), as applicable. All of the Parent Registered IP is subsisting and, in the case of any Parent Registered IP that is registered or issued to the Parent, is valid and enforceable and all issuance, renewal, maintenance and other payments that are or have become due with respect thereto have been timely paid by or on behalf of the Parent. No Parent Registered IP is involved in any interference, reissue, derivation, reexamination, opposition, cancellation or similar proceeding and, to the Knowledge of the Parent, no such action is threatened with respect to any of the Parent Registered IP. The Parent or its Subsidiaries own exclusively, free and clear of any and all Liens (other than Permitted Liens), all Parent Owned IP, including all Intellectual Property created on behalf of the Parent or its Subsidiaries by employees or independent contractors and the Parent has the right to bring actions for the infringement of such Parent Owned IP.
(b) Section 6.19(b) of the Parent Disclosure Letter accurately identifies (i) all contracts pursuant to which any Parent Registered IP is licensed to the Parent or its Subsidiaries (other than (A) any non-customized software that (1) is so licensed solely in executable or object code form pursuant to a nonexclusive, internal-use software license and other Intellectual Property associated with such software and (2) is not incorporated into, or material to the development, manufacturing, or distribution of, any of the Parent’s or its Subsidiaries’ products or services, (B) any Intellectual Property licensed on a nonexclusive basis ancillary to the purchase or use of equipment, reagents or other materials, (C) any confidential information provided under confidentiality agreements and (D) agreements between the Parent and any of its Subsidiaries and their employees in the Parent’s standard form thereof), (ii) the corresponding Contract to which the Parent is a party pursuant to which such Parent Registered IP is licensed to the Parent or any of its Subsidiaries and (iii) whether the license or licenses granted to the Parent or its Subsidiaries are exclusive or nonexclusive.
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(c) Section 6.19(c) of the Parent Disclosure Letter accurately identifies each Contract to which the Parent is a party pursuant to which any Person has been granted any license or covenant not to sue under, or otherwise has received or acquired any right (whether or not currently exercisable) or interest in, any Parent Registered IP (other than (i) any confidential information provided under confidentiality agreements and (ii) any Parent Registered IP nonexclusively licensed to suppliers or service providers for the sole purpose of enabling such supplier or service providers to provide services for the Parent’s benefit).
(d) No facilities of a university, college, other educational institution, or research center, or funding received by the Parent from any of the foregoing, have been used to develop any Parent Registered IP in such a way as to affect the Parent’s rights in the Parent Registered IP. No Person who was involved in, or who contributed to, the creation or development of the Parent Registered IP has performed services for a university, college, or other educational institution or research center in a manner that would affect the Parent’s rights in the Parent Registered IP.
(e) The Parent and its Subsidiaries have taken all commercially reasonable measures to maintain the confidentiality of and protect the proprietary nature of each item of the Parent Registered IP and otherwise protect and enforce its rights in all information that constitutes a Trade Secret of the Parent or its Subsidiaries, including requiring all Persons who have or have had access thereto to execute written nondisclosure agreements or other binding obligations to maintain confidentiality of such information. To the Knowledge of the Parent, no Person is infringing, violating or misappropriating any of the Parent Registered IP.
(f) (i) To the Knowledge of the Parent, the conduct of the businesses of the Parent and its Subsidiaries, including the manufacture, marketing, offering for sale, sale, importation, use or intended use or other disposal of any product as currently sold or under development by the Parent or its Subsidiaries, has not infringed, misappropriated or diluted, and does not infringe, misappropriate or dilute, any Intellectual Property of any Person, (ii) neither the Parent nor any of its Subsidiaries has received any written notice or claim asserting or suggesting that any such infringement, misappropriation, or dilution is or may be occurring or has or may have occurred and (iii) to the Knowledge of the Parent, no Person (including any current or former employee, independent contractor, officer or director of the Parent or its Subsidiaries) is infringing, misappropriating, or diluting any Parent Registered IP.
(g) (i) The Parent and its Subsidiaries have taken commercially reasonable steps to protect the confidentiality and security of the computer and information technology systems used by the Parent and its Subsidiaries (the “Parent IT Systems”) and the information and transactions stored or contained therein or transmitted thereby, (ii) to the Knowledge of the Parent, since January 1, 2024, there has been no unauthorized or improper use, loss, access, transmittal, modification or corruption of any such information or data, and (iii) since January 1, 2024, there have been no material failures, crashes, viruses, or security breaches (including any unauthorized access to any personally identifiable information) affecting the Parent IT Systems.
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(h) (i) The Parent and its Subsidiaries have at all times complied in all material respects with all applicable Privacy Laws, (ii) since January 1, 2024, no claims have been asserted or, to the Knowledge of the Parent, threatened in writing against the Parent alleging a violation of any Person’s privacy or Personal Information, (iii) neither this Agreement nor the consummation of the transactions contemplated hereby will breach or otherwise violate any applicable Privacy Laws and (iv) the Parent and its Subsidiaries have taken commercially reasonable steps to protect the Personal Information collected, used or held for use by the Parent or its Subsidiaries against loss and unauthorized access, use, modification, disclosure or other misuse.
(i) To the knowledge of the Parent, no government funding, facilities or resources of a university, college, other educational institution or research center or funding from third parties was used in the development of the Parent Owned IP, to the Knowledge of the Parent, exclusively licensed to the Parent, and no Governmental Entity, university, college, other educational institution or research center has, to the Knowledge of the Parent, any claim or right in or to such Intellectual Property.
(j) The execution, delivery and performance by the Parent of this Agreement, and the consummation of the transactions contemplated hereby, will not result in the loss of, or give rise to any right of any third party to terminate or modify any of the Parent’s or any of its Subsidiaries’ rights or obligations under any agreement under which the Parent or any of its Subsidiaries grants to any Person, or any Person grants to the Parent or any of its Subsidiaries, a license or right under or with respect to any Intellectual Property that is material to any of the businesses of the Parent or any of its Subsidiaries.
Section 6.20 Related Party Transactions. Since January 1, 2024 through the date of this Agreement, there have been no transactions, agreements, arrangements or understandings between the Parent or any of its Subsidiaries, on the one hand, and the Affiliates of the Parent, on the other hand (other than the Parent’s Subsidiaries, which are disclosed in Section 6.3 of the Parent Disclosure Letter), that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act and that have not been so disclosed in the Parent SEC Documents.
Section 6.21 Certain Payments. Neither the Parent nor any of its Subsidiaries, nor, to the Knowledge of the Parent, any of their respective directors, executives, representatives, agents or employees, (a) has used or is using any corporate funds for any illegal contributions, gifts, entertainment or other unlawful expenses relating to political activity, (b) has used or is using any corporate funds for any direct or indirect unlawful payments to any foreign or domestic governmental officials or employees, (c) has violated or is violating any provision of the Foreign Corrupt Practices Act of 1977, (d) has established or maintained, or is maintaining, any unlawful fund of corporate monies or other properties or (e) has made any bribe, unlawful rebate, payoff, influence payment, kickback or other unlawful payment of any nature.
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Section 6.22 Brokers. Other than as disclosed in the Parent Disclosure Letter, no broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Parent or any of its Affiliates.
Section 6.23 SubCo. SubCo was formed solely for the purpose of engaging in the Amalgamation and the other transactions contemplated hereby and has engaged in no business other than in connection with the transactions contemplated by this Agreement.
Section 6.24 No Other Representations or Warranties. Except for the representations and warranties contained in Article VI, each of the Parent and SubCo acknowledges and agrees that none of the Company or any other Person on behalf of the Company makes any other express or implied representation or warranty whatsoever, and specifically (but without limiting the generality of the foregoing) that none of the Company, its Subsidiaries, or any other Person on behalf of the Company or any of its Subsidiaries makes any representation or warranty with respect to any projections or forecasts delivered or made available to the Parent, SubCo or any of their respective Representatives, of future revenues, results of operations (or any component thereof), cash flows or financial condition (or any component thereof) of the Company (including any such projections or forecasts made available to the Parent, SubCo or any of their respective Representatives in certain “data rooms” or management presentations in expectation of the transactions contemplated by this Agreement), and none of the Parent nor SubCo has relied on any such information or any representation or warranty not set forth in Article V.
Article
VII
COVENANTS
Section 7.1 Proxy Statement.
(a) As promptly as practicable after the Closing Date, the Parent shall prepare and file with the SEC a proxy statement relating to the Parent Stockholders Meeting to be held in connection with the Conversion Proposal, the adoption of to the Equity Incentive Plan and Charter Amendment Proposal (together with any amendments thereof or supplements thereto, the “Proxy Statement”). The Parent shall use its reasonable best efforts to (i) cause the Proxy Statement to comply with Applicable Laws including the applicable rules and regulations promulgated by the SEC and (ii) respond promptly to any comments or requests of the SEC or its staff relating to the Proxy Statement.
(b) The Parent covenants and agrees that the Proxy Statement (and the letter to stockholders, notice of meeting and form of proxy included therewith) will (i) comply as to form in all material respects with the requirements of Applicable Laws, and (ii) not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
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(c) The Parent shall use commercially reasonable efforts to cause the Proxy Statement to be mailed to the Parent’s stockholders as promptly as practicable after the Proxy Statement has been filed with the SEC and either (i) the SEC has indicated that it does not intend to review the Proxy Statement or that its review of the Proxy Statement has been completed or (ii) at least ten (10) days shall have passed since the Proxy Statement was filed with the SEC without receiving any correspondence from the SEC commenting upon, or indicating that it intends to review, the Proxy Statement, all in compliance with Applicable Laws. If the Parent or SubCo becomes aware of any event or information that, pursuant to the Securities Act or the Exchange Act, is required to be disclosed in an amendment or supplement to the Proxy Statement, as the case may be, then such Party, as the case may be, shall file such amendment or supplement with the SEC.
Section 7.2 Stockholders’ Meeting.
(a) The Parent shall take all action necessary under Applicable Laws to call, give notice of and hold a meeting of the holders of the Parent Common Stock to consider and vote to approve (1) the conversion of the Parent Convertible Preferred Stock issued pursuant to this Agreement into shares of the Parent Common Stock in accordance with Nasdaq Listing Rules (the “Conversion Proposal”), (2) the conversion of the Series B Convertible Preferred Stock issued in connection with the Concurrent Financing into shares of the Parent Common Stock, (3) the adoption of the Equity Incentive Plan, and (4) if deemed necessary or appropriate by the Parent or as otherwise required by Applicable Law or Contract, to authorize any amendments to the Parent’s certificate of incorporation or approval of any other resolutions that may be necessary in connection with the consummation of the Transaction (collectively, the “Charter Amendment Proposal”) pursuant to the terms of this Agreement (collectively, the “Parent Stockholder Matters” and such meeting, the “Parent Stockholders Meeting”). The Parent Stockholder Meeting shall be held as promptly as practicable after the date that the definitive Proxy Statement is filed with the SEC, and in any event no later than thirty (30) days (or such other shorter period as is permitted by Applicable Laws) after the Proxy Statement has been filed with the SEC and either (i) the SEC has indicated that it does not intend to review the Proxy Statement or that its review of the Proxy Statement has been completed or (ii) at least ten (10) days shall have passed since the Proxy Statement was filed with the SEC without receiving any correspondence from the SEC commenting upon, or indicating that it intends to review, the Proxy Statement. The Parent shall take reasonable measures to ensure that all proxies solicited in connection with the Parent Stockholder Meeting are solicited in compliance with all Applicable Laws. Notwithstanding anything to the contrary contained herein, if on the date of the Parent Stockholder Meeting, or a date preceding the date on which the Parent Stockholder Meeting is scheduled, the Parent reasonably believes that (i) it will not receive proxies sufficient to obtain the Parent Stockholder Approval, whether or not a quorum would be present or (ii) it will not have sufficient shares of the Parent Common Stock represented (whether in person or by proxy) to constitute a quorum necessary to conduct the business of the Parent Stockholder Meeting, the Parent may postpone or adjourn, or make one or more successive postponements or adjournments of, the Parent Stockholder Meeting as long as the date of the Parent Stockholder Meeting is not postponed or adjourned more than an aggregate of thirty (30) days in connection with any postponements or adjournments.
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(b) The Parent agrees that, subject to the Parent Board’s compliance with its fiduciary duties under Applicable Law, (i) the Parent Board shall recommend that the holders of Parent Common Stock vote to approve the Parent Stockholder Matters and shall use commercially reasonable efforts to solicit such approval within the time frame set forth in Section 7.2(a) above and (ii) the Proxy Statement shall include a statement to the effect that the Parent Board recommends that the Parent’s stockholders vote to approve the Parent Stockholder Matters.
(c) If the Parent does not obtain Parent Stockholder Approval with respect to the Parent Stockholder Matters at the first Parent Stockholder Meeting, the Parent shall use commercially reasonable efforts to call a meeting every thirty (30) days thereafter to seek Parent Stockholder Approval with respect to the Parent Stockholder Matters until such Parent Stockholder Approval is obtained, unless this Agreement has been terminated pursuant to Section 9.1.
Section 7.3 Working Capital Allocation. The Parent shall, from and after the Effective Date, reserve and set aside an amount equal to $2,500,000 (the “Allocated Capital”) from the Working Capital to be used solely for (i) the operation of the Company Business, (ii) the Parent’s ordinary course public company compliance costs incurred after the Closing Date and limited to (a) audit fees, (b) securities regulatory and stock exchange fees, and (c) required legal, accounting, and reporting expenses directly attributable to maintaining the Parent’s compliance and status as a public company, and (iii) payment of expenses incurred by the Company in connection with the Transaction. The Parent shall, from and after the Effective Date, reserve and set aside an amount equal to the number which is determined by subtracting the Allocated Capital from the Working Capital to be used solely for the operation of the Parent’s golf related business.
Section 7.4 Future Financings.
(a) The Parties agree that the Parent will allocate 20% of the proceeds of all future equity financings, excluding any funds raised in the initial $3,000,000 (in stated value) tranche of the Concurrent Financing, to be used for the golf related operations of the Parent in an amount not to exceed $1,250,000 (or such lesser amount as is required for the golf related operations of the Parent for the period of 12 months after the Closing Date), subject to any approval that may be required by any agreements entered into with any placement agent or underwriter in connection with such future equity financings. Notwithstanding the foregoing, the Parent shall, within six (6) months following the Closing Date, use commercially reasonable efforts to complete financings of an aggregate amount of $500,000 to be raised and applied toward the golf related operations from (i) proceeds of an at-the-market offering, (ii) draws under an equity line of credit, or (iii) such other capital-raising transaction as the Parent may determine in its reasonable discretion to be appropriate under the circumstances at the time, and for greater certainty, such amount shall not be funded from the Parent’s existing cash or operating cash flows.
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(b) The Parties agree that a portion of the Working Capital available on the Closing Date will be allocated to repay any and all amounts (i) owed to certain officers (and their Affiliates or relatives) of the Parent (as such amounts are described in the Parent SEC Documents), (ii) that may become payable in connection with any change of the officers of the Parent in connection with the Closing or within 90 days after the Closing Date and (iii) that may become payable in connection with any claims made or litigation commenced against the Parent and/or any of its directors or officers by any shareholders or other third parties, which relate to and were made before the Closing Date or in connection with the Transaction, including Case No. 2:26-CV-695 Commenced in the United States District Court. District of Utah.
Section 7.5 Indemnification, Exculpation and Insurance.
(a) From the Effective Time through the sixth anniversary of the date on which the Effective Time occurs, each of the Parent and Amalco shall indemnify and hold harmless each person who is now, or has been at any time prior to the date hereof, or who becomes prior to the Effective Time, a director or officer of the Parent or the Company, respectively (the “D&O Indemnified Parties”), against all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the fact that the D&O Indemnified Party is or was a director or officer of the Parent or of the Company, whether asserted or claimed prior to, at or after the Effective Time, in each case, to the fullest extent permitted under the Nevada Revised Statutes and the Nevada Revised Statutes. Each D&O Indemnified Party will be entitled to advancement of expenses incurred in the defense of any such claim, action, suit, proceeding or investigation from each of the Parent and Amalco, jointly and severally, upon receipt by the Parent or Amalco from the D&O Indemnified Party of a request therefor; provided that any such person to whom expenses are advanced provides an undertaking to the Parent, to the extent then required by the Nevada Revised Statutes, to repay such advances if it is ultimately determined that such person is not entitled to indemnification.
(b) The provisions of the certificate of incorporation and bylaws of the Parent with respect to indemnification, advancement of expenses and exculpation of present and former directors and officers of the Parent that are presently set forth in the certificate of incorporation and bylaws of the Parent shall not be amended, modified or repealed for a period of six years from the Effective Time in a manner that would adversely affect the rights thereunder of individuals who, at or prior to the Effective Time, were officers or directors of the Parent, unless such modification is required by Applicable Law. The constating documents of Amalco shall contain, and the Parent shall cause the constating documents of Amalco to so contain, provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of present and former directors and officers as those presently set forth in the certificate of formation and bylaws of the Company.
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(c) From and after the Effective Time through the sixth anniversary of the date on which the Effective Time occurs, (i) Amalco shall fulfill and honor in all respects the obligations of the Company to its D&O Indemnified Parties as of immediately prior to the Closing pursuant to any indemnification provisions under the Company’s organizational documents (including its certificate of formation and bylaws) and pursuant to any indemnification agreements between the Company and such D&O Indemnified Parties, with respect to claims arising out of matters occurring at or prior to the Effective Time and (ii) the Parent shall fulfill and honor in all respects the obligations of the Parent to its D&O Indemnified Parties as of immediately prior to the Closing pursuant to any indemnification provisions under the Parent’s organizational documents and pursuant to any indemnification agreements between the Parent and such D&O Indemnified Parties, with respect to claims arising out of matters occurring at or prior to the Effective Time.
(d) From and after the Effective Time through the sixth anniversary of the date on which the Effective Time occurs, the Parent shall maintain directors’ and officers’ liability insurance policies, on commercially available terms and conditions and with coverage limits customary for U.S. public companies similarly situated to the Parent.
(e) From and after the Effective Time through the sixth anniversary of the date on which the Effective Time occurs, the Parent shall pay all expenses, including reasonable attorneys’ fees that are incurred by the D&O Indemnified Parties in connection with their enforcement of the rights provided to such persons in this Section 7.5.
(f) The provisions of this Section 7.5 are intended to be in addition to the rights otherwise available to the current and former officers and directors of the Parent and the Company by Applicable Law, charter, statute, bylaw or agreement, and shall operate for the benefit of, and shall be enforceable by, each of the D&O Indemnified Parties, their heirs and their Representatives.
(g) In the event the Parent or Amalco or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of the Parent or Amalco, as the case may be, shall succeed to the obligations set forth in this Section 7.5. The Parent shall Amalco to perform all of the obligations of Amalco under this Section 7.5.
Section 7.6 Employee Matters. Prior to the Effective Time, the Company shall cause the employees or other service providers of the Company listed on Section 7.6 of the Company Disclosure Letter to waive any change of control or severance benefits that are triggered by virtue of the consummation of the Amalgamation alone and deliver evidence reasonably satisfactory to the Parent that all such waivers have been obtained.
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Section 7.7 Tax Matters.
(a) In order to facilitate the consummation of the Transaction, the Parties agree to use their commercial best efforts to minimize or constitute any adverse tax consequences of the Transaction, including without limitation amending the proposed structure of the Transaction as the parties mutually agree.
(b) All transfer, documentary, sales, use, stamp, registration, excise, recording, registration value-added and other such similar Taxes and fees (including any penalties and interest) that become payable in connection with or by reason of the execution of this Agreement and the transactions contemplated hereby shall be borne and paid by the Parent. Unless otherwise required by Applicable Law, the Parent shall timely file any Tax Return or other document with respect to such Taxes or fees (and the Company shall reasonably cooperate with respect thereto as necessary).
(c) On the Closing Date, the Company shall provide the Parent with a certificate on behalf of the Company, prepared in a manner consistent and in accordance with the requirements of Treasury Regulations § 1.897-2(g), (h) and § 1.1445-2(c)(3), certifying that no interest in the Company is a “U.S. real property interest” within the meaning of Section 897(c) of the Code, and a form of notice to the Internal Revenue Service prepared in accordance with the provisions of Treasury Regulations § 1.897-2(h)(2); provided, that the Parent’s sole remedy for the Company’s failure to deliver such documentation shall be to withhold pursuant to Section 4.2.
Section 7.8 Obligations of SubCo. The Parent will take all action necessary to cause SubCo to perform its obligations under this Agreement and to consummate the Amalgamation on the terms and conditions set forth in this Agreement.
Section 7.9 Confidentiality. The Parties acknowledge that the Parent and the Company have previously executed a Mutual Nondisclosure Agreement dated January 13, 2026 (the “Confidentiality Agreement”), which Confidentiality Agreement is hereby incorporated herein by reference and shall continue in full force and effect in accordance with its terms. To the extent there is any inconsistency between the terms of this Agreement and the terms of the Confidentiality Agreement, the terms of this Agreement shall prevail.
Section 7.10 Conduct of Business by the Company Pending Closing. The Company agrees that, from the date of this Agreement until the earlier of the Closing or the termination of this Agreement (the “Pre-Closing Period”), the Company shall (a) conduct its business only in the ordinary course consistent with past practice, and (b) use its commercially reasonable efforts to preserve and maintain existing relations with employees, customers, distributors, vendors and other Persons with which the Company has business relations. The Company shall not take any action that would be reasonably expected to result in a Company Material Adverse Effect. Without limiting the foregoing, the Company agrees that, during the Pre-Closing Period, except as required by this Agreement, or as otherwise agreed to in writing by the Parent, the Company shall not, directly or indirectly do, take (or omit to take) any other action that, if taken (or omitted to be taken) prior to the date hereof would have been required to be set forth in Section 5.8 of the Company Disclosure Letter.
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Section 7.11 Conduct of Business by the Parent Pending Closing. The Parent agrees that, from the date of this Agreement until the Pre-Closing Period, the Parent shall (a) conduct its business only in the ordinary course consistent with past practice, and (b) use its commercially reasonable efforts to preserve and maintain existing relations with employees, customers, distributors, vendors and other Persons with which the Parent has business relations. The Parent shall not take any action that would be reasonably expected to result in a Parent Material Adverse Effect.
Section 7.12 Mutual Covenants. From the date of this Agreement until the earlier of the Effective Date and the termination of this Agreement in accordance with Article IX, except as otherwise expressly permitted or specifically contemplated by this Agreement or as required by Applicable Laws, each of the Parties shall:
(a) carry on its business in the usual, regular and ordinary course of business consistent with its past practice;
(b) not incur any indebtedness other than in the ordinary course of business consistent with its past practice, or as required in connection with the transactions contemplated by this Agreement;
(c) not alter or amend its constating documents as the same exist at the date of this Agreement, except as required in connection with the transactions contemplated by this Agreement;
(d) take, or cause to be taken, all action and to do, or cause to be done, all other things necessary, proper or advisable under Applicable Laws, within their respective power, to complete the Amalgamation, including using reasonable commercial efforts;
(e) to use reasonable commercial efforts to obtain all necessary consents, assignments, waivers and amendments to or terminations of any agreements and take such measures as may be appropriate to fulfill its obligations hereunder and to carry out the transactions contemplated hereby;
(f) to effect all necessary registrations, filings and submissions of information requested by Governmental Entities required to be effected by it in connection with the Amalgamation;
(g) to oppose, lift or rescind any injunction or restraining or other order seeking to stop, or otherwise adversely affecting its ability to consummate, the Amalgamation and to defend, or cause to be defended, any proceedings to which it is a party or brought against it or its directors or officers challenging this Agreement or the consummation of the transactions contemplated hereby;
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(h) to reasonably cooperate with the other Parties and their tax advisors in structuring the Amalgamation and other transactions contemplated to occur in conjunction with the Amalgamation in a tax effective manner and assist the other Parties and their tax advisors in making such investigations and enquiries with respect to such Parties in that regard, as the other Parties and its tax advisors shall consider necessary, acting reasonably;
(i) not take any action that would render, or would reasonably be expected to render, any representation or warranty made by such Party in this Agreement untrue in any material respect;
(j) use reasonable commercial efforts to obtain and maintain the third-party approvals applicable to them and provide the same to the other Parties on or prior to the Effective Time;
(k) use reasonable commercial efforts to complete the Amalgamation by September 30, 2026, or as soon as reasonably practicable thereafter;
(l) except as provided in this Agreement, not amalgamate or consolidate with, or enter into any other corporate reorganization with, any other corporation or Person or perform any act or enter into any transaction or negotiation which, in the opinion of either of the Parties acting reasonably, interferes or is inconsistent with the completion of the transactions contemplated hereby. Without limiting the foregoing, except as provided in this Agreement or with the prior written consent of the other party, none of the Parties shall (i) make any distribution by way of dividend, return of capital or otherwise to or for the benefit of its shareholders, (ii) subdivide, consolidate or reclassify their share capital, other than the Consolidation, or (iii) issue any of its shares or other securities convertible into shares or enter into any commitment or agreement, other than shares issued in connection with the Concurrent Financing, shares of Parent Common Stock issued on exercise of the Parent Convertible Preferred Stock or shares of Parent Common Stock issued on the exercise of Polymath Options into Polymath Shares (including the grant by Polymath of a cashless exercise right to certain holders of Polymath Options);
(m) furnish to the other Parties such information, in addition to the information contained in this Agreement, relating to its financial condition, business, properties and affairs as may reasonably be requested by another Party and notify the other Parties of any significant development or Material Change relating to it promptly after becoming aware of any such development or change;
(n) promptly notify the other Parties in writing of any change in any representation or warranty provided in this Agreement which change is or may be of such a nature as to render any representation or warranty misleading or untrue in any material respect; and
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(o) promptly notify the other Parties in writing of any material breach by such Party of any covenant, obligation or agreement contained in this Agreement; and not, directly or indirectly, solicit, initiate, assist, facilitate, promote or knowingly encourage the initiation of proposals or offers from, entertain or enter into discussions or negotiations with any Person other than the other Parties hereto, with respect to any amalgamation, merger, consolidation, arrangement, restructuring, sale of any material assets or part thereof of such Party, unless such action, matter or transaction is part of the transactions contemplated in this Agreement or is required as a result of the duties of directors and officers of the applicable Party in compliance with Applicable Laws.
Section 7.13 Additional Covenants of the Parent and SubCo. From the date of this Agreement until the earlier of the Effective Date and the termination of this Agreement in accordance with Article IX, except as expressly permitted or specifically contemplated by this Agreement or required by Applicable Laws, each of the Parent and SubCo covenant and agree that:
(a) the Parent and SubCo shall use their reasonable commercial efforts to satisfy or cause the satisfaction of the conditions set forth in Section 8.1 and Section 8.3 as soon as reasonably practicable, to the extent the fulfillment of the same is within the control of the Parent or SubCo, as the case may be;
(b) the Parent shall, as the sole shareholder of SubCo, approve by special resolution the Amalgamation, together with such matters as are required to effect the Amalgamation;
(c) use commercially reasonable efforts to: (a) take all actions reasonably necessary or required to complete the Amalgamation as soon as practicable and, in any event, on or before September 30, 2026; and (b) seek, obtain, prepare or as necessary file all necessary documents, filings, approvals, consents and acceptances of applicable regulatory authorities and under any applicable agreement or document to which the Parent is party or by which it is bound, required by the Governmental Entities in connection with the issuance of the Parent Convertible Preferred Stock pursuant to the terms of this Agreement, so as to permit and enable such securities to be lawfully distributed on an exempt basis in accordance with this Agreement and Applicable Laws;
(d) adopt the Equity Incentive Plan, which will include a grant, on or before the Closing Date, of awards to acquire up to 2,000,000 Parent Series A Common Stock, with allocation and vesting terms to be determined by the Parties; and
(e) implement such additional governance or management arrangements as may be agreed by the Parties, including a board of directors or advisory board to oversee and govern the golf related operations of the Parent.
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Section 7.14 Additional Covenants of the Company. From the date of this Agreement until the earlier of the Effective Date and the termination of this Agreement in accordance with Article IX, except as expressly permitted or specifically contemplated by this Agreement or required by Applicable Laws, the Company covenants and agrees that:
(a) the Company will use commercially reasonable efforts to satisfy or cause the satisfaction of the conditions set forth in Section 8.1 and Section 8.2 as soon as reasonably practicable, to the extent the fulfillment of the same is within the control of the Company;
(b) the Company shall promptly advise the Parent of the number of Polymath Shares for which the Company receives notices of dissent or written objections to the Amalgamation; and
(c) the Company shall make all necessary filings and applications under applicable foreign, federal and provincial laws and regulations required on its part in connection with the transactions contemplated in this Agreement, and take all reasonable action necessary to be in compliance with such laws and regulations.
Article
VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party’s Obligation to Effect the Transaction. The obligation of each Party to effect the Amalgamation and otherwise consummate the transactions contemplated by this Agreement at the Closing is subject to the satisfaction at or prior to the Effective Time of the following conditions:
(a) the Company shall have obtained (1) the affirmative vote (or written consent) of the Company Board and (2) the Company Shareholder Approval, and such approvals or action shall be in full force and effect;
(b) the Parent shall have obtained the affirmative vote (or written consent) of the Parent Board and such action shall be in full force and effect;
(c) all Consents that are listed in Section 8.1 of the Parent Disclosure Letter shall have been received and be in full force and effect;
(d) no temporary restraining order, preliminary or permanent injunction or other judgment, order or decree issued by any court of competent jurisdiction or other legal restraint or prohibition shall be in effect, and no Applicable Law shall have been enacted, entered, promulgated, enforced or deemed applicable by any Governmental Entity that, in any such case, prohibits or makes illegal the consummation of the Amalgamation and the transactions contemplated by this Agreement;
(e) the representations and warranties of the Company set forth in this Agreement shall be true and correct as of the date hereof and as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties shall be true and correct as of such date), in each case, except where the failure to be true and correct, individually or in the aggregate, has not had, and is not reasonably likely to have a Company Material Adverse Effect; and the Parent shall have received a certificate signed on behalf of the Company by the chief executive officer of the Company to such effect (the “Company Bring-Down Certificate”).
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(f) the representations and warranties of the Parent set forth in this Agreement shall be true and correct as of the date hereof and as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties shall be true and correct as of such date), in each case, except where the failure to be true and correct, individually or in the aggregate, has not had, and is not reasonably likely to have a Parent Material Adverse Effect; and the Company shall have received a certificate signed on behalf of the Parent by the chief executive officer of the Parent to such effect (the “Parent Bring-Down Certificate”);
(g) all Transaction Expenses set forth on Section 8.1(g) of the Parent Disclosure Letter shall have been paid; and
(h) the Parent shall have entered into an irrevocable purchase agreement in connection with the Concurrent Financing providing gross proceeds to the Parent of not less than stated value of $3,000,000, or such other amount as may be agreed to by the Parties, to be received within the timeframe set out in the Amended Exchange Agreement.
Section 8.2 Conditions to the Parent’s and SubCo’s Obligation to Effect the Transaction. The obligations of the Parent and SubCo to effect the Amalgamation and otherwise consummate the transactions contemplated by this Agreement at the Closing is subject to the satisfaction at or prior to the Effective Time of the following conditions:
(a) the Company shall have performed or complied in all material respects with all agreements and covenants required to be performed by the Company under this Agreement at or prior to the Closing;
(b) the Parent shall have received a written resignation from officer and director positions (but not employment with respect to employees), in a form reasonably satisfactory to the Parent, dated as of the Closing Date and effective as of the Closing, executed by those persons listed in Section 8.2(b) of the Parent Disclosure Letter;
(c) since the date of this Agreement, no Company Material Adverse Effect shall have occurred; and
(d) the Company shall have delivered documentation reasonably required by the Parent or its transfer agent with respect to the re-registration of the Polymath Shares and any other shares of Company Capital Stock into the name of the Parent.
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Section 8.3 Conditions to the Company’s Obligation to Effect the Transaction. The obligations of the Company to effect the Amalgamation and otherwise consummate the transactions contemplated by this Agreement at the Closing is subject to the satisfaction at or prior to the Effective Time of the following conditions:
(a) the Parent and SubCo shall have performed or complied in all material respects with all agreements and covenants required to be performed by the Parent and SubCo under this Agreement at or prior to the Closing;
(b) the Parent shall have entered into the Amended Exchange Agreement;
(c) the Company will be satisfied, in its sole discretion, with its due diligence review of the Parent;
(d) the Parent shall have provided an executed employment agreement for each of the Company employees set forth in Section 8.3(d) of the Parent Disclosure Letter on the date of this Agreement;
(e) the Parent shall have obtained Board Agreements from each of the members of the Parent Board, as such Parent Board is to be constituted on the Effective Date;
(f) since the date of this Agreement, no Parent Material Adverse Effect shall have occurred;
(g) the Parent shall have filed the Certificate of Designation, certified by the Secretary of State of the State of Nevada, creating the Parent Convertible Preferred Stock;
(h) the Parent shall have delivered documentation reasonably required by the Company with respect to the issuance of the Parent Common Stock and the Parent Convertible Preferred Stock to the Polymath Shareholders;
(i) the Parent shall have delivered documentation reasonably required by the Company with respect to the issuance of the Replacement Options;
(j) the Parent shall have delivered documentation reasonably required by the Company with respect to the resignation, in a form reasonably satisfactory to the Company, dated as of the Closing Date and effective as of the Closing, executed by each of the officers and directors of the Parent who are not to continue as an officer or director, as the case may be, of the Parent after the Closing as listed in Section 8.3(j) of the Parent Disclosure Letter;
(k) the Parent shall have satisfied all conditions and delivered all documentation necessary for the closing of the first tranche of the Concurrent Financing;
(l) the Parent shall be in full compliance with the continued listing requirements of Nasdaq and Nasdaq shall have not issued any deficiency letters to the Parent;
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(m) the Parent shall have maintained a minimum market value of listed securities (as defined in the Nasdaq Marketplace Rules) of at least $10,000,000 for a period of at least ten (10) consecutive trading days;
(n) certain Polymath Shareholders shall have obtained voting agreements to such Polymath Shareholders’ satisfaction; and
(o) the Parent and Amalco shall each have executed and delivered, at the sole election of the Company, either: (a) a joinder agreement, in form and substance reasonably satisfactory to the Company, pursuant to which each jointly and severally agrees to be bound by that certain Strategic Advisor Agreement dated August 17, 2026 (the “Advisor Agreement”) and that certain Indemnification and Release Agreement dated August 17, 2026 (the “Indemnification Agreement”); or (b) each of the Advisor Agreement and Indemnification Agreement as a direct party thereto, in each case effective as of the Closing Date and without modification any terms of the Advisor Agreement or Indemnification Agreement.
Article
IX
TERMINATION
Section 9.1 Termination. This Agreement may be terminated at any time prior to the Closing (with respect to Section 9.1(b) through Section 9.1(d) by written notice by the terminating Party to the other Parties):
(a) by the mutual written consent of the Parent and the Company;
(b) by either the Parent or the Company if the Closing shall not have been consummated on or before September 30, 2026; provided, however, that the right to terminate this Agreement under this Section 9.1 shall not be available with respect to a Party if the failure to consummate the Closing on or prior to such date is the result of any material breach of this Agreement by the party seeking to terminate the Agreement pursuant to the terms of this Section 9.1(b);
(c) by either the Parent or the Company if a court of competent jurisdiction or other governmental body shall have issued a nonappealable final order, decree or ruling or taken any other action, in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the Closing; or
(d) by either the Parent or the Company if (i) there has been a breach of or inaccuracy in any representation, warranty, covenant or agreement on the part of the Company, on the one hand, or any of the Parent or SubCo, on the other hand, set forth in this Agreement, such that the conditions set forth in Article VIII would not be satisfied by the other Party and (ii) such breach or inaccuracy shall not have been cured within 30 days following receipt by the breaching Party of written notice of such breach or inaccuracy from the other Party; provided that the terminating Party is not then in breach of this Agreement so as to cause the conditions to the Closing set forth in Article VIII to not be satisfied as of the Closing Date.
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Section 9.2 Effect of Termination. In the event of termination of this Agreement as provided in Section 9.1, there shall be no liability on the part of either Party or their respective officers, managers, employees, except as a result of any intentional breach of this Agreement that occurred prior to such termination. Notwithstanding the foregoing, the Confidentiality Agreement and the provisions of Section 7.9, this Section 9.2 and Article XI shall remain in full force and effect and survive any termination of this Agreement. For purposes of this Agreement, the failure to consummate the Closing pursuant to, and when required by, the terms of this Agreement shall constitute a willful breach hereunder. The non-breaching party may petition a court to award damages in connection with any willful breach by the other Party of the terms and conditions set forth in this Agreement.
Article
X
AMENDMENTs
Section 10.1 Amendments. This Agreement may at any time and from time to time on or before the Effective Date be amended by written agreement of the Parties. All waivers of rights under this Agreement shall be in writing, and no waiver by any Party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty, covenant or agreement hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.
Article
XI
general provisionS
Section 11.1 Non-survival of Representations and Warranties. None of the representations, warranties, covenants or agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, other than those covenants or agreements of the Parties which by their terms apply, or are to be performed in whole or in part, after the Effective Time.
Section 11.2 Publicity. Any public announcement or similar publicity with respect to this Agreement or the Amalgamation and the other transactions contemplated by this Agreement will be issued at such time and in such manner as mutually agreed by each Party unless otherwise required by Applicable Law, Governmental Entity or securities listing standards; provided, however, and notwithstanding the foregoing, a Party may issue a press release or public announcement related to this Agreement or the transactions contemplated herein that does not disclose the material terms thereof (other than the transaction value disclosed in the Parent’s public filings) after the Closing without the consent of the other Parties; and provided, further, however and notwithstanding the foregoing, the Parent may make such public disclosures at such time and in such manner as the Parent determines is required under Applicable Law or as it otherwise deems appropriate. With respect to communications prior to the Closing, (x) the form of press release announcing the Amalgamation and the other transactions contemplated by this Agreement will be in form mutually agreed by the Parties, and (y) the Parties will consult with each other concerning the means by which employees, customers, suppliers and others having dealings with the Parties will be informed of the Amalgamation and the other transactions contemplated by this Agreement.
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Section 11.3 Waiver. The Parties may, by action taken or authorized by their respective Boards of Directors, to the extent permitted by Applicable Law, waive compliance with any of the agreements or conditions of the other parties contained herein; provided, however, that after the Parent Stockholder Approval has been obtained, no waiver may be made that pursuant to Applicable Law requires further approval or adoption by the Polymath Shareholders or the Parent, as applicable, without such further approval or adoption. Any agreement on the part of a Party to any such waiver shall be valid only if set forth in a written instrument executed and delivered by a duly authorized officer on behalf of such Party. No failure or delay of any Party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Parties hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have hereunder.
Section 11.4 Fees and Expenses. Except as otherwise set forth in this Agreement or as agreed to by the Parties, fees and expenses incurred in connection with this Agreement and Consummation of the Transaction up to $750,000 will be paid from the Working Capital.
Section 11.5 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by e-mail, upon written confirmation of receipt by e-mail or otherwise, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the Party to receive such notice:
if to the Parent or SubCo, to:
60 North 1400 West
Centerville, Utah, 84014
Attention:
Steven Passey
Email: [email protected]
with a copy (which shall not constitute notice) to:
ArentFox
Schiff LLP
1717 K Street NW
Washington, DC 20006
Attention: Cavas S. Pavri
Email: [email protected]
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if to Company, to:
Polymath Research Inc.
First Canadian Place
100 King Street West, Suite 5700
Toronto, ON M5X 1C7
Attention: Natalie Hirsch
Email: [email protected]
with a copy (which shall not constitute notice) to:
Cozen
O’Connor LLP
550 Burrard Street, Suite 2501
Vancouver, BC V6C 2B5
Attention: Virgil Z. Hlus
Email: [email protected]
Section 11.6 Entire Agreement. This Agreement, the Company Disclosure Letter, the Parent Disclosure Letter, the Certificate of Designations and the Confidentiality Agreement constitute the entire agreement, and supersede all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications and understandings among the Parties with respect to the subject matter hereof and thereof.
Section 11.7 No Third-Party Beneficiaries.
(a) Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the Parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement, except as provided in Section 2.12(a) and Section 7.3.
(b) The representations and warranties in this Agreement are the product of negotiations among the Parties and are for the sole benefit of the Parties. Any inaccuracies in such representations and warranties are subject to waiver by the Parties in accordance with Section 11.3 without notice or liability to any other Person. In some instances, the representations and warranties in this Agreement may represent an allocation among the Parties of risks associated with particular matters regardless of the knowledge of any of the Parties. Consequently, Persons other than the Parties may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.
Section 11.8 Governing Law. This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of Nevada, without regard to the laws of any other jurisdiction that might be applied because of the conflicts-of-laws principles of the State of Nevada.
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Section 11.9 Submission to Jurisdiction. Each of the Parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by any Party or its Affiliates against any other Party or its Affiliates shall be brought and determined in the Eighth Judicial District Court of the State of Nevada; provided, that if jurisdiction is not then available in the Eighth Judicial District Court of the State of Nevada, then any such legal action or proceeding may be brought in any federal court located in the State of Nevada or any other Nevada state court. Each of the Parties hereby irrevocably submits to the jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby. Each of the Parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in Nevada, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Nevada as described herein. Each of the Parties further agrees that notice as provided herein shall constitute sufficient service of process and the Parties further waive any argument that such service is insufficient. Each of the Parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in Nevada as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.
Section 11.10 Assignment; Successor. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any Party without the prior written consent of the other Parties, and any such assignment without such prior written consent shall be null and void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns.
Section 11.11 Specific Performance. The Parties agree that irreparable damage would occur in the event that the Parties do not perform the provisions of this Agreement in accordance with its terms or otherwise breach such provisions. Accordingly, the Parties acknowledge and agree that each Party shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in the Eighth Judicial District Court of the State of Nevada, provided, that if jurisdiction is not then available in the Eighth Judicial District Court of the State of Nevada, then in any federal court located in the State of Nevada or any other Nevada state court, this being in addition to any other remedy to which such Party is entitled at law or in equity. Each of the Parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security as a prerequisite to obtaining equitable relief.
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Section 11.12 Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any Applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.
Section 11.13 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 11.14 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties.
Section 11.15 Electronic Signature. This Agreement may be executed by .pdf or other electronic signature and a .pdf or other electronic signature shall constitute an original for all purposes.
Section 11.16 No Presumption against Drafting Party. Each of the Parent, SubCo and the Company acknowledges that each Party to this Agreement has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting Party has no application and is expressly waived.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
| TRUGOLF HOLDINGS, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| 18141991 CANADA INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| POLYMATH RESEARCH INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
Exhibit 3.1
CERTIFICATE OF DESIGNATION OF RIGHTS AND PREFERENCES OF
SERIES B CONVERTIBLE PREFERRED STOCK OF
TRUGOLF HOLDINGS, INC.
TERMS OF SERIES B CONVERTIBLE PREFERRED STOCK
1. Designation and Number of Shares. There shall hereby be created and established a series of preferred stock of TruGolf Holdings, Inc. (the “Company”), a Nevada corporation, designated as “Series B Convertible Preferred Stock” (the “Series B Convertible Preferred Stock”). The authorized number of shares of Series B Convertible Preferred Stock (the “Preferred Shares”) shall be [_] ([_]) shares (including [_] ([_]) Preferred Shares issuable upon exercise of the Preferred Warrants). Each Preferred Share shall have a par value of $0.0001 per share. Capitalized terms not defined herein shall have the meaning as set forth in Section 32 below.
2. Ranking. Except to the extent that the Required Holders (as defined in the Securities Purchase Agreement) expressly consent to the creation of Parity Stock (as defined below) or Senior Preferred Stock (as defined below) in accordance with Section 16, all shares of capital stock of the Company, other than the Series A Preferred Stock, shall be junior in rank to all Preferred Shares with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company (such junior stock is referred to herein collectively as “Junior Stock”). For the avoidance of doubt, the Preferred Shares will, with respect to dividend rights and rights on liquidation, winding-up and dissolution, rank (A) junior to the Senior Preferred Stock, (B) on parity with the Parity Stock and (C) senior to the Junior Stock. The rights of all such shares of capital stock of the Company shall be subject to the rights, powers, preferences and privileges of the Preferred Shares. Without limiting any other provision of this certificate of designation (this “Certificate of Designation”), without the prior express consent of the Required Holders, voting separately as a single class, the Company shall not hereafter authorize or issue any additional or other shares of capital stock that is (i) of senior rank to the Preferred Shares in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company (collectively, the “Senior Preferred Stock”) (ii) of pari passu rank to the Preferred Shares in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company (collectively, the “Parity Stock”) or (iii) any Junior Stock having a maturity date or any other date requiring redemption or repayment of such shares of Junior Stock that is prior to the second anniversary of the Initial Issuance Date. In the event of the merger or consolidation of the Company with or into another corporation, the Preferred Shares shall maintain their relative rights, powers, designations, privileges and preferences provided for herein and no such merger or consolidation shall result inconsistent therewith.
3. Dividends.
(a) From and after the first date of issuance of any Preferred Shares (the “Initial Issuance Date”), the Preferred Shares shall commence accruing dividends (“Dividends”) at the Dividend Rate computed on the basis of a 360-day year and twelve 30-day months. Dividends shall be payable in arrears on the first Trading Day of each Fiscal Quarter (each, an “Dividend Date”) with the first Dividend Date being the first Trading Day of the initial Fiscal Quarter commencing after the Initial Issuance Date. Dividends shall be payable on each Dividend Date, to each record holder (each, a “Holder”, and collectively, the “Holders”) of Preferred Shares on the applicable Dividend Date, in shares of Common Stock (“Dividend Shares”) so long as no Equity Conditions Failure exists; provided however, that the Company may, at its option following notice to each Holder, pay Dividends on any Dividend Date in cash (“Cash Dividends”) or in a combination of a Cash Dividends and a payment in Dividend Shares or, so long as no Equity Conditions Failure exists, capitalize such Dividend by increasing the Stated Value of each Preferred Share (the “Capitalized Dividend”) on such Dividend Date. The Company shall deliver a written notice (each, an “Dividend Election Notice”) to each Holder of the Preferred Shares on or prior to the fifth (5th) Trading Day immediately prior to the applicable Dividend Date (the date such notice is delivered to all of the Holders, the “Dividend Notice Date”) which notice (i) either (A) confirms that Dividend to be paid on such Dividend Date shall be paid entirely in Dividend Shares or (B) elects to pay a Cash Dividend or a combination of a Cash Dividend and a payment in Dividend Shares and specifies the amount of Dividend that shall be a Cash Dividend and the amount of Dividend, if any, that shall be paid in Dividend Shares or (C) elects to effect a Capitalized Dividend and (ii) to the extent Dividend Shares are being issued or a Capitalized Dividend is being effected, certifies that there has been no Equity Conditions Failure. If an Equity Conditions Failure exists as of the Dividend Notice Date, then unless the Company has elected to pay Cash Dividends, the Dividend Election Notice shall indicate that unless such applicable Holder waives the Equity Conditions Failure, the Dividend shall be paid as a Cash Dividend. Notwithstanding anything herein to the contrary, if no Equity Conditions Failure exists as of the Dividend Notice Date, but an Equity Conditions Failure occurs at any time prior to the Dividend Date, (A) the Company shall provide each Holder a subsequent notice to that effect and (B) unless such applicable Holder waives such Equity Conditions Failure, the Dividend shall be paid as a Cash Dividend. Dividend to be paid on a Dividend Date in Dividend Shares shall be paid in a number of fully paid and nonassessable shares (rounded to the nearest whole share) of Common Stock equal to the quotient of (1) the amount of Dividend payable on such Dividend Date less any Cash Dividend and (2) the Dividend Conversion Price in effect on the applicable Dividend Date.
(b) When any Dividend Shares are to be paid on a Dividend Date to a Holder, the Company shall (i) (A) provided that the Company’s transfer agent (the “Transfer Agent”) is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program (“FAST”), credit such aggregate number of Dividend Shares to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (B) if the Transfer Agent is not participating in FAST, issue and deliver on the applicable Dividend Date, to the address set forth in the register maintained by the Company for such purpose pursuant to the Exchange Agreements or to such address as specified by such Holder in writing to the Company at least two (2) Business Days prior to the applicable Dividend Date, a certificate, registered in the name of such Holder or its designee, for the number of Dividend Shares to which such Holder shall be entitled and (ii) with respect to each Dividend Date, increase the Stated Value of the Preferred Shares by the amount of any Capitalized Dividend (if applicable); provided that in the event of the Conversion Floor Price Condition, on the applicable Dividend Date the Stated Value of the remaining Preferred Shares of such Holder shall automatically increase, pro rata, by the applicable Dividend Floor Amount or, at the Company’s option, the Company shall deliver the applicable Dividend Floor Amount to such applicable Holder on the applicable Dividend Date.
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(c) Prior to the payment of Dividends on a Dividend Date, Dividends on the Preferred Shares shall accrue at the Dividend Rate and be payable by way of inclusion of the Dividends in the Conversion Amount on each Conversion Date in accordance with Section 4(b) or upon any redemption in accordance with Section 9 or upon any required payment upon any Bankruptcy Triggering Event. From and after the occurrence and during the continuance of any Triggering Event, the Dividend Rate in effect with respect to such determination shall automatically be increased to the Default Rate. In the event that such Triggering Event is subsequently cured (and no other Triggering Event then exists (including, without limitation, for the Company’s failure to pay such Dividends at the Default Rate on the applicable Dividend Date)), the adjustment referred to in the preceding sentence shall cease to be effective as of the calendar day immediately following the date of such cure; provided that the Dividends as calculated and unpaid at such increased rate during the continuance of such Triggering Event shall continue to apply to the extent relating to the days after the occurrence of such Triggering Event through and including the date of such cure of such Triggering Event.
4. Conversion. At any time after the Initial Issuance Date, each Preferred Share shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock (the “Conversion Shares”), on the terms and conditions set forth in this Section 4.
(a) Holder’s Conversion Right. Subject to the provisions of Section 4(d), at any time or times on or after the Initial Issuance Date, each Holder shall be entitled to convert any portion of the outstanding Preferred Shares held by such Holder into validly issued, fully paid and non-assessable Conversion Shares in accordance with Section 4(c) at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Preferred Shares.
(b) Conversion Rate. Except as otherwise provided herein, the number of Conversion Shares issuable upon conversion of any Preferred Share pursuant to this Section 4 shall be determined by dividing (x) the Conversion Amount of such Preferred Share by (y) the Conversion Price (or, with respect to the conversion of any Make-Whole Amount, the Alternate Conversion Price as of the applicable Conversion Date (as defined below)) (the “Conversion Rate”).
(i) For purposes of this Certificate of Designation, the term “Conversion Amount” means, with respect to each Preferred Share, as of the applicable date of determination, the sum of (1) the Stated Value thereof plus (2) any Additional Amount thereon as of such date of determination plus (3) the Make-Whole Amount, if any, plus (4) any other amounts owed to such Holder pursuant to this Certificate of Designation or any other Exchange Document (as defined in the Exchange Agreements).
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(ii) For purposes of this Certificate of Designation, the term “Conversion Price” means, with respect to each Preferred Share, as of any Conversion Date or other date of determination, $1.00, subject to adjustment as provided herein.
(c) Mechanics of Conversion. The conversion of each Preferred Share shall be conducted in the following manner:
(i) Optional Conversion. To convert one or more Preferred Shares into Conversion Shares on any date (a “Conversion Date”), a Holder shall deliver (whether via electronic mail or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion of the Preferred Share(s) subject to such conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company. If required by Section 4(c)(ii), within two (2) Trading Days following a conversion of any such Preferred Shares as aforesaid, such Holder shall surrender to a nationally recognized overnight delivery service for delivery to the Company the original certificates, if any, representing the Preferred Shares (the “Preferred Share Certificates”) so converted as aforesaid (or an indemnification undertaking with respect to the Preferred Shares in the case of its loss, theft or destruction as contemplated by Section 18(b)). On or before the first (1st) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by electronic mail an acknowledgment of confirmation and representation as to whether such shares of Common Stock may then be resold pursuant to Rule 144 or an effective and available registration statement, in the form attached hereto as Exhibit II, of receipt of such Conversion Notice to such Holder and the Transfer Agent, which confirmation shall constitute an instruction to the Transfer Agent to process such Conversion Notice in accordance with the terms set forth herein. On or before the first (1st) Trading Day following each date on which the Company has received a Conversion Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade initiated on the applicable Conversion Date of such Conversion Shares issuable pursuant to such Conversion Notice) (the “Share Delivery Deadline”), the Company shall (1) provided that the Transfer Agent is participating in FAST and such shares of Common Stock (i) (A) may then be sold by the applicable Holder pursuant to an available and effective registration statement and (B) such Holder provides such documentation or other information evidencing the sale of the shares of Common Stock as the Company, the Transfer Agent or legal counsel to the Company shall reasonably request (which, for the avoidance of doubt, shall not include the requirement of a medallion guarantee or a legal opinion) or (ii) may be sold by such Holder pursuant to Rule 144 of the 1933 Act, as applicable (the “Resale Eligibility Conditions”, which conditions for the avoidance of doubt do not apply to freely tradeable securities), credit such aggregate number of Conversion Shares to which such Holder shall be entitled pursuant to such conversion to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (2) if the Transfer Agent is not participating in FAST or the Resale Eligibility Conditions are not satisfied, upon the request of such Holder, issue and deliver (via reputable overnight courier) to the address as specified in such Conversion Notice, a certificate, registered in the name of such Holder or its designee, for the number of Conversion Shares to which such Holder shall be entitled; provided that in the event of the Conversion Floor Price Condition, on the applicable Conversion Date the Stated Value of the remaining Preferred Shares of such Holder shall automatically increase, pro rata, by the applicable Make-Whole Floor Amount or, at the Company’s option, the Company shall deliver the applicable Make-Whole Floor Amount to such applicable Holder on the applicable Conversion Date. If the number of Preferred Shares represented by the Preferred Share Certificate(s) submitted for conversion pursuant to Section 4(c)(ii) is greater than the number of Preferred Shares being converted, then the Company shall, as soon as practicable and in no event later than two (2) Trading Days after receipt of the Preferred Share Certificate(s) and at its own expense, issue and mail to such Holder (or its designee) by overnight courier service a new Preferred Share Certificate or a new Book-Entry (in either case, in accordance with Section 18(d)) representing the number of Preferred Shares not converted. The Person or Persons entitled to receive the Conversion Shares issuable upon a conversion of Preferred Shares shall be treated for all purposes as the record holder or holders of such Conversion Shares on the Conversion Date. Notwithstanding the foregoing, if a Holder delivers a Conversion Notice to the Company prior to the date of issuance of Preferred Shares to such Holder, whereby such Holder elects to convert such Preferred Shares pursuant to such Conversion Notice, the Share Delivery Deadline with respect to any such Conversion Notice shall be the later of (x) the date of issuance of such Preferred Shares and (y) the first (1st) Trading Day after the date of such Conversion Notice. Notwithstanding anything to the contrary contained in this Certificate of Designation or the Registration Rights Agreement, after the effective date of a Registration Statement (as defined in the Registration Rights Agreement) and prior to a Holder’s receipt of the notice of a Grace Period (as defined in the Registration Rights Agreement), the Company shall cause the Transfer Agent to deliver unlegended shares of Common Stock to such Holder (or its designee) in connection with any sale of Registrable Securities (as defined in the Registration Rights Agreement) with respect to which such Holder has entered into a contract for sale, and delivered a copy of the prospectus included as part of the particular Registration Statement to the extent applicable, and for which such Holder has not yet settled.
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(ii) Company’s Failure to Timely Convert. If the Company shall fail, for any reason or for no reason, on or prior to the applicable Share Delivery Deadline, either (I) if the Transfer Agent is not participating in FAST or the Resale Eligibility Conditions are not satisfied, to issue and deliver to such Holder (or its designee) a certificate for the number of Conversion Shares to which such Holder is entitled and register such Conversion Shares on the Company’s share register or, if the Transfer Agent is participating in FAST and the Resale Eligibility Conditions are satisfied, to credit such Holder’s or its designee’s balance account with DTC for such number of Conversion Shares to which such Holder is entitled upon such Holder’s conversion of any Conversion Amount (as the case may be) or (II) if the Registration Statement covering the resale of the Conversion Shares that are the subject of the Conversion Notice (the “Unavailable Conversion Shares”) is not available for the resale of such Unavailable Conversion Shares and the Company fails to promptly, but in no event later than as required pursuant to the Registration Rights Agreement (x) notify such Holder and (y) deliver the shares of Common Stock electronically without any restrictive legend by crediting such aggregate number of shares of Common Stock to which such Holder is entitled pursuant to such conversion to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause (II) is hereinafter referred to as a “Notice Failure” and together with the event described in clause (I) above, a “Conversion Failure”), and if on or after such Share Delivery Deadline such Holder acquires (in an open market transaction, stock loan or otherwise) shares of Common Stock corresponding to all or any portion of the number of Conversion Shares issuable upon such conversion that such Holder is entitled to receive from the Company and has not received from the Company in connection with such Conversion Failure or Notice Failure, as applicable, then, in addition to all other remedies available to such Holder, the Company shall, within two (2) Business Days after receipt of such Holder’s request and in such Holder’s discretion, either: (I) pay cash to such Holder in an amount equal to such Holder’s total purchase price (including brokerage commissions, stock loan costs and other out-of-pocket expenses, if any) for the shares of Common Stock so acquired (including, without limitation, by any other Person in respect, or on behalf, of such Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue and deliver such certificate (and to issue such Conversion Shares) or credit to the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Conversion Shares to which such Holder is entitled upon such Holder’s conversion hereunder (as the case may be) (and to issue such Conversion Shares) shall terminate, or (II) promptly honor its obligation to so issue and deliver to such Holder a certificate or certificates representing such Conversion Shares or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Conversion Shares to which such Holder is entitled upon such Holder’s conversion hereunder (as the case may be) and pay cash to such Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (x) such number of shares of Common Stock multiplied by (y) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date of the applicable Conversion Notice and ending on the date of such issuance and payment under this clause (II). In addition to the foregoing, if on or prior to the Share Delivery Deadline either (A) the Transfer Agent is not participating in FAST or the Resale Eligibility Conditions are not satisfied, the Company shall fail to issue and deliver to such Holder (or its designee) a certificate and register such Conversion Shares on the Company’s share register or, if the Transfer Agent is participating in the FAST and the Resale Eligibility Conditions are satisfied, the Transfer Agent shall fail to credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Conversion Shares to which such Holder is entitled upon such Holder’s conversion hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (B) a Notice Failure occurs, then, in addition to all other remedies available to such Holder, (X) the Company shall pay in cash to such Holder on each day after the Share Delivery Deadline that the issuance of such Conversion Shares is not timely effected an amount equal to 1% of the product of (A) the sum of the number of Conversion Shares not issued to such Holder on or prior to the Share Delivery Deadline and to which such Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by such Holder in writing as in effect at any time during the period beginning on the applicable Conversion Date and ending on the applicable Share Delivery Deadline and (Y) such Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned, as the case may be, all, or any portion, of such Preferred Shares that has not been converted pursuant to such Conversion Notice; provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 4(c)(ii) or otherwise. 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 certificates representing Conversion Shares (or to electronically deliver such Conversion Shares) upon the conversion of the Preferred Shares as required pursuant to the terms hereof. Notwithstanding anything herein to the contrary, with respect to any given Notice Failure and/or Conversion Failure, as applicable, this Section 4(c)(ii) shall not apply to a Holder to the extent the Company has already paid such amounts in full to such Holder with respect to such Notice Failure and/or Conversion Failure, as applicable, pursuant to the analogous sections of the Exchange Agreement.
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(iii) Registration; Book-Entry. At the time of issuance of any Preferred Shares hereunder, the applicable Holder may, by written request (including by electronic-mail) to the Company, elect to receive such Preferred Shares in the form of one or more Preferred Share Certificates or in Book-Entry form. The Company (or the Transfer Agent, as custodian for the Preferred Shares) shall maintain a register (the “Register”) for the recordation of the names and addresses of the Holders of each Preferred Share and the Stated Value of the Preferred Shares and whether the Preferred Shares are held by such Holder in Preferred Share Certificates or in Book-Entry form (the “Registered Preferred Shares”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and each Holder of the Preferred Shares shall treat each Person whose name is recorded in the Register as the owner of a Preferred Share for all purposes (including, without limitation, the right to receive payments and Dividends hereunder) notwithstanding notice to the contrary. A Registered Preferred Share may be assigned, transferred or sold only by registration of such assignment or sale on the Register. Upon its receipt of a written request to assign, transfer or sell one or more Registered Preferred Shares by such Holder thereof, the Company shall record the information contained therein in the Register and issue one or more new Registered Preferred Shares in the same aggregate Stated Value as the Stated Value of the surrendered Registered Preferred Shares to the designated assignee or transferee pursuant to Section 18, provided that if the Company does not so record an assignment, transfer or sale (as the case may be) of such Registered Preferred Shares within two (2) Business Days of such a request, then the Register shall be automatically deemed updated to reflect such assignment, transfer or sale (as the case may be). Notwithstanding anything to the contrary set forth in this Section 4, following conversion of any Preferred Shares in accordance with the terms hereof, the applicable Holder shall not be required to physically surrender such Preferred Shares held in the form of a Preferred Share Certificate to the Company unless (A) the full or remaining number of Preferred Shares represented by the applicable Preferred Share Certificate are being converted (in which event such certificate(s) shall be delivered to the Company as contemplated by this Section 4(c)(ii)) or (B) such Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of Preferred Shares upon physical surrender of the applicable Preferred Share Certificate. Each Holder and the Company shall maintain records showing the Stated Value and Dividends converted and/or paid (as the case may be) and the dates of such conversions and/or payments (as the case may be) or shall use such other method, reasonably satisfactory to such Holder and the Company, so as not to require physical surrender of a Preferred Share Certificate upon conversion. If the Company does not update the Register to record such Stated Value and Dividends converted and/or paid (as the case may be) and the dates of such conversions and/or payments (as the case may be) within two (2) Business Days of such occurrence, then the Register shall be automatically deemed updated to reflect such occurrence. In the event of any dispute or discrepancy, the records of the Company establishing the number of Preferred Shares to which the record holder is entitled shall be controlling and determinative in the absence of manifest error. A Holder and any transferee or assignee, by acceptance of a certificate, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of any Preferred Shares, the number of Preferred Shares represented by such certificate may be less than the number of Preferred Shares stated on the face thereof. Each Preferred Share Certificate shall bear the following legend:
ANY TRANSFEREE OR ASSIGNEE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF THE CORPORATION’S CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF SERIES B CONVERTIBLE PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 4(c)(ii) THEREOF. THE NUMBER OF SHARES OF SERIES B CONVERTIBLE PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES B CONVERTIBLE PREFERRED STOCK STATED ON THE FACE HEREOF PURSUANT TO SECTION 4(c)(ii) OF THE CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF SERIES B CONVERTIBLE PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE.
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(iv) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one Holder for the same Conversion Date and the Company can convert some, but not all, of such Preferred Shares submitted for conversion, the Company shall convert from each Holder electing to have Preferred Shares converted on such date a pro rata amount of such Holder’s Preferred Shares submitted for conversion on such date based on the number of Preferred Shares submitted for conversion on such date by such Holder relative to the aggregate number of Preferred Shares submitted for conversion on such date. In the event of a dispute as to the number of Conversion Shares issuable to a Holder in connection with a conversion of Preferred Shares, the Company shall issue to such Holder the number of Conversion Shares not in dispute and resolve such dispute in accordance with Section 23. If a Conversion Notice delivered to the Company would result in a breach of Section 4(d) below, and the applicable Holder does not elect in writing to withdraw, in whole, such Conversion Notice, the Company shall hold such Conversion Notice in abeyance until such time as such Conversion Notice may be satisfied without violating Section 4(d) below (with such calculations thereunder made as of the date such Conversion Notice was initially delivered to the Company).
(d) Limitation on Beneficial Ownership.
(i) Beneficial Ownership. The Company shall not effect the conversion of any of the Preferred Shares held by a Holder, and such Holder shall not have the right to convert any of the Preferred Shares held by such Holder pursuant to the terms and conditions of this Certificate of Designation and any such conversion shall be null and void and treated as if never made, to the extent that after giving effect to such conversion, such Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Holder and the other Attribution Parties shall include the number of shares of Common Stock held by such Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon conversion of the Preferred Shares with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted Preferred Shares beneficially owned by such Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any convertible notes, convertible preferred stock or warrants, including the Preferred Shares) beneficially owned by such Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 4(d). For purposes of this Section 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. For the avoidance of doubt, the calculation of the Maximum Percentage shall take into account the concurrent exercise and/or conversion, as applicable, of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such Holder and/or any other Attribution Party, as applicable. For purposes of determining the number of outstanding shares of Common Stock a Holder may acquire upon the conversion of such Preferred Shares without exceeding the Maximum Percentage, such Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the SEC, as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the “Reported Outstanding Share Number”). If the Company receives a Conversion Notice from a Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall notify such Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Conversion Notice would otherwise cause such Holder’s beneficial ownership, as determined pursuant to this Section 4(d), to exceed the Maximum Percentage, such Holder must notify the Company of a reduced number of shares of Common Stock to be purchased pursuant to such Conversion Notice. For any reason at any time, upon the written or oral request of any Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to such 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 such Preferred Shares, by such Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of Common Stock to a Holder upon conversion of such Preferred Shares results in such Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which such Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and such Holder shall not have the power to vote or to transfer the Excess Shares. Upon delivery of a written notice to the Company, any Holder may from time to time increase (with such increase not effective until the sixty-first (61st) day after delivery of such notice) or decrease the Maximum Percentage of such Holder to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to such Holder and the other Attribution Parties and not to any other Holder that is not an Attribution Party of such Holder. For purposes of clarity, the shares of Common Stock issuable to a Holder pursuant to the terms of this Certificate of Designation in excess of the Maximum Percentage shall not be deemed to be beneficially owned by such Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to convert such Preferred Shares pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. The provisions of this paragraph shall not be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to the extent necessary to correct this paragraph (or any portion of this paragraph) which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 4(d) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of such Preferred Shares.
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(ii) Principal Market Regulation. The Company shall not issue any shares of Common Stock upon conversion of any Preferred Shares or otherwise pursuant to the terms of this Certificate of Designation if the issuance of such shares of Common Stock would exceed the aggregate number of shares of Common Stock which the Company may issue upon conversion of the Preferred Shares without breaching the Company’s obligations under the rules and regulations the listing rules of the Principal Market (the maximum number of shares of Common Stock which may be issued without violating such rules and regulations, the “Exchange Cap”), except that such limitation shall not apply in the event that the Company obtains the approval of its stockholders as required by the applicable rules and regulations of the Principal Market for issuances of shares of Common Stock in excess of such amount. Until such approval is obtained, no Holder shall be issued in the aggregate, upon conversion of any Preferred Shares, shares of Common Stock in an amount greater than the product of (i) the Exchange Cap as of the Initial Issuance Date multiplied by (ii) the quotient of (1) the aggregate number of Preferred Shares issued to such Holder on the Initial Issuance Date, divided by (2) the aggregate number of shares of Preferred Shares and Parity Stock outstanding as of the Initial Issuance Date (with respect to each Holder, the “Exchange Cap Allocation”). In the event that any Holder shall sell or otherwise transfer any of such Holder’s Preferred Shares, the transferee shall be allocated a pro rata portion of such Holder’s Exchange Cap Allocation with respect to such portion of such Preferred Shares so transferred, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation so allocated to such transferee. Upon conversion in full of a Holder’s Preferred Shares, the difference (if any) between such Holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such Holder upon such Holder’s conversion in full of such Preferred Shares shall be allocated, to the remaining holders of Preferred Shares and Parity Stock on a pro rata basis in proportion to the shares of Common Stock underlying the shares of preferred stock of the Company then held by each such holder of Preferred Shares and/or Parity Stock, as applicable.
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(e) Right of Alternate Conversion Upon a Triggering Event.
(i) General. Subject to Section 4(d), at any time after the earlier of a Holder’s receipt of a Triggering Event Notice (as defined below) and such Holder becoming aware of a Triggering Event and ending (such ending date, the “Alternate Conversion Right Expiration Date”) on the tenth (10th) Trading Day after the later of (x) the date such Triggering Event is cured and (y) such Holder’s receipt of a Triggering Event Notice that includes (I) a reasonable description of the applicable Triggering Event, (II) a certification as to whether, in the reasonable opinion of the Company, such Triggering Event is capable of being cured and, if applicable, a reasonable description of any existing plans of the Company to cure such Triggering Event and (III) a certification as to the date the Triggering Event occurred and, if cured on or prior to the date of such Triggering Event Notice, the applicable Alternate Conversion Right Expiration Date, such Holder may, at such Holder’s option, by delivery of a Conversion Notice to the Company (the date of any such Conversion Notice, each an “Alternate Conversion Date”), convert all, or any number of Preferred Shares held by such Holder into shares of Common Stock at the Alternate Conversion Price (each, an “Alternate Conversion”).
(ii) Mechanics of Alternate Conversion. On any Alternate Conversion Date, a Holder may voluntarily convert any number of Preferred Shares held by such Holder pursuant to Section 4(c) (with “Alternate Conversion Price” replacing “Conversion Price” for all purposes hereunder with respect to such Alternate Conversion and with “the applicable Required Premium multiplied by the Conversion Amount” replacing “Conversion Amount” in clause (x) of the definition of Conversion Rate in Section 4(b) above with respect to such Alternate Conversion) by designating in the Conversion Notice delivered pursuant to this Section 4(e)(ii) of this Certificate of Designation that such Holder is electing to use the Alternate Conversion Price for such conversion; provided that in the event of the Conversion Floor Price Condition, on the applicable Alternate Conversion Date the Stated Value of the remaining Preferred Shares of such Holder shall automatically increase, pro rata, by the applicable Alternate Conversion Floor Amount or, at the Company’s option, the Company shall deliver the applicable Alternate Conversion Floor Amount to such applicable Holder on the applicable Alternate Conversion Date. Notwithstanding anything to the contrary in this Section 4(e)(ii), but subject to Section 4(d), until the Company delivers to such Holder the shares of Common Stock to which such Holder is entitled pursuant to the applicable Alternate Conversion of such Holder’s Preferred Shares, such Preferred Shares may be converted by such Holder into shares of Common Stock pursuant to Section 4(c) without regard to this Section 4(e)(ii). In the event of an Alternate Conversion pursuant to this Section 4(e)(ii) of all, or any portion, of any Preferred Shares of a Holder, such Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for such Holder. Accordingly, any redemption premium due under this Section 4(e)(ii), together the Alternate Conversion Price used in such Alternate Conversion, as applicable, is intended by the parties to be, and shall be deemed, a reasonable estimate of, such Holder’s actual loss of its investment opportunity and not as a penalty.
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5. Triggering Events.
(a) General. Unless waived by the Holder, each of the following events shall constitute a “Triggering Event” and each of the events in clauses 5(a)(x), 5(a)(xi), and 5(a)(xii), shall constitute a “Bankruptcy Triggering Event”:
(i) the failure of the applicable Registration Statement (as defined in the Registration Rights Agreement) to be filed with the SEC on or prior to the date that is five (5) days after the applicable Filing Deadline (as defined in the Registration Rights Agreement) or the failure of the applicable Registration Statement to be declared effective by the SEC on or prior to the date that is fifteen (15) days after the applicable Effectiveness Deadline (as defined in the Registration Rights Agreement);
(ii) while the applicable Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of the applicable Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or such Registration Statement (or the prospectus contained therein) is unavailable to any holder of Registrable Securities (as defined in the Registration Rights Agreement) for sale of all of such holder’s Registrable Securities in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of five (5) consecutive days or for more than an aggregate of ten (10) days in any 365-day period (excluding days during an Allowable Grace Period (as defined in the Registration Rights Agreement));
(iii) the suspension from trading or the failure of the Common Stock to be trading or listed (as applicable) on an Eligible Market for a period of five (5) consecutive Trading Days;
(iv) the Company’s (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within five (5) Trading Days after the applicable Conversion Date or exercise date (as the case may be) or (B) notice, written or oral, to any holder of Preferred Shares, including, without limitation, by way of public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request for conversion of any Preferred Shares into shares of Common Stock that is requested in accordance with the provisions of this Certificate of Designation, other than pursuant to Section 4(c)(iv) hereof;
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(v) except to the extent the Company is in compliance with Section 11(b) below, at any time following the tenth (10th) consecutive day that a Holder’s Authorized Share Allocation (as defined in Section 11(a) below) is less than 200% of the number of shares of Common Stock that such Holder would be entitled to receive upon a conversion, in full, of all of the Preferred Shares then held by such Holder (assuming conversions at the Floor Price then in effect without regard to any limitations on conversion set forth in this Certificate of Designation);
(vi) the Board fails to declare any Dividend to be paid on the applicable Dividend Date in accordance with Section 3;
(vii) the Company’s failure to pay to any Holder any Dividend on any Dividend Date (whether or not declared by the Board) or any other amount when and as due under this Certificate of Designation (including, without limitation, the Company’s failure to pay any redemption payments or amounts hereunder), the Exchange Agreements or any other Exchange Document or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby (in each case, whether or not permitted pursuant to the Nevada Revised Statutes (“NRS”)), except, in the case of a failure to pay Dividends when and as due, in each such case only if such failure remains uncured for a period of at least two (2) Trading Days;
(viii) the Company fails to remove any restrictive legend on any certificate or any shares of Common Stock issued to the applicable Holder upon conversion or exercise (as the case may be) of any Securities (as defined in the Exchange Agreement) acquired by such Holder under the Exchange Documents as and when required by such Securities or the Exchange Agreement, as applicable, unless otherwise then prohibited by applicable federal securities laws, and any such failure remains uncured for at least five (5) days;
(ix) the occurrence of any default under, redemption of or acceleration prior to maturity of at least an aggregate of $750,000 of Indebtedness (as defined in the Exchange Agreement) of the Company or any of its Subsidiaries;
(x) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third party, shall not be dismissed within sixty (60) days of their initiation;
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(xi) the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Company or any Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a Uniform Commercial Code foreclosure sale or any other similar action under federal, state or foreign law;
(xii) the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or (ii) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law or (iii) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period of sixty (60) consecutive days;
(xiii) a final judgment or judgments for the payment of money aggregating in excess of $750,000 are rendered against the Company and/or any of its Subsidiaries and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged, settled or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; provided, however, any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $750,000 amount set forth above so long as the Company provides each Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to each Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity within thirty (30) days of the issuance of such judgment;
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(xiv) the Company and/or any Subsidiary, individually or in the aggregate, either (i) fails to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness in excess of $750,000 due to any third party (other than, with respect to unsecured Indebtedness only, payments contested by the Company and/or such Subsidiary (as the case may be) in good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP) or is otherwise in breach or violation of any agreement for monies owed or owing in an amount in excess of $750,000, which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist any other circumstance or event that would, with or without the passage of time or the giving of notice, result in a default or event of default under any agreement binding the Company or any Subsidiary, which default or event of default would or is likely to have a material adverse effect on the business, assets, operations (including results thereof), liabilities, properties, condition (including financial condition) or prospects of the Company or any of its Subsidiaries, individually or in the aggregate;
(xv) other than as specifically set forth in another clause of this Section 5(a), the Company or any Subsidiary breaches any representation or warranty in any material respect (other than representations or warranties subject to material adverse effect or materiality, which may not be breached in any respect) or any covenant or other term or condition of any Exchange Document, except, in the case of a breach of a covenant or other term or condition that is curable, only if such breach remains uncured for a period of two (2) consecutive Trading Days;
(xvi) a false or inaccurate certification (including a false or inaccurate deemed certification) by the Company that either (A) the Equity Conditions are satisfied, (B) there has been no Equity Conditions Failure, or (C) as to whether any Triggering Event has occurred;
(xvii) any breach or failure in any respect by the Company or any Subsidiary to comply with any provision of Section 13 of this Certificate of Designation;
(xviii) any Preferred Shares remain outstanding on or after January 8, 2030 (the “Maturity Date”);
(xix) any Change of Control occurs without the prior written consent of the Required Holders, which consent shall not be unreasonably withheld, conditioned or delayed;
(xx) any Material Adverse Effect occurs; or
(xxi) any provision of any Exchange Document shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against the Company, or the validity or enforceability thereof shall be contested, directly or indirectly, by the Company or any Subsidiary, or a proceeding shall be commenced by the Company or any Subsidiary or any governmental authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof or the Company or any of its Subsidiaries shall deny in writing that it has any liability or obligation purported to be created under one or more Exchange Documents.
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(b) Notice of a Triggering Event. Upon the occurrence of a Triggering Event with respect to the Preferred Shares, the Company shall within two (2) Business Days deliver written notice thereof via electronic mail and overnight courier (with next day delivery specified) (a “Triggering Event Notice”) to each Holder.
(c) Mandatory Redemption upon Bankruptcy Triggering Event. Notwithstanding anything to the contrary herein, and notwithstanding any conversion that is then required or in process, upon any Bankruptcy Triggering Event, the Company shall immediately redeem, in cash, each of the Preferred Shares then outstanding at a redemption price equal to the greater of (i) the product of (A) the Conversion Amount to be redeemed multiplied by (B) the Required Premium and (ii) the product of (X) the Conversion Rate (calculated using the lowest Alternate Conversion Price during the period commencing on the 20th Trading Day immediately preceding such public announcement and ending on the date the Company makes the entire redemption payment pursuant to this Section 5(b)) with respect to the Conversion Amount in effect immediately following the date of initial public announcement (or public filing of bankruptcy documents, as applicable) of such Bankruptcy Triggering Event multiplied by (Y) the product of (1) the Required Premium multiplied by (2) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date immediately preceding such Bankruptcy Triggering Event and ending on the date the Company makes the entire payment required to be made under this Section 5(b), without the requirement for any notice or demand or other action by any Holder or any other person or entity, provided that a Holder may, in its sole discretion, waive such right to receive payment upon a Bankruptcy Triggering Event, in whole or in part, and any such waiver shall not affect any other rights of such Holder or any other Holder hereunder, including any other rights in respect of such Bankruptcy Triggering Event or any right to conversion (or Alternate Conversion), as applicable.
6. Rights Upon Fundamental Transactions.
(a) Assumption. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Certificate of Designation and the other Exchange Documents in accordance with the provisions of this Section 6 pursuant to written agreements in form and substance reasonably satisfactory to the Required Holders, including agreements to deliver to each holder of Preferred Shares in exchange for such Preferred Shares a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Certificate of Designation, including, without limitation, having a stated value and dividend rate equal to the stated value and dividend rate of the Preferred Shares held by the Holders and having similar ranking to the Preferred Shares, and reasonably satisfactory to the Required Holders and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market. Upon the occurrence of any 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 Certificate of Designation and the other Exchange 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 Certificate of Designation and the other Exchange Documents with the same effect as if such Successor Entity had been named as the Company herein and therein. In addition to the foregoing, upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to each Holder confirmation that there shall be issued upon conversion or redemption of the Preferred Shares at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 7 and 15, which shall continue to be receivable thereafter)) issuable upon the conversion or redemption of the Preferred Shares prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity) which each Holder would have been entitled to receive upon the happening of such Fundamental Transaction had all the Preferred Shares held by each Holder been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of the Preferred Shares contained in this Certificate of Designation), as adjusted in accordance with the provisions of this Certificate of Designation. Notwithstanding the foregoing, such Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 6 to permit the Fundamental Transaction without the assumption of the Preferred Shares. The provisions of this Section 6 shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion or redemption of the Preferred Shares.
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(b) Notice of a Change of Control; Change of Control Election Notice. No sooner than the earlier of (x) twenty (20) Trading Days prior to the consummation of a Change of Control or (y) the public announcement of the entry into an agreement with respect to a Change of Control, nor later than ten (10) Trading Days prior to the consummation of a Change of Control, the Company shall deliver written notice thereof via electronic mail and overnight courier to each Holder (a “Change of Control Notice”). At any time during the period beginning after a Holder’s receipt of a Change of Control Notice or such Holder becoming aware of a Change of Control if a Change of Control Notice is not delivered to such Holder in accordance with the immediately preceding sentence (as applicable) and ending on twenty (20) Trading Days after the later of (A) the date of consummation of such Change of Control or (B) the date of receipt of such Change of Control Notice or (C) the date of the announcement of such Change of Control, such Holder may require, by delivering written notice thereof (“Change of Control Election Notice”) to the Company (which Change of Control Election Notice shall indicate the number of Preferred Shares subject to such election), to have the Company exchange such Holder’s Preferred Shares designated in such Change of Control Election Notice for consideration equal to the Change of Control Election Price, to be satisfied at the Company’s election (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), in either (I) rights (with a beneficial ownership limitation in the form of Section 4(d) hereof, mutatis mutandis) (collectively, the “Rights”), convertible in whole, or in part, at any time, without the requirement to pay any additional consideration, at the option of the Required Holders, into such Corporate Event Consideration (as defined below) applicable to such Change of Control equal in value to the Change of Control Election Price (as determined with the fair market value of the aggregate number of Successor Shares (as defined below) issuable upon conversion of the Rights to be determined in increments of 10% (or such greater percentage as the applicable Holder may notify the Company from time to time) of the portion of the Change of Control Election Price attributable to such Successor Shares (the “Successor Share Value Increment”), with the aggregate number of Successor Shares issuable upon exercise of the Rights with respect to the first Successor Share Value Increment determined based on 70% of the VWAP of the Successor Shares on the date the Rights are issued and on each of the nine (9) subsequent Trading Days, in each case, the aggregate number of additional Successor Shares issuable upon exercise of the Rights shall be determined based upon a Successor Share Value Increment at 70% of the VWAP of the Successor Shares in effect for such corresponding Trading Day (such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”)), or (II) in cash; provided, that the Company shall not consummate a Change of Control if the Corporate Event Consideration includes capital stock or other equity interest (the “Successor Shares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of the twenty (20) Trading Days prior to the date of consummation of such Change of Control is less than the aggregate number of Successor Shares issuable to all Holders upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on the date of issuance of the Rights and assuming the VWAP of the Successor Shares for each Trading Day in the Rights Measuring Period is the VWAP on the Trading Day ended immediately prior to the time of consummation of the Change of Control). The Company shall give each Holder written notice of each Consideration Election at least twenty (20) Trading Days prior to the time of consummation of such Change of Control. Payment of such amounts or delivery of the Rights, as applicable, shall be made by the Company (or at the Company’s direction) to each Holder on the later of (x) the second (2nd) Trading Day after the date of such request and (y) the date of consummation of such Change of Control (or, with respect to any Right, if applicable, such later time that holders of shares of Common Stock are initially entitled to receive Corporate Event Consideration with respect to the shares of Common Stock of such holder). Any Corporate Event Consideration included in the Rights, if any, pursuant to this Section 6(b) is pari passu with the Corporate Event Consideration to be paid to holders of shares of Common Stock and the Company shall not permit a payment of any Corporate Event Consideration to the holders of shares of Common Stock without on or prior to such time delivering the Right to the Holders in accordance herewith. Cash payments, if any, required by this Section 6(b) shall have priority to payments to all other stockholders of the Company in connection with such Change of Control. Notwithstanding anything to the contrary in this Section 6(b), but subject to Section 4(d), until the applicable Change of Control Election Price is paid in full to the applicable Holder in cash or Corporate Event Consideration in accordance herewith, the Preferred Shares submitted by such Holder for exchange or payment, as applicable, under this Section 6(b) may be converted, in whole or in part, by such Holder into Common Stock pursuant to Section 4 or in the event the Conversion Date is after the consummation of such Change of Control, stock or equity interests of the Successor Entity substantially equivalent to the Company’s shares of Common Stock pursuant to Section 6. In the event of the Company’s repayment or exchange, as applicable, of any of the Preferred Shares under this Section 6(b), such Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for a Holder. Accordingly, any Required Premium due under this Section 6(b) is intended by the parties to be, and shall be deemed, a reasonable estimate of such Holder’s actual loss of its investment opportunity and not as a penalty. Notwithstanding anything herein to the contrary, in connection with any redemption hereunder at a time a Holder is entitled to receive a cash payment under any of the other Exchange Documents, at the option of such Holder delivered in writing to the Company, the applicable redemption price hereunder shall be increased by the amount of such cash payment owed to such Holder under such other Exchange Document and, upon payment in full or conversion in accordance herewith, shall satisfy the Company’s payment obligation under such other Exchange Document.
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7. Rights Upon Issuance of Purchase Rights and Other Corporate Events.
(a) Purchase Rights. In addition to any adjustments pursuant to Section 8 and Section 15 below, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of any class of Common Stock (the “Purchase Rights”), then each Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of all the Preferred Shares (without taking into account any limitations or restrictions on the convertibility of the Preferred Shares and assuming for such purpose that all the Preferred Shares were converted at the Alternate Conversion Price as of the applicable record date) held by such Holder immediately prior to 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, to the extent that such Holder’s right to participate in any such Purchase Right would result in such Holder and the other Attribution Parties exceeding the Maximum Percentage, then such Holder shall not be entitled to participate in such Purchase Right to such extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (and beneficial ownership) to such extent of any such excess) and such Purchase Right to such extent shall be held in abeyance (and, if such Purchase Right has an expiration date, maturity date or other similar provision, such term shall be extended by such number of days held in abeyance, if applicable) for the benefit of such Holder until such time or times, if ever, as its right thereto would not result in such Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times such Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right held similarly in abeyance (and, if such Purchase Right has an expiration date, maturity date or other similar provision, such term shall be extended by such number of days held in abeyance, if applicable)) to the same extent as if there had been no such limitation.
(b) Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to ensure that each Holder will thereafter have the right, at such Holder’s option, to receive upon a conversion of all the Preferred Shares held by such Holder (i) such securities or other assets (the “Corporate Event Consideration”) to which such Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by such Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of the Preferred Shares set forth in this Certificate of Designation) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as such Holder would have been entitled to receive had the Preferred Shares held by such Holder initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate of an Alternate Conversion. Provision made pursuant the preceding sentence shall be in a form and substance reasonably satisfactory to the Required Holders. The provisions of this Section 7 shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of the Preferred Shares set forth in this Certificate of Designation.
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8. Rights Upon Issuance of Other Securities.
(a) Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on or after the Exchange Date the Company grants, issues or sells (or enters into any agreement to grant, issue or sell), or in accordance with this Section 8(a) is deemed to have granted, issued or sold, any shares of Common Stock (including the granting, issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Excluded Securities granted, issued or sold or deemed to have been granted, issued or sold) for a consideration per share (the “New Issuance Price”) less than a price equal to the Conversion Price in effect immediately prior to such granting, issuance or sale or deemed granting, issuance or sale (such Conversion Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation, determining the adjusted Conversion Price and the New Issuance Price under this Section 8(a)), the following shall be applicable:
(i) Issuance of Options. If the Company in any manner grants, issues or sells (or enters into any agreement to grant, issue or sell) any Options and the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting, issuance or sale of such Option for such price per share. For purposes of this Section 8(a)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting, issuance or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof, minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) with respect to any one share of Common Stock upon the granting, issuance or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof plus the value of any other consideration (including, without limitation, consideration consisting of cash, debt forgiveness, assets or any other property) received or receivable by, or benefit conferred on, the holder of such Option (or any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms thereof or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.
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(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells (or enters into any agreement to issue or sell) any Convertible Securities and the lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale (or the time of execution of such agreement to issue or sell, as applicable) of such Convertible Securities for such price per share. For the purposes of this Section 8(a)(ii), the “lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale (or pursuant to the agreement to issue or sell, as applicable) of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security or otherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) with respect to any one share of Common Stock upon the issuance or sale (or the agreement to issue or sell, as applicable) of such Convertible Security plus the value of any other consideration received or receivable (including, without limitation, any consideration consisting of cash, debt forgiveness, assets or other property) by, or benefit conferred on, the holder of such Convertible Security (or any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any such issuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price has been or is to be made pursuant to other provisions of this Section 8(a), except as contemplated below, no further adjustment of the Conversion Price shall be made by reason of such issuance or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion or exercise prices, as applicable, in connection with an event referred to in Section 8(a) below), the Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate (as the case may be) at the time initially granted, issued or sold. For purposes of this Section 8(a)(iii), if the terms of any Option or Convertible Security (including, without limitation, any Option or Convertible Security that was outstanding as of the Exchange Date) are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 8(a) shall be made if such adjustment would result in an increase of the Conversion Price then in effect.
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(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Required Holders, the “Primary Security”, and such Option and/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and the Secondary Security together with the Primary Security, each a “Unit”), together comprising one integrated transaction (or one or more transactions if such issuances or sales or deemed issuances or sales of securities of the Company either (A) have at least one investor or purchaser in common, (B) are consummated in reasonable proximity to each other and/or (C) are consummated under the same plan of financing), the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to be the lowest of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security and (z) the lowest VWAP on any Trading Day during the five (5) Trading Day period (the “Adjustment Period”) immediately following the public announcement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the applicable Eligible Market on a Trading Day, such Trading Day shall be the first Trading Day in such five Trading Day period and if any Preferred Shares are converted, on any given Conversion Date during any such Adjustment Period, solely with respect to such Preferred Shares converted on such applicable Conversion Date, such applicable Adjustment Period shall be deemed to have ended on, and included, the Trading Day immediately prior to such Conversion Date). If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Required Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Required Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.
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(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).
(b) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision of Section 7 or Section 15, if the Company at any time on or after the Exchange Date subdivides (by any stock split, stock dividend, stock combination, recapitalization or other similar transaction) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision of Section 7 or Section 15, if the Company at any time on or after the Exchange Date combines (by any stock split, stock dividend, stock combination, recapitalization or other similar transaction) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 8(b) shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 8(b) occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.
(c) Holder’s Right of Adjusted Conversion Price. In addition to and not in limitation of the other provisions of this Section 8(c), if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (other than pursuant to a Permitted ATM) (any such securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable or exercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting share splits, share combinations, and share dividends (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide written notice thereof via electronic mail and overnight courier to each Holder on the date of such agreement and/or the issuance of such shares of Common Stock, Convertible Securities or Options, as applicable. From and after the date the Company enters into such agreement or issues any such Variable Price Securities, each Holder shall have the right, but not the obligation, in its sole discretion to substitute the Variable Price for the Conversion Price upon conversion of the Preferred Shares by designating in the Conversion Notice delivered upon any conversion of Preferred Shares that solely for purposes of such conversion such Holder is relying on the Variable Price rather than the Conversion Price then in effect. A Holder’s election to rely on a Variable Price for a particular conversion of Preferred Shares shall not obligate such Holder to rely on a Variable Price for any future conversions of Preferred Shares.
(d) Stock Combination Event Adjustments. If at any time and from time to time on or after the Subscription Date there occurs any stock split, stock dividend, stock combination recapitalization or other similar transaction involving the Common Stock (each, a “Stock Combination Event”, and the date of any Stock Combination Event being the “Stock Combination Event Date”) and the Event Market Price is less than the Conversion Price then in effect (after giving effect to the adjustment in Section 8(c) above), then on the sixteenth (16th) Trading Day immediately following such Stock Combination Event Date, the Conversion Price then in effect on such sixteenth (16th) Trading Day (after giving effect to the adjustment in Section 8(b) above) shall be reduced (but in no event increased) to the Event Market Price. For the avoidance of doubt, if the adjustment in the immediately preceding sentence would otherwise result in an increase in the Conversion Price hereunder, no adjustment shall be made.
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(e) Other Events. In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect any Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 8 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Board shall in good faith determine and implement an appropriate adjustment in the Conversion Price so as to protect the rights of such Holder, provided that no such adjustment pursuant to this Section 8(a) will increase the Conversion Price as otherwise determined pursuant to this Section 8, provided further that if such Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Board and such Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.
(f) Calculations. All calculations under this Section 8 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.
(g) Voluntary Adjustment by Company. Subject to the rules and regulations of the Principal Market, the Company may at any time any Preferred Shares remain outstanding, with the prior written consent of the Required Holder, reduce the then current Conversion Price to any amount and for any period of time deemed appropriate by the Board.
(h) Reset. If on the twelve (12) month anniversary of the Initial Issuance Date (the “Reset Date”), the Conversion Price then in effect is greater than the arithmetic average of the VWAP of the Common Stock during the thirty (30) consecutive Trading Day period ending and including the Trading Day immediately preceding the Reset Date (the “Reset Price”), immediately after the close of the Principal Market on the Reset Date the Conversion Price shall automatically lower to such applicable Reset Price.
(i) SA Resets. On any SA Forced Exercise Notice Date (as defined in the Preferred Warrants) (each, a “SA Reset Date”), if (i) the Conversion Price then in effect is greater than the Minimum Price (as defined pursuant to Section 5635(d)(1)(A) of the Nasdaq Market Rules) of the Common Stock as of such applicable SA Reset Date (each, a “SA Reset Price”), immediately after the close of the Principal Market on such applicable SA Reset Date, and (ii) the Company has requested and the Holder has agreed to waive the Minimum Capitalization Condition (as defined in the Preferred Warrants) prior to the receipt of a SA Forced Exercise Notice (as defined in the Preferred Warrants), then the Conversion Price shall automatically lower to the SA Reset Price on the Trading Day prior the SA Forced Exercise Date (as defined in the Preferred Warrants). If the Holder unilaterally waives the Minimum Capitalization Condition (as defined in the Preferred Warrants) prior to the receipt of a SA Forced Exercise Notice (as defined in the Preferred Warrants), then the Holder shall not receive an adjustment pursuant to this Section 8(i) with respect to any given aggregate number of Preferred Shares subject to such SA Forced Exercise Notice (as defined in the Preferred Warrants) at such time as the Minimum Capitalization Condition is not satisfied.
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9. Redemption at the Company’s Election. At any time, the Company shall have the right to redeem all, but not less than all, of the Preferred Shares then outstanding (the “Company Optional Redemption Amount”) on the Company Optional Redemption Date (each as defined below) (a “Company Optional Redemption”). The Preferred Shares subject to redemption pursuant to this Section 9 shall be redeemed by the Company in cash at a price (the “Company Optional Redemption Price”) equal to the greater of (i) the Conversion Amount being redeemed as of the Company Optional Redemption Date and (ii) solely during the occurrence and continuance of an Equity Conditions Failure, the product of (1) the Conversion Rate with respect to the Conversion Amount being redeemed as of the Company Optional Redemption Date multiplied by (2) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date immediately preceding such Company Optional Redemption Notice Date and ending on the Trading Day immediately prior to the date the Company makes the entire payment required to be made under this Section 9. The Company may exercise its right to require redemption under this Section 9 by delivering a written notice thereof by electronic mail and overnight courier to all, but not less than all, of the Holders (the “Company Optional Redemption Notice” and the date all of the Holders received such notice is referred to as the “Company Optional Redemption Notice Date”). Such Company Optional Redemption Notice shall be irrevocable; provided that the Company Optional Redemption Notice may be conditioned upon the consummation of a refinancing transaction or a Going Private Transaction. The Company Optional Redemption Notice shall (x) state the date on which the Company Optional Redemption shall occur (the “Company Optional Redemption Date”) which date shall not be less than ten (10) Trading Days nor more than twenty (20) Trading Days following the Company Optional Redemption Notice Date, and (y) state the aggregate Conversion Amount of the Preferred Shares which is being redeemed in such Company Optional Redemption from such Holder and all of the other Holders of the Preferred Shares pursuant to this Section 9 on the Company Optional Redemption Date. The Company shall deliver the applicable Company Optional Redemption Price to each Holder in cash on the applicable Company Optional Redemption Date. Notwithstanding anything herein to the contrary, at any time prior to the date the Company Optional Redemption Price is paid, in full, the Company Optional Redemption Amount may be converted, in whole or in part, by any Holder into shares of Common Stock pursuant to Section 4. All Conversion Amounts converted by a Holder after the Company Optional Redemption Notice Date shall reduce the Company Optional Redemption Amount of the Preferred Shares of such Holder required to be redeemed on the Company Optional Redemption Date. In the event of the Company’s redemption of any of the Preferred Shares under this Section 9, a Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for such Holder. Accordingly, any redemption premium due under this Section 9 is intended by the parties to be, and shall be deemed, a reasonable estimate of such Holder’s actual loss of its investment opportunity and not as a penalty. For the avoidance of doubt, the Company shall have no right to effect a Company Optional Redemption if any Triggering Event has occurred and is continuing, but any Triggering Event shall have no effect upon any Holder’s right to convert Preferred Shares in its discretion. Notwithstanding the foregoing, with respect to a Going Private Transaction, the Company may effect a Company Optional Redemption under this Section 9, but with “Change of Control Election Price” replacing “Company Optional Redemption Price” for all purposes in this Section 9 in connection therewith.
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10. Noncircumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation of the Company, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, 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 Certificate of Designation, and will at all times in good faith carry out all the provisions of this Certificate of Designation and take all action as may be required to protect the rights of the Holders hereunder. Without limiting the generality of the foregoing or any other provision of this Certificate of Designation or the other Exchange Documents, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the conversion of any Preferred Shares above the Conversion Price then in effect, (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the conversion of Preferred Shares and (c) shall, so long as any Preferred Shares are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Preferred Shares, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the conversion of the Preferred Shares then outstanding (without regard to any limitations on conversion contained herein). Notwithstanding anything herein to the contrary, if after the sixty (60) calendar day anniversary of the Initial Issuance Date, each Holder is not permitted to convert such Holder’s Preferred Shares in full for any reason (other than pursuant to restrictions set forth in Section 4(d) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining such consents or approvals as necessary to effect such conversion into shares of Common Stock.
11. Authorized Shares.
(a) Reservation. So long as any Preferred Shares remain outstanding, the Company shall at all times reserve at least 150% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion, including without limitation, Alternate Conversions, of all of the Preferred Shares then outstanding at the Floor Price then in effect (without regard to any limitations on conversions) (the “Required Reserve Amount”). The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among the Holders based on the number of the Preferred Shares held by each Holder on the Initial Issuance Date or increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the event that a Holder shall sell or otherwise transfer any of such Holder’s Preferred Shares, each transferee shall be allocated a pro rata portion of such Holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Preferred Shares shall be allocated to the remaining Holders of Preferred Shares, pro rata based on the number of the Preferred Shares then held by the Holders. Notwithstanding the foregoing, a Holder may allocate its Authorized Share Allocation to any other of the securities of the Company held by such Holder (or any of its designees) by delivery of a written notice to the Company.
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(b) Insufficient Authorized Shares. If, notwithstanding Section 11(a) and not in limitation thereof, at any time while any of the Preferred Shares remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Preferred Shares at least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Preferred Shares then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than seventy-five (75) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal (or, if a majority of the voting power then in effect of the capital stock of the Company consents to such increase, in lieu of such proxy statement, deliver to the stockholders of the Company an information statement that has been filed with (and either approved by or not subject to comments from) the SEC with respect thereto). Notwithstanding the foregoing, if at any such time of an Authorized Share Failure, the Company is able to obtain the written consent of a majority of the shares of its issued and outstanding shares of Common Stock to approve the increase in the number of authorized shares of Common Stock, the Company may satisfy this obligation by obtaining such consent and submitting for filing with the SEC an Information Statement on Schedule 14C. Nothing contained in Section 11(a) or this Section 11(b) shall limit any obligations of the Company under any provision of the Exchange Agreements or Registration Rights Agreement.
12. Voting Rights. The holders of the Preferred Shares shall have no voting power and no right to vote on any matter at any time, either as a separate series or class or together with any other series or class of share of capital stock, and shall not be entitled to call a meeting of such holders for any purpose nor shall they be entitled to participate in any meeting of the holders of Common Stock, except as provided in this Section 16 and Section 20 or as otherwise required by the NRS. To the extent that under the NRS the vote of the holders of the Preferred Shares, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the Required Holders of the Preferred Shares, voting together in the aggregate and not in separate series unless required under the NRS, represented at a duly held meeting at which a quorum is presented or by written consent of the Required Holders (except as otherwise may be required under the NRS), voting together in the aggregate and not in separate series unless required under the NRS, shall constitute the approval of such action by both the class or the series, as applicable. Holders of the Preferred Shares shall be entitled to written notice of all stockholder meetings or written consents (and copies of proxy materials and other information sent to stockholders) with respect to which they would be entitled to vote, which notice would be provided pursuant to the Company’s bylaws (the “Bylaws”) and the NRS.
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13. Covenants.
(a) Incurrence of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness (other than Permitted Indebtedness).
(b) Existence of Liens. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens.
(c) Restricted Payments and Investments. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (other pursuant to this Certificate of Designation) whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness or make any Investment, as applicable, if at the time such payment with respect to such Indebtedness and/or Investment, as applicable, is due or is otherwise made or, after giving effect to such payment, (i) an event constituting a Triggering Event has occurred and is continuing or (ii) an event that with the passage of time and without being cured would constitute a Triggering Event has occurred and is continuing.
(d) Restriction on Redemption and Cash Dividends. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on any of its capital stock (other than as required by this Certificate of Designation), provided that the cashless or net exercise of any Options or Convertible Securities, or the withholding of Common Stock in the ordinary course of business in connection with the exercise or vesting of any stock options or restricted stock units, shall not be deemed to be a redemption.
(e) Restriction on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, sell, lease, license, assign, transfer, spin-off, split-off, close, convey or otherwise dispose of any assets or rights of the Company or any Subsidiary owned or hereafter acquired whether in a single transaction or a series of related transactions, other than (i) sales, leases, licenses, assignments, transfers, conveyances and other dispositions of such assets or rights by the Company and its Subsidiaries in the ordinary course of business consistent with its past practice, (ii) sales of inventory and product in the ordinary course of business and (iii) the divestment of any assets (other than Cash and Cash equivalents) held as of the date of this Certificate of Designation.
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(f) Change in Nature of Business. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, engage in any material line of business substantially different from those lines of business conducted by or publicly contemplated to be conducted by the Company and each of its Subsidiaries on the Exchange Date or any business substantially related or incidental thereto. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, modify its or their corporate structure or purpose.
(g) Preservation of Existence, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where the failure to become or remain duly qualified or in good standing could not reasonably be expected to result in a Material Adverse Effect.
(h) Maintenance of Properties, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its material properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply, and cause each of its Subsidiaries to materially comply, at all times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.
(i) Maintenance of Intellectual Property. The Company will, and will cause each of its Subsidiaries to, take all action necessary or advisable to maintain all of the Intellectual Property Rights of the Company and/or any of its Subsidiaries that are necessary or material to the conduct of its business in full force and effect.
(j) Maintenance of Insurance. The Company shall maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any Governmental Authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated.
(k) Transactions with Affiliates. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any affiliate, except transactions in the ordinary course of business in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of its business, for fair consideration and on terms no less favorable to it or its Subsidiaries than would be obtainable in a comparable arm’s length transaction with a Person that is not an affiliate thereof.
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(l) Restricted Issuances. The Company shall not, directly or indirectly, without the prior written consent of the Required Holders, (i) issue any Preferred Shares (other than as contemplated by the Exchange Agreements and this Certificate of Designation), (ii) issue any other securities that would cause a breach or default under this Certificate of Designation or (iii) issue, grant or otherwise agree to issue, as applicable, any security of the Company (or any of its Subsidiaries) with a New Issuance Price less than 120% of the Floor Price then in effect.
(m) Stay, Extension and Usury Laws. To the extent that it may lawfully do so, the Company (A) agrees that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law (wherever or whenever enacted or in force) that may affect the covenants or the performance of this Certificate of Designation; and (B) expressly waives all benefits or advantages of any such law and agrees that it will not, by resort to any such law, hinder, delay or impede the execution of any power granted to the Holders by this Certificate of Designation, but will suffer and permit the execution of every such power as though no such law has been enacted.
(n) Taxes. The Company and its Subsidiaries shall pay when due all material taxes, fees or other charges of any nature whatsoever (together with any related interest or penalties) now or hereafter imposed or assessed against the Company and its Subsidiaries or their respective assets or upon their ownership, possession, use, operation or disposition thereof or upon their rents, receipts or earnings arising therefrom (except where the failure to pay would not, individually or in the aggregate, have a material effect on the Company or any of its Subsidiaries). The Company and its Subsidiaries shall file on or before the due date therefor all personal property tax returns (except where the failure to file would not, individually or in the aggregate, have a material effect on the Company or any of its Subsidiaries). Notwithstanding the foregoing, the Company and its Subsidiaries may contest, in good faith and by appropriate proceedings, taxes for which they maintain adequate reserves therefor in accordance with GAAP.
(o) PCAOB Registered Auditor. At all times any Preferred Shares remain outstanding, the Company shall have engaged an independent auditor to audit its financial statements that is registered with (and in compliance with the rules and regulations of) the Public Company Accounting Oversight Board.
(p) Section 3(a)(9) or 3(a)(10) Transaction. So long as any Preferred Shares remain outstanding, the Company shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (other than the cashless exercise of Options in the ordinary course of business and the conversion of the Company’s Class B common stock into Common Stock or involving the exchange of the Series A Preferred Stock) (a “3(a)(9) Transaction”) or Section 3(a)(10) of the 1933 Act (a “3(a)(10) Transaction”) other than the Exchange (as defined in the Exchange Agreements) contemplated under the Exchange Agreements. In the event that the Company does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(10) Transaction while any Preferred Shares remain outstanding, an additional special dividend shall immediately accrue with respect to any such Preferred Shares then outstanding equal to 10% of the Stated Value of such Preferred Shares as of such date of determination.
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(q) Independent Investigation. At the request of the Required Holders either (x) at any time when a Triggering Event has occurred and is continuing, (y) upon the occurrence of an event that with the passage of time or giving of notice would constitute a Triggering Event or (z) at any time such Required Holders reasonably believe a Triggering Event may have occurred or be continuing, the Company shall hire an independent, reputable investment bank selected by the Company and approved by such Holder (such approval not to be unreasonably withheld, conditioned or delayed) to investigate as to whether any breach of this Certificate of Designation has occurred (the “Independent Investigator”). If the Independent Investigator determines that such breach of this Certificate of Designation has occurred, the Independent Investigator shall notify the Company of such breach and the Company shall deliver written notice to each Holder of such breach. In connection with such investigation, the Independent Investigator may, during normal business hours, inspect all contracts, books, records, personnel, offices and other facilities and properties of the Company and its Subsidiaries and, to the extent available to the Company after the Company uses reasonable efforts to obtain them, the records of its legal advisors and accountants and any books of account, records, reports and other papers not contractually required of the Company to be confidential or secret, or subject to attorney-client or other evidentiary privilege, and the Independent Investigator may make such copies and inspections thereof as the Independent Investigator may reasonably request. The Company shall furnish the Independent Investigator with such financial and operating data and other information with respect to the business and properties of the Company as the Independent Investigator may reasonably request. The Company shall permit the Independent Investigator to discuss the affairs, finances and accounts of the Company with, and to make proposals and furnish advice with respect thereto to, the Company’s officers, directors, key employees and independent public accountants or any of them (and by this provision the Company authorizes said accountants to discuss with such Independent Investigator the finances and affairs of the Company and any Subsidiaries), all at such reasonable times, upon reasonable notice, and as often as may be reasonably requested.
14. Liquidation, Dissolution, Winding-Up. In the event of a Liquidation Event, the Holders shall be entitled to receive in cash out of the assets of the Company, whether from capital or from earnings available for distribution to its stockholders (the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of Junior Stock, but pari passu with any Parity Stock then outstanding, an amount per Preferred Share equal to the greater of (A) 125% of the Conversion Amount of such Preferred Share on the date of such payment and (B) the amount per share such Holder would receive if such Holder converted such Preferred Share into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the Holders and holders of shares of Parity Stock, then each Holder and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such Holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designation (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Preferred Shares and all holders of shares of Parity Stock. To the extent necessary, the Company shall cause such actions to be taken by each of its Subsidiaries so as to enable, to the maximum extent permitted by law, the proceeds of a Liquidation Event to be distributed to the Holders in accordance with this Section 14. All the preferential amounts to be paid to the Holders under this Section 14 shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Company to the holders of shares of Junior Stock in connection with a Liquidation Event as to which this Section 14 applies.
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15. Distribution of Assets. In addition to any adjustments pursuant to Section 7 and Section 8, if the Company shall declare or make any dividend or other distributions of its assets (or rights to acquire its assets) to any or all 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) (the “Distributions”), then each Holder, as holders of Preferred Shares, will be entitled to such Distributions as if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of the Preferred Shares (without taking into account any limitations or restrictions on the convertibility of the Preferred Shares and assuming for such purpose that the Preferred Share was converted at the Alternate Conversion Price as of the applicable record date) immediately prior to the date on 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 Stock are to be determined for such Distributions (provided, however, that to the extent that such Holder’s right to participate in any such Distribution would result in such Holder and the other Attribution Parties exceeding the Maximum Percentage, then such Holder shall not be entitled to participate in such Distribution to such extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Distribution (and beneficial ownership) to such extent of any such excess) and the portion of such Distribution shall be held in abeyance for the benefit of such Holder until such time or times as its right thereto would not result in such Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times, if any, such Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on any subsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).
16. Vote to Change the Terms of or Issue Preferred Shares. In addition to any other rights provided by law, except where the vote or written consent of the holders of a greater number of shares is required by law or by another provision of the Articles of Incorporation, without first obtaining the affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the Required Holders, voting together as a single class, the Company shall not: (a) amend or repeal any provision of, or add any provision to, its Articles of Incorporation or bylaws, or file any certificate of designations or articles of amendment of any series of shares of preferred stock, if such action would adversely alter or change in any respect the preferences, rights, privileges or powers, or restrictions provided for the benefit of the Preferred Shares hereunder, regardless of whether any such action shall be by means of amendment to the Articles of Incorporation or by merger, consolidation or otherwise; (b) increase or decrease (other than by conversion) the authorized number of shares of Series B Convertible Preferred Stock; (c) without limiting any provision of Section 2, create or authorize (by reclassification or otherwise) any new class or series of Senior Preferred Stock or Parity Stock; (d) purchase, repurchase or redeem any shares of Junior Stock (other than pursuant to the terms of the Company’s equity incentive plans and options and other equity awards granted under such plans (that have in good faith been approved by the Board)); (e) without limiting any provision of Section 2, pay dividends or make any other distribution on any shares of any Junior Stock; (f) issue any Preferred Shares other than as contemplated hereby or pursuant to the Exchange Agreement; or (g) without limiting any provision of Section 14, whether or not prohibited by the terms of the Preferred Shares, circumvent a right of the Preferred Shares hereunder.
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17. Transfer of Preferred Shares. A Holder may offer, sell or transfer some or all of its Preferred Shares without the consent of the Company subject only to the provisions of Section 6(f) of the Exchange Agreement.
18. Reissuance of Preferred Share Certificates and Book Entries.
(a) Transfer. If any Preferred Shares are to be transferred, the applicable Holder shall surrender the applicable Preferred Share Certificate to the Company (or, if the Preferred Shares are held in Book-Entry form, a written instruction letter to the Company), whereupon the Company will forthwith issue and deliver upon the order of such Holder a new Preferred Share Certificate (in accordance with Section 18(d)) (or evidence of the transfer of such Book-Entry), registered as such Holder may request, representing the outstanding number of Preferred Shares being transferred by such Holder and, if less than the entire outstanding number of Preferred Shares is being transferred, a new Preferred Share Certificate (in accordance with Section 18(d)) to such Holder representing the outstanding number of Preferred Shares not being transferred (or evidence of such remaining Preferred Shares in a Book-Entry for such Holder). Such Holder and any assignee, by acceptance of the Preferred Share Certificate or evidence of Book-Entry issuance, as applicable, acknowledge and agree that, by reason of the provisions of Section 4(c)(i) following conversion or redemption of any of the Preferred Shares, the outstanding number of Preferred Shares represented by the Preferred Shares may be less than the number of Preferred Shares stated on the face of the Preferred Shares.
(b) Lost, Stolen or Mutilated Preferred Share Certificate. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of a Preferred Share Certificate (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the applicable Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of such Preferred Share Certificate, the Company shall execute and deliver to such Holder a new Preferred Share Certificate (in accordance with Section 18(d)) representing the applicable outstanding number of Preferred Shares.
(c) Preferred Share Certificate and Book-Entries Exchangeable for Different Denominations and Forms. Each Preferred Share Certificate is exchangeable, upon the surrender hereof by the applicable Holder at the principal office of the Company, for a new Preferred Share Certificate or Preferred Share Certificate(s) or new Book-Entry (in accordance with Section 18(d)) representing, in the aggregate, the outstanding number of the Preferred Shares in the original Preferred Share Certificate, and each such new Preferred Share Certificate and/or new Book-Entry, as applicable, will represent such portion of such outstanding number of Preferred Shares from the original Preferred Share Certificate as is designated in writing by such Holder at the time of such surrender. Each Book-Entry may be exchanged into one or more new Preferred Share Certificates or split by the applicable Holder by delivery of a written notice to the Company into two or more new Book-Entries (in accordance with Section 18(d)) representing, in the aggregate, the outstanding number of the Preferred Shares in the original Book-Entry, and each such new Book-Entry and/or new Preferred Share Certificate, as applicable, will represent such portion of such outstanding number of Preferred Shares from the original Book-Entry as is designated in writing by such Holder at the time of such surrender.
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(d) Issuance of New Preferred Share Certificate or Book-Entry. Whenever the Company is required to issue a new Preferred Share Certificate or a new Book-Entry pursuant to the terms of this Certificate of Designation, such new Preferred Share Certificate or new Book-Entry (i) shall represent, as indicated on the face of such Preferred Share Certificate or in such Book-Entry, as applicable, the number of Preferred Shares remaining outstanding (or in the case of a new Preferred Share Certificate or new Book-Entry being issued pursuant to Section 18(a) or Section 18(c), the number of Preferred Shares designated by such Holder) which, when added to the number of Preferred Shares represented by the other new Preferred Share Certificates or other new Book-Entry, as applicable, issued in connection with such issuance, does not exceed the number of Preferred Shares remaining outstanding under the original Preferred Share Certificate or original Book-Entry, as applicable, immediately prior to such issuance of new Preferred Share Certificate or new Book-Entry, as applicable, and (ii) shall have an issuance date, as indicated on the face of such new Preferred Share Certificate or in such new Book-Entry, as applicable, which is the same as the issuance date of the original Preferred Share Certificate or in such original Book-Entry, as applicable.
19. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Certificate of Designation shall be cumulative and in addition to all other remedies available under this Certificate of Designation and any of the other Exchange Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit any Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Certificate of Designation. No failure on the part of a Holder to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by such Holder of any right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. In addition, the exercise of any right or remedy of a Holder at law or equity or under this Certificate of Designation or any of the documents shall not be deemed to be an election of such Holder’s rights or remedies under such documents or at law or equity. The Company covenants to each Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by a Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). No failure on the part of a Holder to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by such Holder of any right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. In addition, the exercise of any right or remedy of any Holder at law or equity or under Preferred Shares or any of the documents shall not be deemed to be an election of such Holder’s rights or remedies under such documents or at law or equity. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, each Holder shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security. The Company shall provide all information and documentation to a Holder that is requested by such Holder to enable such Holder to confirm the Company’s compliance with the terms and conditions of this Certificate of Designation.
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20. Payment of Collection, Enforcement and Other Costs. If (a) any Preferred Shares are placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or a Holder otherwise takes action to collect amounts due under this Certificate of Designation with respect to the Preferred Shares or to enforce the provisions of this Certificate of Designation or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Certificate of Designation, then the Company shall pay the costs reasonably incurred by such Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements. The Company expressly acknowledges and agrees that no amounts due under this Certificate of Designation with respect to any Preferred Shares shall be affected, or limited, by the fact that the purchase price paid for each Preferred Share was less than the original Stated Value thereof.
21. Construction; Headings. This Certificate of Designation shall be deemed to be jointly drafted by the Company and the Holders and shall not be construed against any such Person as the drafter hereof. The headings of this Certificate of Designation are for convenience of reference and shall not form part of, or affect the interpretation of, this Certificate of Designation. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Certificate of Designation instead of just the provision in which they are found. Unless expressly indicated otherwise, all section references are to sections of this Certificate of Designation. Terms used in this Certificate of Designation and not otherwise defined herein, but defined in the other Exchange Documents, shall have the meanings ascribed to such terms on the Initial Issuance Date in such other Exchange Documents unless otherwise consented to in writing by the Required Holders.
22. Failure or Indulgence Not Waiver. No failure or delay on the part of a Holder 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 right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. This Certificate of Designation shall be deemed to be jointly drafted by the Company and all Holders and shall not be construed against any Person as the drafter hereof. Notwithstanding the foregoing, nothing contained in this Section 22 shall permit any waiver of any provision of Section 4(d).
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23. Dispute Resolution.
(a) Submission to Dispute Resolution.
(i) In the case of a dispute relating to a Closing Bid Price, a Closing Sale Price, a Conversion Price, a Dividend Conversion Price, an Alternate Conversion Price, a VWAP or a fair market value or the arithmetic calculation of a Conversion Rate, or the applicable redemption price (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or the applicable Holder (as the case may be) shall submit the dispute to the other party via electronic mail (A) if by the Company, within three (3) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by such Holder, within three (3) Business Days after such Holder learned of the circumstances giving rise to such dispute. If such Holder and the Company are unable to promptly resolve such dispute relating to such Closing Bid Price, such Closing Sale Price, such Conversion Price, such Dividend Conversion Price, such Alternate Conversion Price, such VWAP or such fair market value, or the arithmetic calculation of such Conversion Rate or such applicable redemption price (as the case may be), at any time after the third (3rd) Business Day following such initial notice by the Company or such Holder (as the case may be) of such dispute to the Company or such Holder (as the case may be), then such Holder may, with the consent of the Company (not to be unreasonably withheld, conditioned or delayed), select an independent, reputable investment bank to resolve such dispute.
(ii) Such Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 23 and (B) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which such Holder selected such investment bank (the “Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the “Required Dispute Documentation”) (it being understood and agreed that if either such Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and such Holder or otherwise requested by such investment bank, neither the Company nor such Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation).
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(iii) The Company and such Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and such Holder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of such investment bank shall be borne by the party in whose favor the investment bank decides such dispute or, in the event that the investment bank determines that the applicable calculation is in between the amounts submitted by the Company and such Holder, then half of such fees and expenses shall be borne by the Company and half of such fees and expenses shall be borne by the Holder, and such investment bank’s resolution of such dispute shall be final and binding upon all parties absent manifest error.
(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 23 constitutes an agreement to arbitrate between the Company and each Holder (and constitutes an arbitration agreement) under the rules then in effect under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”) and that any Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 23, (ii) the terms of this Certificate of Designation and each other applicable Exchange Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by such investment bank in connection with its resolution of such dispute and in resolving such dispute such investment bank shall apply such findings, determinations and the like to the terms of this Certificate of Designation and any other applicable Exchange Documents, (iii) the applicable Holder (and only such Holder with respect to disputes solely relating to such Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 23 to any state or federal court sitting in The Borough of Manhattan, The City of New York, New York, in lieu of utilizing the procedures set forth in this Section 23 and (iv) nothing in this Section 23 shall limit such Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 23).
24. Notices; Currency; Payments.
(a) Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Certificate of Designation must be in writing and will be deemed to have been delivered on the earliest of: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by electronic mail (provided that such sent email is kept on file (whether electronically or otherwise) by the sending party and the sending party does not receive an automatically generated message from the recipient’s email server that such e-mail could not be delivered to such recipient); or (iii) one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same. The mailing address and e-mail address for any such communications to the Company shall be: 60 North 1400 West. Centerville, Utah Attention: Christopher Jones, e-mail address: [email protected], or such other mailing address and/or e-mail address as the Company has specified by written notice given to each of the Holders in accordance with this Section 24 not later than five (5) days prior to the effectiveness of such change. The mailing address and e-mail address for any such communications to any Holder shall be as set forth on such Holder’s respective signature page to the Exchange Agreement, or such other mailing address and/or e-mail address as such Holder has specified by written notice given to the Company in accordance with this Section 24 not later than five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s e-mail containing the time, date and recipient’s e-mail or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by e-mail or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.
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(b) The Company shall provide each Holder with prompt written notice of all actions taken pursuant to this Certificate of Designation, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company shall give written notice to each Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, or (B) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to such Holder.
(c) Currency. All dollar amounts referred to in this Certificate of Designation are in United States Dollars (“U.S. Dollars”), and all amounts owing under this Certificate of Designation shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Certificate of Designation, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation (it being understood and agreed that where an amount is calculated with reference to, or over, a period of time, the date of calculation shall be the final date of such period of time).
(d) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Certificate of Designation, unless otherwise expressly set forth herein, such payment shall be made in lawful money of the United States of America by wire transfer of immediately available funds pursuant to wire transfer instructions that Holder shall provide to the Company in writing from time to time. Whenever any amount expressed to be due by the terms of this Certificate of Designation is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day.
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25. Waiver of Notice. To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Certificate of Designation and the Exchange Agreement.
26. Governing Law. This Certificate of Designation shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Certificate of Designation shall be governed by, the internal laws of the State of Nevada, 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 Nevada. Except as otherwise required by Section 23 above, the Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Las Vegas, Nevada, 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 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. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein (i) shall be deemed or operate to preclude any Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to such Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of such Holder or (ii) shall limit, or shall be deemed or construed to limit, any provision of Section 23 above. THE COMPANY AND EACH HOLDER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS CERTIFICATE OF DESIGNATIONS OR ANY TRANSACTION CONTEMPLATED HEREBY.
27. Judgment Currency.
(a) If for the purpose of obtaining or enforcing judgment against the Company in any court in any jurisdiction it becomes necessary to convert into any other currency (such other currency being hereinafter in this Section 27 referred to as the “Judgment Currency”) an amount due in U.S. Dollars under this Certificate of Designation, the conversion shall be made at the Exchange Rate prevailing on the Trading Day immediately preceding:
(i) the date actual payment of the amount due, in the case of any proceeding in the courts of New York or in the courts of any other jurisdiction that will give effect to such conversion being made on such date: or
(ii) the date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the date as of which such conversion is made pursuant to this Section 27(a)(ii) being hereinafter referred to as the “Judgment Conversion Date”).
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(b) If in the case of any proceeding in the court of any jurisdiction referred to in Section 27(a)(ii) above, there is a change in the Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the applicable party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the Exchange Rate prevailing on the date of payment, will produce the amount of US dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Conversion Date.
(c) Any amount due from the Company under this provision shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Certificate of Designation.
28. TAXES.
(a) All payments made by the Company hereunder or under any other Exchange Document shall be made in accordance with the terms of the respective Exchange Document and shall be made without set-off, counterclaim, withholding, deduction or other defense. Without limiting the foregoing, all such payments shall be made free and clear of and without deduction or withholding for any present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding (i) taxes imposed on the net income of a Holder by the jurisdiction in which such Holder is organized or where it has its principal lending office, (ii) with respect to any payments made by the Company hereunder, taxes (including, but not limited to, backup withholding) to the extent such taxes are imposed due to the failure of the applicable recipient of such payment to provide the Company with whichever (if any) is applicable of valid and properly completed and executed IRS Forms W-9, W-8BEN, W-8BEN-E, W-8ECI, and/or W-8IMY, when requested in writing by the Company, and (iii) with respect to any payments made by the Company, taxes to the extent such taxes are imposed due to the failure of the applicable recipient of such payment to comply with FATCA (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities, collectively or individually, “Taxes”). If the Company shall be required to deduct or to withhold any Taxes from or in respect of any amount payable hereunder or under any other Exchange Document:
(i) the amount so payable shall be increased to the extent necessary so that after making all required deductions and withholdings (including Taxes on amounts payable to a Holder pursuant to this sentence) such Holder receives an amount equal to the sum it would have received had no such deduction or withholding been made,
(ii) the Company shall make such deduction or withholding,
(iii) the Company shall pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law, and
(iv) as promptly as possible thereafter, the Company shall send such Holder an official receipt (or, if an official receipt is not available, such other documentation as shall be satisfactory to such Holder, as the case may be) showing payment. In addition, the Company agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery, registration or enforcement of, or otherwise with respect to, this Preferred Shares or any other Exchange Document (collectively, “Other Taxes”).
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(b) The Company hereby indemnifies and agrees to hold each Holder and each of their affiliates and their respective officers, directors, employees, agents and advisors (each, an “Indemnified Party”) each Indemnified Party harmless from and against Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 28) paid by any Indemnified Party as a result of any payment made hereunder or from the execution, delivery, registration or enforcement of, or otherwise with respect to, this Preferred Shares or any other Exchange Document, and any liability (including penalties, interest and expenses for nonpayment, late payment or otherwise) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be paid within thirty (30) days from the date on which such Holder makes written demand therefor, which demand shall identify the nature and amount of such Taxes or Other Taxes.
(c) If the Company fails to perform any of its obligations under this Section 28, the Company shall indemnify such Holder for any taxes, interest or penalties that may become payable as a result of any such failure. The obligations of the Company under this Section 28 shall survive the repayment and/or conversion, as applicable, in full of the Preferred Shares and all other amounts payable with respect thereto.
(d) If any Indemnified Party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 28 (including by the payment of additional amounts pursuant to this Section 28), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 28 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including taxes) of such Indemnified Party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such Indemnified Party, shall repay to such Indemnified Party the amount paid over pursuant to this paragraph (d) (plus any penalties, interest, or other charges imposed by the relevant Governmental Authority) in the event that such Indemnified Party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (d), in no event will the Indemnified Party be required to pay any amount to an indemnifying party pursuant to this paragraph (d) the payment of which would place the Indemnified Party in a less favorable net after-Tax position than the Indemnified Party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph (d) shall not be construed to require any Indemnified Party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
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29. Severability. If any provision of this Certificate of Designation is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Certificate of Designation so long as this Certificate of Designation as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
30. Maximum Payments. Without limitation Section 9(d) of the Exchange Agreement, nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the applicable Holder and thus refunded to the Company.
31. Stockholder Matters; Amendment.
(a) Stockholder Matters. Any stockholder action, approval or consent required, desired or otherwise sought by the Company pursuant to the NRS, the Articles of Incorporation, this Certificate of Designation or otherwise with respect to the issuance of Preferred Shares may be effected by written consent of the Company’s stockholders or at a duly called meeting of the Company’s stockholders, all in accordance with the applicable rules and regulations of the NRS. This provision is intended to comply with the applicable sections of the NRS permitting stockholder action, approval and consent affected by written consent in lieu of a meeting.
(b) Amendment. Except for Section 4(d)(i), which may not be amended or waived hereunder, this Certificate of Designation or any provision hereof may be amended by obtaining the affirmative vote at a meeting duly called for such purpose, or written consent without a meeting in accordance with the NRS, of the Required Holders, voting separate as a single class, and with such other stockholder approval, if any, as may then be required pursuant to the NRS and the Articles of Incorporation of the Company. Except (a) to the extent otherwise expressly provided in this Certificate of Designation or the Articles of Incorporation with respect to voting or approval rights of a particular class or series of capital stock or (b) to the extent otherwise provided pursuant to the NRS, the holders of each outstanding class or series of shares of the Company shall not be entitled to vote as a separate voting group on any amendment to the terms of this Certificate of Designation with respect to which such class or series would otherwise be entitled under the NRS to vote as a separate voting group.
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32. Certain Defined Terms. For purposes of this Certificate of Designation, the following terms shall have the following meanings:
(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
(c) “Additional Amount” means, as of the applicable date of determination, with respect to each Preferred Share, all declared and unpaid Dividends on such Preferred Share.
(d) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (or deemed issuance or sale in accordance with Section 8(a)) of shares of Common Stock (other than rights of the type described in Section 7(a) hereof) that could result in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cash settlement rights, cash adjustment or other similar rights).
(e) “Affiliate” or “Affiliated” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
(f) “Alternate Conversion Price” means, with respect to any Alternate Conversion that price which shall be the lowest of (i) the applicable Conversion Price as in effect on the applicable Conversion Date of the applicable Alternate Conversion, and (ii) the greater of (x) the Floor Price and (y) 90% of the lowest VWAP of the Common Stock during the five (5) consecutive Trading Day period ending and including the Trading Day immediately preceding the delivery or deemed delivery of the applicable Conversion Notice (such period, the “Alternate Conversion Measuring Period”). All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such Alternate Conversion Measuring Period.
(g) “Alternate Conversion Floor Amount” means an amount equal to the product obtained by multiplying (A) the higher of (I) the highest price that the Common Stock trades at on the Trading Day immediately preceding the relevant Alternate Conversion Date and (II) the applicable Alternate Conversion Price and (B) the difference obtained by subtracting (I) the number of shares of Common Stock delivered (or to be delivered) to such Holder on the applicable Share Delivery Deadline with respect to such Alternate Conversion from (II) the quotient obtained by dividing (x) the applicable Conversion Amount that such Holder has elected to be the subject of the applicable Alternate Conversion, by (y) the applicable Alternate Conversion Price without giving effect to clause (x) of such definition.
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(h) “Applicable Date” means the earlier to occur of (A) the effective date of a registration statement registering the resale by the Holders of the Required Registration Amount (as defined in the Registration Rights Agreement) of the shares of Common Stock issuable upon conversion of the Preferred Shares then outstanding and (B) the date the Preferred Shares are eligible to be resold by the Holders (assuming such Holders are not then affiliates of the Company) without restriction under Rule 144 of the 1933 Act (in each case, without regard to any limitations on exercise herein).
(i) “Approved Stock Plan” means any equity incentive plan or agreement which has been approved by the Board prior to or subsequent to the Exchange Date pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee, officer, consultant or director for services provided to the Company in their capacity as such.
(j) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Initial Issuance Date, directly or indirectly managed or advised by a Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of such Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with such Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could be aggregated with such Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively such Holder and all other Attribution Parties to the Maximum Percentage.
(k) “Bloomberg” means Bloomberg, L.P.
(l) “Book-Entry” means each entry on the Register evidencing one or more Preferred Shares held by a Holder in lieu of a Preferred Share Certificate issuable hereunder.
(m) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; 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.
(n) “Cash” of the Company and its Subsidiaries on any date shall be determined from such Persons’ books maintained in accordance with GAAP, and means, without duplication, the cash, cash equivalents and Eligible Marketable Securities accrued by the Company and its wholly owned Subsidiaries on a consolidated basis on such date.
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(o) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, wholly-owned Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders of the Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (or entities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities) after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company or any of its Subsidiaries.
(p) “Change of Control Election Price” means, with respect to any given Change of Control, such price equal to the greatest of (i) the product of (A) the Required Premium multiplied by (B) the Conversion Amount of the Preferred Shares subject to the applicable election, as applicable, (ii) the product of (A) the Conversion Amount of the Preferred Shares being redeemed or exchanged, as applicable, multiplied by (B) the quotient determined by dividing (I) the greatest Closing Sale Price of the shares of Common Stock during the period beginning on the date immediately preceding the earlier to occur of (1) the consummation of the applicable Change of Control and (2) the public announcement of such Change of Control and ending on the date such Holder delivers the Change of Control Election Notice by (II) the Alternate Conversion Price then in effect, and (iii) the product of (A) the Conversion Amount of the Preferred Shares being redeemed multiplied by (B) the quotient of (I) the aggregate cash consideration and the aggregate cash value of any non-cash consideration per share of Common Stock to be paid to such holders of the shares of Common Stock upon consummation of such Change of Control (any such non-cash consideration constituting publicly-traded securities shall be valued at the highest of the Closing Sale Price of such securities as of the Trading Day immediately prior to the consummation of such Change of Control, the Closing Sale Price of such securities on the Trading Day immediately following the public announcement of such proposed Change of Control and the Closing Sale Price of such securities on the Trading Day immediately prior to the public announcement of such proposed Change of Control) divided by (II) the Conversion Price then in effect.
(q) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Required Holders. If the Company and the Required Holders 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 23. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such period.
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(r) “Closing Date” shall have the meaning set forth in the Exchange Agreement, which date is the date the Company initially issued the Preferred Shares pursuant to the terms of the Exchange Agreement.
(s) “Code” means the Internal Revenue Code of 1986, as amended.
(t) “Common Stock” means (i) the Company’s shares of Class A common stock, $0.0001 par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.
(u) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.
(v) “Conversion Floor Price Condition” means that the relevant Alternate Conversion Price or Dividend Conversion Price is being determined based on clause (x) of such definitions.
(w) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.
(x) “Default Rate” means, as applicable, (i) with respect to any payments of any Dividends hereunder in cash, fifteen percent (15%) per annum or (ii) with respect to any conversions of Dividends hereunder into shares (or otherwise satisfaction of any amounts outstanding hereunder in any non-cash consideration), eighteen percent (18%) per annum.
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(y) “Dividend Conversion Price” means, with respect to any given Dividend Date, that price which shall be the lowest of (i) the applicable Conversion Price as in effect on the applicable Dividend Date, (ii) the greater of (x) the Floor Price and (y) 90% of the lowest VWAP of the Common Stock during the five (5) consecutive Trading Day period ending and including the Trading Day immediately preceding the applicable Dividend Date (such period, the “Dividend Conversion Measuring Period”). All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such Dividend Conversion Measuring Period.
(z) “Dividend Floor Amount” means an amount equal to the product obtained by multiplying (A) the higher of (I) the highest price that the Common Stock trades at on the Trading Day immediately preceding the relevant Dividend Date and (II) the applicable Dividend Conversion Price and (B) the difference obtained by subtracting (I) the number of shares of Common Stock delivered (or to be delivered) to such Holder on the applicable Share Delivery Deadline with respect to such Dividend Date from (II) the quotient obtained by dividing (x) the applicable aggregate amount of such Dividend, by (y) the applicable Dividend Conversion Price without giving effect to clause (x) of such definition.
(aa) “Dividend Rate” means, as of any date of determination, ten percent (10%) per annum; provided, that if such Dividends are being paid in shares of Common Stock hereunder, such Dividends shall recalculated in connection with such issuance of shares of Common Stock at a deemed rate of twelve and one half percent (12.5%) per annum; provided, further, that each of the forgoing rates shall be subject to adjustment from time to time in accordance with Section 3.
(bb) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market.
(cc) “Eligible Marketable Securities” as of any date means marketable securities which would be reflected on a consolidated balance sheet of the Company and its Subsidiaries prepared as of such date in accordance with GAAP, and which are permitted under the Company’s investment policies as in effect on the Issuance Date or approved thereafter by the Company’s Board of Directors.
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(dd) “Equity Conditions” means, with respect to an given date of determination: (i) on each day during the period beginning five Trading Days prior to such applicable date of determination and ending on and including such applicable date of determination either (x) one or more Registration Statements filed pursuant to the Registration Rights Agreement shall be effective and the prospectus contained therein shall be available on such applicable date of determination (with, for the avoidance of doubt, any shares of Common Stock previously sold pursuant to such prospectus deemed unavailable) for the resale of all shares of Common Stock to be issued in connection with the event requiring this determination, as applicable, in the event requiring this determination at the Alternate Conversion Price then in effect (without regard to any limitations on conversion set forth herein) (each, a “Required Minimum Securities Amount”), in each case, in accordance with the terms of the Registration Rights Agreement and there shall not have been during such period any Grace Periods (as defined in the Registration Rights Agreement) or (y) all Registrable Securities shall be eligible for sale pursuant to Rule 144 (as defined in the Exchange Agreement) without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Preferred Shares) and no Current Information Failure (as defined in the Registration Rights Agreement) exists or is continuing; (ii) on each day during the period beginning thirty calendar days prior to the applicable date of determination and ending on and including the applicable date of determination (the “Equity Conditions Measuring Period”), the Common Stock (including all shares of Common Stock issued or issuable upon conversion of the Preferred Shares) is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended from trading on an Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by an Eligible Market have been threatened (with a reasonable prospect of delisting occurring after giving effect to all applicable notice, appeal, compliance and hearing periods) or reasonably likely to occur or pending as evidenced by (A) a writing by such Eligible Market notifying the Company of its intent to delist the Company (and not solely a notification that the Company has fallen below the minimum listing maintenance requirements of the Eligible Market) or (B) the Company falling below the minimum listing maintenance requirements (after taking into effect the receipt of proceeds from the transaction subject to these Equity Conditions) of the Eligible Market on which the Common Stock is then listed or designated for quotation with no available grace period for curing such deficiencies, as applicable; (iii) during the Equity Conditions Measuring Period, the Company shall have delivered all shares of Common Stock issuable upon conversion of the Preferred Shares on a timely basis as set forth in Section 4 hereof and all other shares of capital stock required to be delivered by the Company on a timely basis as set forth in the other Exchange Documents; (iv) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 4(d) hereof; (v) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (vi) on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (vii) the Company shall have no knowledge of any fact that would reasonably be expected to cause (1) any Registration Statement required to be filed pursuant to the Registration Rights Agreement to not be effective or the prospectus contained therein to not be available for the resale of the applicable Required Minimum Securities Amount of Registrable Securities in accordance with the terms of the Registration Rights Agreement or (2) any Registrable Securities to not be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Preferred Shares) and no Current Information Failure exists or is continuing, (viii) none of the Holders shall be in possession of any material, non-public information provided to any of them by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like; (ix) on each day during the Equity Conditions Measuring Period, the Company otherwise shall have been in compliance with each, and shall not have breached any representation or warranty in any material respect (other than representations or warranties subject to material adverse effect or materiality, which may not be breached in any respect) or any covenant or other term or condition of any Exchange Document, including, without limitation, the Company shall not have failed to timely make any payment pursuant to any Exchange Document; (x) there shall not have occurred any Volume Failure or Price Failure as of such applicable date of determination; (xi) on the applicable date of determination (A) no Authorized Share Failure shall exist or be continuing and the applicable Required Minimum Securities Amount of shares of Common Stock are available under the certificate of incorporation of the Company and reserved by the Company to be issued pursuant to this Certificate of Designation and (B) all shares of Common Stock to be issued in connection with the event requiring this determination may be issued in full without resulting in an Authorized Share Failure; (xii) on each day during the Equity Conditions Measuring Period, there shall not have occurred and there shall not exist a Triggering Event or an event that with the passage of time or giving of notice would constitute a Triggering Event; or (xiii) the shares of Common Stock issuable pursuant to the event requiring the satisfaction of the Equity Conditions are duly authorized and listed and eligible for trading without restriction on an Eligible Market.
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(ee) “Equity Conditions Failure” means on the date of determination, the Equity Conditions have not been satisfied (or waived in writing by the Holder).
(ff) “Event Market Price” means, with respect to any Stock Combination Event Date, 120% of the quotient determined by dividing (x) the sum of the VWAP of the Common Stock for each of the five (5) Trading Days with the lowest VWAP of the Common Stock during the fifteen (15) consecutive Trading Day period ending and including the Trading Day immediately preceding the sixteenth (16th) Trading Day after such Stock Combination Event Date, divided by (y) five (5).
(gg) “Exchange Agreements” means, collectively, those certain Second Amendment, Waiver and Exchange Agreements, each by and between the Company and an initial Holder, dated as of August 17, 2026, as may be amended from time in accordance with the terms thereof.
(hh) “Exchange Documents” shall have the meaning as set forth in the Exchange Agreements.
(ii) “Exchange Date” means [____].
(jj) “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, consultants or employees of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that (A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date in any calendar year pursuant to this clause (i) do not, in the aggregate, exceed more than 20% of the Common Stock issued and outstanding immediately prior to the Subscription Date and (B) the exercise price of any such options is not lowered, none of such options are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adversely affects any of the Holders; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities or Options (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversion price of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) is not lowered, none of such Convertible Securities or Options (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such Convertible Securities or Options (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are otherwise materially changed in any manner that adversely affects any of the Holders; (iii) the shares of Common Stock issuable upon conversion of the Preferred Shares (including any Preferred Shares issued or issuable upon exercise of the Preferred Warrants) or otherwise pursuant to the terms of this Certificate of Designation; (iv) any shares of Common Stock issued or issuable pursuant to the Agreement and Plan of Merger, dated March 31, 2023, as amended and restated through the Subscription Date, with DMAC Merger Sub Inc., a Nevada corporation and newly formed wholly-owned subsidiary of the Company, Bright Vision Sponsor LLC, a Delaware limited liability company, and (v) any shares of Common Stock issued or issuable in connection with any bona fide strategic or commercial alliances, acquisitions, mergers, licensing arrangements, and strategic partnerships, provided, that (1) the primary purpose of such issuance is not to raise capital as reasonably determined, and (2) the purchaser or acquirer or recipient of the securities in such issuance solely consists of either (I) the actual participants in such strategic or commercial alliance, strategic or commercial licensing arrangement or strategic or commercial partnership, (II) the actual owners of such assets or securities acquired in such acquisition or merger or (III) the stockholders, partners, employees, consultants, officers, directors or members of the foregoing Persons, in each case, 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 shall provide to the Company additional benefits in addition to the investment of funds, and (IV) the number or amount of securities issued to such Persons by the Company shall not be disproportionate to each such Person’s actual participation in (or fair market value of the contribution to) such strategic or commercial alliance or strategic or commercial partnership or ownership of such assets or securities to be acquired by the Company, as applicable.
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(kk) “FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Certificate of Designation (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.
(ll) “Fiscal Quarter” means each of the fiscal quarters adopted by the Company for financial reporting purposes that correspond to the Company’s fiscal year as of the date hereof that ends on December 31.
(mm) “Floor Price” means $0.25 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events), or, subject to the rules and regulations of the Principal Market, such lower price as the Company and the Required Holders may agree, from time to time.
(nn) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entities as of the date of this Certificate of Designation calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other stockholders of the Company to surrender their shares of Common Stock without approval of the stockholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.
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(oo) “GAAP” means United States generally accepted accounting principles, consistently applied.
(pp) “Going Private Transaction” means any Change of Control (i) pursuant to which, the Company (and the Successor Entity, if applicable) ceases to have any securities registered under the 1934 Act or (ii) that results in the purchase and/or cancellation of all of the Common Stock of the Company solely for cash (and not in whole, or in part, for any other securities of any Person).
(qq) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.
(rr) “Governmental Authority” means any federal, foreign, state, county, municipal, provincial, or local governmental authority, court, judicial body, arbitration tribunal, government or self-regulatory organization, commission, tribunal or organization, or any regulatory, administrative, or other agency, or any political or other subdivision, department, commission, board, bureau, branch, division, ministry, or instrumentality of any of the foregoing.
(ss) “Indebtedness” means of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, including, without limitation, “capital leases” in accordance with United States generally accepted accounting principles consistently applied for the periods covered thereby (other than trade payables entered into in the ordinary course of business consistent with past practice), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with United States generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, deed of trust, lien, pledge, charge, security interest or other encumbrance of any nature whatsoever in or upon any property or assets (including accounts and contract rights) with respect to any asset or property owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above.
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(tt) “Intellectual Property Rights” means, with respect to the Company and its Subsidiaries, all of their rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, original works of authorship, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and registrations therefor.
(uu) “Investment” means any beneficial ownership (including stock, partnership or limited liability company interests) of or in any Person, or any loan, advance or capital contribution to any Person or the acquisition of all, or substantially all, of the assets of another Person or the purchase of any assets of another Person for greater than the fair market value of such assets.
(vv) “Liquidation Event” means, whether in a single transaction or series of transactions, the voluntary or involuntary liquidation, dissolution or winding up of the Company or such Subsidiaries the assets of which constitute all or substantially all of the assets of the business of the Company and its Subsidiaries, taken as a whole.
(ww) “Make-Whole Amount” means, as of any given date, with respect to any given Preferred Shares, and as applicable, in connection with any conversion, redemption or other repayment hereunder, an amount equal to the amount of additional Dividends that would accrue on any outstanding Preferred Shares at the Dividend Rate then in effect assuming for calculation purposes that such converted, redeemed or repaid Preferred Shares remained outstanding through and including the five year anniversary of the applicable date of issuance of such applicable Preferred Shares.
(uu) “Make-Whole Floor Amount” means an amount equal to the product obtained by multiplying (A) the higher of (I) the highest price that the Common Stock trades at on the Trading Day immediately preceding the relevant Conversion Date and (II) the applicable Alternate Conversion Price and (B) the difference obtained by subtracting (I) the number of shares of Common Stock delivered (or to be delivered) to such Holder on the applicable Share Delivery Deadline with respect to such conversion of such Make-Whole Amount included in the applicable Conversion Amount that such Holder has elected to be the subject of the applicable conversion from (II) the quotient obtained by dividing (x) such Make-Whole Amount included in the applicable Conversion Amount that such Holder has elected to be the subject of the applicable conversion, by (y) the applicable Alternate Conversion Price without giving effect to clause (x) of such definition.
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(yy) “Material Adverse Effect” means any material adverse effect on the business, properties, assets, liabilities, operations, results of operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries, if any, individually or taken as a whole, or on the transactions contemplated hereby or on the other Exchange Documents, or by the agreements and instruments to be entered into in connection therewith or on the authority or ability of the Company to perform its obligations under the Exchange Documents.
(zz) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
(aaa) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
(bbb) “Permitted A/R Indebtedness” means Indebtedness arising pursuant to an accounts receivable and/or purchase order factoring facility in which the sole recourse of such Indebtedness is to such accounts receivable and/or purchase order supporting such Indebtedness, in an aggregate amount not to exceed the difference of (x) $2 million and (y) the aggregate amount of any other Permitted Additional Indebtedness then outstanding.
(ccc) “Permitted ATM” shall mean an “at-the-market” offering within the meaning of Rule 415(a)(4) of the Securities Act, in an aggregate amount not to exceed $5 million, pursuant to an agreement approved in writing by the Required Holders pursuant to which the Company may issue and sell shares of Common Stock from time to time after the date hereof both (x) at a price per share of Common Stock no less than 150% of the Floor Price and (y) an aggregate number of shares of Common Stock sold on any Trading Day not to exceed 5% of the aggregate daily trading volume of the Common Stock on such applicable Trading Day.
(ddd) “Permitted Additional Indebtedness” means any Indebtedness of the Company (including, without limitation, any Permitted A/R Indebtedness), in an aggregate amount outstanding not to exceed $2 million, sourced from Chris Jones or affiliates of the Company or through accounts receivable or purchase order factoring; provided that, at no time any Permitted Additional Indebtedness remains outstanding either (x) the Company fails to be in full compliance with the NASDAQ continuing listing standards and (y) the terms, conditions or existence of such Indebtedness could not reasonably be expected to result in the Company’s failure to comply in full with the NASDAQ continuing listing standards at any time such Indebtedness remains outstanding.
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(eee) “Permitted Indebtedness” means (i) Indebtedness set forth on Schedule 5(s) to the Exchange Agreement, as in effect as of the Subscription Date, (ii) Indebtedness secured by Permitted Liens or unsecured but as described in clauses (iv) and (v) of the definition of Permitted Liens and (iii) Permitted Additional Indebtedness.
(fff) “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or Indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment, in either case, with respect to Indebtedness in an aggregate amount not to exceed $500,000, (v) Liens incurred in connection with the extension, renewal or refinancing of the Indebtedness secured by Liens of the type described in clause (iv) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase, (vi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the importation of goods, (vii) Liens on any accounts receivable and/or purchase order supporting Permitted A/R Indebtedness then outstanding; and, (viii) Liens arising from judgments, decrees or attachments in circumstances not constituting a Triggering Event under Section 5(a)(xiii).
(ggg) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.
(hhh) “Preferred Warrants” means the New Preferred Warrants, as defined in the Exchange Agreements.
(iii) “Price Failure” means, with respect to a particular date of determination, the VWAP of the Common Stock on any Trading Day during the ten (10) Trading Day period ending on the Trading Day immediately preceding such date of determination fails to exceed 75% of the Conversion Price on such date of determination (excluding for such purpose any temporary reductions in the Conversion Price made in accordance with Section 8(g)) (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions occurring after the Subscription Date). All such determinations to be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during any such measuring period.
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(jjj) “Principal Market” means, as of any time of determination, the principal trading market, if any, in which the shares of Common Stock then trade.
(kkk) “Registration Rights Agreement” means that certain registration rights agreement, dated as of the Closing Date, by and among the Company and the initial holders of the Preferred Shares relating to, among other things, the registration of the resale of the Common Stock issuable upon conversion of the Preferred Shares or otherwise pursuant to the terms of this Certificate of Designation, as may be amended from time to time.
(lll) “Required Premium” means (x) solely if in connection with a Change of Control at a time no other Triggering Event exists, 105% or (y) otherwise, 125%.
(mmm) “SEC” means the United States Securities and Exchange Commission or the successor thereto.
(nnn) “Securities” shall mean the Preferred Shares and the shares of Common Stock issuable upon conversion of the Preferred Shares.
(ooo) “Securities Purchase Agreement” means that certain Securities Purchase Agreement, dated February 2, 2024 (as may be amended, modified, restated, restructured or supplemented from time to time) by and among the Company and the investors signatory thereto.
(ppp) “Series A Preferred Stock” means (x) the series of convertible preferred stock of the Company, designated as Series A Preferred Stock, $0.0001 par value per share, the series A preferred stock, par value $0.0001 per share, of the Company, the terms of which are set forth in the Fourth Article, Section B., Section (3) of the Company’s Amended and Restated Articles of Incorporation dated March 11, 2026, and (y) any capital stock into which such preferred stock shall have been changed or any share capital resulting from a reclassification of such preferred stock (other than a conversion of such preferred stock into Common Stock in accordance with the terms of such certificate of designations).
(qqq) “Stated Value” shall mean $1,000 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the Initial Issuance Date with respect to the Preferred Shares.
(rrr) “Stock Combination Event” means the occurrence at any time and from time to time on or after the Subscription Date of any stock split, stock dividend, stock combination recapitalization or other similar transaction involving the Common Stock.
(sss) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.
(ttt) “Subscription Date” means August 17, 2026.
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(uuu) “Subsidiary” shall have the meaning set forth in the Exchange Agreement.
(vvv) “Successor Entity” means the Person (or, if so elected by the Required Holders, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Required Holders, the Parent Entity) with which such Fundamental Transaction shall have been entered into.
(www) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the applicable Holder or (y) with respect to all determinations other than price determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.
(xxx) “Volume Failure” means, with respect to a particular date of determination, the aggregate daily dollar trading volume (as reported on Bloomberg) of the Common Stock on the Principal Market on any Trading Day during the twenty (20) Trading Day period ending on the Trading Day immediately preceding such date of determination, is less than $50,000.
(yyy) “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, as reported by Bloomberg through its “VAP” function (set to 09:30 start time and 16:00 end time) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board 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, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, 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 Open Market (or a similar organization or agency succeeding to its functions of reporting prices). 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 Required Holders. If the Company and the Required Holders 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 23. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.
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33. Disclosure. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Certificate of Designation, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company or any of its Subsidiaries, the Company shall on or prior to 9:00 am, New York city time on the Business Day immediately following such notice delivery date, publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company so shall indicate to the applicable Holder explicitly in writing in such notice (or promptly (but no later than the next Business Day) following receipt of notice from such Holder, as applicable), and in the absence of any such written indication in such notice (or notification from the Company promptly (but no later than the next Business Day) following receipt of notice from such Holder), such Holder shall be entitled to presume that information contained in the notice does not constitute material, non-public information relating to the Company or any of its Subsidiaries. Nothing contained in this Section 33 shall limit any obligations of the Company, or any rights of any Holder, under Section 7 of the Exchange Agreement.
34. Absence of Trading and Disclosure Restrictions. The Company acknowledges and agrees that no Holder is a fiduciary or agent of the Company and that each Holder shall have no obligation to (a) maintain the confidentiality of any information provided by the Company or (b) refrain from trading any securities while in possession of such information in the absence of a written non-disclosure agreement signed by an officer of such Holder that explicitly provides for such confidentiality and trading restrictions. In the absence of such an executed, written non-disclosure agreement, the Company acknowledges that each Holder may freely trade in any securities issued by the Company, may possess and use any information provided by the Company in connection with such trading activity, and may disclose any such information to any third party.
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EXHIBIT I
TRUGOLF HOLDINGS, INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designation of the Articles of Incorporation of TruGolf Holdings, Inc., a Nevada corporation (the “Company”) establishing the terms, preferences and rights of the Series B Convertible Preferred Stock, $0.0001 par value (the “Preferred Shares”) of the Company (the “Certificate of Designation”). In accordance with and pursuant to the Certificate of Designation, the undersigned hereby elects to convert the number of Preferred Shares indicated below into shares of common stock, $0.0001 value per share (the “Common Stock”), of the Company, as of the date specified below.
| Date of Conversion: | ||
| Aggregate number of Preferred Shares to be converted: | ||
| Aggregate Stated Value of such Preferred Shares to be converted: | ||
| Aggregate accrued and unpaid Dividends with respect to such Preferred Shares to be converted: | ||
| AGGREGATE CONVERSION AMOUNT TO BE CONVERTED: |
Please confirm the following information:
| Conversion Price: | ||
| Number of shares of Common Stock to be issued: |
☐ If this Conversion Notice is being delivered with respect to an Alternate Conversion, check here if Holder is electing to use the following Alternate Conversion Price:____________
Please issue the Common Stock into which the applicable Preferred Shares are being converted to Holder, or for its benefit, as follows:
| ☐ Check here if requesting delivery as a certificate to the following name and to the following address: | ||
| Issue to: | ||
| ☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows: | ||
| DTC Participant: | ||
| DTC Number: | ||
| Account Number: | ||
Date: _______________,_____
__________________
Name of Registered Holder
| By: | ||
| Name: | ||
| Title: | ||
| Tax ID: | ||
| E-mail Address: | ||
EXHIBIT II
ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice, (a) certifies that the above indicated number of shares of Common Stock [are][are not] eligible to be resold by the applicable Holder either (i) pursuant to Rule 144 (subject to such Holder’s execution and delivery to the Company of a customary 144 representation letter) or (ii) an effective and available registration statement and (b) hereby directs _________________ to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated _____________, 20__ from the Company and acknowledged and agreed to by ________________________.
| TRUGOLF HOLDINGS, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
Exhibit 3.2
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
TruGolf Holdings, Inc. (f/k/a Deep Medicine Acquisition Corp.)
Warrant to Purchase
Series B Convertible Preferred Stock
Preferred Warrant No.: PW-[ ]
Date of Issuance: February 6, 2024 (“Issuance Date”)
Date of Exchange: [__] (“Exchange Date”)
TruGolf Holdings, Inc. (f/k/a Deep Medicine Acquisition Corp.), a Nevada corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [NAME OF HOLDER], the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Series B Convertible Preferred Stock (including any Warrants to Purchase Series B Convertible Preferred Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59 p.m., New York time, on the Expiration Date (as defined below), [NUMBER OF WARRANT PREFERRED SHARES] (subject to adjustment as provided herein) fully paid and non-assessable shares of Series B Convertible Preferred Stock (the “Warrant Preferred Shares”). This Warrant is one of the New Preferred Warrants (as defined in the Exchange Agreement (as defined below)) to Purchase Series B Convertible Preferred Stock (the “Exchange Preferred Warrants”) issued pursuant to those certain Second Amendment, Waiver and Exchange Agreements, dated August 17, 2026, each by and between the Company and a holder of Exchanged Securities (as defined in the Exchange Agreements) (the “Exchange Agreements”, and such Exchange Agreement, by and between the Company and the Holder, the “Exchange Agreement”), which Exchanged Securities were issued to the Holder pursuant to those certain Amendment and Exchange Agreements, dated April 22, 2025 (the “Series A Exchange Agreements”), in exchange for certain securities originally acquired by the Holder pursuant to those certain Securities Purchase Agreements, dated February 2, 2024. Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 18.
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via e-mail or otherwise) of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Preferred Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer of immediately available funds. The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of an Exercise Notice with respect to less than all of the Warrant Preferred Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Preferred Shares. Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Preferred Shares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Preferred Shares in accordance with the terms hereof. On or before the first (1st) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Preferred Shares initiated on the applicable Exercise Date), the Company shall issue and deliver (via reputable overnight courier) to the address as specified in the Exercise Notice, a certificate, registered in the name of the Holder or its designee, for the number of Warrant Preferred Shares to which the Holder shall be entitled pursuant to such exercise. Upon delivery of an Exercise Notice and the release, at the direction of the Holder, of a wire (or irrevocable wire instructions to send the wire as soon as commercially practicable, but in no event later than the next Trading Day) of the Aggregate Exercise Price to the Company (the “Exercise Conditions”), the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Preferred Shares with respect to which this Warrant has been exercised (including, without limitation, the right to convert such Warrant Preferred Shares), irrespective of the date of delivery of the certificates evidencing such Warrant Preferred Shares (as the case may be). If a certificate with respect to this Warrant is delivered to the Company in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Preferred Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Preferred Shares being acquired upon an exercise, then, at the request of the Holder, the Company shall as soon as practicable and in no event later than one (1) Business Day after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance with Section 6(d)) representing the right to purchase the number of Warrant Preferred Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Preferred Shares with respect to which this Warrant is exercised. No fractional Warrant Preferred Shares are to be issued upon the exercise of this Warrant, but rather the number of Warrant Preferred Shares to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses that may be payable with respect to the issuance and delivery of Warrant Preferred Shares upon exercise of this Warrant. Notwithstanding the foregoing, the Company’s failure to deliver Warrant Preferred Shares to the Holder on or prior to the later of (i) one (1) Trading Day after receipt of the applicable Exercise Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Preferred Shares initiated on the applicable Exercise Date) and (ii) the date of the Company’s receipt of the Aggregate Exercise Price (such later date, the “Share Delivery Deadline”) shall not be deemed to be a breach of this Warrant. For the avoidance of doubt, the Holder may convert the Warrant Preferred Shares into shares of Common Stock in accordance with the terms of the Certificate of Designation at any time, at the option of the Holder, following its satisfaction of the applicable Exercise Conditions (whether or not a certificate with respect to such Warrant Preferred Shares has been delivered to the Holder on or prior to such time of conversion).
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(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $900 per each Warrant Preferred Share, subject to adjustment as provided herein.
(c) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Preferred Shares to be issued pursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Preferred Shares that are not disputed and resolve such dispute in accordance with Section 14.
(d) Forced Exercise.
(i) RTO Forced Exercise
1) General. Subject to satisfaction of the conditions set forth in this Section 1(d)(i), in connection with the consummation of the Polymath Acquisition (as defined in the Exchange Agreements) (such date, the “RTO Forced Exercise Eligibility Date”), but solely to the extent, either (x) the market capitalization of the Company is at least $7.5 million (as reported by Bloomberg) for three (3) consecutive Trading Days immediately prior to the RTO Forced Exercise Notice Date (unless waived in writing by the Holder) (the “RTO Market Cap Condition”) or (y) the aggregate Conversion Amount (as defined in the Series A Certificate of Designation, but excluding any Make-Whole Amount (as defined in the Series A Certificate of Designation)) of the Series A Convertible Preferred Stock then outstanding is less than 42% of such Conversion Amount (but excluding any Make Whole Amount) as set forth on the signature page of the Holder to the Exchange Agreement (each of the foregoing conditions, collectively, “RTO Forced Exercise Conditions”), the Company shall have the right, exercisable by delivery of written notice (the “RTO Forced Exercise Notice”, and the date thereof, the “RTO Forced Exercise Notice Date”) to all, but not less than all, of the holders of Exchange Preferred Warrants, to require the exercise, in part, of such Exchange Preferred Warrants (each, an “RTO Forced Exercise”) into such aggregate number of shares of Warrant Preferred Shares as set forth in such RTO Forced Exercise Notice, (not in excess of such aggregate number of shares of Warrant Preferred Shares with a stated value of $1.5 million (such amount, the “Maximum RTO Forced Exercise Share Amount”).
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2) Mechanics. Subject to the satisfaction of the RTO Forced Exercise Conditions, the Company may deliver an RTO Forced Exercise Notice to the Holder (and each other holder of Exchange Preferred Warrants) at least five (5) Trading Days prior to the time of consummation of the Polymath Acquisition, but no more than ten (10) Trading Days prior to the date of consummation of the Polymath Acquisition. For purposes of Section 1(a) hereof, “RTO Forced Exercise Notice” shall be deemed to replace “Exercise Notice” for all purposes hereunder as if the Holder delivered an Exercise Notice to the Company on the first (1st) Trading Day immediately prior to the date of consummation of the Polymath Acquisition, mutatis mutandis. Each RTO Forced Exercise Notice shall be irrevocable. Each RTO Forced Exercise Notice shall state (i) the proposed date of the applicable RTO Forced Exercise (the “RTO Forced Exercise Date”), which shall be no less than five (5) Trading Days after the applicable RTO Forced Exercise Notice Date and no more than ten (10) Trading Days after the applicable RTO Forced Exercise Notice Date (or such other date as mutually agreed upon by the Company and the Holder); provided, however, that under no circumstances shall the RTO Forced Exercise Date occur prior to the consummation of the Polymath Acquisition, (ii) the aggregate portion of this Warrant and the Exchange Preferred Warrants subject to forced exercise from the Holder and all of the holders of the Exchange Preferred Warrants pursuant to this Section 1(d) (and analogous provisions under the Exchange Preferred Warrants, but, in the aggregate, not in excess of the Maximum RTO Forced Exercise Share Amount), (iii) the Maximum RTO Forced Exercise Share Amount applicable to the Holder (including calculations and any other documents reasonably requested by the Holder with respect thereto), (iv) that there has been no RTO Equity Conditions Failure (or specifying any such RTO Equity Conditions Failure that then exists, with an acknowledgement that unless such RTO Equity Conditions are waived, in whole or in part, such RTO Forced Exercise Notice will be invalid) and (v) a certification that, after giving effect to the Polymath Acquisition, at least one of the RTO Forced Exercise Conditions have been met. Notwithstanding anything herein to the contrary, if an RTO Equity Conditions Failure occurs at any time after a RTO Forced Exercise Notice Date (or, solely if the Company is relying on the satisfaction of the RTO Market Cap Condition to meet the RTO Forced Exercise Conditions, the market capitalization of the Company is not at least $7.5 million (as reported by Bloomberg) for each Trading Day), in each case, prior to the time of consummation of such applicable RTO Forced Exercise (each, a “RTO Condition Failure”), (I) the Company shall provide the Holder a subsequent notice to that effect and (II) unless the Holder waives the applicable RTO Conditions Failure, the RTO Forced Exercise shall be cancelled and the applicable RTO Forced Exercise Notice shall be null and void. For the avoidance of doubt, if any RTO Triggering Event has occurred and continuing, unless such RTO Triggering Event has been waived, in whole or in part, in writing by the Holder, Company shall have no right to effect a RTO Forced Exercise; provided, that such RTO Triggering Event, as applicable, shall have no effect upon the Holder’s right to exercise this Warrant in its discretion.
(ii) Post-Polymath Acquisition Forced Exercises
1) Forced Exercise Upon Shareholder Approval; General. Subject to satisfaction of the conditions set forth in this Section 1(d)(ii), on the later of (x) the consummation of the Polymath Acquisition, (y) the twenty-fifth (25th) calendar day after the RTO Forced Exercise Date with respect to the Maximum RTO Forced Exercise Share Amount of shares of Series B Convertible Preferred Stock and (z) the time the Company obtains the Shareholder Approval (as defined in the Exchange Agreements) (such later date, the “SA Forced Exercise Eligibility Date”, the Company shall have the right, exercisable by delivery of written notice (the “SA Forced Exercise Notice”, and the date thereof, the “SA Forced Exercise Notice Date”) to all, but not less than all, of the holders of Exchange Preferred Warrants, to require the exercise, in part, of such Exchange Preferred Warrants (each, an “SA Forced Exercise”) into such aggregate number of Warrant Preferred Shares as set forth in such SA Forced Exercise Notice (not in excess of such aggregate number of Warrant Preferred Shares with a stated value of $1.5 million issuable hereunder) (such amount, the “Maximum SA Forced Exercise Share Amount”)).
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2) Forced Exercise Upon Series C Conversion; General. Subject to satisfaction of the conditions set forth in this Section 1(d)(ii), on the later of (x) the twenty-fifth (25th) calendar day after the time of consummation of the SA Forced Exercise with respect to the Maximum SA Forced Exercise Share Amount of Warrant Preferred Shares and (y) the date on which all of the shares of Series C convertible preferred stock of the Company have been converted into Common Stock pursuant to the certificate of designations with respect thereto (including calculations and any other documents reasonably requested by the Holder with respect thereto) (such later date, the “CC Forced Exercise Eligibility Date”, and together with the SA Forced Exercise Eligibility Date, each a “Forced Exercise Eligibility Date”), the Company shall have the right, exercisable by delivery of written notice (the “CC Forced Exercise Notice”, and together with the SA Forced Exercise Notice, each a “Forced Exercise Notice”, and the date thereof, the “CC Forced Exercise Notice Date”, together with the SA Forced Exercise Notice Date, each a “Forced Exercise Notice Date”) to all, but not less than all, of the holders of Exchange Preferred Warrants, to require the exercise, in part, of such Exchange Preferred Warrants (the “CC Forced Exercise”, and together with the SA Forced Exercise, each a “Forced Exercise”, and the date thereof, each a “Forced Exercise Date”) into such aggregate number of Warrant Preferred Shares as set forth in such CC Forced Exercise Notice (not in excess of such aggregate number of Warrant Preferred Shares with a stated value of $2 million issuable hereunder) (such amount, the “Maximum CC Forced Exercise Share Amount”, and together with the Maximum SA Forced Exercise Share Amount, each a “Forced Exercise Share Amount”)).
3) Mechanics. The Company may deliver a Forced Exercise Notice to the Holder (and each other holder of Exchange Preferred Warrants) on the applicable Forced Exercise Eligibility Date, as applicable, if the market capitalization of the Company is at least $35 million (as reported by Bloomberg) as of the Trading Day immediately prior to such applicable Forced Exercise Notice Date (unless waived in writing by the Holder). For purposes of Section 1(a) hereof, “Forced Exercise Notice” shall be deemed to replace “Exercise Notice” for all purposes thereunder as if the Holder delivered an Exercise Notice to the Company on the first (1st) Trading Day immediately prior to the applicable Forced Exercise Date, mutatis mutandis. Each Forced Exercise Notice shall be irrevocable. Each Forced Exercise Notice shall state (i) the proposed date of the applicable Forced Exercise, which shall be no less than five (5) Trading Days after such applicable Forced Exercise Notice Date and no more than ten (10) Trading Days after such applicable Forced Exercise Notice Date (or such other date as mutually agreed upon by the Company and the Holder), (ii) the aggregate portion of this Warrant and the Exchange Preferred Warrants subject to forced exercise from the Holder and all of the holders of the Exchange Preferred Warrants pursuant to this Section 1(d) (and analogous provisions under the Exchange Preferred Warrants, but, in the aggregate, not in excess of the applicable Forced Exercise Share Amount), (iii) the applicable Forced Exercise Share Amount applicable to the Holder (including calculations and any other documents reasonably requested by the Holder with respect thereto), (iv) that there has been no Equity Conditions Failure (or specifying any such Equity Conditions Failure that then exists, with an acknowledgement that unless such Equity Conditions are waived, in whole or in part, such Forced Exercise Notice will be invalid) and (v) a certification that, the applicable Forced Exercise Eligibility Date has occurred (including calculations and any other documents reasonably requested by the Holder with respect thereto). Notwithstanding anything herein to the contrary, if the market capitalization of the Company fails to be at least $35 million (as reported by Bloomberg) for each Trading Day during the period commencing on the Forced Exercise Notice Date through, and including, the Forced Exercise Date (the “Minimum Capitalization Condition”, and such failure to satisfy the Minimum Capitalization Condition, each a “Minimum Capitalization Failure”) or an Equity Conditions Failure occurs at any time after a Forced Exercise Notice Date and prior to the time of consummation of such applicable Forced Exercise, (I) the Company shall provide the Holder a subsequent notice to that effect and (II) unless the Holder waives the applicable Equity Conditions Failure and/or Minimum Capitalization Failure, the Forced Exercise shall be cancelled and the applicable Forced Exercise Notice shall be null and void. For the avoidance of doubt, if any Triggering Event (as defined in the Certificate of Designations) has occurred and continuing, unless such Triggering Event has been waived, in whole or in part, in writing by the Holder, Company shall have no right to effect a Forced Exercise; provided, that such Triggering Event, as applicable, shall have no effect upon the Holder’s right to exercise this Warrant in its discretion.
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(iii) Pro Rata Exercise Requirement. If the Company elects to cause a Forced Exercise of this Warrant pursuant to this Section 1(d), then it must simultaneously take the same action in the same proportion with respect to all of the Exchange Preferred Warrants.
(iv) Fees. In connection with each Forced Exercise, the Company shall reimburse the Holders, in the aggregate of (i) a non-accountable amount of $20,000 per each such Forced Exercise, for legal fees of outside counsel and disbursements of Kelley Drye & Warren LLP, counsel to one or more Holders and (ii) a non-accountable amount of $20,000 per each such Forced Exercise, for legal fees of outside counsel and disbursements of Venturist Law, Ltd., counsel to one or more Holders (collectively, the “Legal Fees”) and the Company shall be deemed to have directed the applicable Holders to withhold such Legal Fees from its Aggregate Exercise Price (and any unpaid Legal Fee Amount (as defined in the Exchange Agreement) owed to Kelley Drye & Warren LLP and Venturist Law, Ltd., if any) hereunder with respect thereto; provided, that the Company shall promptly reimburse the Holder (or Kelley Drye & Warren LLP and Venturist Law, Ltd., as applicable) on demand for all Legal Fees hereto (and any unpaid Legal Fee Amount (as defined in the Exchange Agreement) owed to Kelley Drye & Warren LLP and Venturist Law, Ltd., if any) not so reimbursed through such withholding in the payment of such Aggregate Exercise Price by the Holder pursuant to such applicable Forced Exercise. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, transfer agent fees, DTC fees or broker’s commissions (other than for Persons engaged by the Holder) relating to or arising out of the transactions contemplated hereby. The Company shall pay, and hold the Holder harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with any claim relating to any such payment.
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(e) Reservation of Shares. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance under this Warrant a number of shares of Series B Convertible Preferred Stock at least equal to 100% of the maximum number of shares of Series B Convertible Preferred Stock as shall be necessary to satisfy the Company’s obligation to issue shares of Series B Convertible Preferred Stock under the Exchange Preferred Warrants then outstanding (without regard to any limitations on exercise) (the “Required Reserve Amount”); provided that at no time shall the number of shares of Series B Convertible Preferred Stock reserved pursuant to this Section 1(e) be reduced other than proportionally in connection with any exercise or redemption of Exchange Preferred Warrants or such other event covered by Section 2(a) below. The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among the holders of the Exchange Preferred Warrants based on number of shares of Series B Convertible Preferred Stock issuable upon exercise of Exchange Preferred Warrants held by each holder on the Closing Date (without regard to any limitations on exercise) or increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s Exchange Preferred Warrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Series B Convertible Preferred Stock reserved and allocated to any Person which ceases to hold any Exchange Preferred Warrants shall be allocated to the remaining holders of Exchange Preferred Warrants, pro rata based on the number of Warrant Preferred Shares issuable upon exercise of the Exchange Preferred Warrants then held by such holders (without regard to any limitations on exercise). If, notwithstanding the foregoing, and not in limitation thereof, at any time while any of the Exchange Preferred Warrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Series B Convertible Preferred Stock to satisfy its obligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Series B Convertible Preferred Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for all the Exchange Preferred Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its shareholders for the approval of an increase in the number of authorized shares of Series B Convertible Preferred Stock. In connection with such meeting, the Company shall provide each shareholder with a proxy statement and shall use its best efforts to solicit its shareholders’ approval of such increase in authorized shares of Series B Convertible Preferred Stock and to cause its board of directors to recommend to the shareholders that they approve such proposal. Notwithstanding the foregoing, if any such time of an Authorized Share Failure, the Company is able to obtain the written consent of a majority of its issued and outstanding shares of Series B Convertible Preferred Stock to approve the increase in the number of authorized shares of Series B Convertible Preferred Stock, the Company may satisfy this obligation by obtaining such consent and submitting for filing with the SEC an Information Statement on Schedule 14C.
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2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT PREFERRED SHARES. The Exercise Price and number of Warrant Preferred Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 2.
(a) Stock Dividends and Splits. If the Company, at any time on or after the Exchange Date, (i) pays a stock dividend on one or more classes of its then outstanding Warrant Preferred Shares or otherwise makes a distribution on any class of capital stock that is payable in Warrant Preferred Shares, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding Warrant Preferred Shares into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding Warrant Preferred Shares into a smaller number of shares then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of Warrant Preferred Shares outstanding immediately before such event and of which the denominator shall be the number of Warrant Preferred Shares outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflect such event.
(b) Number of Warrant Preferred Shares. Simultaneously with any adjustment to the Exercise Price pursuant to this Section 2, the number of Warrant Preferred Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Preferred Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regard to any limitations on exercise contained herein).
(c) Voluntary Adjustment By Company. Subject to the rules and regulations of the Principal Market, the Company may at any time during the term of this Warrant, with the prior written consent of the Holder, 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.
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3. FUNDAMENTAL TRANSACTIONS.
(a) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Warrant and the other Exchange Documents (as defined in the Exchange Agreements) in accordance with the provisions of this Section 3(a) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to 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, including, without limitation, which is exercisable for a corresponding number of shares of capital stock equivalent to the shares of Series B Convertible Preferred Stock acquirable and receivable upon 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 Series B Convertible Preferred Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such adjustments to the 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 (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the other Exchange 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 Exchange Documents with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Series B Convertible Preferred Stock (or other securities, cash, assets or other property) issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been completely exercised (and the underlying Warrant Preferred Shares completely converted) immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the conversion of the Warrant Preferred Shares), as adjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, the Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 3(a) to permit the Fundamental Transaction without the assumption of this Warrant. In addition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant and conversion of the underlying Warrant Preferred Shares at any time after the consummation of the applicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property) issuable upon the exercise of the Warrant and conversion of the underlying Warrant Preferred Shares prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised and converted into Warrant Preferred Shares immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.
(b) Application. The provisions of this Section 3 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shall be applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant.
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4. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation (as defined in the Exchange Agreement), Bylaws (as defined in the Exchange Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issuance 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, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any Warrant Preferred Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Warrant Preferred Shares upon the exercise of this Warrant.
5. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Preferred Shares which it is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company, except to the extent required, from time to time, pursuant to Section 1(d) herein. Notwithstanding this Section 5, the Company shall provide the Holder with copies of the same notices and other information given to the shareholders of the Company generally, contemporaneously with the giving thereof to the shareholders. Notwithstanding anything herein to the contrary, if after the sixty (60) calendar day anniversary of the Exchange Date, the Holder is not permitted to exercise this Warrant in full for any reason, the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining such consents or approvals as necessary to permit such exercise into shares of Series B Convertible Preferred Stock.
6. REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 6(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Preferred Shares being transferred by the Holder and, if less than the total number of Warrant Preferred Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 6(d)) to the Holder representing the right to purchase the number of Warrant Preferred Shares not being transferred.
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(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 6(d)) representing the right to purchase the Warrant Preferred Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 6(d)) representing in the aggregate the right to purchase the number of Warrant Preferred Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Preferred Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for fractional Warrant Preferred Shares shall be given.
(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Preferred Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 6(a) or Section 6(c), the Warrant Preferred Shares designated by the Holder which, when added to the number of Warrant Preferred Shares underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Preferred Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, (iv) shall have an exchange date, as indicated on the face of such new Warrant which is the same as the Exchange Date, and (v) shall have the same rights and conditions as this Warrant.
7. NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 11 of the New Registration Rights Agreement (as defined in the Exchange Agreement). The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than the issuance of Warrant Preferred Shares upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the Exercise Price and the number of Warrant Preferred Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, (iii) at least ten (10) Trading Days prior to the consummation of any Fundamental Transaction and (iv) within one (1) Business Day of the occurrence of a Triggering Event (as defined in the Certificate of Designations), setting forth in reasonable detail any material events with respect to such Triggering Event and any efforts by the Company to cure such Triggering Event. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of its Subsidiaries (as defined in the Exchange Agreement), the Company shall simultaneously file such notice with the SEC (as defined in the Exchange Agreement) pursuant to a Current Report on Form 8-K. If the Company or any of its Subsidiaries provides material non-public information to the Holder that is not simultaneously filed in a Current Report on Form 8-K and the Holder has not agreed to receive such material non-public information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of its Subsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basis of, such material non-public information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.
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8. DISCLOSURE. Upon delivery by the Company to the Holder (or receipt by the Company from the Holder) of any notice in accordance with the terms of this Warrant, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company or any of its Subsidiaries, the Company shall on or prior to 9:00 am, New York city time on the Business Day immediately following such notice delivery date, publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company so shall indicate to the Holder explicitly in writing in such notice (or immediately upon receipt of notice from the Holder, as applicable), and in the absence of any such written indication in such notice (or notification from the Company immediately upon receipt of notice from the Holder), the Holder shall be entitled to presume that information contained in the notice does not constitute material, non-public information relating to the Company or any of its Subsidiaries. Nothing contained in this Section 8 shall limit any obligations of the Company, or any rights of the Holder, under Section 7 of the Exchange Agreement.
9. ABSENCE OF TRADING AND DISCLOSURE RESTRICTIONS. The Company acknowledges and agrees that the Holder is not a fiduciary or agent of the Company and that the Holder shall have no obligation to (a) maintain the confidentiality of any information provided by the Company or (b) refrain from trading any securities while in possession of such information in the absence of a written non-disclosure agreement signed by an officer of the Holder that explicitly provides for such confidentiality and trading restrictions. In the absence of such an executed, written non-disclosure agreement, the Company acknowledges that the Holder may freely trade in any securities issued by the Company, may possess and use any information provided by the Company in connection with such trading activity, and may disclose any such information to any third party.
10. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.
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11. SEVERABILITY. If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
12. GOVERNING LAW. This Warrant shall be governed by and 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 Nevada, without giving effect to any provision of law or rule (whether of the State of Nevada or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Nevada. The Company 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 the Company at the address set forth on the signature page of the Exchange Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Las Vegas, Nevada, 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 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. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.
13. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant but defined in the other Exchange Documents shall have the meanings ascribed to such terms on the date of the Exchange Agreement in such other Exchange Documents unless otherwise consented to in writing by the Holder.
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14. DISPUTE RESOLUTION.
(a) Submission to Dispute Resolution.
(i) In the case of a dispute relating to the Exercise Price or fair market value or the arithmetic calculation of the number of Warrant Preferred Shares (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via electronic mail (A) if by the Company, within two (2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Exercise Price or such fair market value or such arithmetic calculation of the number of Warrant Preferred Shares (as the case may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of such dispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank to resolve such dispute.
(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 14 and (B) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the “Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the “Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation).
(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and the Holder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. Such investment bank’s resolution of such dispute shall be final and binding upon all parties absent manifest error.
(iv) Any reasonable costs and/or fees, including all reasonable attorneys’ fees of all parties and/or the reasonable fees of the investment bank, shall be paid at the resolution of the dispute by the losing party.
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(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 14 constitutes an agreement to arbitrate between the Company and the Holder (and constitutes an arbitration agreement) under the applicable rules then in effect under the laws of Nevada, as amended, (ii) the terms of this Warrant and each other applicable Exchange Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by such investment bank in connection with its resolution of such dispute, in its sole discretion, the Holder shall have the right to submit any dispute described in this Section 14 to any state or federal court sitting in Las Vegas, Nevada in lieu of utilizing the procedures set forth in this Section 14 and (iii) nothing in this Section 14 shall limit the Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 14).
15. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Exchange Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). The issuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.
16. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions of this Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involving a claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.
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17. TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.
18. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
(b) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
(c) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
(d) “Bloomberg” means Bloomberg, L.P.
(e) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; 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.
(f) “Certificate of Designation” means that certain Certificate of Designation for the Series B Convertible Preferred Stock of the Company, to be dated on or before closing of the Polymath Acquisition, as amended from time to time.
(g) “Common Stock” means (i) the Company’s shares of class A common stock, $0.0001 par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.
(h) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Principal Market.
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(i) “Equity Conditions” means, with respect to an given date of determination: (i) on such applicable date of determination one or more registration statements (each, the “Forced Exercise Registration Statement”) filed pursuant to the New Registration Rights Agreement (as defined in the Exchange Agreement) shall be effective and the prospectus contained therein shall be available on such applicable date of determination (with, for the avoidance of doubt, any shares of Common Stock previously sold pursuant to such prospectus deemed unavailable) for the resale of all shares of Common Stock (the “Conversion Shares”) issuable upon conversion of the Series B Convertible Preferred Stock then outstanding and such Warrant Preferred Shares to be issued in connection with the event requiring such determination, without regard to any limitations on conversion set forth in the Certificate of Designation, at the Floor Price (as defined in the Certificate of Designation) then in effect (such applicable aggregate number of shares of Common Stock, each, a “Required Minimum Securities Amount”) in accordance with the terms of the Registration Rights Agreement and there shall not have been during such period any Grace Periods (as defined in the Registration Rights Agreement); (ii) on each day during the period beginning thirty (30) calendar days prior to the applicable date of determination and ending on and including the applicable date of determination (the “Equity Conditions Measuring Period”), the Common Stock (including all shares of Common Stock issuable upon conversion of the Series B Convertible Preferred Stock then outstanding and the Warrant Preferred Shares to be issued in the event requiring this determination) is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended from trading on an Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by an Eligible Market have been threatened (with a reasonable prospect of delisting occurring after giving effect to all applicable notice, appeal, compliance and hearing periods) or reasonably likely to occur or pending as evidenced by (A) a writing by such Eligible Market or (B) the Company falling below the minimum listing maintenance requirements of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable) (or, any such failure to comply with the minimum listing maintenance requirements would cease to exists after giving effect to the consummation of the Forced Exercise pursuant to which this determination is being made); (iii) during the Equity Conditions Measuring Period, the Company shall have delivered all Warrant Preferred Shares issuable upon exercise of this Warrant on a timely basis as set forth in Section 1 hereof and all other shares of capital stock required to be delivered by the Company on a timely basis as set forth in the other Exchange Documents; (iv) any Warrant Preferred Shares to be issued in connection with the event requiring determination (and the Required Minimum Securities Amount of Conversion Shares related thereto and issuable upon conversion of the Preferred Shares (as defined in the Certificate of Designation) then outstanding (in each case, without regard to any limitations on conversion set forth in the Certificate of Designation and at the Floor Price then in effect) may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (v) on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (vi) the Company shall have no knowledge of any fact that would reasonably be expected to cause the applicable Forced Exercise Registration Statement to not be effective or the prospectus contained therein to not be available for the resale by the Holder of the Required Minimum Securities Amount of Conversion Shares related to all Preferred Shares then outstanding and any Warrant Preferred Shares to be issued in connection with such determination, respectively, and no Current Public Information Failure (as defined in the Registration Rights Agreement) exists or is continuing; (vii) the Holder shall not be in possession of any material, non-public information provided to any of them by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like; (viii) on each day during the Equity Conditions Measuring Period, the Company otherwise shall have been in compliance with each, and shall not have breached any representation or warranty in any material respect (other than representations or warranties subject to material adverse effect or materiality, which may not be breached in any respect) or any covenant or other term or condition of any Exchange Document, including, without limitation, the Company shall not have failed to timely make any payment pursuant to any Exchange Document; (ix) there shall not have occurred any Volume Failure or Price Failure as of such applicable date of determination; (x) on the applicable date of determination (A) no Authorized Share Failure shall exist or be continuing, (B) all Warrant Preferred Shares to be issued in connection with the event requiring this determination may be issued in full without resulting in an Authorized Share Failure (as defined in Section 1(e) above) and (C) the issuance of the Conversion Shares issuable upon conversion of such Warrant Preferred Shares and the Series B Convertible Preferred Stock then outstanding (assuming, for such purpose, that all the Series B Convertible Preferred Stock then outstanding and such Warrant Preferred Shares are converted at the Floor Price then in effect and without regard to any limitations on conversion set forth in the Certificate of Designations) will not result in an Authorized Share Failure (as defined in the Certificate of Designations); (xi) on each day during the Equity Conditions Measuring Period, there shall not have occurred and there shall not exist a Triggering Event (as defined in the Certificate of Designation) or an event that with the passage of time or giving of notice would constitute a Triggering Event; (xii) the shares of Common Stock issuable upon conversion of all of the Preferred Shares issued pursuant to the Exchange Agreements and issuable upon exercise of the Exchange Preferred Warrants are duly authorized and listed and eligible for trading without restriction on an Eligible Market (assuming, for such purpose, that all the Preferred Shares then outstanding and such Warrant Preferred Shares are converted at the Floor Price then in effect and without regard to any limitations on conversion set forth in the Certificate of Designation); (xiii) no bona fide dispute shall exist, by and between any of holder of Series B Convertible Preferred Stock or Exchange Preferred Warrants, the Company, the Principal Market (or such applicable Eligible Market in which the Common Stock of the Company is then principally trading) and/or FINRA with respect to any term or provision of the Certificate of Designation, any Exchange Preferred Warrant or any other Exchange Document and (xiv) the Company shall have obtained the Shareholder Approval (as defined in the Exchange Agreement), which shall remain in full force and effect as of such date of determination.
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(j) “Equity Conditions Failure” means that on each day during the period commencing twenty (20) Trading Days prior to the applicable Forced Exercise Notice Date through and including the applicable Forced Exercise Date, the Equity Conditions have not been satisfied (or waived in writing by the Holder).
(k) “Expiration Date” means the date that is the eighteen (18) month anniversary of the Shareholder Approval Date (or such later date as extended by written consent of the Company and the Holder) or, if such date falls on a day other than a Trading Day or on which trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.
(l) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entities as of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stock without approval of the shareholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.
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(m) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.
(n) “Holder Pro Rata Amount” means a fraction (i) the numerator of which is the aggregate number of shares of Series B Convertible Preferred Stock issued to the Holder on the Exchange Date and (ii) the denominator of which is the aggregate number of shares of Series B Convertible Preferred Stock issued to pursuant to the Exchange Agreements on the Exchange Date.
(o) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
(p) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.
(q) “Price Failure” means, with respect to a particular date of determination, the VWAP of the Common Stock on any of the last five (5) Trading Days during the thirty (30) Trading Day period ending on the Trading Day immediately preceding such date of determination fails to exceed $1.10 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions occurring after the Exchange Date). All such determinations to be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during any such measuring period.
(r) “Principal Market” means the Nasdaq Capital Market.
(s) “RTO Equity Conditions” means, with respect to an given date of determination:
(i) on each day during the period beginning thirty (30) calendar days prior to the applicable date of determination and ending on and including the applicable date of determination (the “RTO Equity Conditions Measuring Period”), the Common Stock (including all shares of Common Stock issuable upon conversion of the Series A Convertible Preferred Stock then outstanding and the Warrant Preferred Shares to be issued in the event requiring this determination) is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended from trading on an Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by an Eligible Market have been threatened (with a reasonable prospect of delisting occurring after giving effect to all applicable notice, appeal, compliance and hearing periods) or reasonably likely to occur or pending as evidenced by (A) a writing by such Eligible Market or (B) the Company falling below the minimum listing maintenance requirements of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable) (or, any such failure to comply with the minimum listing maintenance requirements would cease to exists after giving effect to the consummation of the Forced Exercise pursuant to which this determination is being made);
(ii) during the RTO Equity Conditions Measuring Period, the Company shall have delivered all Warrant Preferred Shares issuable upon exercise of this Warrant on a timely basis as set forth in Section 1 of the Series A Certificate of Designation and all other shares of capital stock required to be delivered by the Company on a timely basis as set forth in the other Exchange Documents;
| 19 |
(iii) after the Company shall have obtained the Shareholder Approval (as defined in the Exchange Agreements), any Warrant Preferred Shares to be issued in connection with the event requiring determination (and the Required Minimum Securities Amount of Conversion Shares related thereto and issuable upon conversion of the Preferred Shares (as defined in the Certificate of Designation) then outstanding (in each case, without regard to any limitations on conversion set forth in the Certificate of Designation and at the Floor Price then in effect) may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable);
(iv) on each day during the RTO Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated;
(v) other than during the period commencing on the time the Holder receives the RTO Forced Exercise Notice through, and including, the date of consummation of the Polymath Acquisition, the Holder shall not be in possession of any material, non-public information provided to any of them by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like;
(vi) after the Company shall have obtained the Shareholder Approval (as defined in the Exchange Agreements) (A) no Authorized Share Failure shall exist or be continuing, (B) all Warrant Preferred Shares to be issued in connection with the event requiring this determination may be issued in full without resulting in an Authorized Share Failure and (C) the issuance of the Conversion Shares issuable upon conversion of such Warrant Preferred Shares and the Series B Convertible Preferred Stock then outstanding (assuming, for such purpose, that all the Series B Convertible Preferred Stock then outstanding and such Warrant Preferred Shares are converted at the Floor Price then in effect and without regard to any limitations on conversion set forth in the Certificate of Designations) will not result in an Authorized Share Failure (as defined in the Certificate of Designations);
(vii) on each day during the RTO Equity Conditions Measuring Period, there shall not have occurred and there shall not exist an RTO Triggering Event;
(viii) after the Company shall have obtained the Shareholder Approval, the shares of Common Stock issuable upon conversion of all of the Preferred Shares issued pursuant to the Exchange Agreements and issuable upon exercise of the Exchange Preferred Warrants are duly authorized and listed and eligible for trading without restriction on an Eligible Market (assuming, for such purpose, that all the Preferred Shares then outstanding and such Warrant Preferred Shares are converted at the Floor Price then in effect and without regard to any limitations on conversion set forth in the Certificate of Designation); and
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(ix) no bona fide dispute shall exist, by and between any of holder of Series B Convertible Preferred Stock or Exchange Preferred Warrants, the Company, the Principal Market (or such applicable Eligible Market in which the Common Stock of the Company is then principally trading) and/or FINRA with respect to any term or provision of the Certificate of Designation, any Exchange Preferred Warrant or any other Exchange Document or with respect to the listing, issuance, exercise or conversion of any New Securities or the listing or trading of any shares of Common Stock issuable pursuant thereto.
(t) “RTO Equity Conditions Failure” means that on the applicable RTO Forced Exercise Notice Date through and including the applicable RTO Forced Exercise Date, the RTO Equity Conditions have not been satisfied (or waived in writing by the Holder).
(u) “RTO Triggering Event” means the occurrence of any of the following:
(i) the suspension from trading or the failure of the Common Stock to be trading or listed (as applicable) on an Eligible Market for a period of five (5) consecutive Trading Days;
(ii) the Company’s (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within five (5) Trading Days after the applicable Conversion Date or exercise date (as the case may be) or (B) notice, written or oral, to any holder of Preferred Shares, including, without limitation, by way of public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request for conversion of any Preferred Shares into shares of Common Stock that is requested in accordance with the provisions of the Series A Certificate of Designation, other than pursuant to Section 4(d) hereof;
(iii) the occurrence of any default under, redemption of or acceleration prior to maturity of at least an aggregate of $750,000 of Indebtedness (as defined in the Series A Certificate of Designation) of the Company or any of its Subsidiaries;
(iv) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third party, shall not be dismissed within sixty (60) days of their initiation;
(v) the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Company or any Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a Uniform Commercial Code foreclosure sale or any other similar action under federal, state or foreign law;
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(vi) the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or (ii) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law or (iii) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period of sixty (60) consecutive days;
(vii) a final judgment or judgments for the payment of money aggregating in excess of $750,000 are rendered against the Company and/or any of its Subsidiaries and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged, settled or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; provided, however, any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $500,000 amount set forth above so long as the Company provides each Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to each Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity within thirty (30) days of the issuance of such judgment;
(viii) the Company and/or any Subsidiary, individually or in the aggregate, either (i) fails to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness in excess of $750,000 due to any third party (other than, with respect to unsecured Indebtedness only, payments contested by the Company and/or such Subsidiary (as the case may be) in good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP) or is otherwise in breach or violation of any agreement for monies owed or owing in an amount in excess of $750,000, which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist any other circumstance or event that would, with or without the passage of time or the giving of notice, result in a default or event of default under any agreement binding the Company or any Subsidiary, which default or event of default would or is likely to have a material adverse effect on the business, assets, operations (including results thereof), liabilities, properties, condition (including financial condition) or prospects of the Company or any of its Subsidiaries, individually or in the aggregate;
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(ix) other than as specifically set forth in another clause of this Section 18(u), the Company or any Subsidiary breaches any representation or warranty in any material respect (other than any representation or warranty subject to a materiality or Material Adverse Effect qualification, which may not be breached in any respect), or breached in any material respect any covenant or other term or condition of this Warrant or any Exchange Agreement, including, without limitation, any Series A Exchange Agreement, the Series A Certificate of Designation, any Series A Preferred Warrant and any other document governing or relating to the Series A Preferred Stock or Series A Preferred Warrants, except, in the case of a breach of a covenant or other term or condition that is curable, only if such breach remains uncured for a period of two (2) consecutive Trading Days; or
(x) other than the Polymath Acquisition, any Change of Control occurs without the prior written consent of the Required Holders, which consent shall not be unreasonably withheld, conditioned or delayed.
(v) “SEC” means the United States Securities and Exchange Commission or the successor thereto.
(w) “Series A Certificate of Designation” shall have the meaning as set forth in the Exchange Agreements.
(x) “Series A Convertible Preferred Stock” means (i) the Company’s Series A Convertible Preferred Stock, $0.0001 par value per share, issued and issuable pursuant to the Series A Certificate of Designation and (ii) any capital stock into which such Series A Convertible Preferred Stock shall have been changed or any share capital resulting from a reclassification of such Series A Convertible Preferred Stock.
(y) “Series B Certificate of Designation” shall mean the New Certificate of Designation (as defined in the Exchange Agreements).
(z) “Series B Convertible Preferred Stock” means (i) the Company’s Series B Convertible Preferred Stock, $0.0001 par value per share, issued and issuable pursuant to the Series B Certificate of Designation and (ii) any capital stock into which such Series B Convertible Preferred Stock shall have been changed or any share capital resulting from a reclassification of such Series B Convertible Preferred Stock.
(aa) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.
(bb) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.
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(cc) “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.
(dd) “Volume Failure” means, with respect to a particular date of determination, the aggregate daily dollar trading volume (as reported on Bloomberg) of the Common Stock on the Principal Market on any five (5) Trading Days during the thirty (30) Trading Day period ending on the Trading Day immediately preceding such date of determination (such period, the “Volume Failure Measuring Period”), is less than (x) with respect to any SA Forced Exercise, $75,000, or (y) with respect to any CC Forced Exercise, $400,000, in each case, as adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions occurring after the Exchange Date.
(a) “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, as reported by Bloomberg through its “VAP” function (set to 09:30 start time and 16:00 end time) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board 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, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, 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 Open Market (or a similar organization or agency succeeding to its functions of reporting prices). 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 Holder. If the Company and the 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 14. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.
[signature page follows]
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IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Series B Convertible Preferred Stock to be duly executed as of the Exchange Date set out above.
| TruGolf Holdings, Inc. (f/k/a Deep Medicine Acquisition Corp.) | ||
| By: | ||
| Name: | ||
| Title: | ||
EXHIBIT A
EXERCISE NOTICE
TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE SERIES B CONVERTIBLE PREFERRED STOCK
TRUGOLF HOLDINGS, INC.
The undersigned holder hereby elects to exercise the Warrant to Purchase Series B Convertible Preferred Stock, No. [ ] (the “Warrant”) of TruGolf Holdings, Inc., a Nevada corporation (the “Company”) as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Payment of Exercise Price. The Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.
2. Delivery of Warrant Preferred Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Series B Convertible Preferred Stock in accordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as a certificate to the following name and to the following address:
| Issue to: | ||
Date: _____________ __, _______
_________________________
Name of Registered Holder
| By: | ||
| Name: | ||
| Title: |
| Tax ID: | ||
| E-mail Address: |
EXHIBIT B
ACKNOWLEDGMENT
The Company hereby acknowledges receipt of the attached Exercise Notice and consents to such exercise of the Warrant in accordance therewith.
Dated: ______________
| TRUGOLF HOLDINGS, INC. (F/K/A DEEP MEDICINE ACQUISITION CORP.) | ||
| By: | ||
| Name: | ||
| Title: | ||
Exhibit 10.1
SECOND AMENDMENT, WAIVER AND EXCHANGE AGREEMENT
This Second Amendment, Waiver and Exchange Agreement (the “Agreement”) is entered into as of August 17, 2026, by and among TruGolf Holdings, Inc. (f/k/a Deep Medicine Acquisition Corp.), a Nevada corporation with offices located at 60 North 1400 West, Centerville, Utah 84014 (the “Company”) and the investor signatory hereto (the “Holder”), with reference to the following facts:
A. Prior to the date hereof, (a) the Company and the Holder and/or certain other investors (the “Other Holders”, and together with the Holder, the “Holders”) entered into that certain Securities Purchase Agreement, dated February 2, 2024 (as may be amended, modified, restated, restructured or supplemented from time to time, each a “Securities Purchase Agreement”), pursuant to which the Holder purchased, among other things, certain senior convertible notes (as amended, modified or waived prior to the date hereof, the “Notes”) and certain warrants to purchase shares of Common Stock (as defined in the Securities Purchase Agreement) (the “Warrants”, together with the Notes, the “Original Securities”), and (b) the Company and each Holder entered into that certain Amendment and Exchange Agreement, dated as of April 22, 2025 (each, as may be amended, modified, or waived, from time to time, a “Series A Exchange Agreement”, and collectively, the “Series A Exchange Agreements”), pursuant to which, among other things, the Holder acquired in exchange for the Original Securities, (i) certain shares (the “Series A Preferred Shares”) of a series of convertible preferred stock of the Company designated as Series A Preferred Stock, $0.0001 par value per share (the “Series A Preferred Stock”), the terms of which are set forth in the Fourth Article, Section B., Section (3) of the Company’s Amended and Restated Articles of Incorporation dated March 11, 2026 (the “Series A Certificate of Designation”) and (ii) certain warrants to purchase shares of Series A Preferred Stock (the “Series A Preferred Warrants”, and collectively with the Series A Preferred Shares, the “Series A Securities”). Capitalized terms not defined herein shall have the meaning as set forth in the Series A Exchange Agreements.
B. The Company has authorized a new series of convertible preferred stock of the Company designated as Series B Convertible Preferred Stock, $0.0001 par value, the terms of which are set forth in the certificate of designation for such series of preferred stock (the “New Certificate of Designation”) in the form attached hereto as Exhibit A (together with any convertible preferred shares issued in replacement thereof in accordance with the terms thereof, the “Series B Preferred Stock”), which Series B Preferred Stock shall be convertible into shares of Common Stock, in accordance with the terms of the New Certificate of Designation.
C. The Company has duly authorized the issuance to the Holder of a warrant to purchase such aggregate number of shares of Series B Preferred Stock as set forth on the signature page of the Holder attached hereto in the form attached hereto as Exhibit B (the “New Preferred Warrants”, and such shares of Series B Preferred Stock issuable pursuant to the terms of the New Preferred Warrants, including, without limitation, upon exercise or otherwise, collectively, the “New Warrant Preferred Shares”, and such shares of Common Stock issuable upon the conversion of the New Warrant Preferred Shares, collectively, the “New Warrant Preferred Conversion Shares”), in exchange for all of the Series A Preferred Warrants (the “Exchanged Securities”), as set forth on the signature page of the Holder attached hereto.
D. On the Closing Date (as defined below), each of the Company and the Holder desire to effectuate the exchange of the Exchanged Securities for the New Preferred Warrants (the “Exchange”) on the basis and subject to the terms and conditions set forth in this Agreement in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 144(d)(3)(ii) of the Securities Act.
E. In connection with the proposed acquisition by the Company of all the securities of Polymath Research Inc., a Canadian company (the “Polymath Acquisition”, and the time of closing of the Polymath Acquisition, the “Polymath Closing Time”), the Company desires to obtain a waiver, in part, of Sections 3(a), 3(c), 5(a)(vi), 5(a)(vii), 5(a)(xix), 6(b), 8(a), 13(f), 13(l) and 13(p) of the Series A Certificate of Designation solely to the extent necessary to permit the Polymath Acquisition and the issuances of shares in connection with the Polymath Acquisition (the “Limited Waivers”).
F. In connection with the Polymath Acquisition, the Company desires to obtain the consent for (i) the consummation of the Polymath Acquisition for the purposes of Section 5(a)(xix) of the Series A Certificate of Designation such that the Polymath Acquisition shall not be deemed a Triggering Event (as defined in the Series A Certificate of Designation), and (ii) the creation of the Series B Preferred Stock and Series C preferred stock for purposes of Section 16 of Series A Certificate of Designation (the “Polymath Acquisition Consents”).
G. Concurrently herewith, the Company has also requested that each Other Holder enter into amendment and exchange agreements in form and substance identical to this Agreement (each, as may be amended, modified, or waived, from time to time, a “Other Exchange Agreement”, and collectively, the “Other Exchange Agreements”, and together with this Agreement, the “Series B Exchange Agreements”, and collectively with the Series A Exchange Agreements, the “Exchange Agreements”).
H. The New Preferred Warrants, the New Warrant Preferred Shares and the New Warrant Preferred Conversion Shares are collectively referred to herein as the “New Securities”.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants hereinafter contained, the parties hereto agree as follows:
1. Exchange.
(a) General. On the Closing Date, pursuant to Section 4(a)(2) of the Securities Act and Rule 144(d)(3)(ii) of the Securities Act, the Holder hereby agrees to convey, assign and transfer the Exchanged Securities to the Company in exchange for which the Company agrees to issue the Holder the New Preferred Warrants. As soon as commercially practicable following the Effective Date, the Holder shall deliver or cause to be delivered to the Company (or its assignee) the Exchanged Securities (or affidavit of lost warrant certificate in form provided upon request by the Company and reasonably acceptable to the Holder). Immediately following the issuance of the New Preferred Warrants to the Holder on the books and records of the Company, the Holder hereby relinquishes all rights, title and interest in the Exchanged Securities and assigns the same to the Company and the Exchanged Securities shall be cancelled; provided, that (i) the New Warrant Preferred Shares shall be immediately convertible by the Holder, in whole or in part, after such issuance, regardless of the date of the Holder’s actual receipt of a certificate evidencing the New Warrant Preferred Shares and (ii) the New Preferred Warrants shall be immediately exercisable by the Holder, in whole or in part, after such issuance, regardless of the date of the Holder’s actual receipt of a certificate evidencing the New Preferred Warrants. Notwithstanding the foregoing, to the extent the Exchanged Securities held by the Holder as of the Closing Date are less than the aggregate number of Exchanged Securities set forth on the signature page of the Holder attached hereto then the aggregate number of New Preferred Warrants that shall be issued to the Holder shall be adjusted proportionally to reflect the foregoing, mutatis mutandis.
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(b) Closing. Subject to the conditions set forth in Section 2 below, the Exchange shall take place via the electronic exchange of documents, securities and signatures, one (1) Business Day (as defined in the New Certificate of Designation) after the initial date such conditions are satisfied or waived by the respective parties (or at such other time and place as the Company and the Holder mutually agree) (the “Closing” and such date, the “Closing Date”).
2. Closing Conditions to the Closing.
(a) Conditions to the Holder’s Obligations at the Closing. The obligation of the Holder to consummate the Closing is subject to the fulfillment (or waiver, at the sole option of the Holder), to the Holder’s reasonable satisfaction, prior to or at the Closing, of each of the following conditions:
(i) Exchange Documents. The Company shall have duly executed and delivered to the Holder this Agreement, the registration rights agreement in the form attached hereto as Exhibit C, with respect to the registration for resale by the Holder of the New Warrant Preferred Conversion Shares (the “New Registration Rights Agreement”), the Irrevocable Transfer Agent Instructions (as defined below) and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the transactions contemplated hereby and thereby, as may be amended from time to time (collectively, the “Exchange Documents”) to which it is a party and the Company shall have issued to the Holder the New Securities, on the books and records of the Company.
(ii) Representations and Warranties. Each and every representation and warranty of the Company set forth herein shall be true and correct in all material respects (except where qualified by materiality or material adverse effect, which shall be true and correct in all respect) as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date) and the Company shall have performed, satisfied and complied in all respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Holder shall have received a certificate, duly executed by the Chief Executive Officer or Chief Financial Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Holder in the form acceptable to the Holder.
| 3 |
(iii) Issuance of Securities. At the Closing, the Company shall issue the New Preferred Warrants on the books and records of the Company, with certificates with respect thereto delivered to the Holder no later than five (5) Trading Days after the Closing Date.
(iv) No Actions. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or authority or legislative body to enjoin, restrain, prohibit or obtain substantial damages in respect of, this Agreement or the consummation of the transactions contemplated by this Agreement.
(v) Proceedings and Documents. All proceedings in connection with the transactions contemplated hereby and all documents and instruments incident to such transactions shall be satisfactory in substance and form to the Holder, and the Holder shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. The Company shall have obtained all governmental, regulatory or third-party consents and approvals, if any, necessary for the Exchange, including without limitation, those required by the Principal Market (defined hereafter), if any.
(vi) No RTO Triggering Event or Default. On each Trading Day during the fifteen (15) Trading Days immediately preceding the Closing Date and the Closing Date, (A) no RTO Triggering Event (as defined in the New Preferred Warrants) or event that with the passage of time or giving of notice would constitute an RTO Triggering Event shall have occurred (in each case, excluding any RTO Triggering Event waived in writing by the Holder) and (B) no material breach or default by the Company under any Exchange Document shall have occurred or be continuing, and (C) no event shall have occurred or exist that, with the passage of time, the giving of notice or both, would constitute any of the foregoing.
(vii) Eligible Market. On each Trading Day (as defined in the New Certificate of Designation) during the fifteen (15) Trading Days immediately preceding the Closing Date and the Closing Date, the Common Stock (I) shall be designated for quotation or listed on an Eligible Market (as defined in the New Certificate of Designation) and (II) shall not have been suspended.
(viii) Payment of Fees. The Company shall have paid Kelley Drye & Warren LLP and Venturist Law, Ltd. the Legal Fee Amount in accordance with Section 10 below.
(ix) Good Standing Certificate. The Company shall have delivered to the Holder a certificate evidencing the Company’s good standing issued by the Secretary of State (or comparable office) of the State of Nevada and a certificate of existence from each jurisdiction in which the Company conducts business and is required to qualify to do business as a foreign corporation, as of a date within ten (10) days of the Closing Date.
(x) Certified Charter. The Company shall have delivered to the Holder a certified copy of the Articles of Incorporation (as defined below) as certified by the Nevada Secretary of State within ten (10) days of the Closing Date (including evidence of the filing of the New Certificate of Designation on or prior to the Closing Date).
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(xi) Secretary Certificate. The Company shall have delivered to the Holder a certificate, in the form acceptable to the Holder, executed by the Secretary of the Company and dated as of the Closing Date, as to (i) the resolutions consistent with Section 5(b) below as adopted by the Company’s board of directors in a form reasonably acceptable to the Holder, (ii) the Articles of Incorporation of the Company and (iii) the Bylaws (as defined below) of the Company, each as in effect at the Closing.
(xii) Instruction Letter. The Company shall have executed and duly delivered to the Holder a copy of the Irrevocable Transfer Agent Instructions (as defined below) which instructions shall have been delivered to and acknowledged in writing by the Company’s transfer agent.
(xiii) Transfer Agent Certificate. The Company shall have delivered to such Holder a letter from the Company’s transfer agent certifying the number of shares of Common Stock outstanding on the Closing Date immediately prior to the Closing.
(xiv) Listing. The New Warrant Preferred Conversion Shares (A) shall be designated for quotation or listed (as applicable) on the Principal Market (as defined in the New Certificate of Designation) and (B) except as otherwise disclosed in the SEC Documents with respect to the Principal Market, shall not have been suspended, as of the Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension by the SEC or the Principal Market have been threatened, as of the Closing Date, either (I) in writing by the SEC or the Principal Market or (II) by falling below the minimum maintenance requirements of the Principal Market.
(xv) Filings with Principal Market. The Company shall have filed the Listing of Additional Shares with the Principal Market to list or designate for quotation (as the case may be) the New Warrant Preferred Conversion Shares.
(xvi) Conditions to Polymath Closing. Other than the Closing and the consummation of the RTO Forced Exercise (as defined in the New Preferred Warrant) all conditions to the closing of the Polymath Acquisition shall have been satisfied or irrevocably waived in writing by the party entitled to the benefit thereof, and the Holder shall have received a written confirmation, in form and substance reasonably satisfactory to the Holder, duly executed by the Company, SubCo (as defined in the Merger Agreement) and Polymath Research Inc., confirming that (A) all such conditions have been satisfied or irrevocably waived, other than the Closing and the consummation of the RTO Forced Exercise, (B) no party to the agreement governing the Polymath Acquisition (the “Merger Agreement”) has exercised, or has any then-existing right to exercise, any right to terminate, rescind or abandon the Polymath Acquisition, other than as a result of the failure of the Closing or the RTO Forced Exercise to occur, (C) all documents, instruments and other deliveries required to consummate the Polymath Acquisition have been duly executed and delivered or placed into escrow, as applicable, (D) each such party is irrevocably committed to consummate the Polymath Acquisition substantially concurrently with the Closing and the RTO Forced Exercise, without any further action, consent, approval or exercise of discretion by any such party, and (E) the condition set forth in Section 8.3(w) of the Merger Agreement shall be deemed satisfied upon the substantially concurrent consummation of the Closing and the RTO Forced Exercise.
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(xvii) Other. The Company and its Subsidiaries shall have delivered to such Holder such other documents, instruments or certificates relating to the transactions contemplated by this Agreement as such Holder or its counsel may reasonably request.
(b) Conditions to the Company’s Obligations to the Closing. The obligation of the Company to consummate the Closing is subject to the fulfillment (or waiver, at the sole option of the Company), to the Company’s reasonable satisfaction, prior to or at the Closing in question, of each of the following conditions:
(i) Representations and Warranties. The representations and warranties of the Holder set forth herein shall be true and correct in all material respects (except where qualified by materiality or material adverse effect, which shall be true and correct in all respect) as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date), and the Holder shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Holder at or prior to the Closing Date.
(ii) No Actions. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or authority or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, this Agreement or the consummation of the transactions contemplated by this Agreement.
(iii) Proceedings and Documents. All proceedings in connection with the transactions contemplated hereby and all documents and instruments incident to such transactions shall be satisfactory in substance and form to the Company and the Company shall have received all such counterpart originals or certified or other copies of such documents as the Company may reasonably request.
3. Waivers; Voluntary Adjustments.
(a) Definitions. Solely for the purpose of this Section 3, capitalized terms not defined herein shall have the meaning as set forth in the Series A Certificate of Designation.
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(b) Limited Waivers. The Holder hereby agrees to grant the Limited Waivers and the Polymath Acquisition Consents in its capacity as a holder of Series A Preferred Shares, and upon the receipt of waivers from the Required Holders by way of the execution of the Exchange Agreements (as defined in the Securities Purchase Agreement), the Limited Waivers and the Polymath Acquisition Consents shall be effective as of the date hereof. The Limited Waivers and the Polymath Acquisition Consents set forth in this Agreement constitute one-time waivers and consents and are limited to the matters expressly contemplated and waived herein and should not be construed as an indication that the Holder would be willing to agree to any future modifications to, consent of, or waiver of any of the terms of any other agreement, instrument or security or any modifications to, consents of, or waiver of any default that may exist or occur thereunder.
(c) Holder Series A Preferred Waivers. Effective as of the Closing Date, the Holder hereby agrees to waive, in part, the Series A Certificate of Designation as follows:
(i) Triggering Event Thresholds. Clauses (ix), (xiii) and (xiv) of Section 5(a) of the Series A Certificate of Designation shall be waived, in part, such that no Triggering Event shall be deemed to occur with respect to such clauses as if such references to “$500,000” were deemed to be “$750,000”.
(ii) Company Optional Redemption. Clause (ii) in the definition of “Company Optional Redemption Price” in Section 9 of the Series A Certificate of Designation shall not apply to a Company Optional Redemption unless, as of such applicable Company Optional Redemption Date (as defined in the Series A Certificate of Designation), an Equity Conditions Failure (as defined in the Series A Certificate of Designation) then exists.
(iii) Insufficient Authorized Shares. Section 11(b) of the Series A Certificate of Designation shall be waived, in part, as if such references to “60” were deemed to be “75”.
(iv) Permitted Transfer of Assets. Section 13(e) of the Series A Certificate of Designation is hereby waived with respect to the divestment of any assets (other than Cash (as defined in the Series A Certificate of Designation) and Cash equivalents) held as of the Closing Date.
(v) Permitted Exchange. Sections 13(l) and 13(p) of the Series A Certificate of Designation is hereby waived with respect to the Exchange.
(vi) Dispute Resolution. Section 23(a)(i)(A) of the Series A Certificate of Designation is hereby waived, in part, such that “at any time” as used therein shall be limited to “three (3) Business Days”.
(vii) Dividend Rate. The Holder hereby waives, in part, the definition of “Dividend Rate” in the Series A Certificate of Designation, such that the reference to “fifteen percent (15%)” shall be “twelve and a half percent (12.5%)”.
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(d) Additional Series A Preferred Waivers. Effective as of the Closing Date, the Holder and the Company jointly agrees to waive, in part, the following provisions the Series A Certificate of Designation as follows:
(i) Dispute Resolution. Section 23(a)(i) of the Series A Certificate of Designation is hereby waived, in part, such that all references to “two (2) Business Days” shall be deemed to be “three (3) Business Days”.
(e) Voluntary Adjustments of Series A Preferred Shares. Pursuant to Section 8(g) of the Series A Certificate of Designation, the Company and the Holder hereby agree as follows:
(i) Reset. Effective as of the Closing Date, if on the twelve (12) month anniversary of the Closing Date (the “Reset Date”), the Conversion Price (as defined in the Series A Certificate of Designation) (the “Series A Conversion Price”) then in effect is greater than the arithmetic average of the VWAP of the Common Stock during the thirty (30) consecutive Trading Day period ending and including the Trading Day immediately preceding the Reset Date (the “Reset Price”), immediately after the close of the Principal Market on the Reset Date the Series A Conversion Price shall automatically lower to such applicable Reset Price.
(ii) SA Resets. Effective as of the Closing Date, (i) if on any SA Forced Exercise Notice Date (as defined in the New Preferred Warrants) (each, a “SA Reset Date”), the Conversion Price then in effect is greater than the Minimum Price (as defined pursuant to Section 5635(d)(1)(A) of the Nasdaq Market Rules) of the Common Stock as of such applicable SA Reset Date (each, a “SA Reset Price”), immediately after the close of the Principal Market on such applicable SA Reset Date and (ii) the Company has requested and the Holder has agreed to waive the Minimum Capitalization Condition (as defined in the New Preferred Warrants) prior to the receipt of a SA Forced Exercise Notice (as defined in the New Preferred Warrants), then the Conversion Price shall automatically lower to the SA Reset Price on the Trading Day prior to the SA Forced Exercise Date (as defined in the New Preferred Warrants). If the Holder unilaterally waives the Minimum Capitalization Condition (as defined in the New Preferred Warrants) prior to the receipt of a SA Forced Exercise Notice (as defined in the New Preferred Warrants), then the Holder shall not receive an adjustment pursuant to this Section 3(c)(ii) with respect to any given aggregate number of New Warrant Preferred Shares subject to such SA Forced Exercise Notice (as defined in the New Preferred Warrants) at such time as the Minimum Capitalization Condition is not satisfied.
(iii) Signing Reset. Immediately after the close of the Principal Market on the date prior to the date of this Agreement, the Conversion Price (as defined in the Series A Certificate of Designation) of the Series A Preferred Shares shall automatically lower to $1.00 per share (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations and similar events).
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(f) Automatic Reinstatement of Series A Rights. Notwithstanding anything herein to the contrary, upon the occurrence of any of the following: (i) prior to the consummation of the Polymath Acquisition, the Merger Agreement is terminated, rescinded, abandoned or otherwise ceases to be in full force and effect, (ii) the Closing has not occurred in accordance with Section 14 below, or (iii) following the Closing, either the Polymath Acquisition or the RTO Forced Exercise is not consummated substantially concurrently with the Closing (each, a “Reinstatement Event”), then, automatically and without any further action by the Holder or the Company:
(i) the Limited Waivers and the Polymath Acquisition Consents granted pursuant to Section 3(b) shall immediately cease to have any further force or effect;
(ii) each waiver granted by the Holder pursuant to Sections 3(c) and 3(d) shall immediately cease to have any further force or effect, and the applicable provisions of the Series A Certificate of Designation shall automatically be reinstated and thereafter apply in accordance with their terms as in effect immediately prior to the effectiveness of such waivers, including with respect to any event, condition, breach or default then continuing;
(iii) the cessation of any waiver or consent pursuant to this Section 3(f) shall operate prospectively from and after the applicable Reinstatement Event and shall not retroactively invalidate any transaction or action irrevocably consummated prior to such Reinstatement Event in reliance upon such waiver or consent; provided that any such waiver or consent shall survive solely to the extent necessary to preserve the validity of such previously consummated transaction or action;
(iv) no adjustment to the Series A Conversion Price or other right or benefit granted to the Holder pursuant to Section 3(e), including, without limitation, the Signing Reset pursuant to Section 3(e)(iii), shall be rescinded, reversed or otherwise adversely affected by the occurrence of a Reinstatement Event; and
(v) no Reinstatement Event shall affect any right, claim, liability or obligation arising from any breach of this Agreement or any other Exchange Document occurring prior to such Reinstatement Event.
4. Amendments.
(a) Ratifications. Except as otherwise expressly provided herein, the Exchange Agreements and each other Transaction Document (as defined in the Exchange Agreements), is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that on and after the Effective Date: (i) all references in the Exchange Agreements to “this Agreement”, “hereto”, “hereof”, “hereunder” or words of like import referring to such Exchange Agreement shall mean the applicable Exchange Agreement as amended by this Agreement, and (ii) all references in the other Transaction Documents, to the applicable “Exchange Agreement”, “thereto”, “thereof”, “thereunder” or words of like import referring to such Exchange Agreement shall mean the Exchange Agreement as amended by this Agreement.
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(b) Amendments to Transaction Documents. On and after the Effective Date, each of the Transaction Documents (as defined in the Series A Exchange Agreements) are hereby amended as follows:
(i) The defined term “Notes” is hereby amended to include the New Warrant Preferred Shares (as defined in each Series B Exchange Agreement) and, for the avoidance of doubt, including the New Certificate of Designation relating to the New Warrant Preferred Shares.
(ii) The defined term “Conversion Shares” is hereby amended to include the New Warrant Preferred Conversion Shares (as defined in each Series B Exchange Agreement).
(iii) The defined terms “Transaction Documents” and “Exchange Documents” are hereby each amended to include this Agreement.
(iv) The defined term “Warrants” is hereby amended to include the New Preferred Warrants (as defined in each Series B Exchange Agreement).
(v) The defined term “Warrant Shares” is hereby amended to include New Warrant Preferred Shares.
5. Representations and Warranties of the Company. The Company represents and warrants to the Holder, as of the date hereof and as of the Closing Date, as follows:
(a) Organization and Qualification. The Company is duly organized and validly existing and in good standing under the laws of the jurisdiction in which it was formed, and has the requisite power and authority to own its properties and to carry on its business as now being conducted and as presently proposed to be conducted. The Company is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have a Material Adverse Effect (as defined below). As used in this Agreement, “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any Subsidiary, individually or taken as a whole, (ii) the transactions contemplated hereby or in any of the other Exchange Documents or any other agreements or instruments to be entered into in connection herewith or therewith or (iii) the authority or ability of the Company or any of its Subsidiaries to perform any of their respective obligations under any of the Exchange Documents (as defined below). Other than the Persons (as defined below) set forth on Schedule 4(a) hereto the Company has no Subsidiaries. “Subsidiaries” means any Person in which the Company, directly or indirectly, (A) owns any of the outstanding capital stock or holds any equity or similar interest of such Person or (B) controls or operates all or any part of the business, operations or administration of such Person, and each of the foregoing, is individually referred to herein as a “Subsidiary”. “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any Governmental Entity or any department or agency thereof.
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(b) Authorization; Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations (including, without limitation, the issuance of the New Preferred Warrants in accordance with the terms hereof, the reservation and issuance of the New Warrant Preferred Shares in accordance with the terms hereof and the reservation and issuance of the New Warrant Preferred Conversion Shares in accordance with the terms of the New Certificate of Designation) under the Exchange Documents. The execution and delivery of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the New Preferred Warrants, in accordance with the terms hereof, the reservation and issuance of the New Warrant Preferred Shares in accordance with the terms of this Agreement and the New Preferred Warrants, and the reservation and issuance of the New Warrant Preferred Conversion Shares in accordance with the terms of this Agreement and the New Certificate of Designation, have been duly authorized by the Board of Directors of the Company and, other than such filings required under applicable securities or “Blue Sky” laws of the states of the United States (the “Required Approvals”) no further filing, consent, or authorization is required by the Company or of its Board of Directors or its shareholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company and constitute the legal, 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 general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.
(c) Issuance of New Securities. The issuance of the New Preferred Warrants are duly authorized and, upon issuance in accordance with the terms of this Agreement, the New Preferred Warrants shall be duly issued, fully paid and non-assessable and free from all preemptive or similar rights, mortgages, defects, claims, liens, pledges, charges, taxes, rights of first refusal, encumbrances, security interests and other encumbrances (collectively “Liens”) with respect to the issue thereof. Upon exercise of the New Preferred Warrants into the New Warrant Preferred Shares in accordance with the New Preferred Warrants and the New Certificate of Designation, the New Warrant Preferred Shares issued to the Holder, when issued, will be validly issued, fully paid and nonassessable and free from all preemptive or similar rights or Liens with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of shares of Series B Preferred Stock. Upon conversion of the New Warrant Preferred Shares in accordance with the New Certificate of Designation, the Common Stock issued to the Holder upon such conversion of the New Warrant Preferred Shares, when issued, will be validly issued, fully paid and nonassessable and free from all preemptive or similar rights or Liens with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Assuming the accuracy of the representations and warranties of the Holder contained herein, the offer and issuance by the Company of the New Preferred Warrants are exempt from registration under the 1933 Act. As of the Effective Date, the Company shall have reserved from its duly authorized capital stock not less than the Required Reserve Amount (as defined below) for issuances of New Warrant Preferred Conversion Shares pursuant to the New Certificate of Designation and New Warrant Preferred Shares issuable pursuant to the New Warrant Preferred Shares.
(d) Securities Law Exemptions. Assuming the accuracy of the representations and warranties of the Holder contained herein, the offer and issuance by the Company of the New Preferred Warrants in exchange for the Exchanged Securities is exempt from registration under the 1933 Act, pursuant to the exemption provided by Section 4(a)(2) and Rule 144(d)(3)(ii) thereof, and applicable state securities laws.
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(e) No Conflict; Required Filings and Consents.
(i) The execution, delivery and performance of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) result in a violation of the Articles of Incorporation (as defined below) (including, without limitation, any certificate of designation contained therein), Bylaws (as defined below), certificate of formation, memorandum of association, articles of association, bylaws or other organizational documents of the Company or any of its Subsidiaries, or any capital stock or other securities of the Company or any of its Subsidiaries, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) in any respect under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party for which a consent or waiver has not been obtained, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, foreign, federal and state securities laws and regulations and the rules and regulations of the Nasdaq Capital Market (the “Principal Market”) and including all applicable foreign, federal and state laws, rules and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected.
(ii) Neither the Company nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with (other than the Required Approvals), any Governmental Entity or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its respective obligations under or contemplated by the Exchange Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company or any Subsidiary is required to obtain pursuant to the preceding sentence have been or will be obtained or effected on or prior to the date hereof, and neither the Company nor any of its Subsidiaries are aware of any facts or circumstances which might prevent the Company or any of its Subsidiaries from obtaining or effecting any of the registration, application or filings contemplated by the Exchange Documents. Except as disclosed in the SEC Documents, the Company is not in violation of the requirements of the Principal Market and has no knowledge of any facts or circumstances which could reasonably lead to delisting or suspension of the Common Stock in the foreseeable future. “Governmental Entity” means any nation, state, county, city, town, village, district, or other political jurisdiction of any nature, federal, state, local, municipal, foreign, or other government, governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal), multi-national organization or body; or body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature or instrumentality of any of the foregoing, including any entity or enterprise owned or controlled by a government or a public international organization or any of the foregoing.
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(f) Acknowledgment Regarding Holder’s Acquisition of New Securities. The Company acknowledges and agrees that the Holder is acting solely in the capacity of an arm’s length purchaser with respect to the Exchange Documents and the transactions contemplated hereby and thereby and that the Holder is not (i) an officer or director of the Company or any of its Subsidiaries, (ii) to its knowledge, an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule thereto) (collectively, “Rule 144”)) of the Company or any of its Subsidiaries or (iii) to its knowledge, a “beneficial owner” of more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the 1934 Act). The Company further acknowledges that the Holder is not acting as a financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Exchange Documents and the transactions contemplated hereby and thereby, and any advice given by the Holder or any of its representatives or agents in connection with the Exchange Documents and the transactions contemplated hereby and thereby is merely incidental to the Holder’s purchase of the New Securities. The Company further represents to the Holder that the Company’s and each Subsidiary’s decision to enter into the Exchange Documents to which it is a party has been based solely on the independent evaluation by the Company, each Subsidiary and their respective representatives.
(g) No Placement Agent. Other than as described to the Holder by the Company, neither the Company nor any of its Subsidiaries has engaged any placement agent or other agent in connection with the offer or sale of the New Securities. The Company shall pay, and hold the Holder harmless against, any liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in connection with any such claim.
(h) No Integrated Offering. None of the Company, its Subsidiaries or any of their affiliates, nor 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 New Securities to require approval of shareholders of the Company under any applicable shareholder 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 for quotation. None of the Company, its Subsidiaries, their affiliates nor any Person acting on their behalf will take any action or steps that would cause the offering of any of the New Securities to be integrated with other offerings of securities of the Company.
(i) Dilutive Effect. The Company understands and acknowledges that the number of New Warrant Preferred Conversion Shares will increase in certain circumstances. The Company further acknowledges that its obligation to issue the New Warrant Preferred Conversion Shares upon conversion of the New Warrant Preferred Shares in accordance with this Agreement and the New Certificate of Designation is, absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
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(j) Application of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested shareholder, business combination, poison pill (including, without limitation, any distribution under a rights agreement), shareholder rights plan or other similar anti-takeover provision under the Articles of Incorporation, Bylaws or other organizational documents or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to the Holder as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the New Securities and the Holder’s ownership of the New Securities. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of shares of Common Stock or a change in control of the Company or any of its Subsidiaries.
(k) SEC Documents; Financial Statements. During the two (2) years prior to the date hereof, the Company has filed all reports, schedules, forms, proxy statements, statements and other documents required to be filed by it with the Securities and Exchange Commission (the “SEC”) pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits and appendices included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). The Company has delivered or has made available to the Holders or their respective representatives true, correct and complete copies of each of the SEC Documents not available on the EDGAR system. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, 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 the light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as in effect as of the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”), consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude 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 its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not be material, either individually or in the aggregate). The reserves, if any, established by the Company or the lack of reserves, if applicable, are reasonable based upon facts and circumstances known by the Company on the date hereof and there are no loss contingencies that are required to be accrued by the Statement of Financial Accounting Standard No. 5 of the Financial Accounting Standards Board which are not provided for by the Company in its financial statements or otherwise. No other information provided by or on behalf of the Company to any of the Holders which is not included in the SEC Documents (including, without limitation, information in the disclosure schedules to this Agreement) contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein not misleading, in the light of the circumstance under which they are or were made. The Company is not currently contemplating to amend or restate any of the financial statements (including, without limitation, any notes or any letter of the independent accountants of the Company with respect thereto) included in the SEC Documents (the “Financial Statements”), nor is the Company currently aware of facts or circumstances which would require the Company to amend or restate any of the Financial Statements, in each case, in order for any of the Financial Statements to be in compliance with GAAP and the rules and regulations of the SEC. The Company has not been informed by its independent accountants that they recommend that the Company amend or restate any of the Financial Statements or that there is any need for the Company to amend or restate any of the Financial Statements.
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(l) Absence of Certain Changes. Since the date of the Company’s most recent financial statements contained in a Form 10-K or Form 10-Q, as applicable, there has been no material adverse change and no material adverse development in the business, assets, liabilities, properties, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any of its Subsidiaries. Since the date of the Company’s most recent financial statements contained in a Form 10-K or Form 10-Q, as applicable, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, outside of the ordinary course of business or (iii) made any capital expenditures, individually or in the aggregate, outside of the ordinary course of business. Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up.
(m) No Undisclosed Events, Liabilities, Developments or Circumstances. Except as set forth in the SEC Documents, no event, liability, development or circumstance has occurred or exists, or is reasonably expected to exist or occur with respect to the Company, any of its Subsidiaries or any of their respective businesses, properties, liabilities, prospects, operations (including results thereof) or condition (financial or otherwise), that (i) would be required to be disclosed by the Company under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced, (ii) could have a material adverse effect on the Holder’s investment hereunder or (iii) could have a Material Adverse Effect.
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(n) Conduct of Business; Regulatory Permits. Neither the Company nor any of its Subsidiaries is in violation of any term of or in default under its Articles of Incorporation, any certificate of designation, preferences or rights of any other outstanding series of preferred stock of the Company or any of its Subsidiaries or Bylaws or their organizational charter, certificate of formation, memorandum of association, articles of association, Articles of Incorporation or certificate of incorporation or bylaws, respectively. Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except in all cases for possible violations which could not, individually or in the aggregate, have a Material Adverse Effect. Without limiting the generality of the foregoing, except as set forth in the SEC Documents, the Company is not in violation of any of the rules, regulations or requirements of the Principal Market and has no knowledge of any facts or circumstances that could reasonably lead to delisting or suspension of the Common Stock by the Principal Market in the foreseeable future. During the two years prior to the date hereof, (i) the Common Stock has been listed or designated for quotation on the Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal Market and (iii) except as set forth in the SEC Documents, the Company has received no communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the Common Stock from the Principal Market. The Company and each of its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. There is no agreement, commitment, judgment, injunction, order or decree binding upon the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries is a party which has or would reasonably be expected to have the effect of prohibiting or materially impairing any business practice of the Company or any of its Subsidiaries, any acquisition of property by the Company or any of its Subsidiaries or the conduct of business by the Company or any of its Subsidiaries as currently conducted other than such effects, individually or in the aggregate, which have not had and would not reasonably be expected to have a Material Adverse Effect on the Company or any of its Subsidiaries.
(o) Foreign Corrupt Practices. Neither the Company, the Company’s subsidiary or any director, officer, agent, employee, nor any other person acting for or on behalf of the foregoing (individually and collectively, a “Company Affiliate”) have violated the U.S. Foreign Corrupt Practices Act or any other applicable anti-bribery or anti-corruption laws, nor has any Company Affiliate offered, paid, promised to pay, or authorized the payment of any money, or offered, given, promised to give, or authorized the giving of anything of value, to any officer, employee or any other person acting in an official capacity for any Governmental Entity to any political party or official thereof or to any candidate for political office (individually and collectively, a “Government Official”) or to any person under circumstances where such Company Affiliate knew or was aware of a high probability that all or a portion of such money or thing of value would be offered, given or promised, directly or indirectly, to any Government Official, for the purpose of:
(i) (A) influencing any act or decision of such Government Official in his/her official capacity, (B) inducing such Government Official to do or omit to do any act in violation of his/her lawful duty, (C) securing any improper advantage, or (D) inducing such Government Official to influence or affect any act or decision of any Governmental Entity, or
(ii) assisting the Company or its Subsidiaries in obtaining or retaining business for or with, or directing business to, the Company or its Subsidiaries.
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(p) Sarbanes-Oxley Act. The Company and each Subsidiary is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, and any and all applicable rules and regulations promulgated by the SEC thereunder.
(q) Transactions With Affiliates. Except as set forth in the SEC Documents, no current or former employee, partner, director, officer or shareholder (direct or indirect) of the Company or its Subsidiaries, or any associate, or, to the knowledge of the Company, any affiliate of any thereof, or any relative with a relationship no more remote than first cousin of any of the foregoing, is presently, or has ever been, (i) a party to any transaction with the Company or its Subsidiaries (including any contract, agreement or other arrangement providing for the furnishing of services by, or rental of real or personal property from, or otherwise requiring payments to, any such director, officer or shareholder or such associate or affiliate or relative Subsidiaries (other than for ordinary course services as employees, officers or directors of the Company or any of its Subsidiaries)) or (ii) the direct or indirect owner of an interest in any corporation, firm, association or business organization which is a competitor, supplier or customer of the Company or its Subsidiaries (except for a passive investment (direct or indirect) in less than 5% of the common stock of a company whose securities are traded on or quoted through an Eligible Market (as defined in the New Certificate of Designation)), nor does any such Person receive income from any source other than the Company or its Subsidiaries which relates to the business of the Company or its Subsidiaries or should properly accrue to the Company or its Subsidiaries. No employee, officer, shareholder or director of the Company or any of its Subsidiaries or member of his or her immediate family is indebted to the Company or its Subsidiaries, as the case may be, nor is the Company or any of its Subsidiaries indebted (or committed to make loans or extend or guarantee credit) to any of them, other than (i) for payment of salary for services rendered, (ii) reimbursement for reasonable expenses incurred on behalf of the Company, and (iii) for other standard employee benefits made generally available to all employees or executives (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of the Company).
(r) Equity Capitalization.
(i) Definitions:
(1) “Common Stock” means (x) the Company’s Class A shares of common stock, $0.0001 par value per share, and (y) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.
(2) “Preferred Stock” means (x) the Company’s blank check preferred stock, $0.0001 par value per share, the terms of which may be designated by the board of directors of the Company in a certificate of designation and (y) any capital stock into which such preferred stock shall have been changed or any share capital resulting from a reclassification of such preferred stock (other than a conversion of such preferred stock into Common Stock in accordance with the terms of such certificate of designation).
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(ii) Authorized and Outstanding Capital Stock. Schedule 4(r)(ii) sets forth as of the date hereof, the authorized, issued and outstanding capital stock of the Company as well as all outstanding equity linked securities, including all options, warrants, restricted stock units, Common Stock Equivalents. No shares of Common Stock are held in the treasury of the Company. “Common Stock Equivalents” mean any capital stock or other security of the Company or any of its Subsidiaries that is at any time and under any circumstances directly or indirectly convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any capital stock or other security of the Company (including, without limitation, Common Stock) or any of its Subsidiaries.
(iii) Valid Issuance; Available Shares; Affiliates. All of such outstanding shares are duly authorized and have been, or upon issuance will be, validly issued and are fully paid and nonassessable. The SEC Documents disclose all securities that are, as of the date hereof, owned by Persons who are “affiliates” (as defined in Rule 405 of the 1933 Act and calculated based on the assumption that only officers, directors and holders of at least 10% of the Company’s issued and outstanding Common Stock are “affiliates” without conceding that any such Persons are “affiliates” for purposes of federal securities laws) of the Company or any of its Subsidiaries. To the Company’s knowledge, except as set forth in the SEC Documents, no Person owns 10% or more of the Company’s issued and outstanding shares of Common Stock (calculated based on the assumption that all Common Stock Equivalents (as defined below), whether or not presently exercisable or convertible, have been fully exercised or converted (as the case may be) taking account of any limitations on exercise or conversion (including “blockers”) contained therein without conceding that such identified Person is a 10% shareholder for purposes of federal securities laws).
(iv) Existing Securities; Obligations. Except as set forth in the SEC Documents: (A) none of the Company’s or any Subsidiary’s shares, interests or capital stock is subject to preemptive rights or any other similar rights or Liens suffered or permitted by the Company or any Subsidiary; (B) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares, interests or capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries; (C) except as set forth on Schedule 4(r)(iv), there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act; (D) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (E) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the New Securities; and (F) neither the Company nor any Subsidiary has any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement.
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(v) Organizational Documents. The SEC Documents disclose true, correct and complete copies of the Company’s Articles of Incorporation, as amended and as in effect on the date hereof (the “Articles of Incorporation”), and the Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all Common Stock Equivalents and the material rights of the holders thereof in respect thereto.
(s) Indebtedness and Other Contracts. Neither the Company nor any of its Subsidiaries, except as set forth in the SEC Documents or on Schedule 4(s), (i) has any outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound, (ii) is a party to any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected to result in a Material Adverse Effect, (iii) has any financing statements securing obligations in any amounts filed in connection with the Company or any of its Subsidiaries; (iv) is in violation of any term of, or in default under, any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, or (v) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries have any liabilities or obligations required to be disclosed in the SEC Documents which are not so disclosed in the SEC Documents, other than those incurred in the ordinary course of the Company’s or its Subsidiaries’ respective businesses and which, individually or in the aggregate, do not or could not have a Material Adverse Effect. For purposes of this Agreement: (x) “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, “capital leases” in accordance with GAAP) (other than trade payables entered into in the ordinary course of business consistent with past practice), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; and (y) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.
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(t) Litigation. There is no action, suit, arbitration, proceeding, inquiry or investigation before or by the Principal Market, any court, public board, other Governmental Entity, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries, the Common Stock or any of the Company’s or its Subsidiaries’ officers or directors, whether of a civil or criminal nature or otherwise, in their capacities as such, which could result, individually or in the aggregate, in a Material Adverse Effect, other than as set forth on Section 5(t) of the Disclosure Schedules attached hereto. No director, officer or employee of the Company or any of its subsidiaries has willfully violated 18 U.S.C. §1519 or engaged in spoliation in reasonable anticipation of litigation. Without limitation of the foregoing, there has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company, any of its Subsidiaries or any current or former director or officer of the Company or any of its Subsidiaries. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the 1933 Act or the 1934 Act. Except as set forth in the SEC Documents, neither the Company nor any of its Subsidiaries is subject to any order, writ, judgment, injunction, decree, determination or award of any Governmental Entity.
(u) Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for, and neither the Company nor any such Subsidiary has any reason to believe that it will be unable 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 at a cost that would not have a Material Adverse Effect.
(v) Employee Relations. Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs any member of a union. The Company and its Subsidiaries believe that their relations with their employees are good. No executive officer (as defined in Rule 501(f) promulgated under the 1933 Act) or other key employee of the Company or any of its Subsidiaries has notified the Company or any such Subsidiary that such officer intends to leave the Company or any such Subsidiary or otherwise terminate such officer’s employment with the Company or any such Subsidiary. No current (or former) executive officer or other key employee of the Company or any of its Subsidiaries is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer or other key employee (as the case may be) does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
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(w) Title.
(i) Real Property. Each of the Company and its Subsidiaries holds good title to all real property, leases in real property, facilities or other interests in real property owned or held by the Company or any of its Subsidiaries (the “Real Property”) owned by the Company or any of its Subsidiaries (as applicable). The Real Property is free and clear of all Liens and is not subject to any rights of way, building use restrictions, exceptions, variances, reservations, or limitations of any nature except for (a) Liens for current taxes not yet due and (b) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto. Any Real Property held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company or any of its Subsidiaries.
(ii) Fixtures and Equipment. Each of the Company and its Subsidiaries (as applicable) has good title to, or a valid leasehold interest in, the tangible personal property, equipment, improvements, fixtures, and other personal property and appurtenances that are used by the Company or its Subsidiary in connection with the conduct of its business (the “Fixtures and Equipment”). The Fixtures and Equipment are structurally sound, are in good operating condition and repair, are adequate for the uses to which they are being put, are not in need of maintenance or repairs except for ordinary, routine maintenance and repairs and are sufficient for the conduct of the Company’s and/or its Subsidiaries’ businesses (as applicable) in the manner as conducted prior to the date hereof. Each of the Company and its Subsidiaries owns all of its Fixtures and Equipment free and clear of all Liens except for (a) liens for current taxes not yet due and (b) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto.
(x) Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, original works of authorship, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and registrations therefor (“Intellectual Property Rights”) necessary to conduct their respective businesses as now conducted and presently proposed to be conducted. The Company does not have any knowledge of any infringement by the Company or its Subsidiaries of Intellectual Property Rights of others. There is no claim, action or proceeding being made or brought, or to the knowledge of the Company or any of its Subsidiaries, being threatened, against the Company or any of its Subsidiaries regarding its Intellectual Property Rights. Neither the Company nor any of its Subsidiaries is aware of any facts or circumstances which might give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights.
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(y) Environmental Laws. (i) The Company and its Subsidiaries (A) are in compliance with any and all Environmental Laws (as defined below), (B) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (C) are in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (A), (B) and (C), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, 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.
(ii) No Hazardous Materials:
(A) have been disposed of or otherwise released from any Real Property of the Company or any of its Subsidiaries in violation of any Environmental Laws; or
(B) are present on, over, beneath, in or upon any Real Property or any portion thereof in quantities that would constitute a violation of any Environmental Laws. No prior use by the Company or any of its Subsidiaries of any Real Property has occurred that violates any Environmental Laws, which violation would have a material adverse effect on the business of the Company or any of its Subsidiaries.
(iii) Neither the Company nor any of its Subsidiaries knows of any other person who or entity which has stored, treated, recycled, disposed of or otherwise located on any Real Property any Hazardous Materials, including, without limitation, such substances as asbestos and polychlorinated biphenyls.
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(iv) None of the Real Properties are on any federal or state “Superfund” list or Liability Information System (“CERCLIS”) list or any state environmental agency list of sites under consideration for CERCLIS, nor subject to any environmental related Liens.
(z) Tax Status. The Company and each of its Subsidiaries (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely 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, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all 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 and its Subsidiaries know of no basis for any such claim. The Company is not operated in such a manner as to qualify as a passive foreign investment company, as defined in Section 1297 of the Code.
(aa) Internal Accounting and Disclosure Controls. Except as set forth in the SEC Documents, the Company and each of its Subsidiaries maintains internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the 1934 Act) that is effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including 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 GAAP and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference. Except as set forth in the SEC Documents, the Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the 1934 Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure. Except as set forth in the SEC Documents, neither the Company nor any of its Subsidiaries has received any notice or correspondence from any accountant, Governmental Entity or other Person relating to any potential material weakness or significant deficiency in any part of the internal controls over financial reporting of the Company or any of its Subsidiaries.
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(bb) Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.
(cc) Investment Company Status. The Company is not, and upon consummation of the sale of the New Securities will not be, an “investment company,” an affiliate of an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.
(dd) Acknowledgement Regarding Holder’s Trading Activity. It is understood and acknowledged by the Company that (i) following the public disclosure of the transactions contemplated by the Exchange Documents, in accordance with the terms thereof, the Holder has not been asked by the Company or any of its Subsidiaries to agree, nor has the Holder agreed with the Company or any of its Subsidiaries, to desist from effecting any transactions in or with respect to any securities of the Company, or “derivative” securities based on securities issued by the Company or to hold any of the New Securities for any specified term provided that the Holder will not engage in any Short Sales (as defined herein); (ii) the Holder shall not be deemed to have any affiliation with or control over any arm’s length counterparty in any “derivative” transaction; and (iii) the Holder may rely on the Company’s obligation to timely deliver shares of Common Stock upon conversion, exercise or exchange, as applicable, of the New Securities as and when required pursuant to the Exchange Documents for purposes of effecting trading in the Common Stock of the Company. The Company further understands and acknowledges that following the public disclosure of the transactions contemplated by the Exchange Documents pursuant to the 8-K Filing (as defined below) the Holder may engage in hedging and/or trading activities (including, without limitation, the location and/or reservation of borrowable shares of Common Stock) at various times during the period that the New Securities are outstanding, including, without limitation, during the periods that the value and/or number of the New Warrant Preferred Conversion Shares deliverable with respect to the New Warrant Preferred Shares are being determined and such hedging and/or trading activities (including, without limitation, the location and/or reservation of borrowable shares of Common Stock), if any, can reduce the value of the existing shareholders’ equity interest in the Company both at and after the time the hedging and/or trading activities are being conducted. The Company acknowledges that such aforementioned hedging and/or trading activities do not constitute a breach of this Agreement, the New Certificate of Designation or any other Exchange Document or any of the documents executed in connection herewith or therewith.
(ee) Manipulation of Price. Neither the Company nor any of its Subsidiaries has, and, to the knowledge of the Company, no Person acting on their behalf has, directly or indirectly, (i) taken any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company or any of its Subsidiaries to facilitate the sale or resale of any of the New Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the New Securities, (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company or any of its Subsidiaries or (iv) paid or agreed to pay any Person for research services with respect to any securities of the Company or any of its Subsidiaries.
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(ff) U.S. Real Property Holding Corporation. Neither the Company nor any of its Subsidiaries is, or has ever been, and so long as any of the New Warrant Preferred Shares are held by any of the Holders, shall become, a U.S. real property holding corporation within the meaning of Section 897 of the Code, and the Company and each Subsidiary shall so certify upon the Holder’s request.
(gg) Transfer Taxes. On the date hereof, all stock transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the issuance, exchange and transfer of the New Warrant Preferred Shares to be issued to the Holder hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.
(hh) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries is 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”). Neither the Company nor any of its Subsidiaries or affiliates owns or controls, 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. Neither the Company nor any of its Subsidiaries or affiliates exercises 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.
(ii) Illegal or Unauthorized Payments; Political Contributions. Neither the Company nor any of its Subsidiaries nor, to the best of the Company’s knowledge (after reasonable inquiry of its officers and directors), any of the officers, directors, employees, agents or other representatives of the Company or any of its Subsidiaries or any other business entity or enterprise with which the Company or any Subsidiary is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services, whether or not in contravention of applicable law, (i) as a kickback or bribe to any Person or (ii) to any political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving the direct or indirect use of funds of the Company or any of its Subsidiaries.
(jj) Money Laundering. The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA Patriot Act of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, but not limited to, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, without limitation, (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.
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(kk) Management. During the past five-year period, no current officer or director of the Company or any of its Subsidiaries has been the subject of:
(i) a petition under bankruptcy laws or any other insolvency or moratorium law or the appointment by a court of a receiver, fiscal agent or similar officer for such Person, or any partnership in which such person was a general partner at or within two years before the filing of such petition or such appointment, or any corporation or business association of which such person was an executive officer at or within two years before the time of the filing of such petition or such appointment;
(ii) a conviction in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations that do not relate to driving while intoxicated or driving under the influence);
(iii) any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining any such person from, or otherwise limiting, the following activities:
(1) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the United States Commodity Futures Trading Commission or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
(2) Engaging in any particular type of business practice; or
(3) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of securities laws or commodities laws;
(iv) any order, judgment or decree, not subsequently reversed, suspended or vacated, of any authority barring, suspending or otherwise limiting for more than sixty (60) days the right of any such person to engage in any activity described in the preceding sub paragraph, or to be associated with persons engaged in any such activity;
(v) a finding by a court of competent jurisdiction in a civil action or by the SEC or other authority to have violated any securities law, regulation or decree and the judgment in such civil action or finding by the SEC or any other authority has not been subsequently reversed, suspended or vacated; or
(vi) a finding by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding has not been subsequently reversed, suspended or vacated.
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(ll) Stock Option Plans. Each stock option granted by the Company was granted (i) in accordance with the terms of the applicable stock option plan of the Company 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 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 policy or practice of the Company 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 Subsidiaries or their financial results or prospects.
(mm) No Disagreements with Accountants and Lawyers. There are no material disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which would be reasonably likely to affect the Company’s ability to perform any of its obligations under any of the Exchange Documents. In addition, on or prior to the date hereof, the Company had discussions with its accountants about its financial statements previously filed with the SEC. Based on those discussions, the Company has no reason to believe that it will need to restate any such financial statements or any part thereof.
(nn) No Additional Agreements. The Company does not have any agreement or understanding with the Holder with respect to the transactions contemplated by the Exchange Documents other than as specified in the Exchange Documents.
(oo) Public Utility Holding Act None of the Company nor any of its Subsidiaries is a “holding company,” or an “affiliate” of a “holding company,” as such terms are defined in the Public Utility Holding Act of 2005.
(pp) Federal Power Act. None of the Company nor any of its Subsidiaries is subject to regulation as a “public utility” under the Federal Power Act, as amended.
(qq) Cybersecurity. The Company and its Subsidiaries’ information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, and databases (collectively, “IT Systems”) are adequate for, and operate and perform in all material respects as required in connection with the operation of the business of the Company and its subsidiaries as currently conducted, free and clear of all material bugs, errors, defects, Trojan horses, time bombs, malware and other corruptants that would reasonably be expected to have a Material Adverse Effect on the Company’s business. The Company and its Subsidiaries have implemented and maintained commercially reasonable physical, technical and administrative controls, policies, procedures, and safeguards to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and data, including “Personal Data,” used in connection with their businesses. “Personal Data” means (i) a natural person’s name, street address, telephone number, e-mail address, photograph, social security number or tax identification number, driver’s license number, passport number, credit card number, bank information, or customer or account number; (ii) any information which would qualify as “personally identifying information” under the Federal Trade Commission Act, as amended; (iii) “personal data” as defined by the European Union General Data Protection Regulation (“GDPR”) (EU 2016/679); (iv) any information which would qualify as “protected health information” under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (collectively, “HIPAA”); and (v) 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 data related to an identified person’s health or sexual orientation. There have been no breaches, violations, outages or unauthorized uses of or accesses to same, except for those that have been remedied without material cost or liability or the duty to notify any other person or such, nor any incidents under internal review or investigations relating to the same except in each case, where such would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The Company and its Subsidiaries are 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 Personal Data and to the protection of such IT Systems and Personal Data from unauthorized use, access, misappropriation or modification except in each case, where such would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
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(rr) Compliance with Data Privacy Laws. The Company and its Subsidiaries are, and at all prior times were, in compliance with all applicable state and federal data privacy and security laws and regulations, including without limitation HIPAA, and the Company and its Subsidiaries have taken commercially reasonable actions to prepare to comply with, and since May 25, 2018, have been and currently are in compliance with, the GDPR (EU 2016/679) (collectively, the “Privacy Laws”) except in each case, where such would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. To ensure compliance with the Privacy Laws, the Company and its Subsidiaries have in place, comply with, and take appropriate steps reasonably designed to ensure compliance in all material respects with their policies and procedures relating to data privacy and security and the collection, storage, use, disclosure, handling, and analysis of Personal Data (the “Policies”). The Company and its Subsidiaries have at all times made all disclosures to users or customers required by applicable laws and regulatory rules or requirements, and none of such disclosures made or contained in any Policy have, to the knowledge of the Company, been inaccurate or in violation of any applicable laws and regulatory rules or requirements in any material respect. The Company further certifies that neither it nor any Subsidiary: (i) has received notice of any actual or potential liability under or relating to, or actual or potential violation of, any of the Privacy Laws, and has no knowledge of any event or condition that would reasonably be expected to result in any such notice; (ii) is currently conducting or paying for, in whole or in part, any investigation, remediation, or other corrective action pursuant to any Privacy Law; or (iii) is a party to any order, decree, or agreement that imposes any obligation or liability under any Privacy Law.
(ss) No Consideration Paid. No commission or other remuneration has been paid by Company for soliciting the exchange of the Exchanged Securities for the New Preferred Warrants as contemplated hereby.
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(tt) Disclosure. The Company confirms that neither it nor any other Person acting on its behalf has provided any of the Holders or their agents or counsel with any information that constitutes or could reasonably be expected to constitute material, non-public information concerning the Company or any of its Subsidiaries, other than the existence of the transactions contemplated by this Agreement and the other Exchange Documents. The Company understands and confirms that each of the Holders will rely on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the Holders regarding the Company and its Subsidiaries, their businesses and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on behalf of the Company or any of its Subsidiaries is true and correct as of the date furnished and does not contain any untrue statement of a material fact or omit to state any material fact as of the date furnished necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. All of the written information furnished after the date hereof by or on behalf of the Company or any of its Subsidiaries to the Holder pursuant to or in connection with this Agreement and the other Exchange Documents, taken as a whole, will be true and correct in all material respects as of the date on which such information is so provided and will 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 the light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, liabilities, prospects, operations (including results thereof) or conditions (financial or otherwise), which, under applicable law, rule or regulation, requires public disclosure at or before the date hereof or announcement by the Company but which has not been so publicly disclosed. The Company acknowledges and agrees that the Holder has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 6 below.
6. Representations and Warranties of Holders. The Holder represents and warrants to the Company, as of the date hereof and as of the Closing Date, as follows:
(a) Organization and Authority. The Holder has the requisite power and authority to enter into and perform its obligations under this Agreement. The execution and delivery of this Agreement by the Holder and the consummation by Holder of the transactions contemplated hereby has been duly authorized by Holder’s board of directors or other governing body. This Agreement has been duly executed and delivered by Holder and constitutes the legal, valid and binding obligation of Holder, enforceable against Holder in accordance with its terms.
(b) Ownership of Exchanged Securities. The Holder owns the Exchanged Securities (subject to any reductions in connection with any conversion and/or exercise thereof prior to the Closing Date) free and clear of any Liens (other than the obligations pursuant to this Agreement, the Transaction Documents, the Exchange Documents and applicable securities laws).
(c) Reliance on Exemptions. The Holder understands that the New Securities are being offered and exchanged in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Holder set forth herein and in the Exchange Documents in order to determine the availability of such exemptions and the eligibility of the Holder to acquire the New Securities.
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(d) Validity; Enforcement. This Agreement and the Exchange Documents to which the Holder is a party have been duly and validly authorized, executed and delivered on behalf of the Holder and shall constitute the legal, valid and binding obligations of the Holder enforceable against the Holder in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.
(e) No Conflicts. The execution, delivery and performance by the Holder of this Agreement and the Exchange Documents to which the Holder is a party, and the consummation by the Holder of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of the Holder or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Holder is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to the Holder, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Holder to perform its obligations hereunder.
(f) Transfer or Resale. The Holder understands that: (i) the New Securities have not been and, except as provided in the New Registration Rights Agreement, are not being registered under the 1933 Act or any state securities laws, are and will be offered and sold in reliance upon federal and state exemptions for transactions not involving any public offering and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the Holder shall have delivered to the Company (if requested by the Company) an opinion of counsel, in a form reasonably acceptable to the Company, to the effect that such New Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) the Holder provides the Company with reasonable assurance that such New Securities can be sold, assigned or transferred pursuant to Rule 144; (ii) any sale of the New Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the New Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC promulgated thereunder; and (iii) except as set forth in the New Registration Rights Agreement, if any, neither the Company nor any other Person is under any obligation to register the New Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. Notwithstanding the foregoing, the New Securities may be pledged in connection with a bona fide margin account or other loan or financing arrangement secured by the New Securities, subject to the requirements of applicable laws, and such pledge of New Securities shall not be deemed to be a transfer, sale or assignment of the New Securities hereunder, and the Holder effecting a pledge of New Securities shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Exchange Document, including, without limitation, this Section 6(f).
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(g) No Consideration Paid. No commission or other remuneration has been paid by the Holder for soliciting the exchange of the Exchanged Securities for the New Preferred Warrants as contemplated hereby.
7. Disclosure of Transaction. The Company shall, on or before 9:30 a.m., New York City Time, on the first (1st) Business Day after the date of this Agreement, file a Current Report on Form 8-K describing the terms of the transactions contemplated hereby in the form required by the 1934 Act and attaching the Exchange Documents, to the extent they are required to be filed under the 1934 Act, that have not previously been filed with the SEC by the Company (including, without limitation, this Agreement, the New Certificate of Designation, the form of New Preferred Warrant, and the New Registration Rights Agreement) as exhibits to such filing (including all attachments, the “8-K Filing”). From and after the filing of the 8-K Filing, the Company shall have disclosed all material, non-public information (if any) provided up to such time to the Holder by the Company or any of its Subsidiaries or any of their respective officers, directors, employees or agents. In addition, effective upon the filing of the 8-K Filing, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement with respect to the transactions contemplated by the Exchange Documents or as otherwise disclosed in the 8-K Filing, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and any of the Holder or any of their affiliates, on the other hand, shall terminate. Neither the Company, its Subsidiaries nor the Holder shall issue any press releases or any other public statements with respect to the transactions contemplated hereby without the consent of the other party; provided, however, the Company shall be entitled, without the prior approval of the Holder, to make a press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith or (ii) as is required by applicable law and regulations (provided that in the case of clause (i) the Holder shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release). Without the prior written consent of the Holder (which may be granted or withheld in the Holder’s sole discretion), except as required by applicable law, the Company shall not (and shall cause each of its Subsidiaries and affiliates to not) disclose the name of the Holder in any filing, announcement, release or otherwise.
8. No Integration. None of the Company, its Subsidiaries, any of their affiliates, or any Person acting on their behalf shall, directly or indirectly, make any offers or sales of any security (as defined in the Securities Act) or solicit any offers to buy any security or take any other actions, under circumstances that would require registration of the New Securities under the Securities Act or cause this offering of the New Securities to be integrated with such offering or any prior offerings by the Company for purposes of Regulation D under the Securities Act.
9. Listing. The Company shall promptly make all filings necessary for the listing or designation for quotation (as applicable) of all of the New Warrant Preferred Conversion Shares upon the Principal Market (subject to official notice of issuance). The Company shall maintain the Common Stock’s authorization for quotation on the Principal Market. Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 9.
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10. Fees. The Company shall reimburse, on demand, (i) Kelley Drye & Warren LLP, as counsel to one or more Holders, an aggregate non-accountable amount equal to $95,000 (the “KDW Legal Fee Amount”) and (ii) Venturist Law, LTD, as counsel to one or more Holders an aggregate non-accountable amount equal to $50,000 (the “Venturist Legal Fee”, and together with the KDW Legal Fee Amount, the “Legal Fee Amounts”) for all costs and expenses incurred by such counsel, respectively, in connection with preparing and delivering this Agreement (including, without limitation, all legal fees and disbursements in connection therewith, and due diligence in connection with the transactions contemplated thereby) and other amounts.
11. Blue Sky. The Company shall make all filings and reports relating to the Exchange as required under applicable securities or “Blue Sky” laws of the states of the United States following the date hereof, if any.
12. Effective Date. Except as otherwise provided herein, this Agreement shall be deemed effective as of such date that Company and the Holder shall have duly executed and delivered this Agreement (the “Effective Date”).
13. No Commissions. Other than as has been disclosed to the Holders by the Company, neither the Company nor the Holder has paid or given, or will pay or give, to any person, any commission, fee or other remuneration, directly or indirectly, in connection with the transactions contemplated by this Agreement.
14. Termination. Notwithstanding anything contained in this Agreement to the contrary, if the Closing Date has not occurred and the Company does not deliver the New Preferred Warrants to the Holder, in accordance with Section 1 hereof, then, at the election of the Holder delivered in writing to the Company at any time after (i) the six month anniversary of the date hereof, or (ii) the Merger Agreement is terminated, rescinded, abandoned or otherwise ceases to be in full force and effect, this Agreement shall be terminated and be null and void ab initio and the Exchanged Securities shall not be cancelled hereunder and shall remain outstanding as if this Agreement never existed. Notwithstanding the foregoing, (x) the adjustment to the Series A Conversion Price pursuant to Section 3(e)(iii) shall remain in full force and effect and shall not be reversed or otherwise affected by any termination of this Agreement, (y) the Company’s obligations under Section 10 and Section 19 shall survive any such termination, and (z) no such termination shall affect any right, claim, liability or obligation arising from any breach of this Agreement occurring prior to such termination.
15. Conversion and Exercise Procedures. The form of Conversion Notice (as defined in the New Certificate of Designation) included in the New Certificate of Designation and the form of Exercise Notice (as defined in the New Preferred Warrants) sets forth the totality of the procedures required of the Holder in order to convert the New Warrant Preferred Shares and exercise the New Preferred Warrants, respectively. No legal opinion or other information or instructions shall be required of the Holder to convert the New Warrant Preferred Shares or exercise the New Preferred Warrants. The Company shall honor conversions of the New Warrant Preferred Shares and shall deliver the New Warrant Preferred Conversion Shares in accordance with the terms, conditions and time periods set forth in the New Certificate of Designation. The Company shall honor exercises of the New Preferred Warrants and shall deliver the New Warrant Preferred Shares in accordance with the terms, conditions and time periods set forth in the New Preferred Warrants. Without limiting the preceding sentences, no ink-original Conversion Notice or Exercise Notice shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Conversion Notice or Exercise Notice form be required in order to convert the New Warrant Preferred Shares or exercise the New Preferred Warrant, as the case may be.
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16. Reservation of Shares. So long as any portion of the New Preferred Warrants or the New Warrant Preferred Shares remains outstanding, the Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than (a) 100% of the maximum number of New Warrant Preferred Shares issuable upon exercise of the New Preferred Warrants and (b) 100% of the maximum number of the New Warrant Preferred Conversion Shares issuable upon conversion of the New Warrant Preferred Shares then outstanding (assuming for purposes hereof that (x) the New Warrant Preferred Shares are convertible at the Floor Price (as defined the New Certificate of Designation) then in effect, (y) dividends on the New Warrant Preferred Shares shall accrue through January 8, 2030 and will be converted in shares of Common Stock at a dividend conversion price equal to the Floor Price then in effect, and (z) any such conversion shall not take into account any limitations on the conversion of the New Warrant Preferred Shares set forth in the New Certificate of Designation) (the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock or Series B Preferred Stock, as applicable, reserved pursuant to this Section 16 be reduced other than proportionally in connection with any conversion of the New Warrant Preferred Shares or exercise of any New Preferred Warrants, as applicable. If at any time the number of shares of Common Stock or Series B Preferred Stock, as applicable, authorized and reserved for issuance by the Company is not sufficient to meet the applicable Required Reserve Amount, the Company will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including, without limitation, calling a special meeting of shareholders to authorize additional shares of Common Stock to meet the Company’s obligations pursuant to the Exchange Documents, in the case of an insufficient number of authorized shares, obtain shareholder approval of an increase in such authorized number of shares, and voting the management shares of the Company in favor of an increase in the authorized shares of the Company to ensure that the number of authorized shares is sufficient to meet the applicable Required Reserve Amount.
17. Pledge of New Securities. Notwithstanding anything to the contrary contained in this Agreement, the Company acknowledges and agrees that the New Securities may be pledged by an Holder in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the New Securities, subject to the requirements of applicable laws. The pledge of New Securities shall not be deemed to be a transfer, sale or assignment of the New Securities hereunder, and no Holder effecting a pledge of New Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Exchange Document, including, without limitation, Section 6(f) hereof; provided that an Holder and its pledgee shall be required to comply with the provisions of Section 6(f) hereof in order to effect a sale, transfer or assignment of New Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as a pledgee of the New Securities may reasonably request in connection with a pledge of the New Securities to such pledgee by the Holder.
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18. Shareholder Approval. The Company shall either (x) if the Company shall have obtained the prior written consent of the requisite shareholders (the “Shareholder Consent”) to obtain the Shareholder Approval (as defined below), inform the shareholders of the Company of the receipt of the Shareholder Consent by preparing and filing with the SEC, as promptly as practicable after the date hereof, but prior to the forty-fifth (45th) calendar day after the date hereof (or, if such filing is delayed by a court or regulatory agency, in no event later than ninety (90) calendar days after the date hereof), an information statement with respect thereto or (y) provide each shareholder entitled to vote at a special meeting of shareholders of the Company (the “Shareholder Meeting”), which shall be promptly called and held not later than ninety (90) days after the date hereof (the “Shareholder Meeting Deadline”), a proxy statement, in each case, in a form reasonably acceptable to the Holders. Kelley Drye & Warren LLP and Venturist Law, Ltd., at the expense of the Company, with the Company obligated to reimburse the expenses of Kelley Drye & Warren LLP incurred in connection therewith in an amount not to exceed $5,000 and the expenses of Venturist Law, Ltd incurred in connection therewith in an amount not to exceed $5,000, respectively. The proxy statement, if any, shall solicit each of the Company’s shareholder’s affirmative vote at the Shareholder Meeting for approval of resolutions (“Shareholder Resolutions”) providing for the issuance of all of the New Securities in compliance with the rules and regulations of the Nasdaq Capital Market (without regard to any limitations on conversion set forth in the New Certificate of Designation) (such affirmative approval being referred to herein as the “Shareholder Approval”, and the date such Shareholder Approval is obtained, the “Shareholder Approval Date”), and the Company shall use its reasonable best efforts to solicit its shareholders’ approval of such resolutions and to cause the Board of Directors of the Company to recommend to the shareholders that they approve such resolutions. The Company shall be obligated to seek to obtain the Shareholder Approval by the Shareholder Meeting Deadline. If, despite the Company’s reasonable best efforts the Shareholder Approval is not obtained on or prior to the Shareholder Meeting Deadline, the Company shall cause an additional Shareholder Meeting to be held on or prior to sixty (60) days after the Shareholder Meeting Deadline. If, despite the Company’s reasonable best efforts the Shareholder Approval is not obtained after such subsequent shareholder meetings, the Company shall cause an additional Shareholder Meeting to be held semi-annually thereafter until such Shareholder Approval is obtained.
19. Holding Period. For the purposes of Rule 144, the Company acknowledges that after giving effect to the terms and conditions of this Agreement, the holding period of the Series A Preferred Shares (and upon conversion of the Series A Preferred Shares, the Conversion Shares (as defined in the Securities Purchase Agreement)) shall commence on the date of initial issuance of such Series A Preferred Shares, and the Company agrees not to take a position contrary to this Section 19. The Company acknowledges and agrees that, subject to the Holder’s representations and warranties contained in Section 6 of this Agreement, the Series A Preferred Shares (and upon conversion of the Series A Preferred Shares, the Conversion Shares) shall not be required to bear any restrictive legend and shall be freely transferable by the Holder pursuant to and in accordance with Rule 144, provided, for the avoidance of doubt, that the Holder shall not be an affiliate of the Company and shall not have been an affiliate during the ninety (90) days preceding the date of any transfer. Upon conversion of the Series A Preferred Shares in accordance with the terms of the Series A Certificate of Designation, the Conversion Shares shall be freely tradeable by the Holder and shall be issued without any restricted legend.
20. 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 any 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.
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21. Register; Transfer Agent Instructions; Legend.
(a) Register. The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to each Holder), a register for the New Preferred Warrants in which the Company shall record the name and address of the Person in whose name the New Preferred Warrants has been issued (including the name and address of each transferee), the number of New Warrant Preferred Shares issuable upon exercise of any New Preferred Warrants held by such Person and the number of New Warrant Preferred Conversion Shares issuable upon conversion of the New Warrant Preferred Shares held by such Person. The Company shall keep the register open and available at all times during business hours for inspection of the Holder or its legal representatives.
(b) Transfer Agent Instructions. On or prior to the date hereof, the Company shall issue irrevocable instructions to its transfer agent (the “Transfer Agent”) and, prior to obtaining any subsequent transfer agent, the Company shall issue irrevocable instructions to any subsequent transfer agent, in each case, in a form acceptable to the Holder (the “Irrevocable Transfer Agent Instructions”) to issue certificates or credit shares to the applicable balance accounts at the Depository Trust Company (“DTC”), registered in the name of the Holder or its respective nominee(s), for the New Warrant Preferred Conversion Shares in such amounts as specified from time to time by the Holder to the Company upon the conversion of the New Warrant Preferred Shares. The Company represents and warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 21(b) will be given by the Company to its Transfer Agent with respect to the New Warrant Preferred Conversion Shares, and that the New Warrant Preferred Conversion Shares shall otherwise be freely transferable on the books and records of the Company, as applicable, to the extent provided in this Agreement and the other Exchange Documents. If the Holder effects a sale, assignment or transfer of the New Warrant Preferred Conversion Shares, subject to applicable laws, the Company shall permit the transfer and shall promptly instruct its Transfer Agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by the Holder to effect such sale, transfer or assignment. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 21(b) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 21(b) that the Holder shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. The Company shall cause its counsel to issue each legal opinion referred to in the Irrevocable Transfer Agent Instructions to the Transfer Agent as follows: (i) upon each conversion of the New Warrant Preferred Shares (unless such issuance is covered by a prior legal opinion previously delivered to the Transfer Agent), and (ii) on each date a registration statement with respect to the issuance or resale of any of the New Warrant Preferred Conversion Shares is declared effective by the SEC. Any fees (with respect to the Transfer Agent, counsel to the Company or otherwise) associated with the issuance of such opinions or the removal of any legends on any of the New Warrant Preferred Conversion Shares shall be borne by the Company.
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(c) Legends. The Holder understands that the New Preferred Warrants have been issued (or will be issued in the case of the New Warrant Preferred Shares and the New Warrant Preferred Conversion Shares) pursuant to an exemption from registration or qualification under the 1933 Act and applicable state securities laws, and except as set forth below, the New Securities shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE][CONVERTIBLE] HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
(d) Removal of Legends. Certificates evidencing New Securities shall not be required to contain the legend set forth in Section 21(c) above or any other legend (i) while a registration statement covering the resale of such New Securities is effective under the 1933 Act, (ii) following any sale of such New Securities pursuant to Rule 144 (assuming neither the transferor nor the transferee is an affiliate of the Company), (iii) if such New Securities are eligible to be sold, assigned or transferred under Rule 144 (provided that the Holder provides the Company with reasonable assurances that such New Securities are eligible for sale, assignment or transfer under Rule 144 which shall not include an opinion of Holder’s counsel), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that the Holder provides the Company with an opinion of counsel to the Holder, in a generally acceptable form, to the effect that such sale, assignment or transfer of the New Securities may be made without registration under the applicable requirements of the 1933 Act or (v) if such legend is not required under applicable requirements of the 1933 Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the SEC). If a legend is not required pursuant to the foregoing with respect to such New Securities, the Company shall no later than one (1) Trading Day (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade initiated on the date the Holder delivers such legended certificate representing such New Securities to the Company) following the delivery by the Holder to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such New Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), together with any other deliveries from the Holder as may be required above in this Section 21(d), as directed by the Holder, either: (A) provided that the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer Program and such New Securities are New Warrant Preferred Conversion Shares, credit the aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program (“FAST”), issue and deliver (via reputable overnight courier) to the Holder, a certificate representing such New Securities that is free from all restrictive and other legends, registered in the name of the Holder or its designee (the date by which such credit is so required to be made to the balance account of the Holder’s or the Holder’s nominee with DTC or such certificate is required to be delivered to the Holder pursuant to the foregoing is referred to herein as the “Required Delivery Date”, and the date such shares of Common Stock are actually delivered without restrictive legend to the Holder or the Holder’s designee with DTC, as applicable, the “Share Delivery Date”). The Company shall be responsible for any transfer agent fees or DTC fees with respect to any issuance of New Securities or the removal of any legends with respect to any New Securities in accordance herewith.
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(e) Failure to Timely Deliver; Buy-In. If the Company fails, for any reason or for no reason, to issue and deliver (or cause to be delivered) to the Holder (or its designee) by the Required Delivery Date, if the Transfer Agent is not participating in FAST, a certificate for the number of New Warrant Preferred Conversion Shares to which the Holder is entitled and register such New Warrant Preferred Conversion Shares on the Company’s share register or, if the Transfer Agent is participating in FAST, to credit the balance account of the Holder or the Holder’s designee with DTC for such number of New Warrant Preferred Conversion Shares submitted for legend removal by the Holder pursuant to Section 21(d) above (a “Delivery Failure”), then, in addition to all other remedies available to the Holder, the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure an amount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Required Delivery Date and to which the Holder is entitled, and (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the period beginning on the date of the delivery by the Holder to the Company of the applicable New Warrant Preferred Conversion Shares and ending on the applicable Share Delivery Date. In addition to the foregoing, if on or prior to the Required Delivery Date if the Transfer Agent is not participating in FAST, the Company shall fail to issue and deliver a certificate to the Holder and register such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in FAST, credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock to which the Holder submitted for legend removal by the Holder pursuant to Section 21(d) above, and if on or after such Trading Day the Holder acquires (in an open market transaction, stock loan or otherwise) shares of Common Stock corresponding to all or any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not received from the Company in connection with such Delivery Failure (a “Buy-In”), then the Company shall, within one (1) Trading Day after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, stock loan costs and other out-of-pocket expenses, if any, for the shares of Common Stock so acquired) (the “Buy-In Price”), at which point the Company’s obligation to so deliver such certificate or credit the Holder’s balance account shall terminate and such shares shall be cancelled, or (ii) promptly honor its obligation to so deliver to the Holder a certificate or certificates or credit the balance account of the Holder or the Holder’s designee with DTC representing such number of shares of Common Stock that would have been so delivered if the Company timely complied with its obligations hereunder and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of New Warrant Preferred Conversion Shares that the Company was required to deliver to the Holder by the Required Delivery Date multiplied by (B) the lowest Closing Sale Price (as defined in the New Certificate of Designation) of the Common Stock on any Trading Day during the period commencing on the date of the delivery by the Holder to the Company of the applicable New Warrant Preferred Conversion Shares and ending on the date of such delivery and payment under this clause (ii). Nothing shall limit the 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 certificates representing shares of Common Stock (or to electronically deliver such shares of Common Stock) as required pursuant to the terms hereof. Notwithstanding anything herein to the contrary, with respect to any given Delivery Failure, this Section 21(e) shall not apply to the applicable Holder the extent the Company has already paid such amounts in full to the Holder with respect to such Delivery Failure pursuant to the analogous sections of the New Certificate of Designation.
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(f) FAST Compliance. While the New Warrant Preferred Shares or New Preferred Warrants remain outstanding, the Company shall maintain a transfer agent that participates in the DTC Fast Automated Securities Transfer Program.
22. Variable Securities. Until the later of (x) the two (2) year anniversary of the Closing Date and (y) the date that no Series A Preferred Shares, New Warrant Preferred Shares or New Preferred Warrants remain outstanding, the Company shall be prohibited from effecting or entering into an agreement to effect any Subsequent Placement (as defined below) involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any Common Stock Equivalents (as defined below) either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such Common Stock Equivalents, 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 Common Stock Equivalents 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 Stock, other than pursuant to a customary “weighted average” anti-dilution provision or (ii) enters into any agreement (including, without limitation, an equity line of credit) whereby the Company may sell securities at a future determined price (other than standard and customary “preemptive” or “participation” rights). The Holder shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages. “Subsequent Placement” refers to the Company or any of its Subsidiaries, directly or indirectly, issuing, offering, selling, granting any option or right to purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant of any option or right to purchase or other disposition of) any equity security or any equity-linked or related security (including, without limitation, any “equity security” (as that term is defined under Rule 405 promulgated under the 1933 Act), any Common Stock Equivalents, any debt, any preferred stock or any purchase rights). The prohibition described in this Section 22 shall not be applicable to a traditional “at-the-market” offering within the meaning of Rule 415(a)(4) of the 1933 Act of the Company.
23. No Short Sales. The Holder hereby agrees that neither it, nor any person or entity acting on its behalf or pursuant to any understanding with it, will engage in any Short Sales with respect to securities of the Company, excluding any sales marked “short exempt” or deemed “short” as a result of any breach by the Company of any term or condition of any Transaction Document (including, without limitation, the Series A Certificate of Designation and the New Certificate of Designation). For purposes of this Section, “Short Sales” shall include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the 1934 Act, and all types of direct and indirect stock pledges (other than pledges in the ordinary course of business as part of prime brokerage arrangements), forward sale contracts, options, puts, calls, swaps and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker dealers or foreign regulated brokers.
24. Reporting of Sales. The Holder will provide the Company, on the first day of each week for the period commencing on the date of the execution of this Agreement and ending on the date of the closing of the Polymath Acquisition, a reconciliation of the sales of shares of Common Stock by the Holder for the previous week.
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IN WITNESS WHEREOF, Holder and the Company have executed this Agreement as of the date set forth on the signature page of the Holder below.
| COMPANY: | ||
| TRUGOLF HOLDINGS, INC. (F/K/A DEEP MEDICINE ACQUISITION CORP.) | ||
| By: | ||
| Name: | ||
| Title: | ||
| Notice Address: | ||
| ________________________________ | ||
| ________________________________ | ||
| ________________________________ | ||
| ________________________________ | ||
IN WITNESS WHEREOF, Holder and the Company have executed this Agreement as of this [__________] of August, 2026.
| HOLDER: | ||
| By: | ||
| Name: | ||
| Title: | ||
Notice Address: ________________________________ ________________________________ ________________________________ ________________________________
Conversion Amount of Series A Preferred Stock (but excluding any Make Whole Amount) as of this [_] day of August, 2026:
_____________________
Aggregate Number of Shares of Series A Preferred Stock Issuable Upon Exercise of Series A Preferred Warrants prior to Exchange:
_____________________
Aggregate Number of Shares of Series A Preferred Stock Issuable Upon Exercise of Series A Preferred Warrants after to Exchange:
_____________________
Aggregate Number of Shares of Series B Preferred Stock Issuable Upon Exercise of New Preferred Warrants prior to Exchange:
_____________________
Aggregate Number of Shares of Series B Preferred Stock Issuable Upon Exercise of New Preferred Warrants after to Exchange:
_____________________ |
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of August [_], 2026, is by and among TruGolf Holdings, Inc. (f/k/a Deep Medicine Acquisition Corp.), a Nevada corporation with offices located at 60 North 1400 West, Centerville, UT 84014 (the “Company”), and the undersigned buyers (each, a “Buyer,” and collectively, the “Buyers”).
RECITALS
A. In connection with those certain Second, Amendment, Waiver and Exchange Agreements by and among the parties hereto, dated as of August 17, 2026 (the “Exchange Agreements”), the Company has agreed, among other things, to issue to each Buyer the New Preferred Warrants (as defined in the Exchange Agreements), which will be exercisable into New Warrant Preferred Shares (as defined in the Exchange Agreements), which in turn will be convertible into New Warrant Preferred Conversion Shares (as defined in the Exchange Agreements) in accordance with the terms of the New Certificate of Designation (as defined in the Exchange Agreements).
B. To induce the Buyers to consummate the transactions contemplated by the Exchange Agreements, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “1933 Act”), and applicable state securities laws.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Buyers hereby agree as follows:
1. Definitions.
Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Exchange Agreements. As used in this Agreement, the following terms shall have the following meanings:
(a) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York or the State of Utah are authorized or required by law to remain closed; 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.
(b) “Closing Date” shall have the meaning set forth in the Exchange Agreements.
(c) “Effective Date” means the date that the applicable Registration Statement has been declared effective by the SEC.
(d) “Effectiveness Deadline” means (i) with respect to the initial Registration Statement required to be filed pursuant to Section 2(a), the earlier of the (A) the 90th calendar day after the Filing Deadline of such initial Registration Statement and (B) 2nd Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement will not be reviewed or will not be subject to further review and (ii) with respect to any additional Registration Statements that may be required to be filed by the Company pursuant to this Agreement, the earlier of the (A) 75th calendar day following the date on which the Company was required to file such additional Registration Statement and (B) 2nd Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement will not be reviewed or will not be subject to further review.
(e) “Filing Deadline” means (i) with respect to the initial Registration Statement required to be filed pursuant to Section 2(a), the 30th calendar day after the Closing Date; and (ii) with respect to any additional Registration Statements that may be required to be filed by the Company pursuant to this Agreement, the date on which the Company was required to file such additional Registration Statement pursuant to the terms of this Agreement.
(f) “Investor” means a Buyer or any transferee or assignee of any Registrable Securities or New Warrant Preferred Conversion Shares, as applicable, to whom a Buyer assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9 and any transferee or assignee thereof to whom a transferee or assignee of any Registrable Securities or New Warrant Preferred Conversion Shares, as applicable, assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9.
(g) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization or a government or any department or agency thereof.
(h) “register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more Registration Statements in compliance with the 1933 Act and pursuant to Rule 415 and the declaration of effectiveness of such Registration Statement(s) by the SEC.
(i) “Registrable Securities” means (i) the New Warrant Preferred Conversion Shares, and (ii) any capital stock of the Company issued or issuable with respect to the New Warrant Preferred Conversion Shares, including, without limitation, (1) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise and (2) shares of capital stock of the Company into which the shares of Common Stock (as defined in the New Certificate of Designation) are converted or exchanged and shares of capital stock of a Successor Entity (as defined in the New Preferred Warrants) into which the shares of Common Stock are converted or exchanged, in each case, without regard to any limitations on conversion of the New Certificate of Designation or exercise of the New Preferred Warrants.
(j) “Registration Statement” means a registration statement or registration statements of the Company filed under the 1933 Act covering Registrable Securities.
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(k) “Required Holders” shall have the meaning as set forth in the Exchange Agreements.
(l) “Required Registration Amount” means, as of any time of determination, 100% of the maximum number of New Warrant Preferred Conversion Shares issuable upon conversion of all the New Warrant Preferred Shares (assuming for purposes hereof that (a) all of the New Preferred Warrants have been exercised in full into New Warrant Preferred Shares, (b) any such exercise of the New Preferred Warrants shall not take into account any limitations on the exercise thereof set forth therein, (c) the New Warrant Preferred Shares have been converted in full into New Warrant Preferred Conversion Shares, (d) any such conversion of the New Warrant Preferred Shares shall not take into account any limitations on conversion set forth in the New Certificate of Designation, (e) dividends have accrued through the Maturity Date (as defined in the New Certificate of Designation) and have been converted into shares of Common Stock, and (f) the New Warrant Preferred Conversion Shares are convertible at the Floor Price (as defined in the New Certificate of Designation) as of such time of determination), all subject to adjustment as provided in Section 2(d) and/or Section 2(f).
(m) “Rule 144” means Rule 144 promulgated by the SEC under the 1933 Act, as such rule may be amended from time to time, or any other similar or successor rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration.
(n) “Rule 415” means Rule 415 promulgated by the SEC under the 1933 Act, as such rule may be amended from time to time, or any other similar or successor rule or regulation of the SEC providing for offering securities on a continuous or delayed basis.
(o) “SEC” means the United States Securities and Exchange Commission or any successor thereto.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and, as soon as practicable, but in no event later than the Filing Deadline, file with the SEC an initial Registration Statement on Form S-3 covering the resale of all of the Registrable Securities, provided that such initial Registration Statement shall register for resale at least the number of shares of Common Stock equal to the Required Registration Amount as of the date such Registration Statement is initially filed with the SEC; provided further that if Form S-3 is unavailable for such a registration, the Company shall use such other form as is required by Section 2(c). Such initial Registration Statement, and each other Registration Statement required to be filed pursuant to the terms of this Agreement, shall contain (except if otherwise directed by the Required Holders) the “Selling Stockholders” and “Plan of Distribution” sections in substantially the form attached hereto as Exhibit A. The Company shall use its reasonable best efforts to have such initial Registration Statement, and each other Registration Statement required to be filed pursuant to the terms of this Agreement, declared effective by the SEC as soon as practicable, but in no event later than the applicable Effectiveness Deadline for such Registration Statement.
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(b) Legal Counsel. Subject to Section 5 hereof, Kelley Drye & Warren LLP, counsel solely to the lead Investor (“Legal Counsel”) shall review and oversee any registration, solely on behalf of the lead Investor, pursuant to this Section 2.
(c) Ineligibility to Use Form S-3. In the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on Form S-1 or another appropriate form reasonably acceptable to the Required Holders and (ii) undertake to register the resale of the Registrable Securities on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of all Registration Statements then in effect until such time as a Registration Statement on Form S-3 covering the resale of all the Registrable Securities has been declared effective by the SEC and the prospectus contained therein is available for use.
(d) Sufficient Number of Shares Registered. In the event the number of shares available under any Registration Statement is insufficient to cover all of the Registrable Securities required to be covered by such Registration Statement or an Investor’s allocated portion of the Registrable Securities pursuant to Section 2(h), the Company shall amend such Registration Statement (if permissible), or file with the SEC a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover at least the Required Registration Amount as of the Trading Day (as defined in the New Certificate of Designation) immediately preceding the date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in any event not later than fifteen (15) days after the necessity therefor arises (but taking account of any Staff (as defined below) position with respect to the date on which the Staff will permit such amendment to the Registration Statement and/or such new Registration Statement (as the case may be) to be filed with the SEC). The Company shall use its reasonable best efforts to cause such amendment to such Registration Statement and/or such new Registration Statement (as the case may be) to become effective as soon as practicable following the filing thereof with the SEC, but in no event later than the applicable Effectiveness Deadline for such Registration Statement. For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities” if at any time the number of shares of Common Stock available for resale under the applicable Registration Statement is less than the product determined by multiplying (i) the Required Registration Amount as of such time by (ii) 0.75. The calculation set forth in the foregoing sentence shall be made without regard to any limitations on conversion, amortization and/or redemption of the New Certificate of Designation (and such calculation shall assume (A) that the New Warrant Preferred Shares are then convertible in full into shares of Common Stock at the then prevailing Conversion Rate (as defined in the New Certificate of Designation) as of such applicable date of determination, (B) all shares of the New Warrant Preferred Shares remain outstanding through the scheduled Maturity Date (as defined in the New Certificate of Designation) and no redemptions of the New Preferred Shares occur prior to the scheduled Maturity Date and (C) the New Preferred Warrants have been exercised in full on the Closing Date).
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(e) Effect of Failure to File and Obtain and Maintain Effectiveness of any Registration Statement. If (i) a Registration Statement covering the resale of all of the Registrable Securities required to be covered thereby (disregarding any reduction pursuant to Section 2(f)) and required to be filed by the Company pursuant to this Agreement is (A) not filed with the SEC on or before the Filing Deadline for such Registration Statement (a “Filing Failure”) (it being understood that if the Company files a Registration Statement without affording each Investor and Legal Counsel the opportunity to review and comment on the same as required by Section 3(c) hereof, the Company shall be deemed to not have satisfied this clause (i)(A) and such event shall be deemed to be a Filing Failure) or (B) not declared effective by the SEC on or before the Effectiveness Deadline for such Registration Statement (an “Effectiveness Failure”) (it being understood that if on the Business Day immediately following the Effective Date for such Registration Statement the Company shall not have filed a “final” prospectus for such Registration Statement with the SEC under Rule 424(b) in accordance with Section 3(b) (whether or not such a prospectus is technically required by such rule), the Company shall be deemed to not have satisfied this clause (i)(B) and such event shall be deemed to be an Effectiveness Failure), (ii) other than during an Allowable Grace Period (as defined below), on any day after the Effective Date of a Registration Statement sales of all of the Registrable Securities required to be included on such Registration Statement (disregarding any reduction pursuant to Section 2(f)) cannot be made pursuant to such Registration Statement (including, without limitation, because of a failure to keep such Registration Statement effective, a failure to disclose such information as is necessary for sales to be made pursuant to such Registration Statement, a suspension or delisting of (or a failure to timely list) the shares of Common Stock on the Principal Market (as defined in the Exchange Agreements) or any other limitations imposed by the Principal Market, or a failure to register a sufficient number of shares of Common Stock or by reason of a stop order) or the prospectus contained therein is not available for use for any reason (a “Maintenance Failure”), or (iii) if a Registration Statement is not effective for any reason or the prospectus contained therein is not available for use for any reason, and either (x) the Company fails for any reason to satisfy the requirements of Rule 144(c)(1), including, without limitation, the failure to satisfy the current public information requirement under Rule 144(c) or (y) commencing on the one-year anniversary of the date the Company files a Form 8-K with the Company setting forth its Form 10 information (as defined in Rule 144), the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) (a “Current Public Information Failure”) as a result of which any of the Investors are unable to sell Registrable Securities without restriction under Rule 144 (including, without limitation, volume restrictions), then, as partial relief for the damages to any holder by reason of any such delay in, or reduction of, its ability to sell the underlying shares of Common Stock (which remedy shall not be exclusive of any other remedies available at law or in equity, including, without limitation, specific performance), the Company shall pay to each holder of Registrable Securities relating to such Registration Statement an amount in cash equal to one percent (1%) of the Stated Value (as defined in the New Certificate of Designation) of the New Warrant Preferred Shares (1) on the date of such Filing Failure, Effectiveness Failure, Maintenance Failure or Current Public Information Failure, as applicable, and (2) on every thirty (30) day anniversary of (I) a Filing Failure until such Filing Failure is cured; (II) an Effectiveness Failure until such Effectiveness Failure is cured; (III) a Maintenance Failure until such Maintenance Failure is cured; and (IV) a Current Public Information Failure until the earlier of (i) the date such Current Public Information Failure is cured and (ii) such time that such public information is no longer required pursuant to Rule 144 (in each case, pro rated for periods totaling less than thirty (30) days). The payments to which a holder of Registrable Securities shall be entitled pursuant to this Section 2(e) are referred to herein as “Registration Delay Payments.” Following the initial Registration Delay Payment for any particular event or failure (which shall be paid on the date of such event or failure, as set forth above), without limiting the foregoing, if an event or failure giving rise to the Registration Delay Payments is cured prior to any thirty (30) day anniversary of such event or failure, then such Registration Delay Payment shall be made on the third (3rd) Business Day after such cure. In the event the Company fails to make Registration Delay Payments in a timely manner in accordance with the foregoing, such Registration Delay Payments shall bear interest at the rate of two percent (2%) per month (prorated for partial months) until paid in full. Notwithstanding the foregoing, no Registration Delay Payments shall be owed to an Investor (other than with respect to a Maintenance Failure resulting from a suspension or delisting of (or a failure to timely list) the shares of Common Stock on the Principal Market) with respect to any period during which all of such Investor’s Registrable Securities may be sold by such Investor without restriction under Rule 144 (including, without limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable).
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(f) Offering. Notwithstanding anything to the contrary contained in this Agreement, but subject to the payment of the Registration Delay Payments pursuant to Section 2(e), in the event the staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering pursuant to a Registration Statement filed pursuant to this Agreement as constituting an offering of securities by, or on behalf of, the Company, or in any other manner, such that the Staff or the SEC do not permit such Registration Statement to become effective and used for resales in a manner that does not constitute such an offering and that permits the continuous resale at the market by the Investors participating therein (or as otherwise may be acceptable to each Investor) without being named therein as an “underwriter,” then the Company shall reduce the number of shares to be included in such Registration Statement by all Investors until such time as the Staff and the SEC shall so permit such Registration Statement to become effective as aforesaid. In making such reduction, the Company shall reduce the number of shares to be included by all Investors on a pro rata basis (based upon the number of Registrable Securities otherwise required to be included for each Investor) unless the inclusion of shares by a particular Investor or a particular set of Investors are resulting in the Staff or the SEC’s “by or on behalf of the Company” offering position, in which event the shares held by such Investor or set of Investors shall be the only shares subject to reduction (and if by a set of Investors on a pro rata basis by such Investors or on such other basis as would result in the exclusion of the least number of shares by all such Investors); provided, that, with respect to such pro rata portion allocated to any Investor, such Investor may elect the allocation of such pro rata portion among the Registrable Securities of such Investor. In addition, in the event that the Staff or the SEC requires any Investor seeking to sell securities under a Registration Statement filed pursuant to this Agreement to be specifically identified as an “underwriter” in order to permit such Registration Statement to become effective, and such Investor does not consent to being so named as an underwriter in such Registration Statement, then, in each such case, the Company shall reduce the total number of Registrable Securities to be registered on behalf of such Investor, until such time as the Staff or the SEC does not require such identification or until such Investor accepts such identification and the manner thereof. Any reduction pursuant to this paragraph will first reduce all Registrable Securities other than those issued pursuant to the Exchange Agreements. In the event of any reduction in Registrable Securities pursuant to this paragraph, an affected Investor shall have the right to require, upon delivery of a written request to the Company signed by such Investor, the Company to file a registration statement within twenty (20) days of such request (subject to any restrictions imposed by Rule 415 or required by the Staff or the SEC) for resale by such Investor in a manner acceptable to such Investor, and the Company shall following such request cause to be and keep effective such registration statement in the same manner as otherwise contemplated in this Agreement for registration statements hereunder, in each case until such time as: (i) all Registrable Securities held by such Investor have been registered and sold pursuant to an effective Registration Statement in a manner acceptable to such Investor or (ii) all Registrable Securities may be resold by such Investor without restriction (including, without limitation, volume limitations) pursuant to Rule 144 (taking account of any Staff position with respect to “affiliate” status) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or (iii) such Investor agrees to be named as an underwriter in any such Registration Statement in a manner acceptable to such Investor as to all Registrable Securities held by such Investor and that have not theretofore been included in a Registration Statement under this Agreement (it being understood that the special demand right under this sentence may be exercised by an Investor multiple times and with respect to limited amounts of Registrable Securities in order to permit the resale thereof by such Investor as contemplated above).
(g) Piggyback Registrations. Without limiting any obligation of the Company hereunder or under the Exchange Agreements, if there is not an effective Registration Statement covering all of the Registrable Securities or the prospectus contained therein is not available for use and the Company shall determine to prepare and file with the SEC a registration statement or offering statement relating to an offering for its own account or the account of others under the 1933 Act of any of its equity securities (other than on Form S-4 or Form S-8 (each as promulgated under the 1933 Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans), then the Company shall deliver to each Investor a written notice of such determination and, if within fifteen (15) days after the date of the delivery of such notice, any such Investor shall so request in writing, the Company shall include in such registration statement or offering statement all or any part of such Registrable Securities such Investor requests to be registered, subject to standard underwriter cut backs; provided, however, the Company shall not be required to register any Registrable Securities pursuant to this Section 2(g) that are eligible for resale pursuant to Rule 144 without restriction (including, without limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or that are the subject of a then-effective Registration Statement.
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(h) Allocation of Registrable Securities. The initial number of Registrable Securities included in any Registration Statement and any increase in the number of Registrable Securities included therein shall be allocated pro rata among the Investors based on the number of Registrable Securities held by each Investor at the time such Registration Statement covering such initial number of Registrable Securities or increase thereof is declared effective by the SEC. In the event that an Investor sells or otherwise transfers any of such Investor’s Registrable Securities, each transferee or assignee (as the case may be) that becomes an Investor shall be allocated a pro rata portion of the then-remaining number of Registrable Securities included in such Registration Statement for such transferor or assignee (as the case may be). Any shares of Common Stock included in a Registration Statement and which remain allocated to any Person which ceases to hold any Registrable Securities covered by such Registration Statement shall be allocated to the remaining Investors, pro rata based on the number of Registrable Securities then held by such Investors which are covered by such Registration Statement.
(i) No Inclusion of Other Securities. Except for such securities as set forth on Schedule 2(i), the Company shall in no event include any securities other than Registrable Securities on any Registration Statement filed in accordance herewith without the prior written consent of the Required Holders; provided, that, in the event of any reduction in the aggregate number of securities included on the applicable Registration Statement required by the SEC (or as necessary to prevent one or more Investors being deemed an underwriter under such applicable Registration Statement), the aggregate number of securities as set forth on Schedule 2(i) shall be reduced on such Registration Statement, pro rata, prior to any reduction of any of the Registrable Securities included in such Registration Statement. Until the Applicable Date (as defined in the Securities Purchase Agreement dated as of February 2, 2024 by and between the Company and the investors signatory thereto), the Company shall not enter into any agreement providing any registration rights to any of its security holders, except as otherwise permitted under the Exchange Agreements.
3. Related Obligations.
The Company shall use its reasonable best efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof, and, pursuant thereto, the Company shall have the following obligations:
(a) The Company shall promptly prepare and file with the SEC a Registration Statement with respect to all the Registrable Securities (but in no event later than the applicable Filing Deadline) and use its reasonable best efforts to cause such Registration Statement to become effective as soon as practicable after such filing (but in no event later than the Effectiveness Deadline). Subject to Allowable Grace Periods, the Company shall keep each Registration Statement effective (and the prospectus contained therein available for use) pursuant to Rule 415 for resales by the Investors on a delayed or continuous basis at then-prevailing market prices (and not fixed prices) at all times until the earlier of (i) the date as of which all of the Investors may sell all of the Registrable Securities required to be covered by such Registration Statement (disregarding any reduction pursuant to Section 2(f)) without restriction pursuant to Rule 144 (including, without limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or (ii) the date on which the Investors shall have sold all of the Registrable Securities covered by such Registration Statement (the “Registration Period”). Notwithstanding anything to the contrary contained in this Agreement, the Company shall ensure that, when filed and at all times while effective, each Registration Statement (including, without limitation, all amendments and supplements thereto) and the prospectus (including, without limitation, all amendments and supplements thereto) used in connection with such Registration Statement (1) shall not contain any 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 case of prospectuses, in the light of the circumstances in which they were made) not misleading and (2) will disclose (whether directly or through incorporation by reference to other SEC filings to the extent permitted) all material information regarding the Company and its securities. The Company shall submit to the SEC, within one (1) Business Day after the later of the date that (i) the Company learns that no review of a particular Registration Statement will be made by the Staff or that the Staff has no further comments on a particular Registration Statement (as the case may be) and (ii) the consent of Legal Counsel is obtained pursuant to Section 3(c) (which consent shall be immediately sought), a request for acceleration of effectiveness of such Registration Statement to a time and date not later than two (2) Business Days after the submission of such request. The Company shall respond in writing to comments made by the SEC in respect of a Registration Statement as soon as practicable, but in no event later than fifteen (15) days after the receipt of comments by or notice from the SEC that an amendment is required in order for a Registration Statement to be declared effective.
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(b) Subject to Section 3(r) of this Agreement, the Company shall prepare and file with the SEC such amendments (including, without limitation, post-effective amendments) and supplements to each Registration Statement and the prospectus used in connection with each such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep each such Registration Statement effective at all times during the Registration Period for such Registration Statement, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company required to be covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement; provided, however, by 8:30 a.m. (New York time) on the second Business Day immediately following each Effective Date, the Company shall file with the SEC in accordance with Rule 424(b) under the 1933 Act the final prospectus to be used in connection with sales pursuant to the applicable Registration Statement (whether or not such a prospectus is technically required by such rule). In the case of amendments and supplements to any Registration Statement which are required to be filed pursuant to this Agreement (including, without limitation, pursuant to this Section 3(b)) by reason of the Company filing a report on Form 8-K, Form 10-Q or Form 10-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company shall, if permitted under the applicable rules and regulations of the SEC, have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the 1934 Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement.
(c) The Company shall (A) permit Legal Counsel and legal counsel for each other Investor to review and comment upon (i) each Registration Statement at least five (5) Business Days prior to its filing with the SEC and (ii) all amendments and supplements to each Registration Statement (including, without limitation, the prospectus contained therein) (except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any similar or successor reports) within a reasonable number of days prior to their filing with the SEC, and (B) not file any Registration Statement or amendment or supplement thereto in a form to which Legal Counsel or any legal counsel for any other Investor reasonably objects. The Company shall not submit a request for acceleration of the effectiveness of a Registration Statement or any amendment or supplement thereto or to any prospectus contained therein without the prior consent of Legal Counsel, which consent shall not be unreasonably withheld. The Company shall promptly furnish to Legal Counsel and legal counsel for each other Investor, without charge, (i) copies of any correspondence from the SEC or the Staff to the Company or its representatives relating to each Registration Statement, provided that such correspondence shall not contain any material, non-public information regarding the Company or any of its Subsidiaries (as defined in the Exchange Agreements), (ii) after the same is prepared and filed with the SEC, one (1) copy of each Registration Statement and any amendment(s) and supplement(s) thereto, including, without limitation, financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, and all exhibits and (iii) upon the effectiveness of each Registration Statement, one (1) copy of the prospectus included in such Registration Statement and all amendments and supplements thereto. The Company shall reasonably cooperate with Legal Counsel and legal counsel for each other Investor in performing the Company’s obligations pursuant to this Section 3.
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(d) The Company shall promptly furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge, (i) after the same is prepared and filed with the SEC, at least one (1) copy of each Registration Statement and any amendment(s) and supplement(s) thereto, including, without limitation, financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, all exhibits and each preliminary prospectus, (ii) upon the effectiveness of each Registration Statement, ten (10) copies of the prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request from time to time) and (iii) such other documents, including, without limitation, copies of any preliminary or final prospectus, as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor; provided, however, that any such item listed in the foregoing clauses (i) through (iii) which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.
(e) The Company shall use its reasonable best efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by Investors of the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions, such amendments (including, without limitation, post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify Legal Counsel, legal counsel for each other Investor and each Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.
(f) The Company shall notify Legal Counsel, legal counsel for each other Investor and each Investor in writing of the happening of any event, as promptly as practicable after becoming aware of such event, as a result of which the prospectus included in a Registration Statement, as then in effect, may include an untrue statement of a material fact or omission 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 (provided that in no event shall such notice contain any material, non-public information regarding the Company or any of its Subsidiaries), and, subject to Section 3(r), promptly prepare a supplement or amendment to such Registration Statement and such prospectus contained therein to correct such untrue statement or omission and deliver ten (10) copies of such supplement or amendment to Legal Counsel, legal counsel for each other Investor and each Investor (or such other number of copies as Legal Counsel, legal counsel for each other Investor or such Investor may reasonably request). The Company shall also promptly notify Legal Counsel, legal counsel for each other Investor and each Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to Legal Counsel, legal counsel for each other Investor and each Investor by e-mail on the same day of such effectiveness and by overnight mail), and when the Company receives written notice from the SEC that a Registration Statement or any post-effective amendment will be reviewed by the SEC, (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate; and (iv) of the receipt of any request by the SEC or any other federal or state governmental authority for any additional information relating to the Registration Statement or any amendment or supplement thereto or any related prospectus. The Company shall respond as promptly as practicable to any comments received from the SEC with respect to each Registration Statement or any amendment thereto (it being understood and agreed that the Company’s response to any such comments shall be delivered to the SEC no later than fifteen (15) Business Days after the receipt thereof).
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(g) The Company shall (i) use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of each Registration Statement or the use of any prospectus contained therein, or the suspension of the qualification, or the loss of an exemption from qualification, of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and (ii) notify Legal Counsel, legal counsel for each other Investor and each Investor who holds Registrable Securities of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
(h) If any Investor may be required under applicable securities law to be described in any Registration Statement as an underwriter and such Investor consents to so being named an underwriter, at the request of any Investor, the Company shall furnish to such Investor, on the date of the effectiveness of such Registration Statement and thereafter from time to time on such dates as an Investor may reasonably request (i) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the Investors.
(i) If any Investor may be required under applicable securities law to be described in any Registration Statement as an underwriter and such Investor consents to so being named an underwriter, upon the written request of such Investor, the Company shall make available for inspection by (i) such Investor, (ii) legal counsel for such Investor and (iii) one (1) firm of accountants or other agents retained by such Investor (collectively, the “Inspectors”), all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by each Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, each Inspector shall agree in writing to hold in strict confidence and not to make any disclosure (except to such Investor) or use of any Record or other information which the Company’s board of directors determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (1) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the 1933 Act, (2) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (3) the information in such Records has been made generally available to the public other than by disclosure in violation of this Agreement or any other Transaction Document (as defined in the Exchange Agreements). Such Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein (or in any other confidentiality agreement between the Company and such Investor, if any) shall be deemed to limit any Investor’s ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations.
(j) The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required to be disclosed in such Registration Statement pursuant to the 1933 Act, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other Transaction Document. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at such Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.
(k) Without limiting any obligation of the Company under the Exchange Agreements, the Company shall use its reasonable best efforts either to (i) cause all of the Registrable Securities covered by each Registration Statement to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, (ii) secure designation and quotation of all of the Registrable Securities covered by each Registration Statement on an Eligible Market (as defined in the Exchange Agreements), or (iii) if, despite the Company’s reasonable best efforts to satisfy the preceding clauses (i) or (ii) the Company is unsuccessful in satisfying the preceding clauses (i) or (ii), without limiting the generality of the foregoing, to use its reasonable best efforts to arrange for at least two market makers to register with the Financial Industry Regulatory Authority (“FINRA”) as such with respect to such Registrable Securities. In addition, the Company shall cooperate with each Investor and any broker or dealer through which any such Investor proposes to sell its Registrable Securities in effecting a filing with FINRA pursuant to FINRA Rule 5110 as requested by such Investor. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 3(k).
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(l) The Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts (as the case may be) as the Investors may reasonably request from time to time and registered in such names as the Investors may request.
(m) If requested by an Investor, the Company shall as soon as practicable after receipt of notice from such Investor and subject to Section 3(r) hereof, (i) incorporate in a prospectus supplement or post-effective amendment such information as an Investor reasonably 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 or prospectus contained therein if reasonably requested by an Investor holding any Registrable Securities.
(n) The Company shall use its reasonable best efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.
(o) The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the 1933 Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the applicable Effective Date of each Registration Statement.
(p) The Company shall otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.
(q) Within one (1) Business Day after a Registration Statement which covers Registrable Securities is declared effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the SEC along with the Company’s legal counsel’s standard form of legal opinion regarding the removal of legends from share certificates upon sale pursuant to the Registration Statement.
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(r) Notwithstanding anything to the contrary herein (but subject to the last sentence of this Section 3(r)), at any time after the Effective Date of a particular Registration Statement, the Company may delay the disclosure of material, non-public information concerning the Company or any of its Subsidiaries the disclosure of which at the time is not, in the good faith opinion of the board of directors of the Company, in the best interest of the Company and, in the opinion of counsel to the Company, otherwise required (a “Grace Period”), provided that the Company shall promptly notify the Investors in writing of the (i) existence of material, non-public information giving rise to a Grace Period (provided that in each such notice the Company shall not disclose the content of such material, non-public information to any of the Investors) and the date on which such Grace Period will begin and (ii) date on which such Grace Period ends, provided further that (I) no Grace Period shall exceed ten (10) consecutive days and during any three hundred sixty five (365) day period all such Grace Periods shall not exceed an aggregate of thirty (30) days, (II) the first day of any Grace Period must be at least five (5) Trading Days after the last day of any prior Grace Period and (III) no Grace Period may exist during the sixty (60) Trading Day period immediately following the Effective Date of such Registration Statement (provided that such sixty (60) Trading Day period shall be extended by the number of Trading Days during such period and any extension thereof contemplated by this proviso during which such Registration Statement is not effective or the prospectus contained therein is not available for use) (each, an “Allowable Grace Period”). For purposes of determining the length of a Grace Period above, such Grace Period shall begin on and include the date the Investors receive the notice referred to in clause (i) above and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii) above and the date referred to in such notice. The provisions of Section 3(g) hereof shall not be applicable during the period of any Allowable Grace Period. Upon expiration of each Grace Period, the Company shall again be bound by the first sentence of Section 3(f) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable. Notwithstanding anything to the contrary contained in this Section 3(r), the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Exchange Agreements in connection with any sale of Registrable Securities with respect to which such Investor has entered into a contract for sale, and delivered a copy of the prospectus included as part of the particular Registration Statement to the extent applicable, prior to such Investor’s receipt of the notice of a Grace Period and for which the Investor has not yet settled.
(s) The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by each Investor of its Registrable Securities pursuant to each Registration Statement.
(t) Neither the Company nor any Subsidiary or affiliate thereof shall identify any Investor as an underwriter in any public disclosure or filing with the SEC, the Principal Market or any Eligible Market (as defined in the New Certificate of Designation) and any Buyer being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has under this Agreement or any other Transaction Document (as defined in the Exchange Agreements); provided, however, that the foregoing shall not prohibit the Company from including the disclosure found in the “Plan of Distribution” section attached hereto as Exhibit A in the Registration Statement.
(u) Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Buyers in this Agreement or otherwise conflicts with the provisions hereof.
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4. Obligations of the Investors.
(a) At least five (5) Business Days prior to the first anticipated filing date of each Registration Statement, the Company shall notify each Investor in writing of the information the Company requires from each such Investor with respect to such Registration Statement. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect and maintain the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.
(b) Each Investor, by such Investor’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of each Registration Statement hereunder, unless such Investor has notified the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable Securities from such Registration Statement.
(c) Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of 3(f), such Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until such Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(g) or the first sentence of Section 3(f) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary in this Section 4(c), the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Exchange Agreements in connection with any sale of Registrable Securities with respect to which such Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of Section 3(f) and for which such Investor has not yet settled.
5. Expenses of Registration.
All reasonable expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, FINRA filing fees (if any) and fees and disbursements of counsel for the Company shall be paid by the Company. The Company shall reimburse Legal Counsel for its fees and disbursements in connection with registration, filing or qualification pursuant to Sections 2 and 3 of this Agreement which amount shall be limited to $10,000 for each such registration, filing or qualification.
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6. Indemnification.
(a) To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor and each of its directors, officers, shareholders, members, partners, employees, agents, advisors, representatives (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) and each Person, if any, who controls such Investor within the meaning of the 1933 Act or the 1934 Act and each of the directors, officers, shareholders, members, partners, employees, agents, advisors, representatives (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 Person”), against any losses, obligations, claims, damages, liabilities, contingencies, judgments, fines, penalties, charges, costs (including, without limitation, court costs, reasonable attorneys’ fees and costs of defense and investigation), amounts paid in settlement or expenses, joint or several, (collectively, “Claims”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an Indemnified Person is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, 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 light of the circumstances under which the statements therein were made, not misleading or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement or (iv) any violation of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, “Violations”). Subject to Section 6(c), the Company shall reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person for such Indemnified Person expressly for use in connection with the preparation of such Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(d); and (ii) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of any of the Registrable Securities by any of the Investors pursuant to Section 9.
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(b) In connection with any Registration Statement in which an Investor is participating, such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case, to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(c) and the below provisos in this Section 6(b), such Investor will reimburse an Indemnified Party any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such Claim; provided, however, the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld or delayed, provided further that such Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the applicable sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of any of the Registrable Securities by any of the Investors pursuant to Section 9.
(c) Promptly after receipt by an Indemnified Person or Indemnified Party (as the case may be) under this Section 6 of notice of the commencement of any action or proceeding (including, without limitation, any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party (as the case may be) shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party (as the case may be); provided, however, an Indemnified Person or Indemnified Party (as the case may be) shall have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the indemnifying party if: (i) the indemnifying party has agreed in writing to pay such fees and expenses; (ii) the indemnifying party shall have failed promptly to assume the defense of such Claim and to employ counsel reasonably satisfactory to such Indemnified Person or Indemnified Party (as the case may be) in any such Claim; or (iii) the named parties to any such Claim (including, without limitation, any impleaded parties) include both such Indemnified Person or Indemnified Party (as the case may be) and the indemnifying party, and such Indemnified Person or such Indemnified Party (as the case may be) shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Person or such Indemnified Party and the indemnifying party (in which case, if such Indemnified Person or such Indemnified Party (as the case may be) notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, then the indemnifying party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the indemnifying party, provided further that in the case of clause (iii) above the indemnifying party shall not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for such Indemnified Person or Indemnified Party (as the case may be)). The Indemnified Party or Indemnified Person (as the case may be) shall reasonably cooperate with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person (as the case may be) which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person (as the case may be) reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent; provided, however, the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person (as the case may be), consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person (as the case may be) of a release from all liability in respect to such Claim or litigation, and such settlement shall not include any admission as to fault on the part of the Indemnified Party. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person (as the case may be) with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party (as the case may be) under this Section 6, except to the extent that the indemnifying party is materially and adversely prejudiced in its ability to defend such action.
(d) The indemnification required by this Section 6 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 Indemnified Damages are incurred.
(e) The indemnity and contribution agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.
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7. Contribution.
To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however: (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6 of this Agreement, (ii) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii) contribution by any seller of Registrable Securities shall be limited in amount to the amount of net proceeds received by such seller from the applicable sale of such Registrable Securities pursuant to such Registration Statement. Notwithstanding the provisions of this Section 7, no Investor shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Investor from the applicable sale of the Registrable Securities subject to the Claim exceeds the amount of any damages that such Investor has otherwise been required to pay, or would otherwise be required to pay under Section 6(b), by reason of such untrue or alleged untrue statement or omission or alleged omission.
8. Reports Under the 1934 Act.
Until the date no New Preferred Warrants or New Warrant Preferred Shares remain outstanding, with a view to making available to the Investors the benefits of Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements (it being understood and agreed that nothing herein shall limit any obligations of the Company under the Exchange Agreements) and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and
(c) furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting, submission and posting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company with the SEC if such reports are not publicly available via EDGAR, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.
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9. Assignment of Registration Rights.
All or any portion of the rights under this Agreement shall be automatically assignable by each Investor to any transferee or assignee (as the case may be) of all or any portion of such Investor’s Registrable Securities, New Warrant Preferred Shares or New Preferred Warrants if: (i) such Investor agrees in writing with such transferee or assignee (as the case may be) to assign all or any portion of such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such transfer or assignment (as the case may be); (ii) the Company is, within a reasonable time after such transfer or assignment (as the case may be), furnished with written notice of (a) the name and address of such transferee or assignee (as the case may be), and (b) the securities with respect to which such registration rights are being transferred or assigned (as the case may be); (iii) immediately following such transfer or assignment (as the case may be) the further disposition of such securities by such transferee or assignee (as the case may be) is restricted under the 1933 Act or applicable state securities laws if so required; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence such transferee or assignee (as the case may be) agrees in writing with the Company to be bound by all of the provisions contained herein; (v) such transfer or assignment (as the case may be) shall have been made in accordance with the applicable requirements of the Exchange Agreements, the New Certificate of Designation and the New Warrant Preferred Shares and the New Preferred Warrants (as the case may be); and (vi) such transfer or assignment (as the case may be) shall have been conducted in accordance with all applicable federal and state securities laws.
10. Amendment of Registration Rights.
Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Required Holders; provided that any such amendment or waiver that complies with the foregoing, but that disproportionately, materially and adversely affects the rights and obligations of any Investor relative to the comparable rights and obligations of the other Investors shall require the prior written consent of such adversely affected Investor. Any amendment or waiver effected in accordance with this Section 10 shall be binding upon each Investor and the Company, provided that no such amendment shall be effective to the extent that it (1) applies to less than all of the holders of Registrable Securities or (2) imposes any obligation or liability on any Investor without such Investor’s prior written consent (which may be granted or withheld in such Investor’s sole discretion). No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration (other than the reimbursement of legal fees) also is offered to all of the parties to this Agreement.
11. Miscellaneous.
(a) Solely for purposes of this Agreement, a Person is deemed to be a holder of Registrable Securities whenever such Person owns, or is deemed to own, of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record owner of such Registrable Securities.
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(b) Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by electronic mail (provided that such sent email is kept on file (whether electronically or otherwise) by the sending party and the sending party does not receive an automatically generated message from the recipient’s email server that such e-mail could not be delivered to such recipient); or (iii) one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same. The mailing addresses and e-mail addresses for such communications shall be:
If to the Company:
TruGolf Holdings, Inc. (f/k/a Deep Medicine Acquisition Corp.)
60 North 1400 West
Centerville, UT 84014
Telephone: (801) 298-1997
Attention: Chief Executive Officer
E-Mail: [email protected]
With a copy (for informational purposes only) to:
Cozen O’Connor LLP
550 Burrard Street, Suite 2501
Vancouver, BC V6C 2B5
Attn: Virgil Z. Hlus
Telephone: 236-317-6894
E-mail: [email protected]
and
ArnetFox Schniff LLP
1717 K Street NW
Washington, DC 20006
Attn: Cavas S. Pavri
Telephone: (202) 724-6847
E-Mail: [email protected]
If to the Transfer Agent:
Equiniti Trust Company, LLC
48 Wall Street, Floor 23
New York, NY 10005
Attention: Felix Orihuela and John Baker
E-Mail: [email protected]
If to Legal Counsel:
Kelley Drye & Warren LLP
3 World Trade Center
175 Greenwich Street
New York, NY 10007
Telephone: (212) 808-7540
Facsimile: (212) 808-7897
Attention: Michael A. Adelstein, Esq.
E-mail: [email protected]
If to a Buyer, to its mailing address and/or email address set forth on the Schedule of Buyers attached to the Exchange Agreements, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers, or to such other mailing address and/or email address and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change, provided that Kelley Drye & Warren LLP shall only be provided notices sent to the lead investor. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s e-mail containing the time, date and recipient’s e-mail or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by e-mail or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
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(c) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. The Company and each Investor acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that each party hereto shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement by any other party hereto and to enforce specifically the terms and provisions hereof (without the necessity of showing economic loss and without any bond or other security being required), this being in addition to any other remedy to which any party may be entitled by law or equity.
(d) All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Nevada, without giving effect to any provision or rule (whether of the State of Nevada or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Nevada. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Las Vegas, Nevada, 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 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 for such 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 manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, 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 OR ANY TRANSACTION CONTEMPLATED HEREBY.
(e) If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
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(f) This Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein constitute the entire agreement among the parties hereto and thereto solely with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein supersede all prior agreements and understandings among the parties hereto solely with respect to the subject matter hereof and thereof; provided, however, nothing contained in this Agreement or any other Transaction Document shall (or shall be deemed to) (i) have any effect on any agreements any Investor has entered into with the Company or any of its Subsidiaries prior to the date hereof with respect to any prior investment made by such Investor in the Company, (ii) waive, alter, modify or amend in any respect any obligations of the Company or any of its Subsidiaries or any rights of or benefits to any Investor or any other Person in any agreement entered into prior to the date hereof between or among the Company and/or any of its Subsidiaries and any Investor and all such agreements shall continue in full force and effect or (iii) limit any obligations of the Company under any of the other Transaction Documents.
(g) Subject to compliance with Section 9 (if applicable), this Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto. This Agreement is not for the benefit of, nor may any provision hereof be enforced by, any Person, other than the parties hereto, their respective permitted successors and assigns and the Persons referred to in Sections 6 and 7 hereof.
(h) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.
(i) This Agreement may be executed in two or more identical counterparts, each of which shall be deemed an original, but all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an email which contains a portable document format (.pdf) file of an executed signature page, such signature page 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 signature page were an original thereof.
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(j) 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 any 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.
(k) The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party. Notwithstanding anything to the contrary set forth in Section 10, terms used in this Agreement but defined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date in such other Transaction Documents unless otherwise consented to in writing by each Investor.
(l) All consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders, determined as if all of the outstanding New Warrant Preferred Shares then held by the Investors have been converted for Registrable Securities without regard to any limitations on redemption, amortization and/or conversion of the New Warrant Preferred Shares and the outstanding New Preferred Warrants then held by Investors have been exercised for Registrable Securities without regard to any limitations on exercise of the New Preferred Warrants.
(m) This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
(n) The obligations of each Investor under this Agreement and the other Transaction Documents are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under this Agreement or any other Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as, and the Company acknowledges that the Investors do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Investors are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by the Transaction Documents or any matters, and the Company acknowledges that the Investors are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by this Agreement or any of the other the Transaction Documents. Each Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained herein was solely in the control of the Company, not the action or decision of any Investor, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Investor. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and an Investor, solely, and not between the Company and the Investors collectively and not between and among Investors.
[signature page follows]
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IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.
| COMPANY: | ||
TRUGOLF HOLDINGS, INC. (F/K/A DEEP MEDICINE ACQUISITION CORP.) | ||
| By: | ||
| Name: | ||
| Title: | ||
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.
| BUYERS: | ||
| [BUYER] | ||
| By: | ||
| Name: | ||
| Title: | ||
EXHIBIT A
SELLING STOCKHOLDERS
The shares of common stock being offered by the selling stockholders are those issuable to the selling stockholders upon conversion of the preferred shares. For additional information regarding the issuance of the preferred shares, see “Exchange of Preferred Warrants” above. We are registering the shares of common stock in order to permit the selling stockholders to offer the shares for resale from time to time. Except for the ownership of the preferred shares issued pursuant to the Exchange Agreements, the selling stockholders have not had any material relationship with us within the past three years.
The table below lists the selling stockholders and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder) of the shares of common stock held by each of the selling stockholders. The second column lists the number of shares of common stock beneficially owned by the selling stockholders, based on their respective ownership of shares of common stock, preferred shares and warrants, as of ________, 20__, assuming conversion of the preferred shares and exercise of the warrants held by each such selling stockholder on that date but taking account of any limitations on conversion and exercise set forth therein.
The third column lists the shares of common stock being offered by this prospectus by the selling stockholders and does not take in account any limitations on conversion of the preferred shares set forth in the certificate of designations.
In accordance with the terms of a registration rights agreement with the holders of the preferred shares and the warrants, this prospectus generally covers the resale of 100% of the maximum number of new warrant preferred conversion shares issuable upon conversion of all the new warrant preferred shares (assuming for purposes hereof that (a) all of the new preferred warrants have been exercised in full into new warrant preferred shares, (b) any such exercise of the new preferred warrants shall not take into account any limitations on the exercise thereof set forth therein (c) the new warrant preferred shares have been converted in full into new warrant preferred conversion shares, (d) any such conversion of the new warrant preferred shares shall not take into account any limitations on conversion set forth in the new certificate of designations (e) dividends have accrued through [DATE] and have been converted into shares of common stock, and (f) the new warrant preferred conversion shares are convertible at the floor price (as defined in the new certificate of designations) as of such time of determination) calculated as of the trading day immediately preceding the date this registration statement was initially filed with the SEC. Because the conversion price of the preferred shares may be adjusted, the number of shares that will actually be issued may be more or less than the number of shares being offered by this prospectus. The fourth column assumes the sale of all of the shares offered by the selling stockholders pursuant to this prospectus.
Under the terms of the preferred shares and the warrants, a selling stockholder may not convert the preferred shares or exercise the warrants to the extent (but only to the extent) such selling stockholder or any of its affiliates would beneficially own a number of shares of our common stock which would exceed 4.99% of the outstanding shares of the Company. The number of shares in the second column reflects these limitations. The selling stockholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”
Name of Selling Stockholder |
Number of Shares of Common Stock Owned Prior to Offering |
Maximum Number of Shares of Common Stock to be Sold Pursuant to this Prospectus |
Number of Shares of Common Stock of Owned After Offering | |||
PLAN OF DISTRIBUTION
We are registering the shares of common stock issuable upon conversion of the preferred shares to permit the resale of these shares of common stock by the holders of the preferred shares from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all fees and expenses incident to our obligation to register the shares of common stock.
The selling stockholders may sell all or a portion of the shares of common stock held by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions, pursuant to one or more of the following methods:
| ● | on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale; | |
| ● | in the over-the-counter market; | |
| ● | in transactions otherwise than on these exchanges or systems or in the over-the-counter market; | |
| ● | through the writing or settlement of options, whether such options are listed on an options exchange or otherwise; | |
| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; | |
| ● | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; | |
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; | |
| ● | an exchange distribution in accordance with the rules of the applicable exchange; | |
| ● | privately negotiated transactions; | |
| ● | short sales made after the date the Registration Statement is declared effective by the SEC; | |
| ● | broker-dealers may agree with a selling security holder to sell a specified number of such shares at a stipulated price per share; | |
| ● | a combination of any such methods of sale; and | |
| ● | any other method permitted pursuant to applicable law. |
The selling stockholders may also sell shares of common stock under Rule 144 promulgated under the Securities Act of 1933, as amended, if available, rather than under this prospectus. In addition, the selling stockholders may transfer the shares of common stock by other means not described in this prospectus. If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in some or all of the preferred shares or shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
To the extent required by the Securities Act and the rules and regulations thereunder, the selling stockholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed, which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.
Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.
The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.
We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be $[ ] in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, a selling stockholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the selling stockholders against liabilities, including some liabilities under the Securities Act in accordance with the registration rights agreements or the selling stockholders will be entitled to contribution. We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the Securities Act that may arise from any written information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the related registration rights agreements or we may be entitled to contribution.
Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.
Exhibit 99.1
| TruGolf Holdings, Inc. | Polymath Research Inc. |
JOINT NEWS RELEASE
TruGolf to Acquire Polymath Research Inc., Bringing Tokenization Innovator to the Public Markets on Nasdaq
Polymath to become one of the first Layer-1 Blockchain companies in the public markets on the NASDAQ Stock Exchange via a business combination with TruGolf Holdings, Inc., making institutional-grade tokenization accessible to the financial industry at scale.
Salt Lake City, Utah, and Toronto, Canada, August 18, 2026 – TruGolf Holdings, Inc. (“TruGolf” or the “Company”) (NASDAQ: TRUG) and Polymath Research Inc. (“Polymath”), a privately-held Canadian technology company focused on the issuance, compliance and lifecycle management of regulated digital securities and other tokenized financial instruments, today jointly announced that they have entered into an acquisition agreement dated August 17, 2026, pursuant to which TruGolf will acquire Polymath in exchange for shares of TruGolf Class A common stock and non-voting Series C preferred stock (the “Transaction”). The Transaction will bring one of the first regulated, purpose-built blockchains for tokenized securities to the public markets, positioning the combined company at the center of a fundamental shift in how the world’s financial assets are issued, traded, and owned.
Tokenization, representing real-world assets such as securities, funds, and private investments as digital tokens on a blockchain, is widely regarded as one of the most significant shifts underway in global capital markets, with the potential to make traditionally illiquid assets faster to issue, cheaper to administer, and tradable around the clock. Polymath sits at the forefront of that shift as the creator of Polymesh, an institutional-grade, purpose-built Layer-1 blockchain designed specifically for regulated assets. Unlike general-purpose blockchains, Polymesh builds compliance, identity verification, and governance requirements directly into the base layer of the chain, enabling banks, asset managers, and other regulated institutions to issue and manage tokenized securities within existing legal frameworks. Following its acquisition of Polymesh Labs earlier this year, Polymath unified the blockchain and its tokenization platform under one roof, giving institutions a single, end-to-end path to issue and manage regulated assets on-chain. Polymath had revenues of $4.2 million in 2025 and assets totaling $21 million.
Through the combination, Polymath will join the public markets as part of TruGolf, which will remain listed on Nasdaq. Polymath’s shareholders will become stockholders of the combined company, receiving a mix of TruGolf Class A common stock and non-voting Series C preferred stock as consideration.
Additionally, in connection with the Transaction, TruGolf will raise aggregate gross proceeds of $3.0 million (in stated value) from existing holders of TruGolf’s Series A preferred stock concurrently with the closing.
Brenner Adams, TruGolf’s Chairman of the Board, said, “This acquisition marks an exciting new chapter of growth for TruGolf. Our Company will now have exposure to one of the fastest-growing areas of financial infrastructure while the golf simulation business continues to operate with full focus and continuity. We believe tokenization is where capital markets are headed, and Polymath has spent nearly a decade building the compliant infrastructure institutions need to get there. Bringing that platform into a public company gives it the credibility and access to capital to accelerate institutional adoption and positions our shareholders to benefit as that market matures. Combining two growing, distinct businesses should accelerate TruGolf’s path to profitability. We believe this path will provide the best opportunity for our stakeholders to receive the appropriate valuation in the marketplace for our company.”
Natalie Hirsch, Chief Financial Officer of Polymath, who will serve as Chief Financial Officer and Chief Operating Officer of the combined company following closing, added:
“This transaction marks a pivotal moment for Polymath and the broader tokenization industry as a whole. Becoming part of a NASDAQ-listed company will give us the transparency, credibility, and access to capital that institutional partners have come to expect. We built Polymath to make regulated digital securities practical at scale, and this milestone validates years of disciplined work by our team. As we bring our purpose-built infrastructure to the public markets, we look forward to supporting institutional adoption of tokenized real-world assets.”
Natalie Hirsch is a finance and operations leader with more than 15 years of experience across public and private companies in fintech, enterprise software, and e-commerce. As CFO of Polymath for the past two years, Hirsch drives strategic planning, financial modeling, and scaling operations to fuel growth in the tokenization space. Previously, Hirsch served as Interim CEO and COO of AnalytixInsight Inc. (TSXV), overseeing global operations and serving on the board of its Italian fintech subsidiary. Before that, she spent more than four years at Coinsquare as Vice President of Operations, where she played a key role in establishing and scaling one of Canada’s first regulated investment dealers and alternative trading systems (ATS) for digital assets, helping bridge the gap between traditional capital markets and emerging blockchain infrastructure. A CPA, CA and PMP, Hirsch holds an MBA with honors from Tel Aviv University’s Recanati School of Business and a Master’s in Management & Professional Accounting from the Rotman School of Management at the University of Toronto.
As consideration for the Transaction, the shareholders of Polymath (will receive such number of shares of Class A common stock of TruGolf equal to approximately 19.9% of the total outstanding TruGolf Class A common shares immediately prior to closing, together with shares of non-voting Series C preferred stock, the number of which will be determined based on the balance of the total purchase price payable, less the TruGolf Class A common shares issued at closing, divided by the number of issued and outstanding shares of Polymath immediately before the closing.
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Closing Conditions and Further Information
The Transaction has been unanimously approved by the boards of directors of both TruGolf and Polymath and is expected to close in the third quarter of 2026, subject to customary closing conditions, including TruGolf maintaining a minimum market value of listed securities of at least $10.0 million for a period of at least ten consecutive trading days, receipt of all requisite regulatory and third-party consents, waivers, and approvals for the closing, as applicable. There can be no assurance that the Transaction will be completed as proposed or at all.
Further details of the Transaction can be found in the Company’s Form 8-K filed on Edgar on August 18, 2026.
This news release does not constitute an offer to sell or a solicitation of an offer to buy the securities described herein in the United States. The securities described herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the “1933 Act”), or any state securities laws and may not be offered or sold in the United States or to the account or benefit of a U.S. person absent an exemption from the registration requirements of the 1933 Act.
| Contact Information: | |
TruGolf Holdings, Inc. 60 North 1400 West Centerville, Utah 84014 917-886-9071 Email: [email protected] |
Polymath Research Inc. 100 King Street West, Suite 5700, Toronto, Ontario, Canada, M5X 1C7 Email: [email protected] |
About the Company
Since 1983, TruGolf has been passionate about driving the golf industry forward with innovative indoor golf solutions. TruGolf builds products that capture the spirit of golf. TruGolf’s mission is to help grow the game by making it more available, approachable, and affordable through technology, because TruGolf believes that golf is for everyone. TruGolf’s team has built award-winning video games, innovative hardware solutions, and an all-new e-sports platform to connect golfers around the world with E6 CONNECT. Since TruGolf’s beginning, TruGolf has continued to attempt to define and redefine what is possible with golf technology.
About Polymath
Polymath is a privately-held Canadian technology company that develops enterprise-grade capital markets infrastructure for the issuance, compliance, and lifecycle management of regulated digital securities and other tokenized financial instruments for private and institutional markets.
Polymath enables issuers, investors, and market participants to create and manage tokenized representations of real-world assets within compliant frameworks, supporting investor onboarding, regulatory controls, and post-issuance administration across private and institutional markets.
With a strong history of building blockchain-based capital markets infrastructure, Polymath’s technology is designed to support scalable, compliant deployment of tokenized securities across a variety of asset classes, including real-world assets, private equity, and structured financial products.
Polymath’s solutions are purpose-built for institutional adoption and evolving regulatory environments.
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Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, including Section 27A of the 1933 Act, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, as well as forward-looking information within the meaning of applicable securities laws. Forward-looking statements are statements that are not historical facts and include statements regarding beliefs, plans, expectations, intentions, estimates, projections, or assumptions regarding future events or performance.
Forward-looking statements in this press release include, but are not limited to, statements regarding: the completion of the Transaction; the structure and timing of the Transaction and the financing, including the amalgamation; the issuance and conversion of the TruGolf Common Shares and Series C Preferred Shares; the completion, size, and use of proceeds of the financing; anticipated timing of any changes to management roles; anticipated changes to the Board and management of TruGolf; and the satisfaction of closing conditions, regulatory approvals, and other approvals required to consummate the Transaction.
Forward-looking statements are generally identified by words such as “anticipates,” “believes,” “expects,” “intends,” “plans,” “projects,” “estimates,” “may,” “will,” “would,” “could,” “should,” and similar expressions or the negative thereof. These statements are based on current expectations, assumptions, and estimates of management as of the date of this press release and involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or developments to differ materially from those expressed or implied by such forward-looking statements.
Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include, among others: the failure to complete the Transaction or the financing on the terms described or at all; the inability to satisfy closing conditions or obtain required regulatory, exchange, or shareholder approvals; changes in market conditions; risks related to the issuance, conversion, and dilution effects of equity securities; risks related to digital assets and token-related initiatives; execution risks associated with integrating Polymath’s business following the closing; changes in applicable laws or regulations; competitive pressures; general economic and business conditions; and other risks and uncertainties described from time to time in TruGolf’s filings with the Securities and Exchange Commission.
Although management believes that the assumptions and expectations reflected in the forward-looking statements are reasonable as of the date hereof, no assurance can be given that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made, and TruGolf undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.
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