Zeta Network Group 6-K, filed Mar 13, 2026
Zeta Network Group (ZNB)
About this 6-K
Zeta Network Group filed this 6-K on March 13, 2026.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2026
Commission File Number: 333-226308
ZETA NETWORK GROUP
(Translation of registrant’s name into English)
14 Wall Street, 20th Floor
New York, NY 10005
Tel: +1 (929) 317-2699
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Registered Direct Offering
On March 10, 2026, Zeta Network Group (the “Company”) entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional investors (the “Investors”) for the purchase and sale of up to $10 million of convertible notes and warrants to purchase the Company’s Class A Ordinary Shares, having a nominal or par value of USD$0.25 each (the “Ordinary Shares”) to take place in up to two tranches. The first tranche includes (a) $6 million in principal amount of the Company’s Senior 10% Original Issue Discount Convertible Promissory Notes (the “First Tranche Notes”) and (b) warrants (the “First Tranche Warrants”) to purchase up to 270,271 Ordinary Shares. The Company also agreed to issue 185,344 Ordinary Shares (the “Pre-Delivery Shares,” together with the First Tranche Notes, the First Tranche Warrants, and the Ordinary Shares underlying the First Tranche Notes and the First Tranche Warrants, the “Securities”) to the Investors. The first tranche offering resulted in gross proceeds to the Company of $5.4 million, before deducting placement agent fees and other offering expenses (the “Offering”).
The First Tranche Notes bear no interest and are convertible immediately upon issuance, subject to certain exceptions, into the Ordinary Shares at an initial conversion price equal to the lower of (i) $18.51, or (ii) a price equal to the greater of (x) the initial floor price (the “Floor Price”) of $1.742, subject to adjustment, or (y) an “Alternative Conversion Price,” equal to 90% of the lowest daily VWAP during the ten trading days immediately preceding the conversion date. If the Alternative Conversion Price is less than the Floor Price in effect, the Company is obligated to issue a number of shares equal to the conversion amount divided by such Floor Price, and either pay to the First Tranche Note holder in cash by via transfer of immediately available funds, or add to the outstanding principal of the First Tranche Notes an amount described in the First Tranche Notes. The First Tranche Notes are secured by each subsidiary of the Company and rank senior to all other Company debts and liabilities.
The First Tranche Warrants are exercisable immediately upon issuance, subject to certain exceptions, will expire five years from the initial date of exercise, and have an initial exercise price of $18.51 per share (subject to a market price adjustment in the event of a share consolidation) and contain certain anti-dilution provisions.
The Company issued the Pre-Delivery Shares for the Investors to hold against the Company’s delivery of Ordinary Shares upon the conversion of the First Tranche Notes or the exercise of the First Tranche Warrants. The Investors may not vote or dispose of the Pre-Delivery Shares until their conversion or exercise.
The Company also entered into a placement agency agreement dated March 10, 2026 (the “Placement Agency Agreement”) with Maxim Group, LLC, as exclusive placement agent (the “Placement Agent”), in connection with the Offering. The Company agreed to pay the Placement Agent an aggregate fee equal to 6.0% of the gross proceeds raised in the Offering.
The Company intends to use the net proceeds from the Offering for general corporate and working capital purposes. The Offering closed on March 12, 2026.
In addition, the Company also agreed to sell the Investors, subject to the conditions set forth in the Securities Purchase Agreement, on the first trading day following 60 days after the effectiveness and reflection on the records of the Depository Trust Company and in the trading of the Ordinary Shares on Nasdaq of the previously announced 1:100 reverse share split and share consolidation, $4 million in principal amount of our Senior 10% Original Issue Discount Convertible Promissory Notes and warrants, the number of which will be determined by dividing $2 million by the daily VWAP as of the trading day immediately prior to the closing date, with substantially the same terms as the First Tranche Notes and First Tranche Warrants.
A form of the SPA, the Placement Agency Agreement, a form of the First Tranche Notes and a form of the First Tranche Warrants, are attached hereto as Exhibits 99.1, 99.2, 99.3 and 99.4, to this report on Form 6-K and such documents are incorporated herein by reference. The foregoing is only a brief description of the material terms the SPA, the Placement Agency Agreement, the First Tranche Notes and the First Tranche Warrants, and does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to such exhibits.
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On March 10, 2026, the Company issued a press release announcing the pricing. A copy of the pricing press release is attached hereto as Exhibit 99.5 and is incorporated herein by reference. A copy of the legal opinion issued by the Company’s Cayman Islands counsel Conyers Dill & Pearman LLP is attached hereto as Exhibit 5.1.
The sale and offering of the Securities described above was effected as a takedown off the Company’s shelf registration statement on Form F-3 (File No. 333-292327) that was previously filed with the Securities and Exchange Commission on December 22, 2025 and declared effective on January 5, 2026.
This Form 6-K is hereby incorporated by reference into the registration statements of the Company on Form S-8 (File No.: 293130, filed on February 2, 2026) and on Form F-3 (File No. 333-292327, filed on January 5, 2026), to the extent not superseded by documents or reports subsequently filed or furnished by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
| Exhibit No. | Description | |
| 5.1 | Cayman Islands Legal Opinion | |
| 99.1 | Form of SPA | |
| 99.2 | Placement Agency Agreement | |
| 99.3 | Form of First Tranche Note | |
| 99.4 | Form of First Tranche Warrant | |
| 99.5 | Pricing Press Release dated March 10, 2026 |
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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, thereunto duly authorized.
Dated: March 13, 2026
| ZETA NETWORK GROUP | ||
| By: | /s/ Samantha Huang | |
| Name: | Samantha Huang | |
| Title: | Chief Executive Officer and Director | |
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Exhibit 5.1
 |
CONYERS DILL & PEARMAN LLP |
| SIX, 2nd Floor, Cricket Square | |
| PO Box 2681, Grand Cayman KY1-1111 | |
Cayman Islands | |
T +1 345 945 3901 | |
| conyers.com |
12 March 2026
1-345-814-7786
Cora.Miller@conyers.com
Zeta Network Group
14 Wall Street, 20th Floor
New York, NY
USA 10005
Dear Sir / Madam,
Re: Zeta Network Group (the “Company”)
We have acted as special Cayman Islands legal counsel to the Company in connection with a registered direct offering under the Company’s shelf registration statement on Form F-3 (File No. 333-292327) initially filed with the United States Securities and Exchange Commission (the “Commission”) on 22 December 2025, as amended (the “Registration Statement”) and was declared effective by the Commission on 5 January 2026, and prospectus supplement dated 12 March 2026 annexed thereto (the “Prospectus Supplement”) (which terms do not include any other document or agreement whether or not specifically referred to therein or attached as an exhibit or schedule thereto) filed by the Company with the Commission relating to the registration under the US Securities Act of 1933 (as amended) (the “Securities Act”) of (i) the offering of up to US$10 million in principal amount of senior convertible notes of the Company (the “Convertible Notes”), (ii) the issuance of Class A ordinary share purchase warrants to purchase Class A ordinary shares with a nominal or par value of US$0.25 each (the “Warrants”), (iii) the issuance of Class A ordinary shares with a nominal or par value of US$0.25 each (the “Pre-Delivery Shares”), (iv) the issuance of the Class A ordinary shares with a nominal or par value of US$0.25 each upon the conversion, payment or otherwise of the Convertible Notes (the “Conversion Shares”) and (v) the issuance of the Class A ordinary shares with a nominal or par value of US$0.25 each upon the exercise of the Warrants (the “Warrant Shares” and together with the Conversion Shares, the “Underlying Shares” and together with the Convertible Notes, the Warrants, the Pre-Delivery Shares and the Conversion Shares, the “Securities”), in each case, as described further in the Prospectus Supplement and subject to and in accordance with the terms and conditions of the SPA, the Convertible Note Agreement and the Warrant Agreement (as applicable and as each term is defined below).
| 1. | DOCUMENTS REVIEWED |
For the purposes of giving this opinion, we have examined and relied upon a copy of the following documents:
| 1.1. | the Registration Statement; |
| 1.2. | the Prospectus Supplement; |
| 1.3. | the securities purchase agreement between the Company and each of the investors set out thereto dated 10 March 2026 (the “SPA”); |
| 1.4. | the form of senior 10% original issue discount convertible promissory note between the Company and each of the investors set out in the SPA (the “Convertible Note Agreement”); and |
| 1.5. | the form of class A ordinary shares purchase warrant between the Company and each of the investors set out in the SPA (the “Warrant Agreement”). |
The documents listed in items 1.1 through 1.5 above are herein sometimes collectively referred to as the “Transaction Documents” and the documents listed in items 1.3 to 1.5 above are herein sometimes collectively referred to as the “Securities Documents” (which terms do not include any other instrument or agreement whether or not specifically referred to therein or attached as an exhibit or schedule thereto).
We have also reviewed:
| 1.6. | a copy of the Certificate of Incorporation of the Company dated 28 June 2018, the Certificate of Incorporation on Change of Name of the Company dated 12 July 2019, the Certificate of Incorporation on Change of Name of the Company dated 1 May 2020, the Certificate of Incorporation on Change of Name of the Company dated 9 July 2025, the Eighth Amended and Restated Memorandum and Articles of Association of the Company approved by special resolution passed on 22 January 2026 and effective on 10 February 2026 (collectively, the “Constitutional Documents”); |
| 1.7. | a copy of unanimous written resolution of the directors of the Company dated 19 December 2025 and 10 March 2026 (the “Resolutions”); |
| 1.8. | a copy of a Certificate of Good Standing (the “Good Standing Certificate”) issued by the Registrar of Companies in relation to the Company on 3 March 2026 (the “Certificate Date”); |
| 1.9. | a copy of a certificate of incumbency of the Company issued by Conyers Trust Company (Cayman) Limited dated 6 March 2026 (the “Incumbency Certificate” and together with the Constitutional Documents, the Good Standing Certificate, Officer’s Certificate and the Resolutions, the “Corporate Documents”); |
| 1.10. | the results of our electronic searches against the Company at the Registrar of Companies conducted on 11 March 2026 and the electronic Register of Writs and other Originating Process of the Grand Court of the Cayman Islands conducted at 12 pm on 11 March 2026; |
| 1.11. | a certificate issued by an officer of the Company dated 12 March 2026 (the “Officer’s Certificate”); and |
| 1.12. | such other documents and made such enquiries as to questions of law as we have deemed necessary in order to render the opinion set forth below. |
| 2. | ASSUMPTIONS |
We have assumed:
| 2.1. | the genuineness and authenticity of all signatures and the conformity to the originals of all copies (whether or not certified) examined by us and the authenticity and completeness of the originals from which such copies were taken; |
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| 2.2. | that where a document has been examined by us in draft form, it will be or has been executed in the form of that draft, and where a number of drafts of a document have been examined by us all changes thereto have been marked or otherwise drawn to our attention; |
| 2.3. | the capacity, power and authority of each of the parties to the Transaction Documents, other than the Company, to enter into and perform its respective obligations under the Transaction Documents; |
| 2.4. | the due execution and delivery of the Transaction Documents by each of the parties thereto, other than the Company, and the physical delivery thereof by with an intention to be bound thereby; |
| 2.5. | the accuracy and completeness of all factual representations made in the Resolutions and Transaction Documents and other documents reviewed by us; |
| 2.6. | that the Resolutions were passed at one or more duly convened, constituted and quorate meetings or by unanimous written resolutions, remain in full force and effect and have not been rescinded or amended; |
| 2.7. | that there is no provision of the law of any jurisdiction, other than the Cayman Islands, which would have any implication in relation to the opinions expressed herein; |
| 2.8. | that the Company will issue the Securities in furtherance of its objects as set out in its Constitutional Documents; |
| 2.9. | that the Constitutional Documents will not be amended in any manner that would affect the opinions set forth herein; |
| 2.10. | that, upon the issue of any Securities to be sold by the Company, the Company will receive consideration for the full issue price thereof which shall not be less than the par value thereof; |
| 2.11. | no invitation has been or will be made by or on behalf of the Company to the public in the Cayman Islands to subscribe for any Securities of the Company; |
| 2.12. | the Offering and the transactions contemplated under the Transaction Documents complies with the requirements of the applicable rules of the Nasdaq Stock Market; |
| 2.13. | that on the date of entering into the Securities Documents, the Company is and after entering into the Securities Documents will be able to pay its debts; |
| 2.14. | the Company has not taken any action to appoint a restructuring officer; |
| 2.15. | the validity and binding effect under the laws of the United States of America of the Registration Statement and Prospectus Supplement and that the Registration Statement and Prospectus Supplement will or have been duly filed with and declared effective by the Commission prior to, or concurrent with, the sale and/or issuance of the Securities (as applicable); |
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| 2.16. | the Company will have sufficient authorized capital to effect the issue of each of the Securities at the time of issuance pursuant to the Transaction Documents, whether as a principal issue or on the exercise, conversion, payment or otherwise of Convertible Note or a Warrant; |
| 2.17. | that there is no contractual or other prohibition or restriction (other than as arising under Cayman Islands law) binding on the Company prohibiting or restricting it from entering into and performing its obligations under the documents reviewed by us; |
| 2.18. | each of the Transaction Documents reviewed by us are, or will be, legal, valid, binding and enforceable against all relevant parties in accordance with their terms under all relevant laws (other than, with respect to the Company, the laws of the Cayman Islands); and |
| 2.19. | save for the Corporate Documents and the statutory registers of the Company, there are no records of the Company, resolutions, agreements, documents or arrangements which materially affect, amend or vary the transactions envisaged in the documents reviewed by us or restrict the powers and authority of the directors of the Company in any way or which would affect any opinion given herein. |
| 3. | QUALIFICATIONS |
| 3.1. | We express no opinion with respect to the issuance of Securities pursuant to any provision of the Transaction Documents that purports to obligate the Company to issue Securities following the commencement of a winding up or liquidation of the Company. |
| 3.2. | Under Cayman Islands law, the register of members (shareholders) is prima facie evidence of title to shares and this register would not record a third party interest in such shares. However, there are certain limited circumstances where an application may be made to a Cayman Islands court for a determination on whether the register of members reflects the correct legal position. Further, the Cayman Islands court has the power to order that the register of members maintained by a company should be rectified where it considers that the register of members does not reflect the correct legal position. As far as we are aware, such applications are rarely made in the Cayman Islands and there are no circumstances or matters of fact known to us on the date of this opinion letter which would properly form the basis for an application for an order for rectification of the register of members of the Company, but if such an application were made in respect of the Shares, then the validity of such shares may be subject to re-examination by a Cayman Islands court. |
| 3.3. | We have made no investigation of and express no opinion in relation to the laws of any jurisdiction other than the Cayman Islands. This opinion is to be governed by and construed in accordance with the laws of the Cayman Islands and is limited to and is given on the basis of the current law and practice in the Cayman Islands. |
| 3.4. | This opinion is issued solely for your benefit and use in connection with the matter described herein and is not to be relied upon by any other person, firm or entity or in respect of any other matter. |
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| 4. | OPINION |
On the basis of and subject to the foregoing, we are of the opinion that:
| 4.1. | The Company is duly incorporated and existing under the laws of the Cayman Islands and, based on the Certificate of Good Standing, is in good standing as at the Certificate Date. Pursuant to the Companies Act (as revised) (the “Act”), a company is deemed to be in good standing if all fees and penalties under the Act have been paid and the Registrar of Companies has no knowledge that the company is in default under the Act. |
| 4.2. | The Convertible Notes and Warrants have been duly authorized and when issued and delivered by the Company pursuant to the Securities Documents against payment of the consideration set forth in the Securities Documents, such Convertible Notes and Warrants will be validly issued and will constitute valid and binding obligations of the Company in accordance with the terms thereof. |
| 4.3. | When issued and paid for in accordance with the Transaction Documents and recorded in the register of members of the Company, the Pre-Delivery Shares and the Underlying Shares will be validly issued, fully-paid and non-assessable (which term when used herein means that no further sums are required to be paid by the holders thereof in connection with the issue of such shares). |
We hereby consent to the filing of this opinion as exhibit 5.1 to the Registration Statement and further consent to all references to us in the Registration Statement and any amendments thereto. In giving this consent, we do not consider that we are “experts” within the meaning of such term as used in the Securities Act, or the Rules and Regulations of the Commission promulgated thereunder, with respect to any part of the Registration Statement, including this opinion as an exhibit or otherwise.
| Yours faithfully, | |
| /s/ Conyers Dill & Pearman LLP | |
| Conyers Dill & Pearman LLP |
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Exhibit 99.1
[EXECUTION VERSION | 10 March]
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is dated as of March 10, 2026, between Zeta Network Group, a Cayman Islands exempted company with limited liability (the “Company”), and the purchasers identified on the signature pages hereto (together with its successors and assigns, each, an “Investor” and collectively the “Investors”).
Whereas, subject to the terms and conditions set forth in this Agreement and with respect to the Notes and Warrants, pursuant to Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder and, with respect to the Underlying Shares, pursuant to an effective Registration Statement under the Securities Act (as such terms are defined below), the Company desires to issue and sell to each Investor, and each Investor desires to purchase from the Company, securities of the Company as more fully described in this Agreement.
Now, Therefore, In Consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each Investor agrees as follows:
Article
I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized words and terms that are not descriptive and are otherwise defined herein have the meanings given to such terms in the Notes (as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:
“2026 Reverse Split” means the one-for-100 reverse split of the Common Stock as approved by ordinary resolution of the shareholders of the Company by way of extraordinary general meeting of shareholders of the Company held on 22 January 2026 and by the Company’s Board of Directors on February 10, 2026.
“2026 Reverse Split Date” means March 12, 2026, being the date that the 2026 Reverse Split becomes reflected on the records of the Depository Trust Company and in the trading of the Common Stock on the Principal Market.
“Acquiring Person” shall have the meaning ascribed to such term in Section 4.7.
“Action” shall have the meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Alternative Conversion Price” shall have the meaning defined in the Notes.
“Beneficial Ownership Limitation” means the applicable beneficial ownership percentage of shares of Common Stock above which an Investor may not convert its Note, exercise its Warrant, or purchase Pre-Delivery Shares, as applicable. Each Investor’s initial Beneficial Ownership Limitation with respect to each of the Investor’s Note, Warrant and Pre-Delivery Shares shall be as selected by the Investor on its signature page hereto in each such case, subject further to the provisions of this Agreement, the Warrant and the Note, as applicable.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in New York, N.Y. are authorized or required by Laws 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 New York, N.Y. are generally are open for use by customers on such day.
“Charter Documents” means the Memorandum and Articles of Association of the Company, as amended, restated, supplemented or substituted from time to time and adopted by special resolution of the shareholders in accordance with Cayman Islands law.
“Closing” means the First Tranche Closing and the Second Tranche Closing.
“Closing Date” means each of the First Tranche Closing Date and the Second Tranche Closing Date.
“Common Stock” means the Class A ordinary shares of the Company, par value $0.25 per share.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Company Cayman Counsel” means Conyers Dill & Pearman LLP.
“Company Intellectual Property” means all Intellectual Property that is owned or purported to be owned or held for use by the Company.
“Company IP Agreements” means all licenses, sublicenses, consent to use agreements, settlements, coexistence agreements, covenants not to sue, permissions and other contracts (including any right to receive or obligation to pay royalties or any other consideration), whether written or oral, relating to Intellectual Property to which the Company is a party, beneficiary or otherwise bound.
“Company IP Registrations” means all Company Intellectual Property that is subject to any issuance registration, application or other filing by, to or with any Governmental Authority or authorized private registrar in any jurisdiction, including registered trademarks, domain names and copyrights, issued and reissued patents and pending applications for any of the foregoing.
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“Company Privacy Policy” means each external or internal, past or present privacy policy or privacy or data security-related policy of Company, as well as any representation, obligation or promise of Company under any contract, relating to: (i) the privacy of customers or users of any Company Products, website, products or services operated by or on behalf of Company; and (ii) the collection, storage, hosting, disclosure, transmission, transfer, disposal, other processing or security of any Customer Data or Personal Information, each as defined.
“Company Products” means all proprietary products and services of the Company that are currently being, or at any time since the Company’s inception have been, offered, licensed, sold, distributed, hosted, maintained, supported or otherwise provided or made available by or on behalf of Company.
“Company Systems” means all Software, and computer hardware, servers, networks, platforms, peripherals, data communication lines and other information technology equipment and related systems, including any outsourced systems and processes, that are owned or used by Company in the conduct of its business as currently conducted.
“Company U.S. Counsel” means Loeb & Loeb LLP.
“Conversion Price” shall have the meaning ascribed to such term in the Notes.
“Conversion Shares” means the shares of Common Stock issuable upon conversion, payment or otherwise pursuant to the Notes.
“Customer Data” means all data, text, content, information or other material uploaded or otherwise transmitted by Company’s customers to, or stored by Company’s customers on or in Company Products or any service of Company.
“Disclosure Schedules” refer to the Schedules attached to this Agreement.
“Disclosure Time” means, (i) if this Agreement is signed on a day that is not a Trading Day or after 9:00 a.m. (New York, N.Y. time) and before midnight (New York, N.Y. time) on any Trading Day, 9:01 a.m. (New York, N.Y. time) on the Trading Day immediately following the date hereof, and (ii) if this Agreement is signed between midnight (New York, N.Y. time) and 9:00 a.m. (New York, N.Y. time) on any Trading Day, no later than 9:01 a.m. (New York, N.Y. time) on the date hereof.
“Equity Conditions” has the meaning set forth in the Notes.
“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(aa).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, except as apparent from the context.
“Exclusive Action(s)” shall have the meaning ascribed to such term in Section 5.9(b).
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“Exempt Issuance” means the issuance of (a) shares of Common Stock or options not to exceed 10% of the shares of Common Stock outstanding at any given time to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose for services rendered to the Company, and (b) securities upon the exercise or exchange of or conversion of (i) any Securities issued hereunder, (ii) any warrants issued to the Placement Agent in connection with the transactions pursuant to this Agreement and any securities upon exercise of such warrants so issued to the Placement Agent, or (iii) other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement (without regard to any vesting requirements), provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations) or to extend the term of such securities.
“First Tranche” means the issuance of up to $6,000,000 in face value of Notes and Warrants issuable in accordance with Article II of this Agreement. All references to “$” or “dollars” herein and in any other Transaction Document means United States dollars.
“First Tranche Closing” means the Closing of the First Tranche.
“First Tranche Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Investor’s obligations to pay each portion of the Subscription Amount as to the First Tranche Closing and (ii) the Company’s obligations to deliver the Securities to be issued and sold in the First Tranche Closing, in each case, have been satisfied or waived.
“First Tranche Notes” means the Senior Secured Convertible Notes to be issued by the Company to the Investors hereunder at the First Tranche Closing, in the form of Exhibit A attached hereto.
“First Tranche Warrants” means the Common Stock Purchase Warrants to be delivered to the Investors hereunder in the First Tranche Closing in the form of Exhibit C attached hereto.
“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.
“Fixed Conversion Price” has the meaning ascribed to such term in the Notes.
“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
“Governmental Authority” means any federal, state, county, territorial, local, municipal or other government or political subdivision thereof, whether domestic or foreign, and any agency, authority, commission, ministry, instrumentality, regulatory body, court, tribunal, arbitrator, central bank or other Person exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to any such government.
“Guarantee Agreement” means the Guarantee Agreement, dated the date hereof, among the Company, its Subsidiaries and the Investor, in the form of Exhibit A attached hereto.
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“Indebtedness” means (a) any liabilities of the Company including all Subsidiaries for borrowed money or amounts (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations of the Company including all Subsidiaries in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the footnotes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (c) the present value of any lease payments of the Company including all Subsidiaries due under leases required to be capitalized in accordance with GAAP; and (d) transactions relating to the sale of any existing or future sales of accounts receivables including merchant cash advances or sales of future accounts receivable of the Company including all Subsidiaries;
“Intellectual Property” means all intellectual property and industrial property rights and assets, and all rights, interests and protections that are associated with, similar to, or required for the exercise of, any of the foregoing, however arising, pursuant to the Laws of any jurisdiction throughout the world, whether registered or unregistered, including any and all: (a) trademarks, service marks, trade names, brand names, logos, trade dress, design rights and other similar designations of source, sponsorship, association or origin, together with the goodwill connected with the use of and symbolized by, and all registrations, applications and renewals for, any of the foregoing; (b) internet domain names, whether or not trademarks, registered in any top-level domain by any authorized private registrar or Governmental Authority, web addresses, web pages, websites and related content, social media accounts, including but not limited to X (formerly Twitter) and Facebook and the content found thereon and related thereto, and URLs; (c) works of authorship, expressions, designs and design registrations, whether or not copyrightable, including copyrights, author, performer, moral and neighboring rights, and all registrations, applications for registration and renewals of such copyrights; (d) inventions, discoveries, trade secrets, business and technical information and know-how, data, databases, and data collections, and confidential and proprietary information and all rights therein; (e) patents (including all reissues, divisionals, provisionals, continuations and continuations-in-part, re-examinations, renewals, substitutions and extensions thereof), patent applications, and other patent rights and any other Governmental Authority-issued indicia of invention ownership (including inventor’s certificates, petty patents and patent utility models); and (f ) Software.
“Investor Party” shall have the meaning ascribed to such term in Section 4.10.
“Key Executives” means all of the Company’s officers and directors as of the date hereof.
“Laws” with respect to a Person means any federal, state, territorial, local, municipal, or other laws, common law, statutes, constitutions, ordinances, rules, regulations, codes, orders, or legally enforceable requirements enacted, issued, adopted, promulgated, enforced, ordered, or applied by any Governmental Authority applicable to such Person or any of its Subsidiaries, including its respective business and operations.
“Lead Investor” means the Investor indicated as “Lead Investor” on Schedule 1.1.
“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(b).
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“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).
“Material Permits” shall have the meaning ascribed to such term in Section 3.1(n).
“Maximum Rate” shall have the meaning ascribed to such term in Section 5.18.
“Nason Yeager” means Nason, Yeager, Gerson, Harris & Fumero, P.A. counsel to the Lead Investor.
“Note” and “Notes” means any of the First Tranche Notes and the Second Tranche Notes, as applicable.
“Open Source Software” means any Software or Intellectual Property that is distributed as “free” or “open source” or pursuant to any license identified as an “open source license” by the Open Source Initiative (www.opensource.org/licenses) or other license that substantially conforms to the Open Source Definition (http://opensource.org/osd) including but not limited to the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), GNU Affero General Public License (AGPL), MIT License (MIT), Apache License, Artistic License and BSD Licenses.
“Participation Maximum” shall have the meaning ascribed to such term in Section 4.12(a).
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, exempted company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Personal Information” means: (i) a natural person’s name, street address, telephone number, email 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, biometric identifiers or any other piece of information that allows the identification of or contact with a natural person and for greater certainty includes all such information with respect to employees, (ii) data collected from an IP address, unique device identifier or MAC address, web beacon, pixel tag, ad tag, cookie, local storage object, software, or by any other means, or from a particular computer, web browser, mobile device, or other device or application, where such data (a) is collected from a particular computer or device regarding online activities; or (b) is or may be used to identify or contact an individual or device or application, to predict or infer the preferences, interests, or other characteristics of the device or application or of a user of such device or application, or to target advertisements or other content to a device or application, or to a user of such device or application, and (iii) any information that is associated, directly or indirectly (by, for example, records linked via unique keys), to any of the foregoing. Personal Information also includes any information not listed in (i), (ii) or (iii) above if such information is defined as “personal data”, “personally identifiable information”, “individually identifiable health information,” “protected health information,” or “personal information” under any Law.
“Placement Agent” means Maxim Group LLC.
“Pre-Delivery Shares” means shares of Common Stock issuable to the Investors at each Closing in accordance with Article II of this Agreement and as more specifically provided in Section 4.14 of this Agreement and Section 4.4 of the Notes and Section 5(b) of the Warrants.
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“Pre-Notice” shall have the meaning ascribed to such term in Section 4.12(b).
“Principal Amount” means, as to each Investor, the amounts set forth below such Investor’s signature block on the signature pages hereto next to the heading “Principal Amount,” in United States Dollars.
“Principal Market” means The Nasdaq Capital Market.
“Principal Market Rules” means the rules and regulations of the Principal Market.
“Pro Rata Portion” has the meaning set forth in Section 4.12(e).
“Prospectus” means the final base prospectus filed for the Registration Statement.
“Prospectus Supplement” means the supplement to the Prospectus complying with Rule 424(b) of the Securities Act that is filed with the SEC and delivered by the Company to each Investor at the applicable Closing.
“Public Information Failure” shall have the meaning ascribed to such term in Section 4.3(b).
“Public Information Failure Payments” shall have the meaning ascribed to such term in Section 4.3(b).
“Registration Statement” means the effective registration statement on Form F-3 (File No. 333-292327) covering the offer, sale and issuance of the Underlying Shares.
“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
“Required Holders” means (i) prior to the First Tranche Closing Date, each Investor and (ii) on or after the First Tranche Closing Date, holders of at least a majority of the aggregate Principal Amount of Notes then outstanding.
“Required Minimum” means, as of any date, the 300% of the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise in full of all Warrants or conversion in full of all Notes (including Underlying Shares issuable as payment of interest on the Notes), ignoring any conversion or exercise limits set forth therein (including, without limitation, the Floor Price or the Event Market Price (each as defined in the Notes)), and assuming that (i) the Conversion Price is at all times on and after the date of determination equal to 20% of the closing price of the Common Stock as of the most recent Closing Date and (ii) for the Warrants, the Underlying Shares equals the product of the number of Warrant Shares multiplied by the VWAP, divided by 20% of the closing price of the Common Stock as of the most recent Closing Date.
“Rule 144” means Rule 144 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.
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“Rule 424” means Rule 424 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same purpose and effect as such Rule.
“Schedule” refers to the Disclosure Schedules.
“SEC” means the United States Securities and Exchange Commission.
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
“Second Tranche” means the issuance of up to $4,000,000 in face value of Notes and Warrants issuable in accordance with Article II of this Agreement.
“Second Tranche Closing” means the Closing of the Second Tranche.
“Second Tranche Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Investor’s obligations to pay each portion of the Subscription Amount as to the Second Tranche Closing and (ii) the Company’s obligations to deliver the Securities to be issued and sold in the Second Tranche Closing, in each case, have been satisfied or waived.
“Second Tranche Note” means the Senior Secured Convertible Note to be issued by the Company to the Investor hereunder in the Second Tranche Closing in the form of Exhibit A attached hereto.
“Second Tranche Warrants” means the Common Stock Purchase Warrants to be delivered to the Investors hereunder in the Second Tranche Closing in the form of Exhibit C attached hereto.
“Securities” means the Notes and the Warrants.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Shareholder Approval” means such approval as may be required by the Principal Market Rules and/or applicable Law from the shareholders of the Company with respect to the transactions contemplated by the Transaction Documents, including the issuance of all of the Underlying Shares underlying the Securities in excess of 19.99% of the issued and outstanding Common Stock on the First Tranche Closing Date.
“Software” means any and all computer software and code, including all new versions, updates, revisions, improvements and modifications thereof, whether in source code, object code, or executable code format, including systems software, application software (including mobile apps), firmware, middleware, programming tools, scripts, routines, interfaces, architecture, schematics, records, libraries, and data, databases and data collections, and all related specifications and documentation, including developer notes, comments and annotations, user manuals and training materials relating to any of the foregoing.
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“Subscription Amount” means, as to each Investor, the aggregate amount to be paid for each Note and Warrants purchased hereunder as specified below the Investor’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds, which Subscription Amount shall be 90% of the Principal Amount.
“Subsequent Financing” shall have the meaning ascribed to such term in Section 4.12(a).
“Subsequent Financing Notice” shall have the meaning ascribed to such term in Section 4.12(b).
“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“to the Knowledge of the Company,” “to the Company’s Knowledge” and similar words and phrases relating to the Company’s “Knowledge” means the actual knowledge of any of the Key Executives of the Company upon reasonable investigation.
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the NYSE American, the New York Stock Exchange the OTCQX, the OTCQB or the Pink Open Market (or any successors to any of the foregoing).
“Transaction Documents” means this Agreement, the Notes, the Warrants, the Guarantee Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“Transfer Agent” means Transhare Corporation, the current transfer agent of the Company, and any successor transfer agent of the Company.
“Underlying Shares” means the Warrant Shares and the Conversion Shares (including Pre-Delivery Shares used therefor), in each case without respect to any limitation or restriction on the conversion of the Notes or the exercise of the Warrants.
“Variable Rate Transaction” shall have the meaning ascribed to such term in Section 4.13(a).
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York, N.Y. time) to 4:02 p.m. (New York, N.Y. time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Investors and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“Warrants” means, collectively, First Tranche Warrants and the Second Tranche Warrants.
“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.
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Article II
PURCHASE AND SALE
2.1 Closing.
(a) First Tranche Closing. On the First Tranche Closing Date, provided that the Equity Conditions shall be satisfied as of such date, and upon the terms and subject to the conditions set forth herein, no sooner than the 2026 Reverse Split Date, the Company agrees to sell, and each Investor, severally and not jointly, agrees to purchase, an aggregate of (i) $6,000,000 of Principal Amount of the First Tranche Notes and (ii) the First Tranche Warrants. On the First Tranche Closing Date, each Investor shall deliver to the Company, via wire transfer, immediately available funds equal to such Investor’s Subscription Amount as to the First Tranche Closing as set forth on the signature page hereto executed by the Investor, and the Company shall deliver to the Investor the Investor’s First Tranche Note and First Tranche Warrants, as determined pursuant to Section 2.2, and the Company and each Investor shall deliver the other items set forth in Section 2.2 deliverable at the First Tranche Closing. The First Tranche Closing shall occur remotely by electronic transfer of applicable Transaction Documents.
(b) Second Tranche Closing. Subject to the terms and conditions set forth herein, the Second Tranche Closing shall occur on the first Trading Day following 60 days after the 2026 Reverse Split Date, upon which date, provided that the Equity Conditions shall be satisfied, and the Par Value Reduction has occurred and upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and each Investor, severally and not jointly, agrees to purchase, an aggregate of (i) $4,000,000 of Principal Amount of the Second Tranche Notes and (ii) the Second Tranche Warrants. On the Second Tranche Closing Date, each Investor shall deliver to the Company, via wire transfer, immediately available funds equal to such Investor’s Subscription Amount as to the Second Tranche Closing as set forth on the signature page hereto executed by the Investor, and the Company shall deliver to the Investor the Investor’s Second Tranche Note and Second Tranche Warrants, as determined pursuant to Section 2.2, and the Company and each Investor shall deliver the other items set forth in Section 2.2 deliverable at the Second Tranche Closing. The Second Tranche Closing shall occur remotely by electronic transfer of applicable Transaction Documents. Notwithstanding anything herein top the contrary, the obligation of each Investor to purchase Securities in and fund the Second Tranche shall be subject to the following additional conditions being satisfied as of the Second Tranche Closing Date: (i) the outstanding Principal and accrued and unpaid interest under the First Tranche Notes shall be less than $2,000,000 in the aggregate, (ii) no Event of Default (as defined in the Notes) shall have occurred or be continuing under any of the First Tranche Notes, and (iii) the Company’s Common Stock shall have a market capitalization of at least $10,000,000 calculated by multiplying the closing price of the Common Stock by the number of shares of Common Stock outstanding excluding Pre-Delivery Shares.
(c) Notwithstanding anything herein to the contrary, with respect to each Closing, the obligation of each Investor to purchase the Securities shall be subject to an effective Registration Statement registering the offer, sale and issuance of the Securities, Pre-Delivery Shares and Underlying Shares.
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2.2 Deliveries.
(a) On or prior to each Closing Date, the Company shall deliver or cause to be delivered to each Investor the following, which deliveries shall be provided with respect to each Closing except where otherwise expressly provided:
(i) as to the First Tranche Closing, this Agreement duly executed by the Company;
(ii) a legal opinion of Company Cayman Counsel and Company U.S. Counsel, each dated as of the applicable Closing Date, in a form reasonably acceptable to the Investor which shall include, without limitation, an opinion concerning the registration of the offer, sale and issuance of the Securities and Underlying Shares to the Investor pursuant to the Registration Statement and Prospectus Supplement;
(iii) the Prospectus and Prospectus Supplement (which may be delivered in accordance with Rule 172 under the Securities Act);
(iv) a Note registered in the name of the Investor with the Principal Amount reflected on the Investor’s signature page;
(v) a number of Warrants determined by dividing 50% of the Principal Amount of the applicable Note issued in the applicable Closing by the daily VWAP as of the Trading Day immediately prior to the applicable Closing Date (as adjusted for the 2026 Reverse Split);
(vi) a number of Pre-Delivery Shares determined by dividing 33.3% of the Principal Amount of the applicable Note issued in the applicable Closing by the last sale price of the Common Stock on the Trading Day immediately prior to the applicable Closing Date (as adjusted for the 2026 Reverse Split), registered in the name of the Investor as reflected on each Investor’s signature page, together with a copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver the Pre-Delivery Shares free of any restrictive or trading legend on an expedited basis via The Depository Trust Company Deposit or Withdrawal at Custodian system (“DWAC”), subject to the applicable Beneficial Ownership Limitation selected by the Investor for the Pre-Delivery Shares and to Section 4.14;
(vii) the Company shall have provided the Investor with the Company’s wire instructions, on Company letterhead and executed by the Chief Executive Officer or Chief Financial Officer;
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(viii) the Guarantee Agreement duly executed by the parties thereto, including the Company and each Subsidiary in favor of the Investor;
(ix) a letter executed by the Company and the Transfer Agent reserving the Required Minimum for the benefit of the Investor;
(x) an officer’s certificate certifying that the representations and warranties of the Company in this Agreement are true and correct as of the applicable 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 to be performed, satisfied or complied with by the Company at or prior to the applicable Closing Date under any Transaction Documents and no Event of Default (as defined in the Notes) has occurred;
(xi) a good standing certificate or its equivalent of the Company and each of its Subsidiaries in each such entity’s jurisdiction of formation or incorporation issued by the relevant competent local government authority or registrar of companies or entities as applicable, to the extent that they are available in such jurisdiction as of a date within 10 days of the applicable Closing Date;
(xii) subordination agreements entered into with holders of outstanding Indebtedness in form satisfactory to the Investor providing for the Indebtedness to be subordinate in right of payment to the Indebtedness evidenced by the Notes;
(xiii) a copy of the Charter Documents (or such equivalent organizational document) of the Company;
(xiv) an officer’s certificate, in the form acceptable to the Investor, executed by an officer of the Company and dated as of the applicable Closing Date, as to the resolutions adopted by the Company’s Board of Directors authorizing the transactions contemplated hereby in a form reasonably acceptable to the Investor;
(xv) a letter from the Transfer Agent certifying the number of shares of Common Stock outstanding on the applicable Closing Date immediately prior to the applicable Closing;
(xvi) a copy of the application for the listing of the Underlying Shares on the Principal Market; and
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(xvii) a copy of the letter from the Company’s Cayman Islands counsel to the Principal Market confirming that the Company is not required to obtain Shareholder Approval with respect to this Agreement and the transactions contemplated hereby pursuant to the laws of the Cayman Islands and the Rules of the Principal Market.
(b) On or prior to each Closing Date, each Investor shall deliver or cause to be delivered to the Company, the following, which deliveries shall be provided with respect to each Closing except where otherwise expressly provided:
(i) as to the First Tranche Closing, this Agreement duly executed by the Investor;
(ii) the Guarantee Agreement duly executed by the Investor; and
(iii) the Investor’s Subscription Amount by wire transfer to the account specified in writing by the Company.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with each Closing are subject to the following conditions being met:
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) on the applicable Closing Date of the representations and warranties of the Investor contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);
(ii) all obligations, covenants and agreements of the Investor that are required to be performed at or prior to the applicable Closing Date shall have been performed; and
(iii) the delivery by the Investor of the items set forth in Section 2.2(b) of this Agreement.
(b) The obligations of each Investor hereunder in connection with each Closing are subject to the following conditions being met:
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the applicable Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);
(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the applicable Closing Date shall have been performed;
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(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;
(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof;
(v) the Company shall not be in default in the payment of any Indebtedness or other obligations, and there shall not have been any material adverse change in the Company’s ability to repay any outstanding Indebtedness or other obligations as they come due;
(vi) from the date hereof to the applicable Closing Date, the SEC has not instituted a preliminary inquiry or issued an Order of Investigation with respect to or relating to the Company, trading in the Common Stock shall not have been suspended by the SEC or the Principal Market and, at any time prior to the applicable Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of the Investor, makes it impracticable or inadvisable to purchase the Securities at the applicable Closing;
(vii) the Company shall have submitted to the Principal Market an application for the listing of the Underlying Shares on the Principal Market, a copy of which shall have been provided to the Investors
(viii) the Principal Market shall have raised no objection with respect thereto;
(ix) no Laws been enacted, entered, promulgated or endorsed by any court of competent jurisdiction or Governmental Authority that prohibits the consummation of any of the transactions contemplated hereby;
(x) the Equity Conditions (as defined in the Note) shall have been met; and
(xi) (A) the United States Congress shall not have adopted or enacted any Law, (ii) The President of the United States has not issued an Executive Order, (B) no cabinet level department of the United States shall have issued a proposed or final rule or regulation, and (C) neither the SEC nor the Trading Market shall have issued a proposed or final rule or regulation, which Law, Executive Order or rule or regulation has the effect of limiting or banning trading by United States residents or citizens in the securities of companies which have their operations in the Hong Kong, Kazakhstan, the Cayman Islands or any other jurisdiction in which the Company or any of its Subsidiaries operates or is present in any manner.
(c) On or prior to the Second Closing Date, the Company shall have delivered to the Investors a certified copy of the Company’s Memorandum and Articles of Association reflecting that the Par Value Reduction has occurred and is effective.
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Article III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Investor, which representations shall be true and correct on each respective Closing Date and shall apply to the Company and its Subsidiaries except where apparent from the context. Any reference to the Company and its Subsidiaries shall not be construed to modify the prior sentence:
(a) Subsidiaries. All of the direct and indirect significant subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock, shares or other equity interests of each Subsidiary, except as disclosed in Schedule 3.1(a), free and clear of any Liens, except for Liens created under the Transaction Documents, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded. The contractual arrangements pursuant to which the Company operates its business in the Hong Kong, Kazakhstan, the Cayman Islands or any other jurisdiction in which the Company or any of its Subsidiaries operates or is present in any manner are valid and binding obligations on the parties thereto, and sufficient to operate the Company’s business as presently conducted and contemplated in accordance with applicable Laws, and to the Company’s Knowledge, there has been no breach or threatened breach of any such contractual arrangement.
(b) Organization and Qualification. The Company and each of the Subsidiaries is an entity incorporated, validly existing and in good standing under the Laws of the jurisdiction of its incorporation, registration or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, memorandum and articles of association, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Action has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
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(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s shareholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other Laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by Laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable Laws.
(d) No Conflicts.
(i) The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, memorandum of association and articles of association, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, anti-dilution or similar adjustments, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any Law to which the Company or a Subsidiary is subject (including federal and state securities Laws), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
(ii) Neither the Company nor any of its Subsidiaries is engaged in, directly or indirectly, and none of the Company’s nor any Subsidiary’s operations, activities or assets entail or involve, directly or indirectly, a “covered activity” within the meaning of that certain Final Rule adopted by the United Stated Department of Treasury pursuant to Executive Order 14105 of August 9, 2023 “Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern,” (31 CFR Part 850) (the “Final Rule”), such that the transactions contemplated by this Agreement and the other Transaction Documents do not and will not constitute a “prohibited transaction” or a “notifiable transaction” within the meaning of the Final Rule. Neither the Company nor any Subsidiary has any present intention or plan to engage in any such covered activity, and the Company covenants and agrees not to, and to cause its Subsidiaries not to, engage in any such covered activity.
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(e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other Governmental Authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.6 of this Agreement, (ii) the filings with the SEC pursuant to or in connection with this Agreement and the other Transaction Documents, and (iii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Underlying Shares for trading thereon in the time and manner required thereby (collectively, the “Required Approvals”). The Company is not and will not be required to obtain Shareholder Approval in connection with this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby.
(f) Issuance of the Securities; Registration.
(i) The Securities and the Underlying Shares are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and non-assessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents or by Laws. The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and non-assessable, free and clear of all Liens imposed by the Company other than, with respect to the Notes, restrictions on transfer provided for in the Transaction Documents or by Laws. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Underlying Shares at least equal to the Required Minimum on the date hereof.
(ii) The Company has prepared and filed the Registration Statement in conformity with the requirements of the Securities Act, which Registration Statement became effective on January 5, 2026, including the Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement. The Company was at the time of the filing of the Registration Statement eligible to use Form F-3. The Company is eligible to use Form F-3 under the Securities Act and it meets the transaction requirements with respect to the aggregate market value of securities being sold pursuant to this offering and during the 12 calendar months prior to this offering, as set forth in all applicable General Instructions to Form F-3. The Registration Statement is effective under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Prospectus and Prospectus Supplement has been issued by the SEC and no proceedings for that purpose have been instituted or, to the Knowledge of the Company, are threatened by the SEC. The Registration Statement registers the offer, sale and issuance of all Underlying Shares contemplated hereby and by the Notes. The Registration Statement has a sufficient quantity of registered and unsold securities available under it to cover the offer, sale and issuance of all Underlying Shares contemplated by the Transaction Documents. The Company, if required by the rules and regulations of the SEC, shall file the Prospectus Supplement with the SEC pursuant to Rule 424(b) in connection with the transactions contemplated by this Agreement and the other Transaction Documents. At the time the Registration Statement and any amendments thereto became effective, at the date of this Agreement and at the applicable Closing Date, the Registration Statement and any amendments thereto conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus and any amendments or supplements thereto, at the time the Prospectus or any amendment or supplement thereto was issued and at the applicable Closing Date, conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. All references to amendments or supplements in this Section 3.1(f) include the Prospectus Supplement.
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(g) Capitalization. The capitalization of the Company as of the date hereof is as set forth on Schedule 3.1(g), which Schedule shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than as disclosed in Schedule 3.1(g) or pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as a result of the purchase and sale of the Securities, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock or the capital stock of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents or capital stock of any Subsidiary, other than as disclosed in the Schedule 3.1(g). The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of Common Stock or other securities to any Person (other than the Investors). There are no outstanding securities or instruments of the Company or any Subsidiary with any provision that adjusts the exercise, conversion, exchange or reset price of such security or instrument upon an issuance of securities by the Company or any Subsidiary. There are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and non-assessable, have been issued in compliance with all federal and state securities Laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. Except as disclosed in Schedule 3.1(g), there are no outstanding shares of Common Stock or shares of Common Stock underlying Common Stock Equivalents that are, or that upon issuance including upon any conversion, exchange, exercise, or other action would be, eligible for public sale or resale by the holders thereof pursuant to an effective registration statement under the Securities Act or under an available exemption from the registration requirements of the Securities Act as of the date hereof and within the next six months, including, without limitation pursuant to Section 3(a)(9) of the Securities Act or Rule 144 under the Securities Act. No holder of any such securities has given notice to the Company of, and the Company has no knowledge of, an intent by any such holders to sell any shares of Common Stock held by or issuable to any such holder, nor has the Company received any legal opinion or inquiry in connection with the removal of restricted legends from any such outstanding or issuable shares of Common Stock. There are no shareholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the Knowledge of the Company, between or among any of the Company’s shareholders other than as disclosed in Schedule 3.1(g).
(h) SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by Law or regulation to file such material) together with the Prospectus and Prospectus Supplement (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received or obtained a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company has never been an issuer subject to Rule 144(i) under the Securities Act. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the footnotes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
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(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the SEC, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its shareholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending before the SEC any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets or financial condition, that would be required to be disclosed by the Company under applicable securities Laws at the time this representation is made or deemed made that has not been publicly disclosed at least one Trading Day prior to the date that this representation is made.
(j) Litigation. Other than as disclosed in any SEC Report, there is no action, lawsuit, inquiry, notice of violation, proceeding, preliminary inquiry or investigation (however any Governmental Authority may call such matter) pending or, to the Knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any Governmental Authority (any, an “Action”) that has resulted in or might be reasonably expected to result in material liability to the Company or any Subsidiary. None of the Actions disclosed in SEC Reports adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities Laws or a claim of breach of fiduciary duty. There has not been, and to the Knowledge of the Company, there is not pending or contemplated, any preliminary inquiry or investigation by the SEC involving the Company or any current or former director or officer of the Company. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Securities Act or the Exchange Act.
(k) Labor Relations. No labor dispute exists or, to the Knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the Knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company 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 Laws relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance has not resulted in or would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. To the Company’s Knowledge:
(i) no allegations of sexual harassment, sexual misconduct or discrimination, whether such discrimination arises from race, ethnic background, sex, gender status, age or otherwise (“Misconduct”) have been made involving any current or former director, officer, employee or independent contractor of the Company or any of its Subsidiaries; and
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(ii) neither the Company nor any of its Subsidiaries have entered into any settlement agreements related to allegations of Misconduct by any current or former director, officer, employee, or independent contractor of the Company or any of its Subsidiaries.
(l) Compliance.
(i) Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other Governmental Authority or (iii) is or has been in violation of any Law of any Governmental Authority, including without limitation all foreign, federal, state and local Laws relating to taxes, insurance, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.
(ii) Without limiting the generality of the foregoing, the Company has maintained, and has implemented reasonable policies, measures and infrastructure to maintain, compliance with Laws related to the administration or involvement in the provision of Company Products and the Company’s operations and activities generally, and the Company and its Subsidiaries are in compliance with all Laws applicable thereto, except as could not have or reasonably be expected to result in a Material Adverse Effect. The Company and its Subsidiaries have not otherwise experienced and have no Knowledge of any pending, threatened or potential development with respect to such Laws or the Governmental Authorities that enact, promulgate and enforce them, that has resulted in or could be reasonably be expected to result in any Material Adverse Effect, including without limitation: (A) the International Tax Co-operation (Economic Substance) Act (as implemented and enforced in the Cayman Islands), and (B) Law on Digital Assets of the Republic of Kazakhstan and related Laws and interpretations issued by the Astana International Financial Centre (AIFC), and in each case such similar or related Laws of other jurisdictions in which the Company or any of its Subsidiaries operates or is present in any manner or to which any such Person is otherwise subject. This Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby do not and will not result in any violation or non-compliance of any Laws applicable to the Company or any Subsidiary, except as could not have or reasonably be expected to result in a Material Adverse Effect. The Company’s corporate structure is not outlawed, disallowed, or otherwise regulated in the Hong Kong, Kazakhstan, the Cayman Islands or any other jurisdiction in which the Company or any of its Subsidiaries operates or is present in any manner.
(m) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with all federal, state, local and foreign Laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including Laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”); (ii) 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 of clause (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
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(n) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of Actions relating to the revocation or modification of any Material Permit.
(o) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance. The Company’s assets are and will be sufficient to conduct its operations as presently conducted and as proposed to be conducted as of the date hereof and as of the applicable Closing Date.
(p) Intellectual Property.
(i) Schedule 3.1(p) lists all (1) Company IP Registrations and (2) Company Intellectual Property, including Software, that is not registered that, in each case, is material to the Company’s business or operations. Except as could not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect, (x) all required filings and fees related to the Company IP Registrations have been timely filed with and paid to the relevant Governmental Authorities and authorized registrars, and all Company IP Registrations are otherwise in good standing, and (y) there are no actions that must be taken by the Company (or any third party on the Company’s behalf) prior to the applicable Closing Date, including the payment of any registration, maintenance or renewal fees or the filing of any responses to office actions, documents, applications or certificates for the purposes of obtaining, maintaining, perfecting, preserving or renewing any Company IP Registrations. To the Company’s Knowledge, there are no facts or circumstances that would render any Company IP Registrations invalid or unenforceable. To the Company’s Knowledge, there has been no misrepresentation or failure to disclose any fact or circumstances in any application for any Company IP Registrations that would constitute fraud or a misrepresentation with respect to such application or that would otherwise affect the validity or enforceability of any Company IP Registrations. Each Company IP Agreement is valid and binding on the Company in accordance with its terms and is in full force and effect, and neither the Company, nor to the Company’s Knowledge any other party thereto, is in breach of or default under (or is alleged to be in breach of or default under), or has provided or received any notice of breach or default of or any intention to terminate, any Company IP Agreement, except, in each case, as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(ii) Other than as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, the Company is the sole and exclusive legal and beneficial, and with respect to the Company IP Registrations, record owner of all right, title and interest in and to the Company Intellectual Property, or has the valid right to use all other Intellectual Property used in or necessary for the conduct of the Company’s current business or operations, in each case, free and clear of Liens.
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(iii) To the Company’s Knowledge, the conduct of the Company’s business as currently and formerly conducted, and the Company Products and related processes and infrastructure, have not infringed, misappropriated, diluted or otherwise violated, and do not and will not infringe, dilute, misappropriate or otherwise violate the Intellectual Property or other rights of any Person. To the Company’s Knowledge, no Person has infringed, misappropriated, diluted or otherwise violated, or is currently infringing, misappropriating, diluting or otherwise violating, any Company Intellectual Property.
(iv) There are no Actions (including any oppositions, interferences or re-examinations) settled, pending or threatened (including in the form of offers to obtain a license or inquiries regarding the need to obtain a license): (i) alleging any infringement, misappropriation, dilution or violation of the Intellectual Property of any Person by the Company; (ii) challenging the validity, enforceability, registrability or ownership of any Company Intellectual Property or the Company’s rights with respect to any Company Intellectual Property; or (iii) by the Company or any other Person alleging any infringement, misappropriation, dilution or violation by any Person of the Company Intellectual Property, in each case as could not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The Company is not subject to any outstanding or prospective governmental order (including any motion or petition therefor) that does or would restrict or impair the use of any Company Intellectual Property.
(q) Company Products; Proprietary Software. All Company Products are fully transferable, alienable or licensable by the Company without restriction and without payment of any kind to any third party. The Company has not transferred ownership of, or granted any exclusive license of (or exclusive right to use), or authorized the retention of any exclusive rights to use or joint ownership of, any Company Product or any related Software or other Intellectual Property to any other Person. The Company is not subject to any Company IP Agreement (other than with respect to current customers pursuant to the Company’s standard form of customer agreement entered into in the ordinary course of business) that includes any unperformed obligations that require the Company to develop any Software or other Intellectual Property, including any enhancements or customizations that are part of or used in connection with the Company Products (collectively, “Customizations”), and the Company owns and will continue to own all right, title and interest in and to all such Customizations developed by the Company.
(r) Source Code. The Company is in actual possession of and has exclusive control over a complete and correct copy of the source code for all Software included in the Company Intellectual Property. As of the date hereof, there has been no unauthorized theft, reverse engineering, decompiling, disassembling or other unauthorized disclosure of or access to any source code for any Company Product.
(s) Open Source Software. The Company has not used any Open Source Software in a manner that does, will or would reasonably be expected to, require the Company or any other Person to (A) disclose or distribute the source code of the Software of any Company Product, (B) license or otherwise offer or distribute any Company Product on a royalty-free basis, or (C) grant any patent license, non-assertion covenant or, rights to modify, make derivative works based on, decompile, disassemble or reverse engineer or any other rights to any Company Product or Company Intellectual Property.
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(t) Conformance with Specifications; Defects; Malicious Code.
(i) All Company Products conform in all material respects to all applicable warranties in all contracts with customers.
(ii) To the Company’s Knowledge, none of the Company Products contain any bug, defect or error that materially adversely affects the functionality or performance of such Company Product against its applicable specifications.
(iii) To the Company’s Knowledge, none of the Company Products, and no other Software used in the provision of any Company Product or otherwise in the operation of its business, contains any “time bomb,” “Trojan horse,” “back door,” “worm,” virus, malware, spyware, or other device or code (“Malicious Code”) designed or intended to, or that could reasonably be expected to, (A) disrupt, disable, harm or otherwise impair the normal and authorized operation of, or provide unauthorized access to, any computer system, hardware, firmware, network or device on which any Company Product or such other Software is installed, stored or used, or (B) damage, destroy or prevent the access to or use of any data or file without the user’s consent. The Company has taken reasonable steps designed to prevent the introduction of Malicious Code into the Company Products.
(u) IT Systems.
(i) To the Company’s Knowledge, the Company Systems are reasonably sufficient for the needs of the Company’s business as currently conducted, including as to capacity, scalability, and ability to process current and anticipated peak volumes in a timely manner, and the Company Systems are in sufficiently good working condition to perform all information technology operations and include sufficient licensed capacity (whether in terms of authorized sites, units, users, seats or otherwise) for all Software, in each case as necessary for the conduct of the Company’s business as currently conducted.
(ii) Since its inception, there has been no unauthorized access, use, intrusion or breach of security, or material failure, breakdown, performance reduction or other adverse event affecting any Company Systems, that has resulted in or could reasonably be expected to result in any: (A) substantial disruption of or interruption in or to the use of such Company Systems or the conduct of the Company’s business; (B) material loss, destruction, damage or harm of or to Company or its operations, personnel, property or other assets; or (C) material liability of any kind to the Company. The Company has taken reasonable actions, consistent with applicable industry best practices in the Company’s industry, to protect the integrity and security of the Company Systems and the data and other information stored thereon.
(iii) The Company maintains commercially reasonable back-up and data recovery, disaster recovery and business continuity plans, procedures and facilities, has acted in material compliance therewith, and has tested such plans and procedures on a regular basis, and such plans and procedures have been proven effective in all material respects upon such testing.
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(v) Data Privacy and Protection; Cybersecurity.
(i) The Company has not suffered a material non-compliance with Company Privacy Policies or with all applicable Laws and contracts to which it is a party relating to: (A) the privacy of customers or users of the Company Products, any website, product or service operated by or on behalf of the Company; and (B) the collection, storage, hosting, disclosure, transmission, transfer, disposal, other processing or security of any Customer Data or Personal Information by the Company or by third parties having authorized access to the records of the Company, with respect to each of (A) and (B) in all material respects. No claims have been asserted or, are threatened against the Company alleging a violation of any person’s privacy, confidentiality or other rights under any Company Privacy Policy, under any contract, or under any Law relating to any Customer Data or Personal Information. With respect to any Customer Data and Personal Information, the Company has taken commercially reasonable measures (including implementing and monitoring compliance with respect to technical and physical security) designed to safeguard such data against loss and against unauthorized access, use, modification, disclosure or other misuse. There has been no unauthorized access to or other misuse of any Customer Data and Personal Information. The Company has not received any complaint from any Person (including any action letter or other inquiry from any Governmental Authority) regarding the Company’s collection, storage, hosting, disclosure, transmission, transfer, disposal, other processing or security of Customer Data or Personal Information. There have been no facts or circumstances that would require Company to give notice to any customers, suppliers, consumers or other similarly situated Persons of any actual or perceived data security breaches pursuant to an applicable Laws requiring notice of such a breach.
(ii) Without limiting the generality of the foregoing, the Company is compliant with all Laws relating to data privacy and data protection, and the collection, storage, maintenance and transmission of personal data and health information, including, without limitation, the (A) the European General Data Protection Regulation, and (C) all other applicable Laws relating to cybersecurity, data privacy and protection and/or Customer Data or Personal Information. The Company is compliant with the agreements, terms and policies of, and has not reason to believe that it will not continue to have access to, the third party data hosting and transmission services and infrastructure it utilizes or anticipates utilizing in its operations as presently conducted or planned, including without limitation, Amazon Web Services, Google Cloud and Microsoft Azure Cloud.
(iii) The Company has complied with the SEC’s rules related to cybersecurity risks and related disclosures.
(w) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.
(x) Cryptocurrency Matters.
(i) The Company and its Subsidiaries in conducting its cryptocurrency mining, pooling and exchanges, do not solely on behalf of third-parties: (i) receive or obtain actual or constructive possession or control of money, funds, virtual currency or digital assets, stored or prepaid value or other form of value that substitutes for money for the purpose of transmitting the same, including by possessing or controlling private cryptographic keys or any portions thereof associated with virtual currency or digital assets of any third-party, (ii) execute orders for the purposes identified in the foregoing clause (i), (iii) advertise, solicit or hold itself out as providing any form of money services or transmission business or virtual currency business or (iv) act as the agent for the purpose of performing any of the activities described in the foregoing clauses (i), (ii) or (iii). The Company has binding contracts and obligations enforceable against third parties and customary in the industry and geographic location of its mining activities providing for the Company’s purchase, access to and management of power or energy, for its cryptocurrency mining activities and operations.
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(ii) The Company owns or has the exclusive ability to access, including by use of “private keys” or other equivalent means, the (A) cash on hand, or cash held in crypto-currency wallets or similar mediums of custody for crypto-currencies and other tokens and digital assets or exchange accounts, (B) cash equivalents, (C) cryptocurrencies, tokens, digital assets and other asset equivalents and (C) assets held in accounts other than any cryptocurrencies, tokens, digital asset and other asset equivalents, in each case in all material respects.
(iii) The Company deposits substantially all of its cryptocurrencies and related assets, including any digital assets mined, in mining pools or digital wallets held or operated by the Company. There are no Liens on, or rights of any person to, digital wallets or the cryptocurrencies or digital assets contained in such digital wallets. The Company has taken commercially reasonable steps to protect digital wallets and assets held therein, including by adopting security protocols to prevent, detect and mitigate inappropriate or unauthorized access to digital wallets and assets held therein.
(iv) The Company has the exclusive ability to control, including by use of “private keys” or other equivalent means or through custody arrangements or other equivalent means, all of the cryptocurrencies, blockchain-based tokens, and other blockchain asset equivalents applicable to the business of the Company. The Company has not taken any actions where it owns a substantial portion of all outstanding tokens in the then existing issued and circulating supply of such tokens on a blockchain to effectuate change through the governance process of that relevant blockchain that could reasonably foreseeably disrupt the continued existence, validity, legality, governance or public availability of the relevant blockchains.
(v) If and to the extent that the Company participates in third-party mining pools, it does so under standard pooling arrangements, with pool distribution based on proportional share of submitted work, all units configured with stratum settings tied to the Company’s unique user credentials, for attribution of compute contributions and payout receipts, no units are leased or shared with third parties, and the Company retains exclusive control over wallet address assignments and pool credentials.
(vi) All cryptocurrency miners used in and necessary for the conduct of the Company’s business are owned or rightfully possessed by, operated by and under the control of the Company. To the Knowledge of the Company, there has been no failure, breakdown or continued substandard performance of any such miners that has caused a material disruption or interruption in or to the use of such miners or the related operation of the business of the Company that has resulted in or would reasonably be expected to result in material liabilities to the Compony or any of its Subsidiaries.. The Company has taken commercially reasonable measures to protect the miners from Malicious Code, malware and other contaminants, hacks and other malicious external or internal threats; (b) ensure continuity of operations with adequate energy supply and minimal uptime required; and (c) provide for the remote-site back-up of data and information critical to the Company. The hashrate of the miners is commercially reasonable and consistent with the nameplate computing power expected from the mix of miners operated as of the date hereof. The Company’s use, provision, disclosure and transfer of miners and digital assets and related operations, activities and services, are conducted in compliance all applicable Laws, including all applicable financial services and anti-money laundering Laws, other than Laws that individually or taken as a whole would not have resulted in or would not reasonably be expected to result in material liabilities to the Compony or any of its Subsidiaries a Material Adverse Effect.
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(y) Customers and Suppliers. The Company has not received any notice, and has no reason to believe, that any of its material customers or suppliers has ceased, or intends to cease after the transactions contemplated hereby, to terminate or materially reduce its relationship with the Company.
(z) Transactions with Affiliates and Employees. Except as set forth on Schedule 3.1(z), none of the officers, directors, or 5% beneficial owners of the Company or any Subsidiary and, to the Knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from providing for the borrowing of money from or lending of money to, or otherwise requiring payments to or from any officer, director or such employee or, to the Knowledge of the Company, any entity in which any officer, director, 5% beneficial owner or any such employee has a substantial interest or is an officer, director, trustee, shareholder, member or partner of (“Related Party Transactions”). Any Related Party Transactions reflect market terms and rates which would reasonably be expected to be obtained in an equivalent arms-length transaction with a third party, and were negotiated in good faith and on an arms-length basis.
(aa) Sarbanes-Oxley; Internal Accounting Controls. Except as disclosed in Schedule 3.1(aa) or in the SEC Reports, the Company and the Subsidiaries are in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof and as of the applicable Closing Date. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient 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 financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries. All material weaknesses in the Company’s prior internal control over financial reporting have been remediated or are in the process of remediation pursuant to a plan set forth in the SEC Reports as of the date of this Agreement.
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(bb) Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents other than the fee payable to the Placement Agent. The Investors shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 3.1(bb) that may be due in connection with the transactions contemplated by the Transaction Documents.
(cc) Trading Market Compliance. The issuance and sale of the Securities hereunder or any Underlying Shares pursuant to the Transaction Documents does not and will not contravene the rules and regulations of the Trading Market.
(dd) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities and the use of the proceeds therefrom, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company currently conducts and shall continue to conduct its business and that of its Subsidiaries in a manner so that neither the Company nor any of its Subsidiaries will become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.
(ee) Registration Rights. Other than the Investors, no Person has any right to cause the Company or any Subsidiary to effect the registration under the Securities Act of any securities of the Company or any Subsidiaries.
(ff) Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to the Company’s Knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such registration. Except as set forth on Schedule 3.1(ff), the Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. Except as set forth on Schedule 3.1(ff), the Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Common Stock is currently eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer.
(gg) Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Charter Documents or the Laws of the Cayman Islands that is or could become applicable to the Investors as a result of the Investors and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and any Underlying Shares and the Investors’ ownership of the Securities and any Underlying Shares.
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(hh) Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any Investor or its agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Investor will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Investors regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that no Investor makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.
(ii) No Integrated Offering. Assuming the accuracy of each Investor’s representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.
(jj) Solvency. Based on the consolidated financial condition of the Company as of the applicable Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no Knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from each Closing Date. Schedule 3.1 (jj) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. None of the Indebtedness is secured by any Lien or similar restrictions under applicable Laws. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.
(kk) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all applicable foreign, federal, regional, state and local income, franchise, value added and other tax returns, reports and declarations required by any jurisdiction to which it and each of its Subsidiaries is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.
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(ll) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the Knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law or (iv) violated in any material respect any provision of FCPA or any applicable Laws of Hong Kong, Kazakhstan, the Cayman Islands or any other jurisdiction in which the Company or any of its Subsidiaries operates or is present in any manner which relate to bribery or political contributions.
(mm) Accountants. The Company’s accounting firm is set forth on Schedule 3.1(mm) of the Disclosure Schedules. Such accounting firm (i) is a public accounting firm registered with the Public Company Accounting Oversight Board (the “PCAOB”) as required by the Exchange Act and (ii) is currently expected to express its opinion with respect to the financial statements to be included in the Company’s annual report on Form 20-F for the fiscal year ending June 30, 2026. To the Company’s Knowledge, such accounting firm has not been subject to any disciplinary actions or other adverse Actions from the PCAOB or any Governmental Authority adversely impacting the ability of such accounting firm to conduct its audit and review and related accounting services for which it was engaged by the Company, nor does the Company have any Knowledge that the PCAOB or any Governmental Authority is conducting any investigation or inquiry, however termed, which may lead to disciplinary action against such accounting firm or which would otherwise limit or preclude the Company’s ability to continue to use such accounting firm in the future.
(nn) Seniority. As of the applicable Closing Date, other than as set forth on Schedule 3.1(nn), no Indebtedness or other claim against the Company is or will be senior to any of the Notes in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise. As of the applicable Closing Date, neither the Company nor any Subsidiary has outstanding any secured Indebtedness or has otherwise granted any security interests on its assets in any jurisdiction, including without limitation Hong Kong, Kazakhstan, the Cayman Islands or any other jurisdiction in which the Company or any of its Subsidiaries operates or is present in any manner, except as disclosed in Schedule 3.1(nn).
(oo) No Disagreements with Accountants and Lawyers. There are no 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 could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.
(pp) Acknowledgment Regarding Each Investor’s Purchase of Securities. The Company acknowledges and agrees that each Investor has been solicited separately by the Placement Agent and is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company acknowledges and agrees that it will not at a later date take the position that the Investors are acting as a group within the meaning of Rule 13d-5 under the Exchange Act. The Company further acknowledges that each Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by the Investor or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Investor’s purchase of the Securities. The Company further represents to each Investor that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
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(qq) Acknowledgment Regarding each Investor’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding, it is understood and acknowledged by the Company that: (i) each Investor has not been asked by the Company to agree, nor has the Investor agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term (other than in respect of Pre-Delivery Shares pursuant to Section 4.4(a) of the Notes), (ii) past or future open market or other transactions by each Investor, specifically including, “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities, (iii) each Investor, and counter-parties in “derivative” transactions to which the Investor is a party, directly or indirectly, may presently have a “short” position in the Common Stock and (iv) each Investor shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (y) each Investor may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Underlying Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing shareholders’ equity interests in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents. The Company further (A) represents and warrants and acknowledges and agrees that (i) to the Company’s Knowledge, each Investor is participating in the offering of Securities contemplated hereby separately and independently of the other Investor(s), (ii) to the Company’s Knowledge, none of the Investors have communicated directly with one another, and all communications by the Investors concerning the Transaction Documents and the transactions contemplated thereby and any matters related thereto were solely conducted separately and independently with the Placement Agent without the involvement or inclusion of any other Investor, and (iii) to the Company’s Knowledge, the Investors do not constitute a “group” as that term is used under Section 13(d) of the Exchange Act, and (B) covenants and agrees not to take a position to the contrary to the foregoing.
(rr) Regulation M Compliance. The Company has not, and to the Company’s Knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement agent in connection with the placement of the Securities.
(ss) Stock Plans. Each stock option granted by the Company under the Company’s stock option plan or equity incentive plan was granted (i) in accordance with the terms of the Company’s stock option plan 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 or equity incentive plan has been backdated. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options or other equity securities or rights to equity securities including restricted stock units 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.
(tt) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s Knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
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(uu) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon the Investor’s request.
(vv) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates 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, 5% or more of the outstanding shares of any class of voting securities or twenty-five percent 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.
(ww) Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder and all other applicable money laundering Laws including in Hong Kong, Kazakhstan, the Cayman Islands and any other jurisdiction in which the Company or any of its Subsidiaries operates or is present in any manner (collectively, the “Money Laundering Laws”), and no Action by or before any court, arbitrator or other Governmental Authority any involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the Knowledge of the Company or any Subsidiary, threatened.
(xx) Other Covered Persons. Other than the Placement Agent, the Company is not aware of any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Securities.
3.2 Representations and Warranties of the Investor. Each Investor, severally and not jointly, hereby represents and warrants as of the date hereof and as of the applicable Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):
(a) Organization; Authority. The Investor is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company, exempted company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by the Investor of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of the Investor. Each Transaction Document to which it is a party has been duly executed by the Investor, and when delivered by the Investor in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Investor, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other Laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by Laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable Law.
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(b) Experience of the Investor. The Investor, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. The Investor is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
(c) Access to Information. The Investor acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits and schedules thereto) and the SEC Reports and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. The Investor acknowledges and agrees that neither the Placement Agent nor any Affiliate of the Placement Agent has provided the Investor with any information or advice with respect to the Securities nor is such information or advice necessary or desired. Neither the Placement Agent nor any Affiliate has made or makes any representation as to the Company or the quality of the Securities and the Placement Agent and any Affiliate may have acquired non-public information with respect to the Company which the Investor agrees need not be provided to it. In connection with the issuance of the Securities to the Investor, neither the Placement Agent nor any of its Affiliates has acted as a financial advisor or fiduciary to the Investor.
(d) Nason Yeager. The law firm of Nason, Yeager, Gerson, Harris & Fumero, P.A. has represented the Lead Investor in connection with this Agreement and the Transaction documents and related investment. It has not represented any other Investor.
The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect the Investor’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby.
Article IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) Free Trading. The Securities, the Pre-Delivery Shares and the Underlying Shares shall be issued pursuant to the Registration Statement, and a Prospectus Supplement thereto and be free of all restrictive legends. The Company shall pay all costs associated with any legal opinions or other documents requested or required by the Transfer Agent in connection with the preceding sentence.
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(b) Without limiting the generality of the foregoing or any other provisions of the Transaction Documents, certificates evidencing the Underlying Shares (or other documentation or evidence of the Underlying Shares, including for issuances in book-entry form) shall not contain any legend: (i) while a Registration Statement covering the sale and issuance of such Underlying Shares is effective under the Securities Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144, when available, or (iii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC). For the avoidance of doubt the Company shall pay all costs associated with such opinions. If all or any portion of a Note is converted at a time when there is an effective Registration Statement to cover the sale and issuance of the Underlying Shares or an exemption from such registration is available, or if such Underlying Shares may be sold under Rule 144 without the requirement for the Company to be in compliance with the current public information requirements of Rule 144(c) and without volume or manner of sale restrictions or if such legend is not otherwise required under applicable requirements of the Securities Act (including Sections 4(a)(1) or 4(a)(7), judicial interpretations and pronouncements issued by the staff of the SEC including what is known as Section 4(a)(1½)) then such Underlying Shares shall be issued free of all legends. For avoidance of doubt, the Company agrees that after the requisite holding period to comply with Rule 144, the legend may be removed under Rule 144 of the Securities Act, assuming the holder satisfies the requirements of Rule 144. The Company agrees that at such time as such legend is not required, it will, no later than the earlier of (i) two Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) following the delivery by any Investor to the Company or the Transfer Agent of a certificate (or stock power if issued in book entry form) representing Underlying Shares, as applicable, issued without a restrictive legend (such date, the “Legend Removal Date”), deliver or cause to be delivered to the Investor a certificate representing such shares that is free from all restrictive and other legends (or provide evidence of such issuance in book entry form). The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Investor by crediting the account of the Investor’s prime broker with the Depository Trust Company System as directed by the Investor. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s Principal Market with respect to the Common Stock as in effect on the date of delivery of a certificate representing Underlying Shares, as applicable, issued with a restrictive legend. Certificates for the Underlying Shares subject to legend removal hereunder shall be transmitted by the transfer agent to the Investor by crediting the account of the Investor’s prime broker with the Depository Trust Company System as directed by the Investor. For avoidance of doubt, as of the date of this Agreement the Standard Settlement Period is one Trading Day.
(c) The Company acknowledges and agrees that any Investor may from time-to-time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Underlying Shares to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and, if required under the terms of such arrangement, the Investor may transfer pledged or secured Underlying Shares to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the Investor’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of the Underlying Shares may reasonably request, including, if the Underlying Shares have been registered for sale and issuance pursuant to a Registration Statement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling shareholders thereunder.
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(d) The Company acknowledges that if any Investor converts any Notes and if any Investor cashlessly exercises any Warrants, Section 3(a)(9) of the Securities Act shall apply and the holding period of the Conversion Shares or Warrant Shares issued as a result shall be the applicable Closing Date on which the applicable Notes and Warrants were issued. The Company covenants and agrees that it shall not challenge or take a position contrary to the preceding sentence.
4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against an Investor and regardless of the dilutive effect that such issuance may have on the ownership of the other shareholders of the Company.
4.3 Intentionally omitted.
4.4 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.
4.5 Conversion and Exercise Procedures. Each of the form of Notice of Exercise included in the Warrants and the form of Conversion Notice included in the Notes set forth the totality of the procedures required of an Investor in order to exercise any of the Warrants or convert any of the Notes. Without limiting the preceding sentences, no ink-original Notice of Exercise or Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise or Conversion Notice form be required in order for an Investor to exercise any of its Warrants or convert any of its Note. No additional legal opinion, other information or instructions shall be required of the Investor to exercise its Warrants or convert its Note. The Company shall honor exercises of the Warrants and conversions of the Notes and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.
4.6 Securities Laws Disclosure; Publicity. The Company shall (a) by the Disclosure Time, issue a press release disclosing the material terms (which shall include the name of the Placement Agent) of the transactions contemplated hereby, (b) file a Current Report on Form 6-K, including the Transaction Documents as exhibits thereto, with the SEC within the time required by the Exchange Act and the Securities Act, and (c) file a Prospectus Supplement with the SEC within the time required under the Securities Act and comply with all other requirements of the Securities Act in connection therewith and the transactions contemplated by the Transaction Documents. From and after the issuance of such press release, the Company represents and warrants to each Investor that it shall have publicly disclosed all material, non-public information delivered to the Investor by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents. In addition, effective upon the issuance of such press release, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates on the one hand, and any of the Investors or any of their Affiliates on the other hand, shall terminate. The Company and each Investor shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor the Investor shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of the Investor, or without the prior consent of the Lead Investor, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by Law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Investor, or include the name of any Investor in any filing with the SEC or any regulatory agency or Trading Market, without the prior written consent of such Investor, except (a) as required by federal securities Law in connection with (i) the Registration Statement contemplated by this Agreement and any replacement or supplemental registration statement or other documents in connection herewith, and (ii) the filing of final Transaction Documents with the SEC and (b) to the extent such disclosure is required by Law or Principal Market Rules, in which case the Company shall provide such Investor with prior notice of such disclosure permitted under this clause (b).
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4.7 Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that an Investor is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that the Investor could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Investor.
4.8 Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, which shall be disclosed pursuant to Section 4.6, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide each Investor or its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto the Investor shall have consented to the receipt of such information and agreed with the Company to keep such information confidential. The Company understands and confirms that each Investor shall be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company, any of its Subsidiaries, or any of their respective officers, director, agents, employees or Affiliates delivers any material, non-public information to an Investor without the Investor’s consent, the Company hereby covenants and agrees that the Investor shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates, or a duty to the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates not to trade on the basis of, such material, non-public information, provided that the Investor shall remain subject to applicable Law. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the SEC pursuant to a Current Report on Form 6-K. The Company understands and confirms that each Investor shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
4.9 Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital and general corporate purposes and shall not use such proceeds for any other purpose.
4.10 Indemnification of Investor. Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Investor and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls the Investor (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Investor Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Investor Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted by the Company or its affiliates or representatives or agents against the Investor Parties in any capacity, or any of them or their respective Affiliates, with respect to any of the transactions contemplated by the Transaction Documents (except to the extent such action is based upon a material breach of such Investor Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Investor Party may have with any such stockholder or any violations by such Investor Party of state or federal securities Laws or any conduct by such Investor Party which is finally judicially determined to constitute fraud, gross negligence or willful misconduct). If any action shall be brought against any Investor Party in respect of which indemnity may be sought pursuant to this Agreement, such Investor Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Investor Party. Any Investor Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Investor Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Investor Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Investor Party under this Agreement (y) for any settlement by the Investor Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Investor Party’s breach of any of the representations, warranties, covenants or agreements made by such Investor Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.10 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Investor Party against the Company or others and any liabilities the Company may be subject to pursuant to Law.
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4.11 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve of the Required Minimum from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.
(b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to obtain the requisite shareholder approval required under Cayman Islands law to amend the Company’s Charter Documents to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later than the 75th day after such date.
(c) The Company shall, if applicable: (i) in the time and manner required by the Principal Market, prepare and file with such Principal Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing or quotation on such Principal Market as soon as possible thereafter, (iii) provide to each Investor evidence of such listing or quotation and (iv) maintain the listing or quotation of such Common Stock on any date at least equal to the Required Minimum on such date on such Principal Market.
4.12 Participation in Future Financing.
(a) From the date hereof until the date that is 18-months after the date of this Agreement, upon any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents for cash consideration, Indebtedness or a combination of units thereof (a “Subsequent Financing”), the Investors shall have the right to participate in the Subsequent Financing up to an aggregate amount equal to 25% of the Subsequent Financing (the “Participation Maximum”) on the same terms, conditions and price provided for in the Subsequent Financing.
(b) At least 10 Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Investor a written notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask the Investor if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”). Upon the request of an Investor, and only upon a request by an Investor, for a Subsequent Financing Notice, the Company shall promptly, but no later than one Trading Day after such request, deliver a Subsequent Financing Notice to such Investor. The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment.
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(c) Each Investor desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30 p.m. (New York, N.Y. time) on the fifth Trading Day after all of the Investors have received the Pre-Notice that the Investor is willing to participate in the Subsequent Financing, the amount of the Investor’s participation, and representing and warranting that such Investor has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Financing Notice. If the Company receives no such notice from any Investor as of such fifth Trading Day, the Investors shall be deemed to have notified the Company that it does not elect to participate.
(d) If by 5:30 p.m. (New York, N.Y. time) on the fifth Trading Day after each Investor has received the Pre-Notice, notification by an Investor of its willingness to participate in the Subsequent Financing (or to cause its designees to participate) has been provided, then the Company may effect the remaining portion of such Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing Notice.
(e) If by 5:30 p.m. (New York, N.Y. time) on the fifth Trading Day after the Investors have received the Pre-Notice, the Company receives responses to a Subsequent Financing Notice from one or more Investors seeking to purchase more than the aggregate amount of the Participation Maximum, each such Investor shall have the right to purchase up to its Pro Rata Portion of the Participation Maximum. “Pro Rata Portion” means the ratio of (x) the Subscription Amount of Securities purchased pursuant to this Agreement by an Investor participating under this Section 4.12 and (y) the sum of the aggregate Subscription Amounts of Securities purchased pursuant to this Agreement by all Investors participating under this Section 4.12.
(f) The Company must provide each Investor with a second Subsequent Financing Notice, and each Investor will again have the right of participation set forth above in this Section 4.12, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within 30 Trading Days after the date of the initial Subsequent Financing Notice.
(g) The Company and each Investor agree that if any Investor elects to participate in the Subsequent Financing, the transaction documents related to the Subsequent Financing shall not include any term or provision that, directly or indirectly, will, or is intended to, exclude one or more of the Investors from participating in a Subsequent Financing, including, but not limited to, provisions whereby any Investor shall be required to agree to any restrictions on trading as to any securities of the Company or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, this Agreement, without the prior written consent of each such Investor.
(h) Notwithstanding anything to the contrary in this Section 4.12 and unless otherwise agreed to by each Investor, the Company shall either confirm in writing to each Investor that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that each Investor will not be in possession of any material, non-public information, by the 10th Business Day following delivery of the Subsequent Financing Notice. If by such 10th Business Day, no public disclosure regarding a transaction with respect to the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction has been received by each Investor, such transaction shall be deemed to have been abandoned and each Investor shall not be deemed to be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries.
(i) This Section 4.12 shall not apply in respect of an Exempt Issuance.
4.13 Subsequent Equity Sales.
(a) From the date hereof until such time as no Investor holds any of the Securities, the Company shall be prohibited from effecting or entering into an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents (or a combination of units thereof) involving a Variable Rate Transaction. “Variable Rate Transaction” means any transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock where the future issuance of Common Stock at a price may vary including but not limited to (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security 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 or (ii) enters into, or effects a transaction under, any agreement, including, but not limited to, an equity line of credit or an at-the-market offering, whereby the Company may issue securities at a future determined price. Each Investor 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.
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(b) While any Note is outstanding, if the Company issues any equity option, warrant or similar instrument which contains an “alternative cashless exercise” provision that provides for the exercise of such security without payment of the exercise price in cash and does not require the security to be “in the money,” each Investor 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.
4.14 Pre-Delivery Shares.
(a) Purchase Right. With respect to each Investor, during the period beginning on the date on which the applicable Investor’s Note is no longer outstanding following the final Closing under this Agreement, and ending on the date that is six-months after such date (as applicable, the “Purchase Right Period”), such Investor will have the right, but not the obligation, to purchase all or any portion or portions of its Pre-Delivery Shares at a price per share equal to 90% of the average of the daily VWAPs for the 10 Trading Days immediately preceding such purchase. This right and the Underlying Shares shall be subject to the Beneficial Ownership Limitation. The Purchaser hereby covenants and agrees that if the Purchaser holds any Pre-Delivery Shares after the end of the Purchase Right Period which have not been purchased pursuant to the Transaction Documents, such remaining Pre-Delivery Shares shall be deemed surrendered and cancelled by the Purchaser on such date.
(b) Registration of Pre-Delivery Shares. The Company shall register and maintain the registration of the Purchaser’s resale of any Pre-Delivery Shares issued or issuable pursuant to the Transaction Documents (including pursuant to the provisions of Section 4.4 of the Notes) on the Registration Statement or a replacement or successor registration statement and in accordance with the other provisions of this Agreement and the Notes and the Warrants. All Pre-Delivery Shares shall be issued as freely tradable shares of Common Stock and shall not bear or otherwise be subject to any restrictive or trading legends or restrictions.
(c) Note and Warrant Provisions. The Pre-Delivery Shares shall be subject to the provisions of the Notes and Warrants, as applicable, including Section 4.4 of the Notes and Section 5(b) of the Warrants, which provisions are incorporated herein by reference and which provisions shall survive the termination or expiration of the applicable Note until the end of the Purchase Right Period.
(d) Pre-Delivery Shares Held In Abeyance. For the avoidance of doubt, notwithstanding anything herein to the contrary, Pre-Delivery Shares shall not be issued under this Agreement or otherwise, and the Investor shall not be deemed to have the right to vote or dispose of any Pre-Delivery Shares or to beneficially own the Pre-Delivery Shares, to the extent such event would result in the Beneficial Ownership Limitation being exceeded, and in such case any such Excess Shares (as such term is defined in the Notes) shall be held in abeyance for the benefit of the Investor until such time or times, if ever, as such issuance and the Investor’s right thereto would not result in the Investor and its Affiliates exceeding the Beneficial Ownership Limitation, at which time or times the Company shall issue such Excess Shares to the Investor subject to and in accordance with this Agreement and the applicable Note or Warrant.
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4.15 Blue Sky Filings. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Investor at each Closing under applicable securities or “blue sky” Laws of the states of the United States and shall provide evidence of such actions promptly upon request of any Investor.
4.16 Capital Changes. From the date hereof until such time as no Investor holds any of the Notes, the Company shall not undertake a reverse or forward stock split or reclassification of the Common Stock without the prior written consent of the Required Holders; provided, that the foregoing restriction will not apply to the reflection on the records of the Depository Trust Company and in the trading of the Common Stock on the Principal Market of the 2026 Reverse Split. As soon as practicable following the First Tranche Closing, the Company shall use its reasonable best efforts, and otherwise in accordance with the applicable requirements of Cayman Islands law, to (x) obtain requisite shareholder approval (supported by a director’s solvency statement, where required) for (i) an additional reverse share split within a pre-approved range to be determined at the discretion of the Board of Directors for purposes of maintaining compliance with the minimum bid price requirements of the Principal Market (a “Pre-Approved Reverse Split”), and (ii) a reduction of capital (supported by a director’s solvency statement in accordance with the applicable requirements under Cayman Islands law) to reduce the par value of the Common Stock and the Class B Ordinary Shares of the Company to $0.0025 per share (the “Par Value Reduction”), and (y) subject to receipt of the requisite shareholder approval in this Section 4.16(x)(ii) and as otherwise required under Cayman Islands law, file and cause the Par Value Reduction to become effective as soon as reasonably practicable and in any event in accordance with, and within the time periods required under, the Companies Act (as revised) of the Cayman Islands. After the Par Value Reduction is filed and effective, the Company covenants and agrees, as long as any Warrants are outstanding, not to increase the par value of its Common Stock (except as otherwise contemplated by this Section 4.16). In addition, in the event that either (i) the Company’s stock price closes below $3.00 per share for five consecutive Trading Days, or (ii) the Company’s stock price on any Trading Day closes at below $2.00 (in either case during and in reference to regular trading hours), then the Company shall immediately implement a Pre-Approved Reverse Split, and use its best efforts to cause such Pre-Approved Reverse Split to be effected and reflected on the records of the Depository Trust Company and the Principal Market prior to the commencement of any delisting procedures in accordance with Principal Market Rules, and in any event within 15 Trading Days of either such event.
4.17 Maintenance of DTC Eligibility. The Company agrees to maintain the eligibility of the Common Stock for electronic transfer through the Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic transfer.
4.18 Compliance With Negative Covenants. The Company agrees that it shall not take any action to or cause any of its Subsidiaries to breach the negative covenants contained in the Notes, the Guarantee Agreement and any other Transaction Documents.
4.19 Intentionally omitted.
4.20. Lead Investor Appointment for Guarantee Agreement.
(a) Each Investor hereby (a) appoints [ ], as the Lead Investor under the Guarantee Agreement, and (b) authorizes the Lead Investor (and its officers, directors, employees and agents) to take such action on such Investors’ behalf in accordance with the terms thereof. The Lead Investor shall not have, by reason hereof, or pursuant to the Transaction Documents or otherwise, a fiduciary relationship in respect of any Investor. Neither the Lead Investor nor any of its officers, directors, employees and agents shall have any liability to any Investor for any action taken or omitted to be taken in connection hereof or the Transaction Documents except to the extent caused by its own gross negligence or willful misconduct, and each Investor agrees to defend, protect, indemnify and hold harmless the Lead Investor and all of its officers, directors, employees and agents (collectively, the “Lead Investor Indemnitees”) from and against any losses, damages, liabilities, obligations, penalties, actions, judgments, suits, fees, costs and expenses (including, without limitation, reasonable attorneys’ fees, costs and expenses) incurred by such Lead Investor Indemnitee, whether direct, indirect or consequential, arising from or in connection with the performance by such Lead Investor Indemnitee of the duties and obligations of Lead Investor pursuant to the Transaction Documents.
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(b) The Lead Investor shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or any telephone message believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Agreement or any of the other Transaction Documents and its duties thereunder, upon advice of counsel selected by it.
(c) The Lead Investor may resign from the performance of all its functions and duties under the Transaction Documents at any time by giving at least ten Trading Days prior written notice to the Company and each Investor. Such resignation shall take effect upon the acceptance by a successor Lead Investor of appointment as provided below. Upon any such notice of resignation, the Required Holders shall appoint a successor Lead Investor. Upon the acceptance of the appointment as Lead Investor, such successor Lead Investor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Lead Investor, and the retiring Lead Investor shall be discharged from its duties and obligations as Lead Investor under the Transaction Documents, as applicable. After any Lead Investor’s resignation, the provisions of this Section 4.20 shall inure to its benefit. If a successor Lead Investor shall not have been so appointed within said 10 Trading Day period, the retiring Lead Investor shall then appoint a successor Lead Investor who shall serve until such time, if any, as the Required Holders appoints a successor Lead Investor as provided above.
(d) The Company hereby covenants and agrees to take all actions as promptly as practicable as reasonably requested by either the Required Holders or the Lead Investor (or its successor), from time to time pursuant to the terms of this Section 4.20, to secure a successor Lead Investor satisfactory to such requesting part(y)(ies), in their sole discretion, including, without limitation, by paying all fees of such successor Lead Investor, by having the Company agree to indemnify any successor Lead Investor and by each Subsidiary of the Company executing a guarantee agreement or similar agreement and/or any amendments to such agreements reasonably requested or required by the successor Lead Investor.
Article V
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by the Company or an Investor, as to such Investor’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and any other Investor, by written notice to the other parties, if the First Tranche Closing has not been consummated on or before the fifth Trading Day following the date hereof, provided, however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties).
5.2 Fees and Expenses. At each Closing, the Company has agreed to reimburse the Lead Investor for its legal fees and expenses, $20,000 of which has been paid prior to the First Tranche Closing. The Company shall deliver to each Investor, prior to each Closing, a completed and executed copy of the closing statement reasonably satisfactory to the Lead Investor. The Company shall also pay the Investor for its legal fees in connection with the review of any replacement Registration Statement or Prospectus Supplement including each amendment. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any conversion or exercise notice delivered by any Investor), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Investor and costs necessary to provide the Investor with a lien on all of the assets of the Company.
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5.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via email at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York, N.Y. time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via email as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York, N.Y. time) on any Trading Day, (c) the second Trading Day following the date of delivery to the carrier, if sent by Federal Express or other U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto, except to the extent a new address has been provided by notice under this Section 5.4.
5.5 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and each Investor or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any amendment effected in accordance with this Section 5.5 shall be binding upon each Investor and holder of Securities and the Company. Such amendment provision shall not be construed to mean that the Beneficial Ownership Limitation, as applicable, set forth in the Notes and the Warrants may be amended.
5.6 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Investor (other than by merger). Any Investor may assign any or all of its rights under this Agreement to any Person to whom the Investor assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the Investor.
5.8 No Third-Party Beneficiaries. The Placement Agent shall be the third-party beneficiary of the representations and warranties of the Company in Section 3.1 and the representations and warranties of each Investor in Section 3.2. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.10 and this Section 5.8.
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5.9 Governing Law; Exclusive and Jurisdiction; Attorneys’ Fees, Costs, and Expenses.
(a) Governing Law. The Transaction Documents and all disputes, claims, defenses, liabilities, obligations, rights, and remedies, whether based on contract, statute, tort, or otherwise, and all other matters arising out of, in connection with, or relating in any way to (i) the Transaction Documents or any of them, (ii) the transactions contemplated by the Transaction Documents or any of them, or (iii) any matters in connection therewith, shall be governed, controlled, and determined by the internal Laws of the Cayman Islands, without regard to conflicts of Law principles or considerations. Without limiting the generality of the foregoing, the Transaction Documents and each of them shall be governed by, construed, defined by, and enforced in accordance with the internal Laws of the Cayman Islands, without regard to conflict of law principles or considerations. Further, and without limitation, the internal Laws of the Cayman Islands, without regard to conflict of law principles or considerations shall govern and apply to all matters regarding the interpretation, validity, enforcement, or enforceability of the Transaction Documents and the transactions contemplated by this Agreement and any other Transaction Documents. For the purposes of this provision, the Transaction Documents shall be deemed to have been entered into in the Cayman Islands.
(b) Exclusive Jurisdiction: Any Action arising in whole or in part out of, in connection with, or relating in any way to (i) the Transaction Documents or any of them, (ii) the transactions contemplated by the Transaction Documents or any of them, or (iii) any matters in connection therewith, or any Action in which the dispute, or any claims or defenses asserted, or which could by asserted in such Action, are within the scope of the governing law provision above (the “Exclusive Action(s)”). The Exclusive Action(s) shall be commenced exclusively in the courts located in George Town, Cayman Islands. Each party hereby irrevocably submits and consents to the exclusive jurisdiction of the courts located in George Town, Cayman Islands for the adjudication of the Exclusive Action(s), and hereby irrevocably waives, and agrees not to assert in any Exclusive Action(s) brought or maintained in the courts located in George Town, Cayman Islands (i) any claim that it is not personally subject to the jurisdiction of such court, (ii) that such Action was brought in an improper or inconvenient venue, or (iii) that the Action should be dismissed or transferred to another court or venue. Each party hereby irrevocably waives personal service of process for such Exclusive Action(s) and consents to process being served in any such Exclusive Action(s) as provided in Section 5.4. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by Law.
(c) Application of Governing Law and Exclusive Jurisdiction to Related Parties. The governing law and exclusive jurisdiction provisions herein shall apply, whether the Action is brought by or against a party hereto, or by or against such party’s respective affiliates, parents, subsidiaries, directors, officers, shareholders, partners, managers, members, trustees, beneficiaries, owners, employees, contractors, representatives, attorneys, accountants, insurers, or agents.
5.10 Attorneys’ Fees, Costs, and Expenses. In any Action in which a party seeks to enforce any provision of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.10, the prevailing party in such Action shall be reimbursed by the non-prevailing party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and litigation of such Action.
5.11 Survival. The representations and warranties contained herein shall survive each Closing and the delivery of the Securities.
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5.12 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by e-mail delivery of a “.pdf” or other electronic format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.
5.13 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
5.14 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Investor exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then the Investor may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that, in the case of a rescission of a conversion of a Note or exercise of a Warrant, the Investor shall be required to return any shares of Common Stock subject to any such rescinded conversion or exercise notice concurrently with the return to the Investor of the aggregate exercise price paid to the Company or Conversion Price for such shares to the Principal Amount of the Note and the restoration of the Investor’s right to acquire such shares pursuant to the Investor’s Note and Warrant (including, issuance of a replacement note or warrant certificate evidencing such restored right).
5.15 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of an affidavit or similar evidence reasonably satisfactory to the Company of such loss, theft or destruction. The Investor or other Person who is an applicant for a new certificate or instrument under such circumstances shall not be required to pay any third-party costs (including indemnity) associated with the issuance of such replacement Securities.
5.16 Remedies. In addition to being entitled to exercise all rights provided herein or granted by Law, including recovery of damages, each of the Company and each Investor will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any Action for specific performance of any such obligation the defense that a remedy at Law would be adequate.
5.17 Payment Set Aside. To the extent that the Company makes a payment or payments to any Investor pursuant to any Transaction Document or the Investor enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any Law (including, without limitation, any bankruptcy Law, state or federal Law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
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5.18 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury Laws wherever enacted, now or at any time hereafter in force, in connection with any Action that may be brought by an Investor in order to enforce any right or remedy under any Transaction Document. In furtherance of this agreement and covenant, the Company shall not take any position that any Laws of any state of the United States relating to usury are applicable. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable Law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by Law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by Law will be the Maximum Rate applicable to the Transaction Documents from the effective date thereof forward, unless such application is precluded by applicable Law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to an Investor with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by the Investor to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at the Investor’s election.
5.19 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.
5.20 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken, or such right may be exercised on the next succeeding Business Day.
5.21 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.
5.22 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY
5.23 Nason Yeager. Each Investor acknowledges that: Nason Yeager represents the Lead Investor. Each Investor acknowledges and agrees that (a) it has been informed that Nason Yeager represents only the Lead Investor in this matter, (b) Nason Yeager has not provided and will not provide legal or other advice to any other Investors, (c) the other Investors are not relying on, and shall not rely on Nason Yeager or any oral or written statements of any Nason Yeager attorneys or other employees for legal advice or for any assurance regarding the accuracy or completeness of any information provided in connection with this Agreement or the transactions contemplated hereby, (d) Nason Yeager does not owe any duty or fiduciary duty including the duties of loyalty or care, to any other Investor except the Lead Investor , and (e) it has had the opportunity to seek, and has been advised to seek, the advice of independent counsel of its choosing with respect to this Agreement and the transactions contemplated hereby. Each Investor further acknowledges and agrees that, to the extent Nason Yeager becomes aware of information in the course of representing the Lead Investor, it shall have no obligation to disclose such information to any other Party, and such information may be subject to the attorney-client privilege and/or duties of confidentiality owed to the Lead Investor. Notwithstanding the foregoing, nothing in this Section 5.23 shall relieve Nason Yeager from disclosure obligations imposed by applicable Law, court order, or rules of professional conduct.
(Signature Pages Follow)
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In Witness Whereof, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
| Zeta Network Group | ||
| By: | ||
| Name: | Samantha Huang | |
| Title: | Chief Executive Officer | |
| Address for Notice: 14 Wall Street, 20th Floor, New York, NY 10005 | |
| Attn: Samantha Huang | |
| Email: samantha@thezetanetwork.com | |
| With a copy to (which shall not constitute notice): | |
| Attn: Henry Yin | |
| Email: henry.yin@loeb.com |
[Remainder
of Page Intentionally Left Blank
Signature Page for Investor Follows]
Signature Page to Securities Purchase Agreement
In Witness Whereof, the undersigned has caused this Securities Purchase Agreement to be duly executed by its authorized signatory as of the date first indicated above.
Name of Investor:
[ ]
Signature of Authorized Signatory of Investor: __________________________________
Name of Authorized Signatory: David Feldman
Title of Authorized Signatory: Portfolio Manager
Email Address of Authorized Signatory: _____________________________________________
Address for Notice to Investor:
______________________________________________________________________________
Address for Delivery of Securities to Investor (if not same as address for notice):
______________________________________________________________________________
First Tranche Subscription Amount: $2,700,000
Principal Amount of First Tranche Note: $3,000,000
Second Tranche Subscription Amount: $1,800,000
Principal Amount of Second Tranche Note: $2,000,000
Initial Beneficial Ownership Limitation (Note):
[ ] 4.99% [x] 9.99% [ ] Other (insert percentage): ____%
Initial Beneficial Ownership Limitation (Warrant):
[ ] 4.99% [x] 9.99% [ ] Other (insert percentage): ____%
Beneficial Ownership Limitation (Pre-Delivery Shares):
[ ] 4.99% [x] 9.99% [ ] Other (insert percentage): ____%
EIN Number:
Wire Instructions to Investor for Interest Payments or Note Repayment:
Bank Name: ______________________________________________________________________________
Routing No.: ______________________________________________________________________________
Account No: ______________________________________________________________________________
SWIFT:
Bank Address: ______________________________________________________________________________
Phone Number: ______________________________________________________________________________3
[Investor Signature Page to Securities Purchase Agreement]
In Witness Whereof, the undersigned has caused this Securities Purchase Agreement to be duly executed by its authorized signatory as of the date first indicated above.
Name of Investor:
[ ]
________________________________
Signature of Authorized Signatory of Investor: __________________________________
Name of Authorized Signatory: ___________________________________________
Title of Authorized Signatory: _______________________________________________
Email Address of Authorized Signatory: _____________________________________________
Address for Notice to Investor:
______________________________________________________________________________
Address for Delivery of Securities to Investor (if not same as address for notice):
______________________________________________________________________________
First Tranche Subscription Amount: $2,025,000
Principal Amount of First Tranche Note: $2,250,000
Second Tranche Subscription Amount: $1,350,000
Principal Amount of Second Tranche Note: $1,500,000
Initial Beneficial Ownership Limitation (Note):
[ ] 4.99% [ ] 9.99% [ ] Other (insert percentage): ____%
Initial Beneficial Ownership Limitation (Warrant/):
[ ] 4.99% [ ] 9.99% [ ] Other (insert percentage): ____%
Beneficial Ownership Limitation (Pre-Delivery Shares):
[ ] 4.99% [ ] 9.99% [ ] Other (insert percentage): ____%
EIN Number: ______________________________________________________________________________
Wire Instructions to Investor for Interest Payments or Note Repayment:
Bank Name: ______________________________________________________________________________
Routing No.: ______________________________________________________________________________
Account No: ______________________________________________________________________________
SWIFT:
Bank Address: ______________________________________________________________________________
Phone Number: ______________________________________________________________________________
[Investor Signature Page to Securities Purchase Agreement]
In Witness Whereof, the undersigned has caused this Securities Purchase Agreement to be duly executed by its authorized signatory as of the date first indicated above.
Name of Investor:
[ ]
________________________________
Signature of Authorized Signatory of Investor: __________________________________
Name of Authorized Signatory: ___________________________________________
Title of Authorized Signatory: _______________________________________________
Email Address of Authorized Signatory: _____________________________________________
Address for Notice to Investor:
______________________________________________________________________________
Address for Delivery of Securities to Investor (if not same as address for notice):
______________________________________________________________________________
First Tranche Subscription Amount: $675,000
Principal Amount of First Tranche Note: $750,000
Second Tranche Subscription Amount: $400,000
Principal Amount of Second Tranche Note: $500,000
Initial Beneficial Ownership Limitation (Note):
[ ] 4.99% [ ] 9.99% [ ] Other (insert percentage): ____%
Initial Beneficial Ownership Limitation (Warrant/):
[ ] 4.99% [ ] 9.99% [ ] Other (insert percentage): ____%
Beneficial Ownership Limitation (Pre-Delivery Shares):
[ ] 4.99% [ ] 9.99% [ ] Other (insert percentage): ____%
EIN Number: ______________________________________________________________________________
Wire Instructions to Investor for Interest Payments or Note Repayment:
Bank Name: ______________________________________________________________________________
Routing No.: ______________________________________________________________________________
Account No: ______________________________________________________________________________
SWIFT:
Bank Address: ______________________________________________________________________________
Phone Number: ______________________________________________________________________________
[Investor Signature Page to Securities Purchase Agreement]
Schedule 1.1
Lead Investor
XXX
Exhibit 99.2
March 10, 2026
Zeta Network Group
14 Wall Street, 20th Floor
New York, NY 10005
Attention: Samantha Huang, CEO
Dear Ms. Huang:
This letter (the “Agreement”) constitutes the agreement between Maxim Group LLC (“Maxim” or the “Placement Agent”) and Zeta Network Group, a Cayman Islands company (the “Company”), pursuant to which the Placement Agent shall serve as the placement agent for the Company, on a “reasonable best efforts” basis, in connection with the proposed placement (the “Placement”) of up to $10 million of Senior 10% Original Issue Discount Convertible Promissory Notes (the “Notes”) convertible into the Company’s Class A ordinary shares, with a nominal or par value of USD$0.25 (the “Ordinary Shares”) and warrants to purchase the Ordinary Shares (the “Warrants”). The Company also agrees to issue certain Ordinary Shares (the “Pre-Delivery Shares,” together with the Notes, the Warrants, the Ordinary Shares underlying the Notes and the Warrants, the “Securities”) to the Purchasers (as defined below). The terms of the Placement and the Securities shall be mutually agreed upon by the Company and the purchasers (each, a “Purchaser” and collectively, the “Purchasers”) and nothing herein constitutes that the Placement Agent would have the power or authority to bind the Company or any Purchaser or an obligation for the Company to issue any Securities or complete the Placement. This Agreement and the documents executed and delivered by the Company and the Purchasers in connection with the Placement, including but not limited to the Purchase Agreement (as defined below), the Lock-Up Agreements (as defined below) and the form of the Notes and the Warrants shall be collectively referred to herein as the “Transaction Documents.” The date of the closing of the Placement shall be referred to herein as the “Closing Date.” The Company expressly acknowledges and agrees that the Placement Agent’s obligations hereunder are on a reasonable best efforts basis only and that the execution of this Agreement does not constitute a commitment by the Placement Agent to purchase the Securities and does not ensure the successful placement of the Securities or any portion thereof or the success of the Placement Agent’s with respect to securing any other financing on behalf of the Company. The Placement Agent may retain other brokers or dealers to act as sub-agents or selected-dealers on its behalf in connection with the Placement. The sale of the Securities to any Purchaser will be evidenced by a securities purchase agreement (the “Purchase Agreement”) between the Company and such Purchaser in a form reasonably acceptable to the Company and the Placement Agent. Capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Purchase Agreement. Prior to the signing of any Purchase Agreement, officers of the Company will be available to answer inquiries from prospective Purchasers.
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY; COVENANTS OF THE COMPANY.
A. Representations of the Company. Each of the representations and warranties (together with any related disclosure schedules thereto) and covenants made by the Company to the Purchasers in the Purchase Agreement in connection with the Placement is hereby incorporated herein by reference into this Agreement (as though fully restated herein) and is, as of the date of this Agreement and as of the Closing Date, hereby made to, and in favor of, the Placement Agent. In addition to the foregoing, the Company represents and warrants that:
1. The Company has prepared and filed with the U.S. Securities Exchange Commission (the “Commission”) a registration statement on Form F-3 (Registration No. 333-292327), as amended, including the exhibits thereto, as amended at the date of this Agreement, the “Registration Statement”) registering the Securities pursuant to the Securities Act of 1933, as amended (the “Securities Act”), and the Registration Statement became effective on January 5, 2026. At the time of such filing, the Company met the requirements of Form F-3 under the Securities Act. The Registration Statement meets the requirements set forth in Rule 415(a)(1)(x) under the Securities Act and complies with said rule. The Company will file with the Commission pursuant to Rule 424(b) under the Securities Act, and the rules and regulations (the “Rules and Regulations”) of the Commission promulgated thereunder, a supplement to the form of prospectus included in such Registration Statement relating to the placement of the Securities and the plan of distribution thereof and has advised the Placement Agent of all further information (financial and other) with respect to the Company required to be set forth therein. Such prospectus in the form in which it appears in the Registration Statement is hereinafter called the “Base Prospectus”; and the supplemented form of prospectus, in the form in which it will be filed with the Commission pursuant to Rule 424(b) (including the Base Prospectus as so supplemented) is hereinafter called the “Prospectus Supplement.” Any reference in this Agreement to the Registration Statement, the Base Prospectus or the Prospectus Supplement shall each be deemed to refer to and include the documents incorporated by reference therein (the “Incorporated Documents”) pursuant to Item 6 of Form F-3 which were filed under the Exchange Act on or before the date of this Agreement, or the issue date of the Base Prospectus or the Prospectus Supplement, as the case may be; and any reference in this Agreement to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement, the Base Prospectus or the Prospectus Supplement shall be deemed to refer to and include the filing of any document under the Exchange Act after the date of this Agreement, or the issue date of the Base Prospectus or the Prospectus Supplement, as the case may be, deemed to be incorporated therein by reference. All references in this Agreement to financial statements and schedules and other information which is “contained,” “included,” “described,” “referenced,” “set forth” or “stated” in the Registration Statement, the Base Prospectus or the Prospectus Supplement (and all other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is or is deemed to be incorporated by reference in the Registration Statement, the Base Prospectus or the Prospectus Supplement, as the case may be. No stop order suspending the effectiveness of the Registration Statement or the use of the Base Prospectus or the Prospectus Supplement has been issued, and no proceeding for any such purpose is pending or has been initiated or, to the Company’s knowledge, is threatened by the Commission.
2. The Registration Statement (and any further documents to be filed with the Commission) contains all exhibits and schedules as required by the Securities Act. Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the Securities Act and the Exchange Act and the applicable Rules and Regulations and did not and, as amended or supplemented, if applicable, will 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 not misleading. The Registration Statement, Base Prospectus and the Prospectus Supplement, each as of its respective date, comply in all material respects with the Securities Act and the Exchange Act and the applicable Rules and Regulations. Each of the Registration Statement, the Base Prospectus and the Prospectus Supplement, as amended or supplemented, did not and will not contain as of the date thereof any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Incorporated Documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the applicable Rules and Regulations, and none of such documents, when they were filed with the Commission, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein (with respect to Incorporated Documents incorporated by reference in the Base Prospectus or Prospectus Supplement), in the light of the circumstances under which they were made not misleading; and any further documents so filed and incorporated by reference in the Registration Statement, the Base Prospectus, or Prospectus Supplement, when such documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act and the applicable Rules and Regulations, as applicable, and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. No post-effective amendment to the Registration Statement reflecting any facts or events arising after the date thereof which represent, individually or in the aggregate, a fundamental change in the information set forth therein is required to be filed with the Commission. There are no documents required to be filed with the Commission in connection with the transaction contemplated hereby that (x) have not been filed as required pursuant to the Securities Act or (y) will not be filed within the requisite time period. There are no contracts or other documents required to be described in the Registration Statement, the Base Prospectus, or Prospectus Supplement, or to be filed as exhibits or schedules to the Registration Statement, which (x) have not been described or filed as required or (y) will not be filed within the requisite time period.
3. The Company is eligible to use free writing prospectuses in connection with the Placement pursuant to Rules 164 and 433 under the Securities Act. Any free writing prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Each free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act or that was prepared by or behalf of or used by the Company complies or will comply in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. The Company will not, without the prior consent of the Placement Agent, prepare, use or refer to, any free writing prospectus.
4. There are no affiliations with any FINRA member firm among the Company’s officers, directors or, to the knowledge of the Company, any five percent (5.0%) or greater shareholder of the Company, except as set forth in the Registration Statement and SEC Reports.
B. Covenants of the Company. The Company has delivered, or will as promptly as practicable deliver, to the Placement Agent complete conformed copies of the Registration Statement and of each consent and certificate of experts, as applicable, filed as a part thereof, and conformed copies of the Registration Statement (without exhibits), the Registration Statement, the Base Prospectus, and the Prospectus Supplement, as amended or supplemented, in such quantities and at such places as the Placement Agent reasonably requests. Neither the Company nor any of its directors and officers has distributed and none of them will distribute, prior to the Closing Date, any offering material in connection with the offering and sale of the Securities pursuant to the Placement other than the Registration Statement, the Base Prospectus, the Prospectus Supplement, the Registration Statement, copies of the documents incorporated by reference therein and any other materials permitted by the Securities Act.
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SECTION 2. REPRESENTATIONS OF THE PLACEMENT AGENT. The Placement Agent represents and warrants that it (i) is a member in good standing of FINRA, (ii) is registered as a broker/dealer under the Exchange Act, (iii) is licensed as a broker/dealer under the laws of the States applicable to the offers and sales of the Securities by such Placement Agent, (iv) is and will be a body corporate validly existing under the laws of its place of incorporation, and (v) has full power and authority to enter into and perform its obligations under this Agreement. The Placement Agent will immediately notify the Company in writing of any change in its status as such. The Placement Agent covenants that it will use its reasonable best efforts to conduct the Placement hereunder in compliance with the provisions of this Agreement and the requirements of applicable law.
SECTION 3. COMPENSATION. In consideration of the services to be provided for hereunder, the Company shall pay to the Placement Agent, or its designees, the following compensation with respect to the Securities which the Placement Agent is placing:
A. A cash fee (the “Cash Fee”) equal to an aggregate of six percent (6.0%) of the aggregate gross proceeds raised in the Placement (which, for the avoidance of doubt, shall not include any proceeds from the exercise of the Warrants). The Cash Fee shall be paid to the Placement Agent at the Closing of the Placement.
B. Subject to compliance with FINRA Rule 5110(g)(5)(A), the Company also agrees to reimburse the Placement Agent up to $50,000 for its actual, reasonable, out-of-pocket costs and expenses incurred by it or its affiliates in connection with the structuring, documentation, negotiation and closing of the transactions contemplated by the Transaction Documents (including, without limitation, any other reasonable fees and expenses in connection with the structuring, documentation, negotiation and closing of the transactions contemplated by the Transaction Documents and due diligence and regulatory filings in connection therewith). The Company will reimburse the Placement Agent directly out of the proceeds it receives on the Closing of the Placement. In the event that this Agreement shall terminate prior to the consummation of the Placement, Maxim shall nevertheless still be entitled to reimbursement for its actual expenses on the Termination Date (as defined below); provided, however, that such expenses shall not exceed $25,000, in the aggregate.
C. The Placement Agent shall be entitled to compensation under Sections 3(A), calculated in the manner set forth herein with respect to any financing of equity, equity-linked, convertible or debt or other capital raising activity (“Tail Financing”) to the extent that such Tail Financing is both (i) provided to the Company by investors that were, during the term of this Agreement, contacted or introduced by the Placement Agent, and (ii) consummated at any time within the six (6)-month period following earlier of the Closing or the Termination Date (other than the termination for Cause (as defined below)). The issuance of any stock or equity of the Company to its officers, directors, employees, or consultants shall not be deemed a Tail Financing. If the Company reasonably anticipates that the Placement Agent may become entitled to payment as set forth in the preceding sentence, the Company shall use its best efforts to notify the Placement Agent promptly of such possible payment.
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D. The Placement Agent reserves the right to reduce any item of its compensation or adjust the terms thereof as specified herein in the event that a determination shall be made by FINRA to the effect that the Placement Agent’s aggregate compensation is in excess of FINRA Rules or that the terms thereof require adjustment.
SECTION 4. INDEMNIFICATION. The Company agrees to the indemnification and other agreements set forth in the Indemnification Provisions (the “Indemnification”) attached hereto as Addendum A, the provisions of which are incorporated herein by reference and shall survive the termination or expiration of this Agreement.
SECTION 5. ENGAGEMENT TERM. The Placement Agent’s engagement hereunder shall be until the earlier of (i) the final closing date of the Placement and (ii) the date when either party of this Agreement terminates the engagement according to the terms as set forth in the next sentence (such date, the “Termination Date”). The Agreement may be terminated, after an initial period of three (3) months from February 10, 2026, by either party upon 10 days written notice to the other party. Notwithstanding anything to the contrary contained herein, the provisions concerning confidentiality, indemnification, contribution and the Company’s obligations to pay fees and reimburse expenses contained herein and the Company’s obligations contained in the Indemnification Provisions will survive any expiration or termination of this Agreement. All such fees and reimbursements due shall be paid to the Placement Agent on or before the Termination Date (in the event such fees and reimbursements are earned or owed as of the Termination Date) or upon the closing of the Placement or any applicable portion thereof (in the event such fees are due as of the Termination Date). The Placement Agent agrees not to use any confidential information concerning the Company provided to them by the Company for any purposes other than those contemplated under this Agreement.
SECTION 6. PLACEMENT AGENT INFORMATION. Notwithstanding anything herein to the contrary, if in the course of the Placement Agent’s performance of due diligence, the Placement Agent deems it necessary to terminate this Agreement, the Placement Agent may do so at any time upon immediate written notice. The Company agrees that any information or advice rendered by the Placement Agent in connection with this engagement is for the confidential use of the Company only in their evaluation of the Placement and, except as otherwise required by law, the Company will not disclose or otherwise refer to the advice or information in any manner without the Placement Agent’s prior written consent.
SECTION 7. NO FIDUCIARY RELATIONSHIP. This Agreement does not create, and shall not be construed as creating rights enforceable by any person or entity not a party hereto, except those entitled hereto by virtue of the Indemnification Provisions hereof. The Company acknowledges and agrees that the Placement Agent is not and shall not be construed as a fiduciary of the Company and shall have no duties or liabilities to the equity holders or the creditors of the Company or any other person by virtue of this Agreement or the retention of the Placement Agent hereunder, all of which are hereby expressly waived.
SECTION 8. CLOSING. The obligations of the Placement Agent, and the closing of the sale of the Securities hereunder are subject to the accuracy, when made and on the Closing Date, of the representations and warranties on the part of the Company and its Subsidiaries contained herein and in the Purchase Agreement, to the accuracy of the statements of the Company and its Subsidiaries made in any certificates pursuant to the provisions hereof, to the performance by the Company and its Subsidiaries of their obligations hereunder, and to each of the following additional terms and conditions, except as otherwise disclosed to and acknowledged and waived by the Placement Agent.
A. No stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the Commission, and any request for additional information on the part of the Commission (to be included in the Registration Statement, the Base Prospectus, the Prospectus Supplement or otherwise) shall have been complied with to the reasonable satisfaction of the Placement Agent. Any filings required to be made by the Company in connection with the Placement shall have been timely filed with the Commission.
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B. The Placement Agent shall not have discovered and disclosed to the Company on or prior to the Closing Date that the Registration Statement, the Base Prospectus, the Prospectus Supplement or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of counsel for the Placement Agent, is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading.
C. All corporate proceedings and other legal matters incident to the authorization, form, execution, delivery and validity of each of this Agreement, the Securities, the Registration Statement, the Base Prospectus and the Prospectus Supplement and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Placement Agent, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.
D. The Placement Agent shall have completed its due diligence investigation of the Company to the satisfaction of the Placement Agent and its counsel.
E. The Placement Agent shall have received from outside counsels to the Company such counsels’ written opinions, addressed to the Placement Agent and the Purchasers and dated as of the Closing Date, in form and substance reasonably satisfactory to the Placement Agent; provided, however, that the negative assurance letter will be only addressed to the Placement Agent.
F. On the Closing Date, the Placement Agent shall have received a “comfort” letter from Audit Alliance LLP with respect to the audited financial statements of the Company as of June 30, 2024 and June 30, 2023, and Assentsure PAC with respect to the audited financial statements of the Company as of June 30, 2025 as of such date, addressed to the Placement Agent and in form and substance satisfactory in all respects to the Placement Agent and Placement Agent’s counsel.
G. On the Closing Date, Placement Agent shall have received a certificate of the Chief Executive Officer of the Company, dated, as applicable, as of the date of such Closing, to the effect that, as of the date of this Agreement and as of the applicable date, the representations and warranties of the Company contained herein and in the Purchase Agreement were and are accurate in all material respects, except for such changes as are contemplated by this Agreement and except as to representations and warranties that were expressly limited to a state of facts existing at a time prior to the applicable Closing Date, and that, as of the applicable date, the obligations to be performed by the Company hereunder on or prior thereto have been fully performed in all material respects.
H. On the Closing Date, Placement Agent shall have received a certificate of an Officer of the Company, dated, as applicable, as of the date of such Closing, certifying to, among others, the organizational documents and board resolutions relating to the Placement of the Securities from the Company.
I. Reserved.
J. Reserved.
K. On the Closing Date, Placement Agent shall have received a certificate of the Chief Executive Officer and Chief Financial Officer of the Company, dated, as applicable, as of the date of such Closing, certifying to, the Company’s eligibility to use the Registration Statement.
L. Lock-Up Agreements. On or before the Closing Date, the Placement Agent shall have received, and the Company shall have caused to be delivered to the Placement Agent, lock-up agreements from the persons specified in the Purchase Agreement in form and substance satisfactory to the Placement Agent.
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M. Neither the Company nor any of its Subsidiaries (i) shall have sustained since the date of the latest audited financial statements included or incorporated by reference in the Registration Statement, the Base Prospectus and the Prospectus Supplement, any loss or interference with its business from fire, explosion, flood, terrorist act or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth in or contemplated by the Registration Statement, the Base Prospectus and the Prospectus Supplement, or (ii) since such date there shall not have been any change in the capital stock or long-term debt of the Company or any of its Subsidiaries or any change, or any development involving a prospective change, in or affecting the business, general affairs, management, financial position, stockholders’ equity, results of operations or prospects of the Company and its Subsidiaries, otherwise than as set forth in or contemplated by the Registration Statement, the Base Prospectus and the Prospectus Supplement, the effect of which, in any such case described in clause (i) or (ii), is, in the judgment of the Placement Agent, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Securities on the terms and in the manner contemplated by the Registration Statement, the Base Prospectus, and Prospectus Supplement.
N. The Company’s Ordinary Shares are registered under the Exchange Act and, as of the Closing Date, the Company has submitted the notification of listing of additional shares including the Ordinary Shares underlying the Notes and the Warrants, and the Pre-Delivery Shares, to the Trading Market or other U.S. applicable national exchange and has not received any information indicating that the such listing of the Ordinary Shares will be rejected and satisfactory evidence of such action shall have been provided to the Placement Agent. The Company shall have taken no action designed to, or likely to have the effect of terminating the registration of the Ordinary Shares under the Exchange Act or delisting or suspending from trading the Ordinary Shares from the Trading Market or other applicable U.S. national exchange, nor has the Company received any information suggesting that the Commission or the Trading Market or other U.S. applicable national exchange is contemplating terminating such registration or listing.
O. No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would, as of the Closing Date, prevent the issuance or sale of the Securities or materially and adversely affect or potentially and adversely affect the business or operations of the Company; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Securities or materially and adversely affect or potentially and adversely affect the business or operations of the Company.
P. On or after the Closing Date, the Company shall have prepared and filed with the Commission a Report of Foreign Private Issuer on Form 6-K with respect to the Placement, including as an exhibit thereto this Agreement.
Q. The Company shall have entered into a Purchase Agreement with each of the Purchasers and such agreements shall be in full force and effect and shall contain representations, warranties and covenants of the Company as agreed between the Company and the Purchasers.
R. FINRA shall have issued a “No Objections Letter” with respect to the Registration Statement on Form F-3 covering the offering of the Securities pursuant to FINRA Rule 5110, and such letter shall remain in full force and effect as of the Closing Date, and FINRA shall not have rescinded, limited or otherwise modified such clearance.
S. Prior to the Closing Date, the Company shall have furnished to the Placement Agent such further information, certificates and documents as the Placement Agent may reasonably request.
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If any of the conditions specified in this Section 8 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written statements or letters furnished to the Placement Agent or to Placement Agent’s counsel pursuant to this Section 8 shall not be reasonably satisfactory in form and substance to the Placement Agent and to Placement Agent’s counsel, all obligations of the Placement Agent hereunder may be cancelled by the Placement Agent at, or at any time prior to, the consummation of the Closing. Notice of such cancellation shall be given to the Company in writing or orally. Any such oral notice shall be confirmed promptly thereafter in writing.
SECTION 9. RIGHT OF FIRST REFUSAL. Upon the closing of the Placement or alternative transaction, for a period of six (6) months from such closing the Company grants Maxim the right of first refusal to act as sole managing underwriter and sole book runner, sole placement agent, or sole sales agent, for any and all future public or private equity, equity-linked or debt (excluding commercial bank debt) offerings for which the Company retains the service of an underwriter, agent, advisor, finder or other person or entity in connection with such offering during such six (6) month period of the Company, or any successor to or any subsidiary of the Company. The Company shall not offer to retain any entity or person in connection with any such offering on terms more favorable than terms on which it offers to retain Maxim. Such offer shall be made in writing in order to be effective. Maxim shall notify the Company within ten (10) business days of its receipt of the written offer contemplated above as to whether or not it agrees to accept such retention. If Maxim should decline such retention, the Company shall have no further obligations to Maxim with respect to the offering for which it has offered to retain Maxim, except as otherwise provided for herein.
SECTION 10. GOVERNING LAW. This Agreement will be governed by, and construed in accordance with, the laws of the State of New York applicable to agreements made and to be performed entirely in such State. This Agreement may not be assigned by either party without the prior written consent of the other party. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns. Any right to trial by jury with respect to any dispute arising under this Agreement or any transaction or conduct in connection herewith is waived. Any dispute arising under this Agreement may be brought into the courts of the State of New York or into the Federal Court located in New York, New York and, by execution and delivery of this Agreement, the Company hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of aforesaid courts. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by delivering a copy thereof via overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. The Company agrees that a final judgment in any such action, proceeding or counterclaim brought in any such court shall be conclusive and binding upon the Company and may be enforced in any other courts to the jurisdiction of which the Company is or may be subject, by suit upon such judgment. If either party shall commence an action or proceeding to enforce any provisions of a Transaction Document, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. In addition to and without limiting the foregoing, the Company has confirmed that it has appointed CT Corporation, as its authorized agent (the “Authorized Agent”) upon whom process may be served in any suit, action or proceeding arising out of or based upon the Agreement or the Transaction Documents or the transactions contemplated herein which may be instituted in any New York federal or state court, by the Placement Agent, the directors, officers, partners, employees and agents of the Placement Agent and each affiliate of the Placement Agent, and expressly accept the non-exclusive jurisdiction of any such court in respect of any such suit, action or proceeding. The Company hereby represents and warrants that the Authorized Agent has accepted such appointment and has agreed to act as said agent for service of process, and the Company agrees to take any and all action, including the filing of any and all documents that may be necessary to continue such appointment in full force and effect as aforesaid. The Company hereby authorizes and directs the Authorized Agent to accept such service. Service of process upon the Authorized Agent shall be deemed, in every respect, effective service of process upon the Company. If the Authorized Agent shall cease to act as agent for service of process, the Company shall appoint, without unreasonable delay, another such agent in the United States, and notify you of such appointment. This paragraph shall survive any termination of this Agreement, in whole or in part.
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SECTION 11. ENTIRE AGREEMENT/MISC. This Agreement (including the attached Indemnification Provisions) embodies the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings, relating to the subject matter hereof. Notwithstanding anything herein to the contrary, the certain letter agreement, dated February 10, 2026 (the “Engagement Agreement”), by and between the Company and the Placement Agent, shall continue to be effective and the terms therein shall continue to survive and be enforceable by the Placement Agent in accordance with its terms, provided that, in the event of a conflict between the terms of the Engagement Agreement and this Agreement, the terms of this Agreement shall prevail. If any provision of this Agreement is determined to be invalid or unenforceable in any respect, such determination will not affect such provision in any other respect or any other provision of this Agreement, which will remain in full force and effect. This Agreement may not be amended or otherwise modified or waived except by an instrument in writing signed by the Placement Agent and the Company. The representations, warranties, agreements and covenants contained herein shall survive the closing of the Placement and delivery of the Securities. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or a .pdf format file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or .pdf signature page were an original thereof.
SECTION 12. CONFIDENTIALITY. The Placement Agent (i) will keep the Confidential Information (as such term is defined below) confidential and will not (except as required by applicable law or stock exchange requirement, regulation or legal process), without the Company’s prior written consent, disclose to any person any Confidential Information, and (ii) will not use any Confidential Information other than in connection with the Placement. The Placement Agent further agrees to disclose the Confidential Information only to its Representatives (as such term is defined below) who need to know the Confidential Information for the purpose of the Placement, and who are informed by the Placement Agent of the confidential nature of the Confidential Information. The term “Confidential Information” shall mean, all confidential, proprietary and non-public information (whether written, oral or electronic communications) furnished by the Company to a Placement Agent or its Representatives in connection with such Placement Agent’s evaluation of the Placement. The term “Confidential Information” will not, however, include information which (i) is or becomes publicly available other than as a result of a disclosure by a Placement Agent or its Representatives in violation of this Agreement, (ii) is or becomes available to a Placement Agent or any of its Representatives on a non-confidential basis from a third-party, (iii) is known to a Placement Agent or any of its Representatives prior to disclosure by the Company or any of its Representatives, (iv) is or has been independently developed by a Placement Agent and/or the Representatives without use of any Confidential Information furnished to it by the Company, or (v) is required to be disclosed pursuant to applicable legal or regulatory authority. The term “Representatives” shall mean each Placement Agent’s directors, board committees, officers, employees, financial advisors, attorneys and accountants. This provision shall be in full force until the earlier of (a) the date that the Confidential Information ceases to be confidential and (b) two (2) years from the date hereof.
SECTION 13. NOTICES. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is sent to the email address specified on the signature pages attached hereto prior to 6:30 p.m. (New York City time) on a business day, (b) the next business day after the date of transmission, if such notice or communication is sent to the email address on the signature pages attached hereto on a day that is not a business day or later than 6:30 p.m. (New York City time) on any business day, (c) the third business day following the date of mailing, if sent by U.S. internationally recognized air courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages hereto.
SECTION 14. PRESS ANNOUNCEMENTS. The Company agrees that the Placement Agent shall, from and after any Closing, have the right to reference the Placement and the Placement Agent’s role in connection therewith in the Placement Agent’s marketing materials and on its website and to place advertisements in financial and other newspapers and journals, in each case at its own expense.
[The remainder of this page has been intentionally left blank.]
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Please confirm that the foregoing correctly sets forth our agreement by signing and returning to Maxim the enclosed copy of this Agreement.
|
Very truly yours, | |||
|
MAXIM GROUP LLC | |||
| By: | /s/ Ritesh M. Veera | ||
| Name: | Ritesh M. Veera | ||
| Title: | Co-Head of Investment Banking | ||
| Address for notice: | |||
| 300 Park Ave., 16th Floor | |||
| New York, NY 10022 | |||
| Attention: James Siegel, General Counsel | |||
| Email: jsiegel@maximgrp.com | |||
Accepted and Agreed to as of
the date first written above:
|
ZETA NETWORK GROUP | |||
| By: | /s/ Samantha Huang | ||
| Name: | Samantha Huang | ||
| Title: | Chief Executive Officer and Director | ||
Zeta Network Group
14 Wall Street, 20th Floor
New York, NY 10005
[Signature Page to Placement Agency Agreement Between
Zeta Network Group and Maxim Group LLC]
ADDENDUM A
INDEMNIFICATION PROVISIONS
In connection with the engagement of Maxim Group LLC (the “Placement Agent”) by Zeta Network Group, a Cayman company pursuant to a placement agency agreement dated as of the date hereof, between the Company and the Placement Agent, as it may be amended from time to time in writing (the “Agreement”), the Company hereby agrees as follows:
1. To the extent permitted by law, the Company will indemnify the Placement Agent and each of its affiliates, directors, officers, employees and controlling persons (within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended) against all losses, claims, damages, expenses and liabilities, as the same are incurred (including the reasonable fees and expenses of counsel), relating to or arising out of its activities hereunder or pursuant to the Agreement, except, with regard to the Placement Agent, to the extent that any losses, claims, damages, expenses or liabilities (or actions in respect thereof) are found in a final judgment (not subject to appeal) by a court of law to have resulted primarily and directly from the Placement Agent’s willful misconduct or gross negligence in performing the services described herein, as the case may be.
2. Promptly after receipt by the Placement Agent of notice of any claim or the commencement of any action or proceeding with respect to which the Placement Agent is entitled to indemnity hereunder, the Placement Agent will notify the Company in writing of such claim or of the commencement of such action or proceeding, and the Company will assume the defense of such action or proceeding and will employ counsel reasonably satisfactory to the Placement Agent and will pay the fees and expenses of such counsel. Notwithstanding the preceding sentence, the Placement Agent will be entitled to employ counsel separate from counsel for the Company and from any other party in such action if counsel for the Placement Agent reasonably determines that it would be inappropriate under the applicable rules of professional responsibility for the same counsel to represent both the Company and the Placement Agent. In such event, the reasonable fees and disbursements of no more than one such separate counsel will be paid by the Company. The Company will have the exclusive right to settle the claim or proceeding provided that the Company will not settle any such claim, action or proceeding without the prior written consent of the Placement Agent, which will not be unreasonably withheld.
3. The Company agrees to notify the Placement Agent promptly of the assertion against it or any other person of any claim or the commencement of any action or proceeding relating to a transaction contemplated by the Agreement.
4. If for any reason the foregoing indemnity is unavailable to the Placement Agent or insufficient to hold the Placement Agent harmless, then the Company shall contribute to the amount paid or payable by the Placement Agent, as the case may be, as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one hand, and the Placement Agent on the other, but also the relative fault of the Company on the one hand and the Placement Agent on the other that resulted in such losses, claims, damages or liabilities, as well as any relevant equitable considerations. The amounts paid or payable by a party in respect of losses, claims, damages and liabilities referred to above shall be deemed to include any legal or other fees and expenses incurred in defending any litigation, proceeding or other action or claim. Notwithstanding the provisions hereof, the Placement Agent’s share of the liability hereunder shall not be in excess of the amount of fees actually received, or to be received, by the Placement Agent under the Agreement (excluding any amounts received as reimbursement of expenses incurred by the Placement Agent).
5. These Indemnification Provisions shall remain in full force and effect whether or not the transaction contemplated by the Agreement is completed and shall survive the termination of the Agreement, and shall be in addition to any liability that the Company might otherwise have to any indemnified party under the Agreement or otherwise.
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| Very truly yours, | |||
| MAXIM GROUP LLC | |||
| By: | /s/ Ritesh M. Veera | ||
| Name: | Ritesh M. Veera | ||
| Title: |
Co-Head of Investment Banking | ||
| Address for notice: | |
| 300 Park Ave, 16th Floor | |
| New York, NY 10022 | |
| Attention: James Siegel, General Counsel | |
| Email: jsiegel@maximgrp.com |
Accepted and Agreed to as of
the date first written above:
| ZETA NETWORK GROUP | |||
| By: | /s/ Samantha Huang | ||
| Name: | Samantha Huang | ||
| Title: | Chief Executive Officer and Director | ||
Zeta Network Group
14 Wall Street, 20th Floor
New York, NY 10005
[Signature Page to Indemnification Provisions
Pursuant to Placement Agency Agreement
between Zeta Network Group and Maxim Group LLC]
Exhibit 99.3
Zeta Network Group
Senior 10% Original Issue Discount Convertible Promissory Note
| Original Issuance Date: March 12, 2026 | Principal: $[ ] |
| Maturity Date: March 12, 2027 | Loan Amount: $[ ] |
FOR VALUE RECEIVED, Zeta Network Group, a Cayman Islands exempted company (the “Maker” or the “Company”), hereby promises to pay to the order of [ ], a [ ], or its assigns (the “Holder”) the principal sum of $[ ] (the “Principal”) pursuant to the terms of this Senior Original Issue 10% Discount Convertible Promissory Note (this “Note”). In exchange for delivery of this Note on the Original Issuance Date referred to above, the Holder shall lend the Maker $[ ] in United States dollars net of an original issuance discount of $[ ].
Unless earlier converted pursuant to the terms of Article 3, the Maturity Date of this Note shall be 12 months from the Original Issuance Date of this Note, which is specified above, unless the Holder has given notice to the Maker that it elects to accelerate the Maturity Date to the extent explicitly permitted by this Note. The Maturity Date is the date upon which the Principal and other amounts shall be due and payable unless earlier due or prepaid or converted. This Note may not be repaid in whole or in part except as otherwise explicitly set forth herein.
The full amount of this Note and all the cash payment obligations of the Company under the Transaction Documents shall be guaranteed in full by each Subsidiary pursuant to a Guarantee Agreement as defined in and in the form attached as an exhibit to the Purchase Agreement.
This Note forms a series with the Other Notes issued under the Purchase Agreement (as defined below) and having substantially the same terms (this Note and the Other Notes, collectively, the “Notes”).
ARTICLE 1
1.1 Purchase Agreement. This Note has been executed and delivered pursuant to, and is issued pursuant to, the Securities Purchase Agreement entered into by and between the Company and the Holder (the “Purchase Agreement”), and is subject to, and incorporates, the provisions of the Purchase Agreement.
1.2 Interest. This Note has been issued with an original issue discount and no interest shall accrue hereunder prior to the occurrence of an Event of Default. From and after the occurrence and during the continuance of an Event of Default set forth in Section 2.1, interest shall accrue hereunder at a rate equal to 10% per annum or, if less, the highest amount permitted by law (such interest upon an Event of Default shall be referred to as “Interest” or “Default Interest” and such rate shall be referred to as the “Default Rate”), shall compound monthly based upon a 360-day year, and shall be due and payable on the first Trading Day of each month during the continuance of such Event of Default (a “Default Interest Payment Date”). In the event that such Event of Default is subsequently cured and no other Event of Default then exists (including, without limitation, for the Company’s failure to pay such Default Interest on the applicable Default Interest Payment Date), the Default Interest shall cease to accrue hereunder as of the day immediately following the date of such cure; provided, that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of such cure of such Event of Default.
1.3 Holder Prepayment Election Upon Subsequent Financing. If following the Original Issuance Date while this Note is outstanding, the Maker directly or indirectly receives proceeds from and closes any kind of financing including through the issuance of any equity securities or Indebtedness, the Maker shall give written notice to the Holder within one Trading Day, and the Holder within 10 Trading Days after receipt of such written notice may request a prepayment of the Principal and any accrued and unpaid interest thereon (if any) in an amount up to 25% of the Holder’s Pro Rata Portion (as defined in the Purchase Agreement) of the gross proceeds received by the Maker if any holder(s) of Other Note(s) also elect such prepayment or, if the holder(s) of the Other Note(s) do not elect such prepayment, up to 25% of the gross proceeds received by the Maker.
1.4 Replacement. Upon receipt of a duly executed Affidavit of Loss and Indemnity Agreement in customary form from the Holder with respect to the loss, theft or destruction of this Note (or any replacement hereof), or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the Maker shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Note. The Holder shall not be required to post a bond or other security.
1.5 Status of Note. The obligations of the Maker under this Note shall rank senior to all other existing Indebtedness and equity of the Company, other than any Other Note(s) with which the obligations under this Note shall rank pari passu. Upon any Liquidation Event (as hereinafter defined), but subject in all cases to the Purchase Agreement, the Holder will be entitled to receive, before any distribution or payment is made upon, or set apart with respect to, any Indebtedness of the Maker ranking junior to this Note in right of payment, an amount equal to the outstanding Principal, Interest and any other sums due. For purposes of this Note, “Liquidation Event” means merger or consolidation of the Company with another entity in which the Company is not the surviving entity (except where the sole purpose is to change the domicile of the Company), the sale of all or substantially all of the assets of the Company in one or more related transactions, a liquidation pursuant to a filing of a petition for bankruptcy under applicable law or any other insolvency or debtor’s relief, an assignment for the benefit of creditors, a determination by a Governmental Authority that the Company (which includes its Subsidiaries) cannot carry on its business substantially consistent with the prior ordinary course of its business, or a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Maker.
1.6 Payments. All payments of made under this Note shall be made as provided in the Purchase Agreement.
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ARTICLE 2
2.1 Events of Default. An “Event of Default” under this Note shall mean the following (unless the Event of Default is waived in writing by the Holder):
(a) Any default in the payment of the Principal, Interest or other sums due under this Note or any Other Note(s) when due (whether on the Maturity Date or by acceleration or otherwise) or as the result of a non-monetary default;
(b) Except as otherwise permitted in this Note, the Maker shall fail to observe or perform any other covenant, condition or agreement contained in this Note or any Transaction Document, including, for the avoidance of doubt, (i) the issuance of any Indebtedness or the imposition of a Lien upon any of the assets of the Maker or any Subsidiary, except for Permitted Indebtedness or Permitted Liens, respectively, (ii) failure of the Registration Statement to adequately cover the offer, sale and issuance of all Underlying Shares in accordance with the Purchase Agreement and other Transaction Documents, or (iii) any other material breach of its covenants and obligations under the Purchase Agreement and other Transaction Documents entered into by and between the Maker and the Holder dated the Original Issuance Date; provided, in each case, that if such failure or breach is capable of being cured as of the time of written notice from the Holder, it remains uncured for 15 days after such written notice from the Holder;
(c) the Maker or any of its Subsidiaries shall (A) default in any payment of any amount or amounts of principal of or interest (if any) on $250,000 or more of any Indebtedness other than the Notes or (B) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity;
(d) the Maker’s notice to the Holder, including by way of public announcement at any time of its inability to comply (including for any of the reasons described in Section 3.2(c) hereof) or its intention not to comply with proper requests for conversion of this Note into Common Stock;
(e) the Maker shall fail to timely deliver shares of Common Stock as and when required under this Note or any other Transaction Document free and clear of any restrictive or trading legend within the Standard Settlement Period (it being understood that the use of Pre-Delivery Shares to satisfy the Maker’s delivery obligations hereunder is not an Event of Default under this section); as used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s Trading Market with respect to the Common Stock as in effect on the date of delivery of a Conversion Notice; for avoidance of doubt, as of the Original Issuance Date the Standard Settlement Period is one Trading Day;
(f) at any time the Maker shall fail to have the Required Minimum of Common Stock authorized, reserved and available for issuance to satisfy the potential conversion in full (disregarding for this purpose any and all limitations of any kind including beneficial ownership limitations on such conversion) of this Note and all Other Notes and upon the exercise of the Warrants;
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(g) any representation or warranty made by the Maker or any of its Subsidiaries in the Purchase Agreement, this Note or any other Transaction Document shall prove to have been false or misleading or breached in a material respect on the date as of which made;
(h) the Maker or any of its Subsidiaries shall: (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets; (ii) make a general assignment for the benefit of its creditors; (iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic); (iv) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally; (v) acquiesce in writing to any petition filed against it in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic); (vi) issue a notice of bankruptcy or winding down of its operations or issue a press release regarding same; or (vii) take any action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing;
(i) an Action shall be commenced in respect of the Maker or any of its Subsidiaries, without its application or consent, in any court of competent jurisdiction, seeking: (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or readjustment of its debts; (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets in connection with the liquidation or dissolution of the Maker or any of its Subsidiaries; or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of 30 days or any order for relief shall be entered in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic) against the Maker or any of its Subsidiaries or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken with respect to the Maker or any of its Subsidiaries and shall continue undismissed, or unstayed and in effect for a period of 30 days;
(j) one or more final judgments or orders for the payment of money aggregating in excess of $250,000 (which value shall be calculated on a daily basis using the local currencies value as reported by the United States Secretary of the Treasury) including any equivalent concepts under any foreign Laws are rendered against one or more of the Company and/or any of its Subsidiaries, that is not dismissed or stayed within a number of days that under the applicable Laws of the country in which a Governmental Authority took the action referred to in this Section 2.1(l) prohibit execution of the judgment or seizing of property;
(k) the Company fails to comply with the reporting requirements of the Exchange Act (including but not limited to becoming delinquent in the filing of any report required to be filed under the Exchange Act including any extension permitted by Rule 12b-25 under the Exchange Act) or ceases to be subject to the reporting requirements of the Exchange Act. For avoidance of doubt, a failure to timely file any Exchange Act report shall be deemed to be an Event of Default hereunder;
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(l) the Maker’s Common Stock ceases to be listed on the Principal Market, or the Maker fails to list the Underlying Shares on the Principal Market (a “Delisting Default”);
(m) the Maker consummates a “going private” transaction and as a result its Common Stock is no longer registered under Sections 12(b) of the Exchange Act;
(n) the Transfer Agent for any reason declines to transfer shares of Common Stock as requested by the Holder within the Standard Settlement Period;
(o) the electronic transfer by the Company of shares of Common Stock through the Depository Trust Company or another established clearing corporation is no longer available or is subject to a “chill”;
(p) the Company replaces its Transfer Agent, and the Company fails to instruct the new Transfer Agent to provide prior to the effective date of such replacement, a fully executed irrevocable transfer agent instructions (including but not limited to the provision to irrevocably reserve the Required Minimum) signed by the successor Transfer Agent and the Company;
(q) the Company or a Subsidiary enters into a Variable Rate Transaction at any time that this Note is outstanding;
(r) the validity or enforceability of any Guarantee Agreement shall be contested by any party thereto and it is finally determined by a court of competent jurisdiction that any such Guarantee Agreement is not valid or enforceable against the Company’s Subsidiary, or an Action shall be commenced by the Company, a Subsidiary or any Governmental Authority having jurisdiction over the Company or a Subsidiary, seeking to establish the invalidity or unenforceability thereof against the Company or such Subsidiary;
(s) any strike, lockout, labor dispute, embargo, condemnation, act of god or public enemy, or other casualty which causes, for more than 15 consecutive days, the cessation or substantial curtailment of the Company’s current operations or revenue producing activities at any facility of the Company or any Subsidiary, if any such event or circumstance could reasonably be expected to have a Material Adverse Effect (as defined in the Purchase Agreement);
(t) the Company organizes or acquires a new Subsidiary and the Company fails to cause the new Subsidiary to become a party to, and to guarantee the Note pursuant to, a Guarantee Agreement within five Trading Days of such organization or acquisition, provided, that such failure remains uncured for 3 days after written notice from the Holder;
(u) the Company loses any material license issued by the PRC, Hong Kong, Singapore, the United Arab Emirates, Kazakhstan or the United States, or any agency or instrumentality thereof or any other jurisdiction in which the Company conducts its business if such loss could reasonably be expected to have a Material Adverse Effect;
(v) the Company issues Indebtedness or grants a security interest (or similar concept under the Laws of any country) to a Person, which Indebtedness or security interest gives such Person priority over the Notes in an Event of Default;
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(w) the Company at any time takes any action which delays or prevents the Holder from selling any shares of Common Stock including but not limited to failing to instruct its Transfer Agent to issue Conversion Shares which are not subject to any restrictions on resale on the Principal Market within the Standard Settlement Period; and
(x) there shall be a suspension in trading of the shares of Common Stock by the SEC or the Trading Market.
2.2 Remedies Upon an Event of Default.
(a) Upon the occurrence of any Event of Default that has not been remedied or waived within two Trading Days (provided, however, that there shall be no cure period for an Event of Default described in Section 2.1(e), (h), (i) or (j)), the Maker shall be obligated to pay to the Holder the Mandatory Default Amount, which Mandatory Default Amount shall be due and payable within two Trading Days of such Event of Default. In the event this Note shall be converted whenever an Event of Default has occurred and is continuing without cure, the Holder shall have the option to convert the Mandatory Default Amount at the Conversion Price then in effect. In lieu of receiving Conversion Shares, the Holder may use Pre-Delivery Shares as provided in Section 4.4.
(b) Upon the occurrence of any Event of Default, the Maker shall, as promptly as possible but in any event within two Trading Days after the occurrence of such Event of Default, notify the Holder of the occurrence of such Event of Default, describing the event or factual situation giving rise to the Event of Default and specifying the relevant subsection or subsections of Section 2.1 hereof under which such Event of Default has occurred.
(c) Upon the failure of the Maker to cure an Event of Default within the time permitted by this Note, or if the Event of Default is not capable of being cured, the remedies provided in this Note shall continue and not be affected by any cure.
(d) The provisions of Section 3.2(b) shall also apply upon any Events of Default relating to Conversion Shares in addition to the remedies under this Section 2.2.
(e) Any Event of Default hereunder may be waived upon the mutual written agreement of the Company and the Holder.
ARTICLE 3
3.1 Conversion.
(a) Conversion. At any time after the Original Issuance Date, this Note shall be convertible (in whole or in part) at the option of the Holder into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing (x) that portion of the outstanding Principal and any accrued and unpaid Interest thereon that the Holder elects to convert (the “Conversion Amount”) by (y) the applicable Conversion Price (as defined below) then in effect on the date on which the Holder delivers to the Maker a notice of conversion in substantially the form attached hereto as Exhibit A (the “Conversion Notice”) in accordance with Section 5.1 (such Conversion Price, the “Applicable Conversion Price”). The Holder shall deliver this Note to the Maker at the address designated in the Purchase Agreement at such time that this Note is fully converted. With respect to partial conversions of this Note, the Maker shall keep written records of the amount of this Note converted as of the date of delivery of the Conversion Notice (each, a “Conversion Date”) for, and giving effect to, each such conversion.
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(b) Conversion Price. The “Conversion Price” means the lower of (A) $18.51 (the “Fixed Conversion Price”) as such Fixed Conversion Price may be adjusted as provided herein, and (B) the Alternative Conversion Price; provided, however, that if any Conversion Price under the foregoing definition results in a fractional amount, the fractional amount shall be rounded down to the nearest whole cent, and provided further that in no event shall the Conversion Price be lower than, or be reduced to lower than, the Floor Price. For avoidance of doubt, all references in this Note to the Fixed Conversion Price or any other Conversion Price including the Alternative Conversion Price shall be construed to include adjustments as provided in this Note.
(c) Intentionally omitted.
(d) Intentionally omitted.
(e) Floor Price. If with respect to a Conversion Notice the Applicable Conversion Price (without regard to the Floor Price) is less than the Floor Price then in effect, the Company shall issue a number of shares equal to the Conversion Amount divided by such Floor Price, and either pay to the Holder in cash by via transfer of immediately available funds, or add to the outstanding Principal of this Note, the applicable Alternate Conversion Floor Amount. “Alternate Conversion Floor Amount” means a dollar amount equal to the product obtained by multiplying (A) the VWAP on the day the Holder delivers the applicable Conversion Notice and (B) the difference obtained by subtracting (I) the number of shares of Common Stock delivered (or to be delivered) to the Holder on the applicable Share Delivery Date with respect to such conversion from (II) the quotient obtained by dividing (x) the applicable Conversion Amount that the Holder has elected to be the subject of the applicable conversion, by (y) the Applicable Conversion Price without giving effect to the Floor Price.
(f) Voluntary Adjustment of Fixed Conversion Price. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of this Note, with the prior written consent of the Holder, reduce the then current Conversion Price of the Note to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.
(g) Ownership. With respect to any conversion pursuant to this Note, the Holder shall be deemed to own the Conversion Shares resulting therefrom for purposes of the Securities Act upon the Holder delivering to the Company the Conversion Notice.
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3.2 Delivery of Conversion Shares.
(a) As soon as practicable after any conversion or payment of any amount due hereunder in the form of shares of Common Stock in accordance with this Note, and in any event within the Standard Settlement Period thereafter (such date, the “Share Delivery Date”), the Maker shall, at its expense, cause to be issued in the name of and delivered to the Holder, or as the Holder may direct, a certificate or certificates evidencing the number of shares of fully paid and non-assessable Common Stock to which the Holder shall be entitled on such conversion or payment (the “Conversion Shares”), in the applicable denominations based on the applicable conversion or payment, which certificate or certificates shall be free of any restrictive or trading legend. In lieu of delivering physical certificates for the Common Stock issuable upon any conversion of this Note, provided the Company’s transfer agent (the “Transfer Agent”) is participating in the Depository Trust Company (“DTC”) DTC Fast Automated Securities Transfer Program (“FAST”) or a similar program, upon request of the Holder, the Company shall cause the Transfer Agent to electronically transmit such Conversion Shares issuable upon conversion of this Note to the Holder (or its designee), by crediting the account of the Holder’s (or such designee’s) broker with DTC through its Deposit Withdrawal At Custodian system (provided that the same time periods herein as for stock certificates shall apply) as instructed by the Holder (or its designee).
(b) Obligation Absolute. The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder of this Note shall elect to convert any or all of the outstanding Principal and any accrued and unpaid Interest thereon (if any) hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Note shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding Principal and any accrued and unpaid Interest thereon (if any) of this Note, which is subject to the injunction, which bond shall remain in effect until the completion of litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue the Conversion Shares or, if applicable, cash, upon delivery of a Conversion Notice.
(c) The Company’s Failure to Timely Convert.
(i) If the Company shall fail for any reason or for no reason, on or prior to the applicable Share Delivery Date, if the Transfer Agent is not participating in FAST, to issue and deliver to the Holder (or its designee) a certificate for the number of Conversion Shares to which the Holder is entitled and register such Conversion Shares on the Company’s register of members 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 Conversion Shares to which the Holder is entitled upon the Holder’s conversion of this Note (as the case may be) (a “Conversion Failure”), then, in addition to all other remedies available to the Holder, the Holder may by notice to the Company (in lieu of receiving such Conversion Shares subject to such Conversion Failure), require the Company to prepay, in cash, the Conversion Amount in such Conversion Failure at a prepayment price equal to the higher of (i) Mandatory Default Amount with respect to such Conversion Amount arising from such Conversion Failure and (ii) the number of shares of Common Stock that the Maker is unable to issue multiplied by the VWAP as of the date of the Conversion Notice (the “Mandatory Prepayment Price”).
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(ii) In addition to the foregoing, if on the Share Delivery Date, if the Transfer Agent is not participating in FAST, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate and register such shares of Common Stock on the Company’s register of members or, if the Transfer Agent is participating in FAST, the Transfer Agent shall fail to 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 is entitled upon the Holder’s conversion hereunder or pursuant to the Company’s obligation pursuant to clause (II) below, and if on or after such Share Delivery Date 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 conversion that the Holder is entitled to receive from the Company and has not received from the Company in connection with such failure, as applicable (a “Buy-In”), then, in addition to all other remedies available to the Holder, the Company shall, within two Trading Days after receipt of 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 and/or markups, 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 the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue and deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (II) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) and pay cash to the 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 applicable Conversion Date and ending on the date of such issuance and payment under this clause (II) (the “Buy-In Payment Amount”). For the avoidance of doubt, subject to Section 3.2(c)(i), the Holder’s right to the Buy-In Payment Amount shall apply regardless of whether the applicable failure constitutes a Conversion Failure.
(d) Conversion Priority. In the event that the Company receives a Conversion Notice from the Holder and any holder(s) of Other Note(s), Options or other Convertible Securities for the same Conversion Date and the Company can effect the conversion and exercise of some, but not all, of such portions of the Note, Other Notes, Options or other Convertible Securities submitted for conversion and exercise, the Company, subject to this Section 3.2(d) , shall (i) first effect the conversion of the entire Conversion Amount submitted for conversion on such date by the Holder and the holder(s) of the Other Note(s), and (ii) shall thereafter effect the exercise and conversion from each holder of Options or other Convertible Securities electing to have Options or other Convertible Securities exercised or converted on such date (other than the Notes).
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(e) Beneficial Ownership Limitation. The Company shall not effect the conversion of any portion of this Note, and the Holder shall not have the right to convert any portion of this Note pursuant to the terms and conditions of this Note 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, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 9.99% (the “Beneficial Ownership Limitation”) 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 the Holder and the other Attribution Parties shall include the number of shares of Common Stock held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon conversion of this Note 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, non-converted portion of this Note beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or non-converted portion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 3.2(e). For purposes of this Section 3.2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. For purposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the conversion of this Note without exceeding the Beneficial Ownership Limitation, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent annual or periodic report on Form 20-F, Current Report on Form 6-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 issued by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (any, the “Reported Outstanding Share Number”). For any reason at any time, upon the written or oral request of the Holder, the Company shall within one Trading Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stock then outstanding. If the Company receives a Conversion Notice from the 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 the Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Conversion Notice would otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section 3.2(e), to exceed the Beneficial Ownership Limitation, the Holder must notify the Company of a reduced number of shares of Common Stock to be issued pursuant to such Conversion Notice. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to each conversion, exchange or exercise of securities of the Company including this Note by the 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 the Holder upon conversion of this Note results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Beneficial Ownership Limitation of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the Exchange Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Beneficial Ownership Limitation (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares. Furthermore, the Company shall indemnify the Holder in accordance with the Purchase Agreement, if the Holder suffers any damages, claims or losses as a result of Excess Shares being issued to the extent due to any fault or negligence of the Company. Upon delivery of a written notice to the Company, the Holder may from time to time increase (with such increase not effective until the 61st day after delivery of such notice) or decrease the Beneficial Ownership Limitation to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of this Note in excess of the Beneficial Ownership Limitation shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the Exchange Act. No prior inability to convert this Note pursuant to this Section 3.2(e) shall have any effect on the applicability of the provisions of this Section 3.2(e) with respect to any subsequent determination of convertibility. The provisions of this Section 3.2(e) shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 3.2(e) to the extent necessary to correct any provision which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 3.2(e) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this Section 3.2(e) may not be waived and shall apply to a successor holder of this Note. In connection with each conversion of this Note, the Holder shall represent that it is not exceeding the Beneficial Ownership Limitation as a result of such conversion.
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(f) If shares of Common Stock are not delivered within the Standard Settlement Period in accordance with this Note as a result of any action or inaction by the Company’s Transfer Agent, then the Holder shall have the right, by giving 30 days’ advance written notice, to require the Company to terminate the Transfer Agent and hire a replacement Transfer Agent, and the Company shall use its best efforts to effect such replacement as soon as possible and by the end of such 30-day period.
3.3 Adjustment of Fixed Conversion Price.
(a) Until this Note has been paid in full or converted in full, the Fixed Conversion Price shall be subject to adjustment from time-to-time, and the Floor Price shall be subject to adjustment solely as to Section 3.3(a) (but in either case shall not be increased, other than pursuant to a combination) as follows:
(i) Adjustments for Stock Splits and Combinations. If the Maker shall at any time or from time-to-time after the Original Issuance Date effect a forward stock split of the outstanding Common Stock or pays a dividend or distribution in Common Stock to holders of its Common Stock, the applicable Fixed Conversion Price in effect immediately prior to such event shall be proportionately decreased. If the Maker shall at any time or from time-to-time after the Original Issuance Date, effect a combination or reverse stock split of the outstanding Common Stock, the applicable Fixed Conversion Price in effect immediately prior to such event shall be proportionately increased. Any adjustments under this Section 3.3(a)(i) shall be effective at the close of business on the date the applicable event occurs, which will be the date the applicable event is effective under Cayman Islands law and concurrently is reflected on the books and records of the Transfer Agent and in the trading of the Common Stock on the Principal Market (the “Event Date”). If at any time or from time-to-time after the Original Issuance Date the Maker effects a forward stock split, stock dividend, stock combination, reverse stock split, recapitalization or other similar transaction and the Event Market Price (as defined below) is less than the Fixed Conversion Price then in effect (after giving effect to the adjustment in this Section 3.3(a)(i) above), then on the fifth Trading Day immediately following the applicable Event Date, the Fixed Conversion Price then in effect on such fifth Trading Day (after giving effect to the adjustment in this Section 3.3(a)(i) 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 Fixed Conversion Price hereunder, no adjustment shall be made. “Event Market Price” means, with respect to any event described in this Section 3.3(a)(i), the quotient determined by dividing (x) the sum of the VWAP of the shares of Common Stock for each of the five Trading Days following the applicable Event Date divided by (y) five. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, reverse stock split, recapitalization or other similar transaction during such period.
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(ii) Adjustments for Certain Dividends and Distributions. If the Maker shall at any time or from time to time after the Closing Date (but whether before or after the Original Issuance Date) make or issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in Common Stock, then, and in each event, the applicable Fixed Conversion Price in effect immediately prior to such event shall be decreased as of the time of such issuance or, in the event such record date shall have been fixed, as of the close of business on such record date, by multiplying the applicable Fixed Conversion Price then in effect by a fraction:
(1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and
(2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.
(iii) Adjustment for Other Dividends and Distributions. If the Maker shall at any time or from time to time after the Closing Date (but whether before or after the Original Issuance Date) make or issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in other Common Stock, then, and in each event, an appropriate revision to the applicable Fixed Conversion Price shall be made and provision shall be made (by adjustments of the Fixed Conversion Price or otherwise) so that the Holder of this Note shall receive upon conversions thereof, in addition to the number of shares of Common Stock receivable thereon, the number of securities of the Maker or other issuer (as applicable) or other property that it would have received had this Note been converted into Common Stock in full (without regard to any conversion limitations herein) on the date of such event and had thereafter, during the period from the date of such event to and including the Conversion Date, retained such securities (together with any distributions payable thereon during such period) or assets, giving application to all adjustments called for during such period under this Section 3.3(a)(iii) with respect to the rights of the holders of this Note; provided, however, that if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Fixed Conversion Price shall be adjusted pursuant to this Section 3.3(a)(iii) as of the time of actual payment of such dividends or distributions.
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(iv) Adjustments for Reclassification, Exchange or Substitution. If the Common Stock at any time or from time to time after the Closing Date (but whether before or after the Original Issuance Date) shall be changed to the same or different number of shares or other securities of any class or classes of stock or other property, whether by reclassification, exchange, substitution or otherwise (other than by way of a stock split or combination of shares or stock dividends provided for in Sections 3.3(a)(i), (ii) and (iii) hereof), then, and in each event, an appropriate revision to the Fixed Conversion Price shall be made and provisions shall be made (by adjustments of the Fixed Conversion Price or otherwise) so that the Holder shall have the right thereafter to convert this Note into the kind and amount of shares of stock or other securities or other property receivable upon reclassification, exchange, substitution or other change, by holders of the number of shares of Common Stock into which such Note might have been converted immediately prior to such reclassification, exchange, substitution or other change, all subject to further adjustment as provided herein.
(v) Rights Upon Issuance of Other Securities.
(1) Adjustment of Fixed Conversion Price upon Issuance of Common Stock. If and whenever on or after the Original Issuance Date the Company issues or sells, or in accordance with this Section 3.3(a)(v) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Exempt Issuance for a consideration per share (the “Dilutive Issuance Price”) less than a price equal to the Fixed Conversion Price in effect immediately prior to such issuance or sale or deemed issuance or sale (such Fixed 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 Fixed Conversion Price then in effect shall be reduced to the lower of (i) an amount equal to the Dilutive Issuance Price, or (ii) (A) the VWAP on the Trading Day following the first public disclosure of the Dilutive Issuance. For the purposes of this Section 3.3(a)(v), the “Trading Day following the first public disclosure of the Dilutive Issuance” shall be: (I) if an announcement of the Dilutive Issuance is made before 9:00 am New York, N.Y. time on a Trading Day, the day of the announcement, and (II) if the announcement made after 9:00 am New York, N.Y. time on a Trading Day or is made on a day which is not a Trading Day, the next Trading Day following such announcement. For all purposes of the foregoing (including, without limitation, determining the adjusted Fixed Conversion Price and the Dilutive Issuance Price under this Section 3.3(a)(v)), the following shall be applicable:
(2) Issuance of Options. If the Company in any manner grants or sells any options or rights to acquire Common Stock or Convertible Securities (“Options”) (other than pursuant to any Exempt Issuance) 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 or sale of such Option for such price per share, excluding any transactions involving an Exempt Issuance. For purposes of this Section 3.3(a)(v) 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 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 or (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 (on a fully-diluted basis) upon the granting 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 received or receivable by, or benefit conferred on, the holder of such Option (or any other Person) with respect to any one share of Common Stock (on a fully-diluted basis). Except as contemplated below, no further adjustment of the Fixed 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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(3) Issuance of Convertible Securities. If the Company in any manner issues or sells 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 of such Convertible Securities for such price per share. For the purposes of this Section 3.3(a)(v), 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 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 (on a fully-diluted basis) upon the issuance or sale of such Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Convertible Security (or any other Person) with respect to any one share of Common Stock (on a fully-diluted basis). Except as contemplated below, no further adjustment of the Fixed 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 Fixed Conversion Price has been or is to be made pursuant to other provisions of this Section 3.3(a)(v), except as contemplated below, no further adjustment of the Fixed Conversion Price shall be made by reason of such issuance or sale.
(4) 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 decreases at any time (other than proportional changes in connection with an event referred to Section 3.3(a)(i) above), the Fixed Conversion Price in effect at the time of such decrease shall be adjusted to the Fixed Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such decreased purchase price, additional consideration or decreased conversion rate (as the case may be) at the time initially granted, issued or sold. For purposes of this Section 3.3(a)(v), if the terms of any Option or Convertible Security that was outstanding as of the Original Issuance Date are 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 decrease. No adjustment pursuant to this Section 3.3(a)(v) shall be made if such adjustment would result in an increase of the Fixed Conversion Price then in effect.
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(5) Issuances of Units. If any Option and/or Convertible Security and/or 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 Holder, the “Primary Security”, and such Option and/or Convertible Security , the “Secondary Securities”), 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 “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” with respect to such Primary Security shall be deemed to be equal to (1) the lowest price per share for which one share of Common Stock was issued (or was deemed to be issued pursuant to this Section 3.3(a)(v), as applicable) in such integrated transaction solely with respect to such Primary Security, minus (2) with respect to such Secondary Securities, the sum of (x) the VWAP of the number of shares of Common Stock underlying each such Secondary Security which accompanies one share of Common Stock in respect of the Primary Security on a fully-diluted basis, if any, and (y) the fair market value (as mutually determined by the Holder and the Company) of such Convertible Security, if any, in each case, as determined on a per share basis in accordance with this Section 3.3(a)(v). If any shares of Common Stock, Options (other than Exempt Issuances) or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security) will be deemed to be the net amount of consideration received by the Company therefor. If any shares of Common Stock, Options (other than Exempt Issuances) or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security) 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 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 (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security) 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 Holder. If such parties are unable to reach agreement within 10 days after the occurrence of an event requiring valuation (the “Valuation Event”) in this Section 3.3(a)(v)(5), the fair value of such consideration will be determined within five Trading Days after the 10th day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the 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. For the avoidance of doubt, in the event of a transaction provided in this Section 3.3(a)(v)(5), the calculation of the consideration per share for the Secondary Securities shall be as provided in Section 3.3(a)(v)(2) and/or (3), as applicable.
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(6) 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); provided, however, that, if the Company shall at any time set a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or to subscribe for or purchase shares of Common Stock, Options or in Convertible Securities and (A) such dividend is not fully paid or if such distribution is not fully made, or the subscription rights are not fully granted, on the date fixed therefor, the Fixed Conversion Price shall be adjusted pursuant to this Section 3.3(a)(v) as of the time of actual payment of such dividends or distributions or the effectiveness of such subscription rights or (B) the Company shall subsequently rescind or otherwise cancel or determine not to make such dividend or distribution or to grant such subscription rights, then any adjustment to the Fixed Conversion Price made pursuant to this Section 3.3(a)(v) with respect to the fixing of such record date shall be reversed and of no further force or effect as of the date of the Company’s public announcement that it is rescinding or otherwise canceling or determining not making such dividend or distribution or the grant of such subscription rights.
(b) Fractional Shares. 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. If any adjustments to the Fixed Conversion Price under this Section 3.3 result in a fractional amount, the fractional amount shall be rounded down to the nearest whole cent.
(c) No Impairment. The Maker shall not, directly or indirectly, by amendment of its Memorandum and Articles or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Maker, but will at all times in good faith assist in the carrying out of all the provisions of this Section 3.3 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the Holder against impairment. In the event the Holder shall elect to convert this Note as provided herein, the Maker cannot refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, violation of an agreement to which the Holder is a party or for any reason whatsoever, unless, an injunction from a court on prior notice, enjoining conversion of this Note shall have issued and the Maker posts a surety bond for the benefit of the Holder in an amount equal to 150% of the Principal of the Note which the Holder has elected to convert, which bond shall remain in effect until the completion of litigation of the dispute and the proceeds of which shall be payable to the Holder (as liquidated damages) in the event it obtains judgment.
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(d) Certificates as to Adjustments. Upon occurrence of each adjustment or readjustment of the Fixed Conversion Price or number of shares of Common Stock issuable upon conversion of this Note pursuant to this Section 3.3, the Maker at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Holder a certificate setting forth such adjustment and readjustment, showing in detail the facts upon which such adjustment or readjustment is based. The Maker shall, upon written request of the Holder, at any time, furnish or cause to be furnished to the Holder a like certificate setting forth such adjustments and readjustments, the applicable Fixed Conversion Price in effect at the time, and the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon the conversion of this Note. Notwithstanding the foregoing, the Maker shall not be obligated to deliver a certificate unless such certificate would reflect an increase or decrease of at least one percent of such adjusted amount.
(e) Issuance Taxes. The Maker shall pay any and all issuance and other taxes, excluding federal, state or local income taxes, that may be payable in respect of any issue or delivery of Common Stock on conversion of this Note pursuant thereto; provided, however, that the Maker shall not be obligated to pay any transfer taxes resulting from any transfer requested by the Holder in connection with any such conversion.
(f) Reservation of Common Stock. The Maker shall at all times while this Note shall be outstanding, reserve and keep available out of its authorized but unissued Common Stock the Required Minimum of Common Stock (disregarding for this purpose any and all limitations of any kind on such conversion). The Maker shall, from time-to-time, increase the authorized number of shares of Common Stock or take other effective action if at any time the unissued number of authorized shares shall not be sufficient to satisfy the Maker’s obligations under this Section 3.3(f).
(g) Regulatory Compliance. If any Common Stock to be reserved for the purpose of conversion of this Note requires registration or listing with or approval of any Governmental Authority, national securities exchange or other regulatory body under any federal or state law or regulation or otherwise before such shares may be validly issued or delivered upon conversion, the Maker shall, at its sole cost and expense, in good faith and as expeditiously as possible, secure such registration, listing or approval, as the case may be.
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3.4 Rights Upon Fundamental Transaction
(a) Assumption. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Person (which may be the Company) formed by, resulting from or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction shall have been entered into (the “Successor Entity”) assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this Section 3.4(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 the Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Note, including, without limitation, having Principal and Interest equal to the Principal then outstanding and any accrued and unpaid Interest thereon (if any) of the Note held by the Holder, having similar conversion rights as the Note and having similar ranking and security to the Note, and satisfactory to the Holder 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 any eligible market listed in the definition of Trading Market in the Purchase Agreement. 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 Note and the other Transaction Documents referring to the “Company” or the “Maker” 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 Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion or prepayment of this Note at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock issuable upon the conversion or prepayment of the Note 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 the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of this Note), as adjusted in accordance with the provisions of this Note. Notwithstanding the foregoing, the Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 3.4(a) to permit the Fundamental Transaction without the assumption of this Note. The provisions of this Section 3.4(a) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.
(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 the Holder will thereafter have the right to receive upon a conversion of this Note, at the Holder’s option, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note) 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 the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion price for such consideration commensurate with the Conversion Price. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section 3.4(b) shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or prepayment of this Note.
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(c) Prepayment Following a Change of Control. No later than 15 days following the entry by the Company into an agreement for a Change of Control but in no event prior to the public announcement of such Change of Control, the Maker shall deliver written notice describing the entry into such agreement (“Notice of Change of Control”) to the Holder. Within 15 days after receipt of a Notice of Change of Control, the Holder may require the Maker to prepay, effective immediately prior to the consummation of such Change of Control, an amount equal to 100% of the sum of (x) the outstanding Principal of this Note and (y) and any accrued and unpaid Interest thereon (if any) (the “COC Repayment Price”), by delivering written notice thereof (“Notice of Prepayment at Option of Holder Upon Change of Control”) to the Maker.
(d) Payment of COC Repayment Price. Upon the Maker’s receipt of a Notice(s) of Prepayment at Option of Holder Upon Change of Control from the Holder, the Maker shall deliver the COC Repayment Price to the Holder immediately prior to the consummation of the Change of Control; provided, that the Holder’s original Note shall have been so delivered to the Maker.
3.5 Inability to Fully Convert.
(a) Holder’s Option if Maker Cannot Fully Convert. If, upon the Maker’s receipt of a Conversion Notice or as otherwise required under this Note, including with respect to repayment of Principal and any accrued and unpaid Interest thereon (if any) in Common Stock as permitted under this Note, the Maker cannot issue Common Stock for any reason, including, without limitation, because the Maker (x) does not have a sufficient number of shares of Common Stock authorized and available, (y) is precluded from issuing Conversion Shares due to (A) the Beneficial Ownership Limitation or (B) a failure to obtain Shareholder Approval in accordance with the Rules of the Trading Market, or (z) is otherwise prohibited by applicable law or by the rules or regulations of any national securities exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Maker or any of its securities from issuing all of the shares of Common Stock which are to be issued to the Holder pursuant to this Note, then the Maker shall issue as many shares of Common Stock as it is able to issue and, with respect to the unconverted portion of this Note or with respect to any Common Stock not timely issued in accordance with this Note, the Holder, solely at Holder’s option, can elect to do the following which shall be in addition to and not instead of any other rights or provisions set forth herein or in any other Transaction Document:
(i) (other than in the case of failure due to clause (y)(A) above and without duplication with Section 3.2(c)) require the Maker to prepay that portion of this Note for which the Maker is unable to issue Common Stock or for which Common Stock were not timely issued (the “Mandatory Prepayment”) at a price equal to the Mandatory Prepayment Price;
(ii) void its Conversion Notice and retain or have returned, as the case may be, this Note that was to be converted pursuant to the Conversion Notice (provided, that the Holder’s voiding its Conversion Notice shall not affect the Maker’s obligations to make any payments which have accrued prior to the date of such notice); or
(iii) defer issuance of the applicable Conversion Shares until such time as the Maker can legally issue such shares; provided, that the Principal and any accrued and unpaid Interest thereon (if any) underlying such Conversion Shares shall remain outstanding until the delivery of such Conversion Shares; and provided, further, that if the Holder elects to defer the issuance of the Conversion Shares, it may exercise its rights under either clause (i) or (ii) above at any time prior to the issuance of the Conversion Shares upon one Trading Day’s notice to the Maker.
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(b) Mechanics of Fulfilling Holder’s Election. The Maker shall immediately send to the Holder, upon receipt of a Conversion Notice from the Holder that cannot be fully satisfied as described in Section 3.5(a) above, a notice of the Maker’s inability to fully satisfy the Conversion Notice (the “Inability to Fully Convert Notice”). Such Inability to Fully Convert Notice shall indicate (i) the reason why the Maker is unable to fully satisfy the Holder’s Conversion Notice; and (ii) the amount of this Note which cannot be converted. The Holder shall notify the Maker of its election pursuant to Section 3.5(a) above by delivering written notice to the Maker (“Notice in Response to Inability to Convert”).
(c) Payment of Mandatory Prepayment Price. If the Holder shall elect to have its Note prepaid pursuant to Section 3.5(a)(i) above, the Maker shall pay the Mandatory Prepayment Price to the Holder within five Trading Days of the Maker’s receipt of the Holder’s Notice in Response to Inability to Convert; provided, that prior to the Maker’s receipt of the Holder’s Notice in Response to Inability to Convert the Maker has not delivered a notice to the Holder stating, to the satisfaction of the Holder, that the event or condition resulting in the Mandatory Prepayment has been cured and all Conversion Shares issuable to the Holder can and will be delivered to the Holder in accordance with the terms of this Note. If the Maker shall fail to pay the applicable Mandatory Prepayment Price to the Holder on the date that is two Trading Days following the Maker’s receipt of the Holder’s Notice in Response to Inability to Convert, in addition to any remedy the Holder may have under this Note and the Purchase Agreement, such unpaid amount shall bear interest at the Default Rate (prorated for partial months) until paid in full. Until the full Mandatory Prepayment Price is paid in full to the Holder, the Holder may (i) void the Mandatory Prepayment with respect to that portion of the Note for which the full Mandatory Prepayment Price has not been paid and (ii) receive back such Note.
3.6 Purchase Rights. If at any time the Company grants, issues or sells any Options, other Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note and assuming for such purpose that the Note was converted at the Applicable Conversion Price as of the applicable record date) 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, that to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder and the other Attribution Parties exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to the extent of the Beneficial Ownership Limitation (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 the 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 the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Beneficial Ownership Limitation, at which time or times the 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).
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3.7 No Rights as Shareholder. Nothing contained in this Note shall be construed as conferring upon the Holder, prior to the conversion of this Note, the right to vote or to receive dividends or to consent or to receive notice as a shareholder of the Company in respect of any meeting of shareholders for the election of directors of the Maker or of any other matter, or any other rights as a shareholder of the Maker.
ARTICLE 4
4.1 Covenants. For so long as any Principal of this Note remains outstanding, unless Holder has otherwise given prior written consent, the Company shall be bound by the following covenants:
(a) Rank. All payments due under this Note shall rank senior to all other Indebtedness of the Company and its Subsidiaries, except for the Other Note(s) with which payments under this Note shall rank pari passu. For the avoidance of doubt, the Company shall not create secured Indebtedness which ranks senior to this Note and the Other Note(s) without the Holder’s written consent.
(b) Incurrence of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, incur or guarantee or assume any Indebtedness, other than Permitted Indebtedness.
(c) 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, deed of trust, 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.
(d) Restricted Payments. Except as otherwise provided for in this Note or the other Transaction Documents, the Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, prepay, 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 than the Note and the Other Note(s)) whether by way of payment in respect of principal of (or premium, if any) or Interest on, such Indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, (i) an event constituting an Event of Default has occurred and is continuing or (ii) an event that with the passage of time and without being cured would constitute an Event of Default has occurred and is continuing.
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(e) Restriction on Prepayment and Cash Dividends. At any time that an Event of Default exists and is continuing under this Note, the Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, prepay, repurchase or declare or pay any cash dividend or other distribution on any of its capital stock excluding any intercompany transfers.
(f) 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, 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 products in the ordinary course of business, and (iii) sales of unwanted or obsolete assets.
(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, other than any Subsidiaries that hold no or de minimis assets.
(h) Maintenance of Properties, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its 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 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 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 of the Company and/or any of its Subsidiaries, in each case 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 by companies in similar businesses similarly situated. Within 30 days of the Original Issuance Date, the Company shall have in effect a directors and officers liability insurance policy in an amount at least equal to the total aggregate Subscription Amount contemplated by the Purchase Agreement, and maintain such insurance policy at all times.
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(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 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.
(l) Dividends. The Company shall not, nor shall it permit any of its Subsidiaries to, pay dividends and other distributions, other than dividends or distributions to the Company or any of its Subsidiaries and, in the case of any non-wholly owned Subsidiary, a dividend or distribution to its equity holders in which the Company or one of its Subsidiaries participates pro rata according to its equity ownership in such Subsidiary.
(m) Use of Proceeds. The Maker shall use the proceeds of this Note as set forth in the Purchase Agreement.
(n) Operation of Business. The Company shall operate its business in the ordinary course consistent with past practices.
(o) Compliance with Transaction Documents. The Maker shall, and shall cause its Subsidiaries to, comply with its obligations under this Note and the other Transaction Documents.
(p) Payment of Taxes, Etc. The Maker shall, and shall cause each of its Subsidiaries to, promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Maker and the Subsidiaries, except for such failures to pay that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect; provided, however, that any such tax, assessment, charge or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Maker or such Subsidiaries shall have set aside on its books adequate reserves with respect thereto, and provided, further, that the Maker and such Subsidiaries will pay all such taxes, assessments, charges or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefor.
(q) Variable Rate Transactions. The Company shall not enter into any Variable Rate Transactions.
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4.2 Option of the Holder. In connection with the number of Trading Days referred to in Sections 3.1(b), 3.1(e) 3.3(a)(i), 5.12(d) and 5.12(xx) of this Note, the Holder shall have the option to add the number of Trading Days for which a temporary “chill” has been in effect as specified in the Purchase Agreement.
4.3 Subsidiary Guaranty. If the Company organizes or acquires a new Subsidiary, the Company shall, within five Trading Days of such organization or acquisition, cause the new Subsidiary to become a party to, and to guarantee the Note pursuant to, a Guarantee Agreement in the form reasonable satisfactory to the Holder.
4.4 Pre-Delivery Shares.
(a) General. The Pre-Delivery Shares (as defined in the Purchase Agreement) are intended to be and, if so elected by the Holder in accordance herewith, are and shall be used by the Holder as Conversion Shares issuable hereunder. By accepting this Note, the Holder hereby agrees and acknowledges that it does not have the right to sell, assign, pledge, transfer, dispose of, swap, hedge, vote, enter into any derivative transaction or similar transaction involving, or enter into an agreement to engage in any of the foregoing with respect to, the Pre-Delivery Shares or any rights or interests therein or incident thereto, other than (x) proportionally in connection with any transfer in whole, or in part, as applicable, of this Note to any other Person or (y) in accordance with this Section 4.4. While this Note remains outstanding, the Holder’s only right with respect to the Pre-Delivery Shares is to cause the Transfer Agent upon a conversion of this Note or exercise of the Holder’s Warrant to transfer the applicable Underlying Shares to the Holder’s prime broker or directly to a third party purchaser of such Underlying Shares.
(b) Application of Pre-Delivery Shares; Delivery Shares. At any time the Company is required to deliver shares of Common Stock to the Holder hereunder (such shares of Common Stock, each a “Delivery Share” and together the “Delivery Shares”), whether upon conversion or otherwise, and the Holder (or its designee) holds one or more Pre-Delivery Shares, the Holder may in its discretion use (each, a “Delivery Share Application”) one or more Pre-Delivery Shares, on a share-for-share basis, as available, and the Transfer Agent shall upon the written authorization of the Holder deliver the Pre-Delivery Shares in lieu of the issuance and delivery of new Conversion Shares on behalf of the Holder as provided in Section 4.4(a), against the aggregate number of shares required to then be delivered by the Company to the Holder hereunder (such aggregate number of shares subject to such Delivery Share Application, each a “Delivery Share Application Amount”); provided, however, that if following and notwithstanding the Company’s best efforts to adhere to the provisions of this Note and to issue and cause the Transfer Agent to process an applicable conversion and the issuance of Conversion Shares pursuant thereto without the use of Pre-Delivery Shares, the Company notifies the Holder in writing, that conversion of the Pre-Delivery Shares is necessary to avoid the occurrence of a Conversion Failure under Section 3.2 or an inability to fully convert under Section 3.5, then the Holder will use a Delivery Share Application to the extent necessary to avoid such Conversion Failure or inability to fully convert. At the time of a Delivery Share Application, each such applied Pre-Delivery Share shall cease to be a Pre-Delivery Share hereunder and shall become a Delivery Share hereunder (with such Delivery Share Applicable Amount of shares issued (or issuable) in such conversion becoming Pre-Delivery Shares upon such issuance and delivery to the Holder); provided, that if the aggregate Pre-Delivery Shares held by the Holder is greater than or equal to the shares then issuable upon a conversion of this Note, upon any subsequent conversion of this Note, in lieu of the issuance and delivery of new Delivery Shares to the Holder, the Holder may use each such applicable Pre-Delivery Share, on a share-by-share basis with respect to such aggregate number of Delivery Shares otherwise issuable in such conversion of this Note, and each such applied Pre-Delivery Share shall cease to be a Pre-Delivery Share hereunder and shall become a Delivery Share hereunder in satisfaction of the Company’s obligation to deliver such Delivery Share to the Holder in such applicable conversion. For the avoidance of doubt, any such treatment with respect to a subsequent conversion shall be deemed to be a “Delivery Share Application.” The terms “Delivery Shares” and “Conversion Shares” are used interchangeably in this Note and in each case refer to the shares of Common Stock issuable upon conversion of this Note.
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(c) Limitations on Dividends and Distributions; Certain Adjustments. The Holder and the Company hereby agree that, without limiting any rights of the Holder hereunder in its capacity as the holder of this Note (including, without limitation, pursuant to Article V herein, which shall not be amended, modified or waived hereunder as a result of this Section 4.4(c) and shall remain in full force and effect), the Holder acknowledges it is not entitled to receive any cash or other dividends or distributions that may be declared or paid by the Company with respect to such Pre-Delivery Shares (other than as set forth in Section 3.3(a)(ii) of this Note); provided, that this Section 4.4(c) shall cease to apply to any applicable Pre-Delivery Share at such time as such Pre-Delivery Share becomes a Delivery Share as a result of a Delivery Share Application hereunder (provided, further, that nothing in this Section 4.4(c) shall amend, modify or waive any term or condition of Article III above, which shall remain in full force and effect notwithstanding the applicability of this Section 4.4(c) to any shares of Common Stock of the Company). Notwithstanding anything herein to the contrary, the Pre-Delivery Shares shall be subject to equitable adjustment with respect to any stock split, stock dividend, reverse stock split or stock combination, recapitalization or similar corporate event, without duplication of Section 3.3(a)(ii) of this Note.
(d) True-Up of Pre-Delivery Shares. If at any time the product of (A) the number of Pre-Delivery Shares then listed in the transfer records of the Company in the name of the Holder and (B) the VWAP then in effect is less than 33.3% of the Principal of this Note then outstanding, the Company shall issue to such account additional Pre-Delivery Shares in an amount necessary such that the dollar value of the Pre-Delivery Shares in such account giving effect to such issuance equals at least 33.3% of the Principal of this Note then outstanding, provided, however, that in no event shall any issuance exceed the Beneficial Ownership Limitation, and in the event such issuance would otherwise result in the Beneficial Ownership Limitation being exceeded, the Excess Shares shall be held in abeyance for the benefit of the Holder until such time or times, if ever, as such issuance and the Holder’s right thereto would not result in the Holder and its Affiliates exceeding the Beneficial Ownership Limitation, at which time or times the Company shall issue such Excess Shares to the Holder whereupon such Excess Shares shall become Pre-Delivery Shares that are subject to this Section 4.4 and the corresponding provisions of this Note, the Holder’s Warrant and the Purchase Agreement.
(e) Surrender and Cancellation of Pre-Delivery Shares. By accepting this Note, the Holder acknowledges and agrees that if the transfer records of the Company reflect that Pre-Delivery Shares are listed in the Holder’s name on the date immediately following six months after this Note is no longer outstanding, the Company shall cause the Transfer Agent to cancel such remaining Pre-Delivery Shares.
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(f) Beneficial Ownership Limitation for Pre-Delivery Shares. Notwithstanding anything herein to the contrary, Pre-Delivery Shares shall not become Delivery Shares, and the Holder shall not be deemed to beneficially own the Pre-Delivery Shares, to the extent such event would result in the Beneficial Ownership Limitation being exceeded, and in such case any such shares shall be held in abeyance in in the same manner as set forth in Section 4.4(d) of this Note. Although the Holder is not a beneficial owner of the Pre-Delivery Shares, out of an abundance of caution if any Conversion Notice delivered under this Note provides for a number of Conversion Shares which, together with the Pre-Delivery Shares (assuming for this purpose that the Pre-Delivery Shares are beneficially owned by the Holder), would cause the Holder to exceed the Beneficial Ownership Limitation, such Conversion Notice shall be deemed to be for such lesser amount of Principal and Conversion Shares so converted so as to cause the Holder to remain below the Beneficial Ownership Limitation after giving to such conversion, and any Excess Shares shall not be issued and shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares.
ARTICLE 5
5.1 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be given as provided in the Purchase Agreement.
5.2 Governing Law; Exclusive Jurisdiction. All questions arising under or concerning the construction, interpretation, validity, enforcement and defense of this Note shall be governed by and construed and enforced in accordance with the Purchase Agreement and all Actions arising under or concerning the construction, interpretation, validity, enforcement and defense of this Note shall only be brought in the courts specified in the Purchase Agreement.
5.3 Headings. Article and Section headings in this Note are included herein for purposes of convenience of reference only and shall not constitute a part of this Note for any other purpose.
5.4 Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including, without limitation, a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder’s right to pursue actual damages for any failure by the Maker to comply with the terms of this Note. 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 the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Maker (or the performance thereof). The Maker acknowledges that a breach by it of its obligations hereunder will cause irreparable and material harm to the Holder and that the remedy at law for any such breach would be inadequate. Therefore, the Maker agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available rights and remedies, at law or in equity, to seek equitable relief, including but not limited to an injunction restraining any such breach or threatened breach, without the necessity of pleading and proving irreparable harm or lack of an adequate remedy at law and without any bond or other security being required.
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5.5 Enforcement Expenses. The Maker agrees to pay all costs and expenses of the Holder in exercising or enforcing its rights under this Note, including, without limitation, reasonable attorneys’ fees and expenses and the fees and expenses of any expert witnesses.
5.6 Binding Effect. The obligations of the Maker set forth herein shall be binding upon its successors and assigns, whether or not such successors or assigns are permitted by the terms herein.
5.7 Amendments; Waivers. Except for Section 3.2(e), which may not be amended, modified or waived by the Company or the Holder except as expressly set forth therein, no provision of this Note may be waived or amended except in a written instrument signed by the Company and the Holder. No waiver of any default with respect to any provision, condition or requirement of this Note shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of the Holder to exercise any right hereunder in any manner impair the exercise of any such right.
5.8 Compliance with Securities Laws. The Holder of this Note acknowledges that this Note is being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder shall not offer, sell or otherwise dispose of this Note in violation of applicable securities laws.
5.9 Failure or Indulgence Not Waiver. No failure or delay on the part of the 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.
5.10 Maker Waivers. Except as otherwise specifically provided herein, the Maker and all others that may become liable for all or any part of the obligations evidenced by this Note, hereby waive presentment, demand, notice of nonpayment, protest and all other demands’ and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and do hereby consent to any number of renewals of extensions of the time or payment hereof and agree that any such renewals or extensions may be made without notice to any such persons and without affecting their liability herein and do further consent to the release of any person liable hereon, all without affecting the liability of the other persons, firms or Maker liable for the payment of this Note, and do hereby waive the right to a trial by jury.
5.11 Definitions. Capitalized words and phrases used herein and not defined and which are not descriptive shall have the meanings set forth in the Purchase Agreement. For the purposes hereof, the following terms shall have the following meanings.
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(a) “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.
(b) “Alternative Conversion Price” means 90% of the lowest daily VWAP in the 10 Trading Days immediately preceding the applicable Conversion Date (as adjusted for the 2026 Reverse Split, where applicable), provided, however, that if an Event of Default has occurred, “90%” shall be replaced with “80%” for all purposes of this definition and Note, and provided further, that if any Alternative Conversion Price under this definition results in a fractional amount, the fractional amount shall be rounded down to the nearest whole cent.
(c) “Alternate Conversion Floor Amount” has the meaning contained in Section 3.1(e).
(d) “Applicable Conversion Price” has the meaning contained in Section 3.1(a).
(e) “Applicable Price” has he meaning contained in Section 3.3(a)(v).
(f) “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 Original Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the 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 the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the Exchange Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Beneficial Ownership Limitation.
(g) “Beneficial Ownership Limitation” has the meaning contained in Section 3.2(e).
(h) “Buy-In” has the meaning contained in Section 3.2(c)
(i) “Buy-In Price” has the meaning contained in Section 3.2(c)
(j) “Buy-In Payment Amount” has the meaning contained in Section 3.2(c)
(k) “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.
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(l) “COC Repayment Price” has the meaning contained in Section 3.4(c).
(m) “Common Stock” shall have the meaning as defined in the Purchase Agreement, and for the purposes of this Note, shall also refer to Conversion Shares unless otherwise apparent from the context.
(n) “Company” has the meaning contained on page 1 of this Note.
(o) “Conversion Amount” has the meaning contained in Section 3.1(a).
(p) “Conversion Date” has the meaning contained in Section 3.1(a).
(q) “Conversion Failure” has the meaning contained in Section 3.2(c).
(r) “Conversion Notice” has the meaning contained in Section 3.1(a).
(s) “Conversion Price” has the meaning contained in Section 3.1(b).
(t) “Conversion Shares” has the meaning contained in Section 3.2(a). In this Note, the use of Common Stock shall also refer to Conversion Shares unless otherwise apparent from the context.
(u) “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.
(v) “Corporate Event” has the meaning contained in Section 3.4(b).
(w) “Default Interest” has the meaning contained in Section 1.2
(x) “Default Interest Payment Date” has the meaning contained in Section 1.2.
(y) “Dilutive Issuance” has the meaning contained in Section 3.3(a)(v).
(z) “Dilutive Issuance Price” has the meaning contained in Section 3.3(a)(v).
(aa) “DTC” has the meaning contained in Section 3.2(a).
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(bb) “Equity Conditions” means, as of any given date of determination, all of the following have been met: (a) the Company has complied with all of the conversion and other provisions of the Notes and related Transaction Documents; (b) the Company shall be current in filing required reports with the SEC and there is no pending extension under Rule 12b-25 of the Exchange Act; (c) the Notes shall not be in default and an Event of Default shall not have otherwise occurred; (d) the Common Stock has not been subject to a trading suspension by the SEC or the Trading Market or been delisted by the Trading Market nor shall delisting or suspension by the Trading Market have been threatened or reasonably likely to occur or pending as evidenced by a writing issued by the Trading Market, nor shall the Company have received notice from its Trading Market of delisting or non-compliance with the rules, regulations and continued listing standards thereof even if subject to cure; (e) the Company’s Common Stock must be DWAC Eligible; (f) the Common Stock shall have not been subject to a “chill” or similar event imposed by The Depository Trust Co.; (g) the Company has met each delivery deadline in connection with prior conversions of the Notes; (h) the Company has complied with all Transaction Documents in all material respects; (i) the Company shall not have engaged in the sale of any securities under Section 3(a)(10) of the Securities Act; (j) 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 attorneys (except, with respect to a closing hereunder, where such material, non-public information that will be disclosed to the public no later than 9:00 AM New York, N.Y. time on the Trading Day immediately following the date of such closing); (k) the Registration Statement and Prospectus Supplement covering the Notes, Warrants and Underlying Shares, has been filed and declared effective within the timeframe provided for in the Agreement and the Prospectus contained in such Registration Statement complies with Sections 5(b) and 10 of the Securities Act (and the Company shall have no knowledge of any fact that would reasonably be expected to cause such Prospectus thereunder to not be true and correct or to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading); (l) any Underlying Shares to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Trading Market; (m) the Company has available shares of Common Stock as necessary to issue all Underlying Shares; (n) no bona fide material dispute shall exist by and between any of holder of the Notes and/or Other Notes and the Company, the Trading Market and/or the Financial Industry Regulatory Authority with respect to any term or provision of any Transaction Document; (o) the Company shall be in compliance with all SEC regulations and rules and all listing requirements of the Trading Market; and (p) the United States Congress shall not have adopted or enacted any Law which has become effective, (ii) The President of the United States has not issued an Executive Order, (iii) no cabinet level department of the United States shall have issued a proposed or final rule or regulation, and (iv) neither the SEC nor the Trading Market shall have issued a proposed or final rule or regulation, which Law, Executive Order or rule or regulation has the effect of limiting or banning trading by United States residents or citizens in the securities of companies which have their operations in the PRC, Kazakhstan or any other jurisdiction in which the Company operates or is present.
(cc) “Event Market Price” has the meaning contained in Section 3.3(a)(i).
(dd) “Event of Default” has the meaning contained in Section 2.1.
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(ee) “Excess Shares” has the meaning contained in Section 3.2(e)
(ff) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
(gg) “FAST” has the meaning contained in Section 3.2(a).
(hh) “Fixed Conversion Price” has the meaning contained in Section 3.1(b).
(ii) “Floor Price” means $2.156; provided, that effective on the six-month anniversary of the Original Issuance Date and each six-month anniversary thereafter, the Floor Price shall be automatically reduced, but in no event increased, to the lower of (A) 20% of the closing price of the Common Stock on such date and (B) 20% of the five-day VWAP for the five Trading Day period ending on such date; provided, further, that the Floor Price may never be lower than the then par value per one share of Common Stock.
(jj) “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 Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole to one or more Persons, or (iii) make, or allow one or more Persons to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Persons 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 Persons making or party to, or Affiliated with any Person or group of Persons 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 Persons making or party to, or Affiliated with any Person making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange 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 Persons whereby all such Persons, 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 Persons making or party to, or Affiliated with any Person 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 Persons become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange 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 Person individually or Persons in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange 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 Persons as of the date of this Note calculated as if any shares of Common Stock held by all such Persons 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 Persons 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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(kk) “Governmental Authority” means the government of the United States, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank, or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
(ll) “Group” means a “group” as that term is used in Section 13(d) of the Exchange Act and as defined in Rule 13d-5 thereunder.
(mm) “Holder” has the meaning contained on page 1 of this Note and includes any Person who has purchased a Note or portion of a Note.
(nn) “Inability to Fully Convert Notice” has the meaning contained in Section 3.5(b).
(oo) “Indebtedness” shall have the meaning contained in the Purchase Agreement.
(pp) “Interest” has the meaning contained in Section 1.2.
(qq) “Liens” has the meaning contained in Section 4.1(c).
(rr) “Liquidation Event” has the meaning contained in Section 1.5.
(ss) “Maker” has the meaning contained on page 1 of this Note.
(tt) “Mandatory Default Amount” means an amount equal to the sum of (x) the outstanding Principal of this Note on the date on which the first Event of Default has occurred hereunder and (y) any accrued and unpaid Interest thereon, if any.
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(uu) “Mandatory Prepayment” and “Mandatory Prepayment Price” have the meaning contained in Section 3.5(a)(i).
(vv) “Market Price” means the average of the two lowest closing bid prices of the Common Stock on the Trading Market for the 10 consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable date of determination.
(ww) “Maturity Date” has the meaning contained on page 1 of this Note.
(xx) “Note” has the meaning contained on page 1 of this Note.
(yy) “Notes” means this Note and the Other Note(s).
(zz) “Notice in Response to Inability to Convert” has the meaning contained in Section 3.5(b).
(aaa) “Notice of Change of Control” has the meaning contained in Section 3.4(c).
(bbb) “Notice of Prepayment at Option of Holder Upon Change of Control” has the meaning contained in Section 3.4(c).
(ccc) “Other Note(s)” means any Note(s) issued to other Investor(s) under the Purchase Agreement or their permitted assigns.
(ddd) “Permitted Indebtedness” means (a) the Indebtedness evidenced by this Note and the Other Note(s), (b) Indebtedness outstanding on the date of this Note, (c) intercompany Indebtedness between the Company and one or more of its Subsidiaries or between one or more of the Company’s Subsidiaries, (d) unsecured Indebtedness incurred after the issue date of this Note, so long as the total Indebtedness of the Company and its Subsidiaries, taken as a whole, does not exceed 5% of the market capitalization of the Ordinary Shares on the date such Indebtedness is incurred.
(eee) “Permitted Liens” means (i) Liens under the Transaction Documents, (ii) 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, (iii) 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, (iv) 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, (v) any Lien existing on the Original Issuance Date securing Indebtedness which is subordinated to the Note in right of payment, and (vi) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under this Note.
(fff) “Pricing Period” means the 10 Trading Days following the cure of an Event of Default as permitted by this Note.
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(ggg) “Primary Security” has the meaning contained in Section 3.3(a)(v)(5).
(hhh) “Principal” has the meaning contained on page 1 of this Note.
(iii) “Purchase Agreement” has the meaning contained in Section 1.1.
(jjj) “Purchase Rights” has the meaning contained in Section 3.5(d).
(kkk) “Reported Outstanding Share Number” has the meaning contained in Section 3.2 (e).
(lll) “Required Minimum” shall have the meaning contained in the Purchase Agreement.
(mmm) “SEC” means the United States Securities and Exchange Commission or the successor thereto.
(nnn) “Secondary Securities” has the meaning contained in Section 3.3(a)(v)(5).
(ooo) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
(ppp) “Share Delivery Date” has the meaning contained in Section 3.2(a).
(qqq) “Standard Settlement Period” has the meaning contained in Section 2.1(f).
(rrr) “Subsidiary” shall have the meaning contained in the Purchase Agreement.
(sss) “Successor Entity” has the meaning contained in Section 3.4(a).
(ttt) “Trading Day” means a day on which the shares of Common Stock are traded on a Trading Market for at least 4.5 hours.
(uuu) “Trading Market” has the meaning contained in the Purchase Agreement.
(vvv) “Transaction Documents” has the meaning contained in the Purchase Agreement.
(www) “Transfer Agent” has the meaning contained in Section 3.2 (a).
(xxx) “Underlying Shares” has the meaning contained in the Purchase Agreement.
(yyy) “Variable Rate Transactions” has the meaning contained in the Purchase Agreement.
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(zzz) “Voluntary Prepayment Premium” has the meaning set forth in Section 1.3.
(aaaa) “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on the Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York, N.Y. time) to 4:02 p.m. (New York, N.Y. time)), (b) if the Common Stock is traded on OTCQB or OTCQX, the volume weighted average sales price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock is then reported in the “Pink Open Market” or successor operated by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent broker-dealer selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
(bbbb) $ means United States dollars.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed by its duly authorized officer as of the date first above indicated.
| Zeta Network Group | ||
| By: | ||
| Name: | ||
| Title: | ||
Signature Page to Note
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EXHIBIT A
FORM OF CONVERSION NOTICE
(To be Executed by the Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $ ________________ of the Principal of Note No. ___ into shares of Class A Ordinary Shares (par value USD 0.25 per share) (“Common Stock”) of Zeta Network Group (the “Maker”) according to the terms and conditions set forth in the aforementioned Note, as of the date written below.
Date of Conversion:
Conversion Amount:
Applicable Conversion Price:
Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder following Conversion:
Number of shares of Common Stock to be issued:
| [HOLDER] | ||
| By: | ||
| Name: | ||
| Title: | ||
Address:
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Exhibit 99.4
CLASS A ORDINARY SHARES PURCHASE WARRANT
ZETA NETWORK GROUP
| Warrant Shares: [_______]1 | Original Issuance Date: March 12, 2026 |
THIS CLASS A ORDINARY SHARES PURCHASE WARRANT (the “Warrant”) certifies that, for value received, [_________], a [_________], or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after March 12, 2026 (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York, N.Y. time) on March 12, 2031 or such later date as the term has been extended pursuant to Section 2(e) (the “Termination Date”) but not thereafter, to subscribe for and purchase from Zeta Network Group, a Cayman Islands exempted company (the “Company”), up to [_________] Class A Ordinary Shares (“Common Stock”) of the Company (as subject to adjustment hereunder, the “Warrant Shares”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. Capitalized words and terms used and not otherwise defined herein and which are not otherwise descriptive shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated March 10, 2026 by and between the Company and the Holder.
Section 2. Exercise.
(a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in the form attached as Exhibit A hereto (the “Notice of Exercise”). Within two Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Notice of Exercise by wire transfer of immediately available funds to a designated Company account unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased (or in the case of a Cashless Exercise, the applicable number of Warrant Shares that would be purchased if the Holder had not elected a Cashless Exercise). The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
(b) Exercise Price. The exercise price per Common Stock under this Warrant shall be $18.51, subject to adjustment as provided herein (the “Exercise Price”). Notwithstanding anything herein to the contrary, at any time or times from and after the occurrence and during the continuance of any Event of Default (as defined in the Note), the Holder may elect to exercise all or any portion of this Warrant at an alternative Exercise Price equal to 80% of the VWAP for the Trading Day immediately preceding the date of such exercise.
| 1. | The number of Warrants will be equal to 50% of the Face Value divided by the daily VWAP prior to the applicable Closing Date, as adjusted for the 2026 Reverse Split. |
(c) Cashless Exercise. If at any time after the Initial Exercise Date there is no effective registration statement registering the Warrant Shares, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two hours thereafter (including until two hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the characteristics of the Warrants being exercised and the holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant Shares. The Company agrees not to take any position contrary to this Section 2(c).
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price per share of the Common Stock for the time in question (or the nearest preceding time) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York, N.Y. time) to 4:02 p.m. (New York, N.Y. time)), (b) if the Common Stock is traded on OTCQB or OTCQX, the volume weighted average sales price per share of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on The New York Stock Exchange, the NYSE American or any tier of The Nasdaq Stock Market (each, a “Trading Market”), the daily volume weighted average price per share of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock are then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York, N.Y. time) to 4:02 p.m. (New York, N.Y. time)), (b) if the Common Stock is traded on OTCQB or OTCQX , the volume weighted average sales price per share of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of an Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
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Notwithstanding anything contained herein to the contrary, subject to the Beneficial Ownership Limitation, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).
(d) Mechanics of Exercise.
(i) Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Company’s share transfer agent (the “Transfer Agent”) to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder, or (B) if there is no effective registration statement and the Warrant is exercised via cashless exercise at a time when such Warrant Shares would be eligible for resale under Rule 144 by a non-affiliate of the Company, such Warrant Shares are delivered to Holder’s broker, and the Company receives a statement from Holder’s broker that it has received instructions to sell the Warrant Shares or that it would take responsibility that the sales of the Warrant Shares will only be made if the Warrant Shares are eligible to be sold under Rule 144, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) three Trading Days after the delivery to the Company of the Notice of Exercise or (ii) one Trading Day after delivery of the aggregate Exercise Price to the Company (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within three Trading Days following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to use commercially reasonable efforts to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable.
(ii) Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
(iii) Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise by delivery of written notice to the Company prior to the Company’s successful transmission of the Warrant Shares.
(iv) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
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(v) No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
(vi) Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which transfer taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached as Exhibit B hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
(vii) Closing of Books. The Company will not close its shareholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
(e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, non-exercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or non-converted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of shares of outstanding Common Stock, a Holder may rely on the number of shares of outstanding Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice issued by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of shares of outstanding Common Stock shall be determined after giving effect to each conversion, exchange or exercise of securities of the Company including this Warrant by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this Section 2(e) shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
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In the event that the automatic exercise provision in Section 2(c) would cause the Holder to exceed the Beneficial Ownership Limitation, the Holder shall be deemed to have given notice of its election to increase the Beneficial Ownership Limitation to 9.99% 61 days prior to the Termination Date (to the extent such percentage is not already in effect as of such time). In such event this Warrant shall not terminate and shall subsequently continue to automatically exercise up to the 9.99% Beneficial Ownership Limitation until such time as the automatic exercises in full of the remaining Warrant Shares does not exceed the 9.99% Beneficial Ownership Limitation. For avoidance of doubt, by virtue of the preceding sentence there may be multiple automatic exercises, one automatic exercise which exercises the remaining Warrant Shares exercisable less that number of Warrant Shares which would otherwise cause the Holder to exceed the 9.99% Beneficial Ownership Limitation and one or more subsequent automatic exercises in which the remaining Warrant Shares are issued until all remaining Warrant Shares have been issued without the Holder exceeding the 9.99% Beneficial Ownership Limitation, after which this Warrant shall terminate.
Section 3. Certain Adjustments.
(a) Stock Dividends and Splits. If the Company, at any time after the Initial Exercise Date: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in Common Stock (which, for avoidance of doubt, shall not include any Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case (1) the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. For the avoidance of doubt, nothing in this Section 3(a) shall operate to limit or prevent the adjustments provided for in Section 3(h).
(b) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock except for the Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the Company or its affiliates’ employees, consultants, and/or management members (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(c) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise, other than cash (including, without limitation, any distribution of stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
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(d) Subsequent Equity Sales. Except in any case for Common Stock issued in an Exempt Issuance (as defined in the Purchase Agreement) to which this Section 3(d) shall not apply, if and whenever, at any time while any Warrants are outstanding, the Company issues, sells or grants or, in accordance with this Section 3, is deemed to have issued, sold, or granted, any Common Stock and/or Common Stock Equivalents (including the issuance, sale or grant of Common Stock owned or held by or for the account of the Company) for a consideration per share (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issuance, sale or grant or deemed issuance, sale or grant (such Exercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance the Exercise 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 Exercise Price and the New Issuance Price under this Section 3(d)), 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 (as defined below) and the lowest price per share for which one Common Stock is at any time issuable upon the exercise of any such Option (as defined below) or upon conversion, exercise, or exchange of any Common Stock Equivalents issuable upon exercise of any such Option (as defined below) or otherwise pursuant to the terms thereof is less than the Applicable Price, then such Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance, sale or grant of such Option (as defined below) for such price per share. For purposes of this Section 3(d)(i), the “lowest price per share for which one Common Stock is at any time issuable upon the exercise of any such Options (as defined below) or upon conversion, exercise or exchange of any Common Stock Equivalents issuable upon exercise of any such Option (as defined below) 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 (as defined below), upon exercise of such Option (as defined below) and upon conversion, exercise or exchange of any Common Stock Equivalents issuable upon exercise of such Option (as defined below) or otherwise pursuant to the terms thereof and (y) the lowest exercise price set forth in such Option (as defined below) for which one Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exercise of any such Options (as defined below) or upon conversion, exercise, or exchange of any Common Stock Equivalents issuable upon exercise of any such Option (as defined below) 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) upon the granting, issuance, or sale of such Option (as defined below), upon exercise of such Option (as defined below) and upon conversion, exercise, or exchange of any Common Stock Equivalents issuable upon exercise of such Option (as defined below) or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Option (as defined below) (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such Common Stock or of such Common Stock Equivalents upon the exercise of such Options (as defined below) or otherwise pursuant to the terms of or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents. “Option” means any rights, warrants or options to subscribe for or purchase Common Stock or Common Stock Equivalents.
(ii) Issuance of Common Stock Equivalents. If the Company in any manner issues or sells (or enters into any agreement to issue or sell) any Common Stock Equivalents (other than Options) 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 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 of such Common Stock Equivalents for such price per share. For the purposes of this Section 3(d)(ii), the “lowest price per share for which one 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 Common Stock upon the issuance or sale of the Common Stock Equivalents and upon conversion, exercise, or exchange of such Common Stock Equivalents or otherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Common Stock Equivalents for which one 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 Common Stock Equivalents (or any other Person) upon the issuance or sale of such Common Stock Equivalents plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Common Stock Equivalents (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such Common Stock upon conversion, exercise, or exchange of such Common Stock Equivalents or otherwise pursuant to the terms thereof, and if any such issuance or sale of such Common Stock Equivalents is made upon exercise of any Options for which adjustment of this Warrant has been or is to be made pursuant to other provisions of this Section 3(d), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of such issuance or sale.
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(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 Common Stock Equivalents, or the rate at which any Common Stock Equivalents are convertible into or exercisable or exchangeable for 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 3(a)), the Exercise Price in effect at the time of such increase or decrease shall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Common Stock Equivalents 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 3(d)(iii), if the terms of any Option or Common Stock Equivalents that was outstanding as of the date this Warrant was issued are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Common Stock Equivalents and the 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 3(d) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.
(iv) Change in Option Price or Rate of Conversion. If any Option and/or Common Stock Equivalents and/or Adjustment Right (as defined below) 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 Holder, the “Primary Security”, and such Option and/or Common Stock Equivalents and/or Adjustment Right (as defined below), the “Secondary Securities”), 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 Common Stock with respect to such Primary Security shall be deemed to be equal to the difference of (x) the lowest price per share for which one Common Stock was issued (or was deemed to be issued pursuant to Section 3(d)(i) or 3(d)(ii) above, as applicable) in such integrated transaction solely with respect to such Primary Security, minus (y) with respect to such Secondary Securities, the sum of (I) the Black Scholes Consideration Value (as defined below) of each such Option, if any, (II) the fair market value (as determined by the Holder in good faith) or the Black Scholes Consideration Value (as defined below), as applicable, of such Adjustment Right (as defined below), if any, and (III) the fair market value (as determined by the Holder) of such Common Stock Equivalents, if any, in each case, as determined on a per share basis in accordance with this Section 3(d)(iv). If any Common Stock, Options, or Common Stock Equivalents are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor (for the purpose of determining the consideration paid for such Common Stock, Option, or Common Stock Equivalents, but not for the purpose of the calculation of the Black Scholes Consideration Value (as defined below)) will be deemed to be the net amount of consideration received by the Company therefor. If any Common Stock, Options, or Common Stock Equivalents are issued or sold for a consideration other than cash, the amount of such consideration received by the Company (for the purpose of determining the consideration paid for such Common Stock, Option, or Common Stock Equivalents, but not for the purpose of the calculation of the Black Scholes Consideration Value (as defined below)) 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 Trading Days immediately preceding the date of receipt. If any Common Stock, Options, or Common Stock Equivalents 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 (for the purpose of determining the consideration paid for such Common Stock, Option, or Common Stock Equivalents, but not for the purpose of the calculation of the Black Scholes Consideration Value (as defined below)) 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 Common Stock, Options, or Common Stock Equivalents (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 Holder. If such parties are unable to reach agreement within 10 days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five Trading Days after the 10th day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the 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). “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 hereunder) of Common Stock (other than rights of the type described in Sections 3(b) and 3(c) 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). “Black Scholes Consideration Value” means the value of the applicable Option, Common Stock Equivalent or Adjustment Right (as the case may be) as of the date of issuance thereof calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the public announcement of the execution of definitive documents with respect to the issuance of such Option or Common Stock Equivalents (as the case may be), (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option, Common Stock Equivalent or Adjustment Right (as the case may be) as of the date of issuance of such Option, Common Stock Equivalent or Adjustment Right (as the case may be), (iii) a zero cost of borrow and (iv) an expected volatility equal to the greater of 100% and the 30 day volatility obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the date of issuance of such Option, Common Stock Equivalent or Adjustment Right (as the case may be).
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(v) Change in Option Price or Rate of Conversion. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options, or in Common Stock Equivalents or (B) to subscribe for or purchase Common Stock, Options, or Common Stock Equivalents, then such record date will be deemed to be the date of the issuance or sale of the 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).
(vi) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to this Section 3(d), the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder 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).
(e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock are effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding Common Stock (not including any Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of common equity of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
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(f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of Common Stock (excluding treasury shares, if any) issued and outstanding.
(g) Notice to Holder.
(i) Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
(ii) Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any shareholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock are converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register (as defined below), at least 10 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company, the Company shall simultaneously file such notice with the Commission pursuant to a Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
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(h) Share Combination Event Adjustment. If at any time after the Initial Exercise Date, there occurs any share split, share dividend, reverse share split, or share combination, recapitalization or other similar transaction involving the shares of Common Stock (each, a “Share Combination Event”, and the date of such Share Combination Event (or if the Share Combination Event occurs after the close of Trading on the Principal Market, the Trading Day following such date), the “Share Combination Event Date”), then, in addition and after giving effect to the adjustments for that Share Combination Event elsewhere in this Section 3, the Exercise Price shall be reduced, but in no event increased, to the lowest VWAP during the period commencing five consecutive Trading Days immediately preceding and the five consecutive Trading Days immediately following the Share Combination Event Date (as applicable, the “Event Market Price” and such period, the “Share Combination Adjustment Period”); provided, that in calculating the Event Market Price, the VWAP for Trading Days prior to the Share Combination Event Date shall be the VWAP reported after adjusting for the Share Combination Event). The adjustment of the Exercise Price shall take effect beginning at the close of trading on the Principal Market on the first day of the Share Combination Adjustment Period and continuing each Trading Day thereafter until the close of trading on the Principal Market on the last day of the Share Combination Adjustment Period, effective at the close of trading on the Principal Market on each Trading Day during the Share Combination Adjustment Period. For each adjustment of the Exercise Price under this Section 3(h) the number of Warrant Shares issuable upon exercise of this Warrant (such resulting number, the “Share Combination Issuable Shares”) shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price on the Issuance Date for the Warrant Shares then outstanding. For the avoidance of doubt, (A) if the Holder delivers a Notice of Exercise during the Share Combination Adjustment Period, the Exercise Price shall equal the lower of (1) the Exercise Price then in effect and (2) the lowest applicable Event Market Price as of the most recent close of trading on the Principal Market as of the day and time on which the Notice of Exercise is delivered (which shall equal the lowest VWAP during the Share Combination Adjustment Period as of such day and time), and (B) if as of the end of the Share Combination Adjustment Period the Event Market Price is not lower than the Exercise Price in effect prior to the Share Combination Adjustment Period, then no adjustment to the Exercise Price or number of Warrant Shares shall occur under this Section 3(h).
(i) Voluntary Adjustment by Company. Subject to the rules and regulations of the Trading Market and the consent of Holders of a majority in interest of the Warrants then outstanding, the Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors.
(j) Par Value. Notwithstanding anything in this Section 3 to the contrary, at no time of exercise shall the Exercise Price be lower than the then existing par value of a share of Common Stock.
Section 4. Transfer of Warrant.
(a) Transferability. Subject to compliance with any applicable securities laws, and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three Trading Days of the date the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
(b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Original Issuance Date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
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(c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
(d) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant or Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
Section 5. Registration Rights; Pre-Delivery Shares.
(a) Registration Rights. The Warrant Shares shall be subject to the registration rights and the terms and conditions thereof as provided for in the Purchase Agreement, which terms and conditions are incorporated herein by reference to the extent applicable to the Warrant Shares.
(b) Pre-Delivery Shares.
(i) General. The Pre-Delivery Shares (as defined in the Purchase Agreement) are intended to be and, if so elected by the Holder in accordance herewith, are and shall be used by the Holder as Warrant Shares issuable hereunder. By accepting this Warrant, the Holder hereby agrees and acknowledges that it does not have the right to sell, assign, pledge, transfer, dispose of, swap, hedge, vote, enter into any derivative transaction or similar transaction involving, or enter into an agreement to engage in any of the foregoing with respect to, the Pre-Delivery Shares or any rights or interests therein or incident thereto, other than (x) proportionally in connection with any transfer in whole, or in part, as applicable, of this Note to any other Person or (y) in accordance with this Section 5(b). While the Holder’s Note remains outstanding, the Holder’s only right with respect to the Pre-Delivery Shares is to cause the Transfer Agent upon a conversion of the Holder’s Note or exercise of this Warrant to transfer the applicable Underlying Shares to the Holder’s prime broker or directly to a third party purchaser of such Underlying Shares.
(ii) Application of Pre-Delivery Shares; Delivery Shares. At any time the Company is required to deliver shares of Common Stock to the Holder hereunder (such shares of Common Stock, each a “Delivery Share” and together the “Delivery Shares”), whether upon exercise or otherwise, and the Holder (or its designee) holds one or more Pre-Delivery Shares, the Holder may in its discretion use (each, a “Delivery Share Application”) one or more Pre-Delivery Shares, on a share-for-share basis, as available, and the Transfer Agent shall upon the written authorization of the Holder deliver the Pre-Delivery Shares in lieu of the issuance and delivery of new Warrant Shares on behalf of the Holder as provided in Section 5(b)(i), against the aggregate number of shares required to then be delivered by the Company to the Holder hereunder (such aggregate number of shares subject to such Delivery Share Application, each a “Delivery Share Application Amount”); provided, however, that if following and notwithstanding the Company’s best efforts to adhere to the provisions of this Warrant and to issue and cause the Transfer Agent to process an applicable exercise and the issuance of Warrants Shares pursuant thereto without the use of Pre-Delivery Shares, that use of the Pre-Delivery Shares for such exercise is necessary to avoid the failure to timely issue the Warrant Shares hereunder in connection therewith, then the Holder will use a Delivery Share Application to the extent necessary to avoid such failure or inability to fully exercise. At the time of a Delivery Share Application, each such applied Pre-Delivery Share shall cease to be a Pre-Delivery Share hereunder and shall become a Delivery Share hereunder (with such Delivery Share Applicable Amount of shares issued (or issuable) in such exercise becoming Pre-Delivery Shares upon such issuance and delivery to the Holder); provided, that if the aggregate Pre-Delivery Shares held by the Holder is greater than or equal to the shares then issuable upon an exercise of this Warrant, upon any subsequent exercise of this Warrant, in lieu of the issuance and delivery of new Delivery Shares to the Holder, the Holder may use each such applicable Pre-Delivery Share, on a share-by-share basis with respect to such aggregate number of Delivery Shares otherwise issuable in such exercise of this Warrant, and each such applied Pre-Delivery Share shall cease to be a Pre-Delivery Share hereunder and shall become a Delivery Share hereunder in satisfaction of the Company’s obligation to deliver such Delivery Share to the Holder in such applicable exercise. For the avoidance of doubt, any such treatment with respect to a subsequent exercise shall be deemed to be a “Delivery Share Application.” The terms “Delivery Shares” and “Warrant Shares” are used interchangeably in this Warrant and in each case refer to the shares of Common Stock issuable upon exercise of this Warrant.
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(iii) Beneficial Ownership Limitation for Pre-Delivery Shares. Notwithstanding anything herein to the contrary, Pre-Delivery Shares shall not become Delivery Shares, and the Holder shall not be deemed to beneficially own the Pre-Delivery Shares, to the extent such event would result in the Beneficial Ownership Limitation being exceeded, and in such case any such shares which would have otherwise resulted in the Beneficial Ownership Limitation being exceeded (such shares, the “Excess Shares”) shall be held in abeyance for the benefit of the Holder until such time or times, if ever, as such issuance and the Holder’s right thereto would not result in the Holder and its Affiliates exceeding the Beneficial Ownership Limitation, at which time or times the Company shall issue such Excess Shares to the Holder whereupon such Excess Shares shall become Pre-Delivery Shares that are subject to this Section 5(b) and the corresponding provisions of this Warrant, the Holder’s Note and the Purchase Agreement. Although the Holder is not a beneficial owner of the Pre-Delivery Shares, out of an abundance of caution if any Notice of Exercise delivered under this Warrant provides for a number of Warrant Shares which, together with the Pre-Delivery Shares (assuming for this purpose that the Pre-Delivery Shares are beneficially owned by the Holder), would cause the Holder to exceed the Beneficial Ownership Limitation, such Notice of Exercise shall be deemed to be for such lesser amount Warrant Shares so converted so as to cause the Holder to remain below the Beneficial Ownership Limitation after giving to such conversion, and any Excess Shares shall not be issued and shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares.
(iv) Note Provisions. The Pre-Delivery Shares shall be subject to the provisions of the Holder’s Note, including Section 4.4 of such Note, which provisions are incorporated herein by reference and which provisions, together with the provisions set forth in this Section 5(b), shall survive the termination or expiration of such Note until the end of the Purchase Right Period (as defined in the Purchase Agreement), and thereafter such provisions and this Section 5(b) shall be of no further force or effect, provided, however, that for purposes of this Section 5(b) any reference in the Note to the Note shall be deemed to refer to this Warrant and any reference in the Note to Conversion Shares shall be deemed to refer to Warrant Shares.
Section 6. Miscellaneous.
(a) No Rights as Shareholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a shareholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.
(b) Loss, Theft, Destruction, or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
(c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
(d) Authorized Shares. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock such number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant as required under Section 5.5 of the Purchase Agreement. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens, and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
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Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its amended and restated memorandum and articles of association or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
(e) Governing Law; Exclusive Jurisdiction. The provisions in the Purchase Agreement relating to governing law and exclusive jurisdiction are incorporated from the Purchase Agreement and apply in all cases.
(f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
(g) No Listing or Quotation. This Warrant is not listed or quoted on any securities exchange or quotation system and will not be publicly traded.
(h) Non-waiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
(i) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.
(j) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
(k) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
(l) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
(m) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
(n) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
(o) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| ZETA NETWORK GROUP | ||
| By: | ||
| Name: | ||
| Title: | ||
EXHIBIT A
NOTICE OF EXERCISE
TO: ZETA NETWORK GROUP
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
______________________
The Warrant Shares shall be delivered to the following DWAC Account Number:
______________________
______________________
______________________
[SIGNATURE OF HOLDER]
Name of Investing Entity: _________________________________________________________
Signature of Authorized Signatory of Investing Entity: __________________________________
Name of Authorized Signatory: ____________________________________________________
Title of Authorized Signatory: _____________________________________________________
Date: _________________________________________________________________________
EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
| Name: | ||
| Address: | (Please Print) | |
| Phone Number: | ||
| Email Address: | ||
| Dated: ___________ __, _____ | ||
| Holder’s Signature: | (Please Print) | |
| Holder’s Name: | ||
| Holder’s Address: |
Warrant Exercise Log
| Date | Number of Warrant Shares Available to be Exercised |
Number of Warrant Shares Exercised |
Number of Warrant Shares Remaining to be Exercised |
Exhibit 99.5
Zeta Network Group (NASDAQ: ZNB) Announces Pricing of $6 Million Registered Direct Offering
NEW YORK, March 10, 2026 -- Zeta Network Group (NASDAQ: ZNB) (the "Company"), today announced it has entered into a securities purchase agreement (the "Purchase Agreement") with certain institutional investors (the "Investors") to issue and sell up to $10 million of its Senior 10% Original Issue Discount Convertible Promissory Notes, having an original issue discount of 10% and a maturity of twelve months from issuance (the "Notes"), and warrants (the "Warrants") to purchase the Company's Class A ordinary shares (the "Ordinary Shares").
The initial closing under the Purchase Agreement (the "First Closing") will involve an aggregate principal amount of $6 million of Notes, resulting in gross proceeds to the Company of $5.4 million, and a number of Warrants determined by dividing $3 million, half of the principal amount of the Notes, by the variable weighted average price ("VWAP") of the Ordinary Shares on the trading day immediately prior to the closing date (as adjusted for the one-for-100 share consolidation as previously announced by the Company that will take effect on Nasdaq upon the opening of the market on March 12, 2026). The First Closing is expected to occur on or about March 12, 2026, subject to the satisfaction of customary closing conditions. A second closing for the remainder of the Notes and Warrants is expected no sooner than May 12, 2026, and is also subject to the satisfaction of closing conditions as contained in the Purchase Agreement, a copy of which will be filed with a Report on Form 6-K.
The Notes will bear no interest and will be convertible immediately upon issuance, subject to certain exceptions, into Ordinary Shares at a variable conversion price subject to a floor price, as more fully described in the prospectus supplement relating to the offering.
The Warrants will be exercisable immediately upon issuance, subject to certain exceptions, will expire five years from the initial date of exercise, and will have an exercise price equal to the initial conversion price of the Notes and contain customary anti-dilution provisions.
Maxim Group LLC is acting as the sole placement agent in connection with the offering.
The securities described above for the First Closing are being offered pursuant to a shelf registration statement on Form F-3 (File No. 333-292327), which was declared effective by the United States Securities and Exchange Commission ("SEC") on January 5, 2026. The Company will file with the SEC a prospectus supplement relating to the securities being offered for the First Closing. Copies of the prospectus supplement relating to the offering, together with the accompanying prospectus, can be obtained at the SEC's website at www.sec.gov or from Maxim Group LLC, 300 Park Avenue, New York, NY 10022, Attention: Syndicate Department, or via email at syndicate@maximgrp.com or telephone at (212) 895-3500.
This press release does not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sales of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
About Zeta Network Group
Zeta Network Group (Nasdaq: ZNB) is a U.S.-listed digital infrastructure and financial technology company pioneering the convergence of traditional finance and the digital asset economy. The Company is developing a Bitcoin-centric institutional finance platform that integrates digital asset treasury management, Bitcoin liquidity aggregation, and sustainable Bitcoin mining operations, all within a regulated Nasdaq framework.
Led by a global team of finance and technology experts, the Company is redefining institutional digital finance by merging the governance and transparency of a public company with the innovation and scalability of blockchain to create a trusted bridge between capital markets and decentralized finance.
For more information, visit ir.thezetanetwork.com.
Forward-Looking Statements
This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. When the Company uses words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantee of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company’s expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following: the First Closing; the Company’s goals and strategies; the Company’s future business development, including the development of the metaverse project; product and service demand and acceptance; changes in technology; economic conditions; the growth of the educational and training services market internationally where the Company conducts its business; reputation and brand; the impact of competition and pricing; government regulations; the ability of the Company to meet NASDAQ listing standards in connection with the consummation of the transaction contemplated therein; and other risks and uncertainties described herein, as well as those risks and uncertainties discussed from time to time in other reports and other public filings with the Securities and Exchange Commission by the Company. For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company’s filings with the SEC, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward–looking statements to reflect events or circumstances that arise after the date hereof unless required by applicable laws, regulations or rules.
Contact
Zeta Network Group Investor Relations
14 Wall Street, 20th Floor
New York, NY 10005
Office: (929) 317-2699
Email: ir@thezetanetwork.com