UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
September 24, 2014 (September 23, 2014)
LABSTYLE INNOVATIONS CORP.
(Exact name of registrant as specified in
its charter)
Delaware |
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333-186054 |
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45-2973162 |
(State or other jurisdiction
of incorporation) |
|
(Commission
File Number) |
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(IRS Employer
Identification No.) |
9 Halamish Street
Caesarea Industrial Park
38900, Israel
(Address of Principal
Executive Offices)
972-4-770-4054
(Issuer’s
telephone number)
(Former name or
former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing
is intended to simultaneously satisfy the filing obligation to the registrant under any of the following provisions:
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 1.01 | Entry into a Material Definitive Agreement |
On September 23, 2014, LabStyle Innovations
Corp. (the “Company”) entered into and closed the transactions contemplated by a definitive Securities Purchase Agreement
(the “Securities Purchase Agreement”) with fourteen institutional and accredited investors (the “Purchasers”)
memorializing a private placement offering (the “Offering”) in which the Company raised approximately $4.2 million
in gross proceeds. In the Offering, the Company issued an aggregate of (i) 42,350 shares of the Company’s newly designated
Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”) and (ii) warrants
(the “Warrants”) to purchase shares of the Company’s common stock, par value $0.0001 per share (the “Common
Stock”). The Company expects to secure net proceeds of approximately $4.1 million from the Offering after deduction of estimated
Offering expenses.
The lead investor in the Offering was Dicilyon
Consulting and Investment Ltd., an affiliate of Israeli investor David Edery (“Edery”), which invested $3 million in
the Offering. Pursuant to the Securities Purchase Agreement, Edery has been granted certain special rights, including (i) a two
year pre-emptive right to participate in future financings of the Company in an amount which would allow Edery to maintain his
fully-diluted percentage ownership of the Company and (ii) a right that, for so long as Edery holds 25%, 15% and 10% of the outstanding
shares of Common Stock, Edery shall have the right to appoint, respectively, three, two or one member of the Company’s seven
person Board of Directors.
Pursuant to the Certificate of
Designation of Preferences, Rights and Limitations of the Series A Preferred Stock (the “Certificate of
Designation”), the shares of Series A Preferred Stock are convertible at any time into an aggregate of 53,418,264
shares of Common Stock based on a conversion price of $0.07928 per share, representing a 20% discount to the volume weighted
average of the Company’s publicly traded common stock for the period from August 21, 2014 through September 22, 2014
(which equaled $0.0991). Such conversion price is not subject to any future price-based anti-dilution adjustments but does
carry customary stock-based anti-dilution protection. Upon the written election of the holders of a majority of the
outstanding Series A Preferred Stock, all shares of Series A Preferred Stock shall convert into Common Stock. The holders of
the Series A Preferred Stock shall vote on an as converted basis with the holders of the Common Stock. The Series A Preferred
Stock does not carry any fixed coupon or dividend rights but does carry a liquidation preference for each Purchaser equal to
the investment made by such Purchaser in the Offering, and such liquidation preference applies in certain deemed liquidation
events such as changes in control of the Company. In addition, the holders of Series A Preferred Stock are eligible to
participate in dividends and other distributions by the Company on an as converted basis. If all shares of Series A Preferred
Stock were converted immediately, the Purchasers would hold approximately 40% of the Company’s primary outstanding
shares of Common Stock.
The Warrants issued in the Offering are
exercisable for an aggregate of 26,709,132 shares of Common Stock (or 50% warrant coverage) at a price of $0.0951 per share. Such
exercise price is also not subject to any future price-based anti-dilution adjustments but does carry customary stock-based anti-dilution
protection. The holders of the Warrants have the right to participate in dividends and other distributions of the Company on an
as exercised basis. The Warrants expire on September 23, 2018.
In connection with the Offering, the
Company also entered into a Registration Rights Agreement with the Purchasers. Pursuant to the terms of the Registration Rights
Agreement, the Company granted to the Purchasers certain registration rights related to the shares of Common Stock underlying
the Series A Preferred Stock and the Warrants (such shares of Common Stock, the “Registrable Securities”). The Company
is required to file a registration statement for the resale of the Registrable Securities within 30 days following the
closing date of the Offering and to use its reasonable best efforts to cause such registration statement to be declared effective
within 60 days following the closing date (or 120 days following the closing date if the Securities and Exchange Commission
determines to review the registration statement). The Company may incur liquidated damages if it does not meet its registration
obligations under the Registration Rights Agreement. The Company also agreed to other customary obligations regarding registration,
including indemnification and maintenance of the applicable registration statement.
The Securities Purchase Agreement, Certificate
of Designation, the Registration Rights Agreement and form of Warrant used in connection with the Offering are filed as Exhibits
10.1, 3.1, 4.1 and 4.2, respectively, to this Current Report on Form 8-K and such documents are incorporated herein by reference.
The foregoing is only a brief description of the material terms of the Securities Purchase Agreement, the Registration Rights Agreement,
the form of Warrant, 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.
The securities issued in the Offering are
exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act and/or Regulation D
promulgated thereunder because, among other things, the transaction did not involve a public offering, the investors are accredited
investors, the investors took the securities for investment and not resale and the Company took appropriate measures to restrict
the transfer of the securities
The Company’s press release dated
September 23, 2014 announcing the Offering is filed as Exhibit 99.1 to this Current Report on Form 8-K, and the relevant information
contained therein is incorporated herein by reference.
| Item 3.02 | Unregistered Sales of Equity Securities. |
The response to this item is included in
Item 1.01, Entry into a Material Definitive Agreement, and is incorporated herein in its entirety.
Item 5.02 Departure of Directors or Certain Officers;
Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Effective as of the closing of
the offering, the Board of Directors of the Company unanimously resolved to increase the number of directors of the Company
from six (6) directors to seven (7) directors, and unanimously resolved to appoint Rami Yehudiha to the Company’s Board
of Directors to fill the vacancy created by the increase in the number of directors. He will also serve on the
Compensation and Nominating and Corporate Goverance Committees of the Board of Directors. The following is Mr.
Yehudiha’s biography:
Rami Yehudiha, age 44, has
been a director of our company since September 23, 2014. Mr. Yehudiha is a marketing and advertising executive with a particular
expertise in developing and implementing campaigns utilizing cutting edge technologies and methods. From 2004 to the present,
he has served as the Founder and Chief Executive Officer of LEAD, a top ten Israeli advertising firm. From 1997 to 2003, he served as the Chief Executive Officer at Ogilvy One Israel, a part of the WPP
Group. Mr. Yehudiha received his B.A. in Political Science and Economics from Tel Aviv University and an M.B.A. in
Marketing from Manchester University.
Mr. Yehudiha was appointed to the Company’s
Board of Directors as a nominee of Edery pursuant to the terms of the Securities Purchase Agreement. Except for the foregoing,
there are no related party transactions involving Mr. Yehudiha that are reportable under Item 404(a) of Regulation S-K. There are
no material plans, contracts or arrangements to which Mr. Yehudiha is a party or in which he participates, nor has there been any
material amendment to any plan, contract or arrangement by virtue of Mr. Yehudiha’s appointment.
| Item 5.03. | Amendments to Articles of Incorporation or Bylaws;
Change in Fiscal Year. |
The Certificate of Incorporation of the
Company authorizes the issuance of up to 5,000,000 shares of preferred stock and further authorizes the Board of Directors of the
Company to fix and determine the designation, preferences, conversion rights, or other rights, including voting rights, qualifications,
limitations, or restrictions of the preferred stock.
On September 23, 2014, the Company filed
the Certificate of Designation with the Delaware Secretary of State to designate the rights and preferences of up to 60,000 shares
of Series A Preferred Stock, of which 42,350 were issued in connection with the Offering.
| Item 9.01. | Financial Statements and Exhibits. |
| 3.1 | Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred
Stock of the Company. |
| 4.1 | Form of Registration Rights Agreement, dated as of September 23, 2014, by and among the Company
and the Buyers named therein. |
| 4.2 | Form of Warrant to be issued to the Purchasers in the Offering. |
| 10.1 | Form of Securities Purchase Agreement, dated as of September 23, 2014, by and among the Company
and the Purchasers named therein. |
| 99.1 | Press release, dated September 23, 2014, issued by the Company. |
Cautionary
Note Regarding Forward-Looking Statements
This Current Report
of the Company contains or may contain forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995. Statements that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting
the generality of the foregoing, words such as “plan,” “project,” “potential,” “seek,”
"may," "will," "expect," "believe," "anticipate," "intend," "could,"
"estimate" or "continue" are intended to identify forward-looking statements. Readers are cautioned that certain
important factors may affect the Company's actual results and could cause such results to differ materially from any forward-looking
statements that may be made in this Current Report. Factors that could cause or contribute to differences between the Company's
actual results and forward-looking statements include, but are not limited to, those risks discussed in the Company's filings with
the U.S. Securities and Exchange Commission. Readers are cautioned that actual results (including, without limitation, the results
and benefit of the Company financing described herein) may differ significantly from those set forth in the forward-looking statements.
The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by applicable law.
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
Dated: September 24, 2014 |
LABSTYLE INNOVATIONS CORP. |
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By: |
/s/ Gadi Levin |
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Name: Gadi Levin |
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Title: Chief Financial Officer, Treasurer and Secretary |
Exhibit 3.1
LABSTYLE
INNOVATIONS CORP.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
PURSUANT
TO SECTION 151(G) OF THE
GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
The undersigned, Erez
Raphael, does hereby certify that:
1. He is the President and Chief
Executive Officer of LabStyle Innovations Corp., a Delaware corporation (the “Corporation”).
2. The Corporation is authorized
to issue 5,000,000 shares of preferred stock, none of which have been issued.
3. The following resolutions were
duly adopted by the board of directors of the Corporation (the “Board of Directors”):
WHEREAS, the
certificate of incorporation of the Corporation, as amended, provides for a class of its authorized stock known as preferred stock,
consisting of 5,000,000 shares, $0.0001 par value per share, issuable from time to time in one or more series;
WHEREAS, the
Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms
of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting
any series and the designation thereof, of any of them; and
WHEREAS, it
is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and
other matters relating to a series of the preferred stock, which shall consist of, except as otherwise set forth in the Purchase
Agreement, up to 60,000 shares of the preferred stock which the Corporation has the authority to issue, as follows:
NOW, THEREFORE,
BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for cash or
exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other
matters relating to such series of preferred stock as follows:
TERMS OF PREFERRED STOCK
Section 1. Definitions.
In addition to the terms defined elsewhere in herein, the following capitalized terms have the following meanings
“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 of the Securities Act.
“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to
close.
“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1 of the Purchase Agreement.
“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) each Holder’s obligations to pay the Subscription Amount and (ii) the
Corporation’s obligations to deliver the Securities have been satisfied or waived.
“Commission”
means the United States Securities and Exchange Commission.
“Common
Stock” means the Corporation’s common stock, par value $0.0001 per share, and stock of any other class of securities
into which such securities may hereafter be reclassified or changed.
“Common
Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof
to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants 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.
“Conversion
Shares” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Preferred Stock in
accordance with the terms hereof.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“GAAP”
means United States generally accepted accounting principles.
“Junior
Securities” means the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities
which are explicitly senior or pari passu to the Preferred Stock in dividend rights or liquidation preference.
“Liens”
means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Original
Issue Date” means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers
of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred
Stock.
“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Purchase
Agreement” means the Securities Purchase Agreement, dated as of the Original Issue Date, among the Corporation and the
original Holders, as amended, modified or supplemented from time to time in accordance with its terms.
“Rule
144” means Rule 144 promulgated by the Commission 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 Commission having substantially the same effect as such Rule.
“Securities”
means the Preferred Stock, the Warrants, the Warrant Shares and the Underlying Shares.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Subscription
Amount” shall mean, as to each Holder, the aggregate amount to be paid for the Preferred Stock purchased pursuant to
the Purchase Agreement as specified below such Holder’s name on the signature page of the Purchase Agreement and next to
the heading “Subscription Amount,” in United States dollars and in immediately available funds.
“Trading
Day” means a day on which the principal Trading Market is open for business.
“Trading
Market” has the meaning ascribed to it in the Purchase Agreement.
“Transaction
Documents” has the meaning ascribed to it in the Purchase Agreement.
“Transfer
Agent” has the meaning ascribed to it in the Purchase Agreement.
“Underlying
Shares” has the meaning ascribed to it in the Purchase Agreement.
“Warrants”
means, collectively, the Common Stock purchase warrants delivered to the Holder at the Closing in accordance with Section 2.2(a)
of the Purchase Agreement.
“Warrant
Shares” means the shares of Common Stock issuable upon exercise of the Warrants.
Section 2. Designation,
Amount and Par Value. The series of preferred stock shall be designated as its Series A Convertible Preferred Stock (the “Preferred
Stock”) and the number of shares so designated shall be up to 60,000 (which shall not be subject to increase without
the written consent of the holders of a majority of the Preferred Stock (each, a “Holder” and collectively,
the “Holders”)). Each share of Preferred Stock shall have a par value of $0.0001 per share and a stated value
equal to $100 (the “Stated Value”).
Section 3. Dividends.
Except for stock dividends or distributions for which adjustments are to be made pursuant to Section 7, Holders shall be entitled
to receive, and the Corporation shall pay, dividends on shares of Preferred Stock equal (on an as-if-converted-to-Common-Stock
basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid
on shares of the Common Stock. No other dividends shall be paid on shares of Preferred Stock.
Section 4. Voting
and Approval Rights.
a) The
Preferred Stock shall vote or otherwise take action with the Common Stock as a single class on all matters for which stockholders
of the Corporation may vote or act on an as-if-converted-to-Common-Stock basis without derogating from any special rights granted
to the Preferred Stock in this Certificate of Designation (including, without limitation, subsection (b) below) or by applicable
law. Each holder of outstanding Preferred Stock shall be entitled to notice of any shareholders’ meeting in accordance with
these Corporation's organizational documents.
b) In
addition, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the consent of the Holders
of a majority of the then outstanding shares of the Preferred Stock, directly or indirectly take any of the following actions:
(a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate
of Designation, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any
rights of the Holders, (c) increase the number of authorized shares of Preferred Stock, (d) change the authorized number of, or
method of electing, the directors of the Corporation, including, but not limited to, increasing the number of members of the Board
of Directors, or (e) enter into any agreement with respect to any of the foregoing or amending any of the foregoing.
Section 5. Liquidation.
Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, including, without limitation,
upon any Deemed Liquidation (as defined below) (any such event, a “Liquidation”), the Holders shall be entitled
to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the Subscription Amount paid by
the original Holder on the Closing Date, plus any accrued and unpaid dividends thereon, for each share of Preferred Stock before
(and in preference to) any distribution or payment shall be made to the holders of the Common Stock, which shall be adjusted appropriately
for share splits, share dividends, combinations, recapitalizations and the like, and if the assets of the Corporation shall be
insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed
among the Holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon
were paid in full. Following the payment of all preferential amounts required to be paid to the Holders the remaining assets of
the Corporation available for distribution to its stockholders shall be distributed among the holders of the shares of Preferred
Stock and Common Stock, pro rata on an as-converted basis, treating for this purpose all such securities as if they had been converted
to Common Stock immediately prior to such Liquidation. The term “Deemed Liquidation” shall mean (i) any merger
or consolidation of the Corporation with or into another corporation; (ii) any sale, or transfer of all or substantially all of
the properties and assets of the Corporation or its subsidiaries, or the grant of a worldwide material, perpetual and exclusive
license to use all or substantially all of the Corporation's technology or intellectual property; (iii) any acquisition by any
person (or group of affiliated or associated persons) of beneficial ownership of a majority of the voting power of the Corporation
or any material subsidiary (whether or not newly-issued shares) in a single transaction or a series of related transactions, after
which less than a majority of the outstanding voting power of the Corporation immediately following such event is held (directly
or indirectly) by persons or entities who were (direct or indirect) shareholders of the Corporation immediately prior to such event;
(iv) any sale, or transfer of all or substantially all of the outstanding shares of the Corporation, (v) any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchange for other securities, cash or property, and (vi) any other transfer of more than 50% of the voting power
of the Corporation to which the Corporation is a party or pursuant to a tender or exchange offer. In furtherance of the foregoing,
the Corporation shall take such actions as are necessary to give effect to the provisions of this Section 5, including, without
limitation, in the case of a merger, consolidation or share transfer causing the definitive agreement relating to such transaction
to provide that any consideration payable in such transaction shall give effect to such preferences and priorities as are set forth
herein, and the Corporation shall not have the power to effect any transaction constituting a Deemed Liquidation unless the relevant
transaction agreement reflects the preferential rights of the Preferred Stock described herein. In the event any consideration
is delivered to the Corporation in respect of any Preferred Share in connection with a Deemed Liquidation, the Corporation shall
promptly take any and all actions necessary to distribute such consideration to the Preferred Stockholder (including liquidation,
dissolution and/or winding up) and shall take no action to contravene or limit its ability to distribute such consideration in
accordance with the preferences set forth herein.
Section 6. Conversion.
a) Conversions
at Option of Holder. Each share of Preferred Stock shall be convertible, at any time and from time to time from and after
the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock determined by
dividing the Stated Value of such share of Preferred Stock by the Conversion Price. Holders shall effect conversions by
providing the Corporation with the form of conversion notice attached hereto as Annex A (a “Notice of
Conversion”). Each Notice of Conversion shall specify the number of shares of Preferred Stock to be converted, the
number of shares of Preferred Stock owned prior to the conversion at issue, the number of shares of Preferred Stock owned
subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to
the date the applicable Holder delivers by facsimile such Notice of Conversion to the Corporation (such date, the
“Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. No ink-original Notice of
Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of
Conversion form be required. The calculations and entries set forth in the Notice of Conversion shall control in the
absence of manifest or mathematical error. To effect conversions of shares of Preferred Stock, a Holder shall not be required
to surrender the certificate(s) representing the shares of Preferred Stock to the Corporation unless all of the shares of
Preferred Stock represented thereby are so converted, in which case such Holder shall deliver the certificate
representing such shares of Preferred Stock promptly following the Conversion Date at issue. Shares of Preferred Stock
converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued.
b) Automatic
Conversion. Upon the written election of holders of a majority of the Preferred Stock and without the payment of any additional
consideration, all outstanding Preferred Stock shall automatically be converted into fully paid and nonassessable shares of Common
Stock at the Conversion Price. Any such election shall be made by written notice to the Company, and such notice may be given at
any time. Upon such election, all holders of the Preferred Stock shall be deemed to have elected to voluntarily convert all the
respective outstanding Preferred Stock into shares of Common Stock pursuant hereto and such election shall bind all holders of
Preferred Stock.
c) Conversion
Price. The per share conversion price for the Preferred Stock shall equal $0.7928, subject to adjustment herein (the “Conversion
Price”).
d) Mechanics
of Conversion
i. Delivery
of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery
Date”), the Corporation shall deliver, or cause to be delivered, to the converting Holder (A) a certificate or certificates
representing the Conversion Shares which, on or after the earlier of (i) the six month anniversary of the Original Issue Date or
(ii) the Effective Date, shall be free of restrictive legends and trading restrictions (other than those which may then (I) be
applicable to Affiliates of the Company for purposes of Rule 144 (if the Holder is then an Affiliate of the Company) or (II) required
by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the conversion of the Preferred Stock,
and (B) a bank check or wire transfer in the amount of accrued and unpaid dividends. On or after the earlier of (i) the six month
anniversary of the Original Issue Date (if the Holder is not then an Affiliate of the Company for purposes of Rule 144) or (ii)
the Effective Date, the Corporation shall use its commercially reasonable efforts to deliver any certificate or certificates required
to be delivered by the Corporation under this Section 6 electronically through the Depository Trust Company or another established
clearing corporation performing similar functions.
ii. Right
to Rescind Conversion. If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to or
as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the
Corporation at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event
the Corporation shall promptly return to the Holder any original Preferred Stock certificate delivered to the Corporation and the
Holder shall promptly return to the Corporation the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion
Notice.
iii. Reservation
of Shares Issuable Upon Conversion. Subject to the requirement of the Corporation to implement the Reverse Split (as defined
in the Purchase Agreement), the Corporation covenants that it will at all times reserve and keep available out of its authorized
and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Preferred Stock as herein provided,
free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders
of the Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall be issuable (taking into account
the adjustments and restrictions of Section 7) upon the conversion of the then outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully
paid and nonassessable.
iv. Fractional
Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Preferred Stock.
As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Corporation 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 Conversion Price or round up to the next whole share.
v. Transfer
Taxes and Expenses. The issuance of certificates for shares of the Common Stock on conversion of this Preferred Stock shall
be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or
delivery of such certificates, provided that the Corporation shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the
Holders of such shares of Preferred Stock and the Corporation shall not be required to issue or deliver such certificates unless
or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall
have established to the satisfaction of the Corporation that such tax has been paid. The Corporation shall pay all Transfer Agent
fees required for same-day processing of any Notice of Conversion.
Section 7. Certain
Adjustments.
a) Stock
Dividends and Stock Splits. If the Corporation, at any time while this Preferred Stock is outstanding: (i) pays a stock dividend
or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any other Common
Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion
of, or payment of a dividend on, this Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number
of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the
Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event, and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section
7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation 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 shares 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 such Holder’s Preferred
Stock immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no
such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue
or sale of such Purchase Rights.
c) Pro
Rata Distributions. During such time as this Preferred Stock is outstanding, if the Corporation declares or makes any dividend
or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of
capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by
way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a
"Distribution"), at any time after the issuance of this Preferred Stock, then, in each such case, the Holder shall
be entitled to participate in, prior and in preference to the holders of Common Stock, such Distribution to the same extent that
the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete
Conversion of this Preferred Stock immediately before the date of which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in
such Distribution.
d) Mergers,
Asset Sales and Change of Control Transactions. If the Common Stock issuable upon the conversion of the Preferred Stock is
changed into the same or a different number of shares of any class or classes of stock, whether by merger, consolidation or otherwise
(other than a Deemed Liquidation or a stock dividend, stock split or reclassification or recapitalization provided for elsewhere
in subsection (a)), in any such event each Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which
it was convertible prior to such event into the kind and amount of securities, cash or other property that a holder of the number
of shares of Common Stock issuable upon conversion of one share of Preferred Stock immediately prior to such merger, consolidation
or other transaction would have been entitled to receive pursuant to such transaction, all subject to further adjustment as provided
herein or with respect to such other securities or property by the terms thereof.
e) Calculations.
All calculations under this Section 7 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 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.
f) Notice
to the Holders of Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this
Section 7, the Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.
Section 8. Miscellaneous.
a) Notices.
Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation,
any Notice of Conversion, shall be in writing and delivered in accordance with the provisions of Section 5.4 of the Purchase Agreement.
b) Absolute
Obligation. Except as expressly provided herein, no provision of this Certificate of Designation shall alter or impair the
obligation of the Corporation, which is absolute and unconditional, to pay accrued dividends, as applicable, on the shares of Preferred
Stock at the time, place, and rate, and in the coin or currency, herein prescribed.
c) Lost
or Mutilated Preferred Stock Certificate. If a Holder’s Preferred Stock certificate shall be mutilated, lost, stolen
or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of
Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of
such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.
d) Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designation
shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to
the principles of conflict of laws thereof.
e) Waiver.
Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as
or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate
of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to
any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or
any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of
Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.
f) Severability.
If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation
shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable
to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates
the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum
rate of interest permitted under applicable law.
g) Next
Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.
h) Headings.
The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not
be deemed to limit or affect any of the provisions hereof.
i) Status
of Converted or Redeemed Preferred Stock. Shares of Preferred Stock may only be issued pursuant to the Purchase Agreement.
If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status
of authorized but unissued shares of preferred stock and shall no longer be designated as Series Convertible Preferred Stock.
*********************
AND BE IT FURTHER RESOLVED, that
any officer of the Corporation be and they hereby are authorized and directed to prepare and file this Certificate of Designation
of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.
IN WITNESS WHEREOF,
the undersigned have executed this Certificate this 23rd day of September, 2014.
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LABSTYLE INNOVATIONS CORP. |
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/s/ Erez Raphael |
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By: |
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Name: Erez Raphael |
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Title: President and Chief Executive Officer |
ANNEX A
NOTICE OF CONVERSION
(To
be Executed by the Registered Holder in order to Convert Shares of Preferred Stock)
The undersigned hereby elects to convert
the number of shares of Series A Convertible Preferred Stock indicated below into shares of common stock, par value $0.0001 per
share (the “Common Stock”), of Labstyle Innovations Corp., a Delaware corporation (the “Corporation”),
according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person
other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates and opinions as may be required by the Corporation in accordance with the Purchase Agreement. No fee will be
charged to the Holders for any conversion, except for any such transfer taxes.
Conversion calculations:
Date to Effect Conversion: _____________________________________________
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Number of shares of Preferred Stock owned
prior to Conversion: _______________
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Number of shares of Preferred Stock to
be Converted: ________________________
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Stated Value of shares of Preferred Stock
to be Converted: ____________________
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Number of shares of Common Stock to be
Issued: ___________________________
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Applicable Conversion Price:____________________________________________
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Number of shares of Preferred Stock subsequent
to Conversion: ________________
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Address for Delivery: ______________________
or
DWAC Instructions:
Broker no: _________
Account no: ___________ |
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[HOLDER] |
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By: |
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Name: |
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Title: |
Exhibit 4.1
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION
RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of September 23, 2014, by and among LabStyle
Innovations Corp., a corporation organized under the laws of the State of Delaware (the “Company”), and each
of the several purchasers signatory hereto (each, a “Purchaser” and, collectively, the “Purchasers”).
This Agreement is being
entered into pursuant to the Securities Purchase Agreement, dated as of the date hereof, between the Company and each Purchaser
(the “Purchase Agreement”).
The Company and each
Purchaser hereby agrees as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given
such terms in the Purchase Agreement. In addition to the other capitalized terms used and defined elsewhere herein, as used in
this Agreement, the following terms shall have the following meanings:
“Commission”
means the Securities and Exchange Commission.
“Common Stock”
means the shares of Common Stock, $0.0001 par value per share of the Company.
“Demand Registration
Statement” means a registration statement of the Company which covers the Registrable Securities requested to be included
therein pursuant to the provisions of Section 2(c) hereof and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the prospectus contained therein, all exhibits thereto and all material incorporated
by reference (or deemed to be incorporated by reference) therein.
“Effectiveness
Date” means, with respect to the Initial Registration Statement required to be filed hereunder, the 60th calendar
day following the Closing Date (or, if the Initial Registration Statement is reviewed by the Commission, the 120th calendar
day following Closing Date).
"Exchange Act"
means the Securities Exchange Act of 1934 and the rules promulgated thereunder, as amended.
“Filing Date”
means the 30th calendar day following the Closing Date.
“Holder”
or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.
“Initial Registration
Statement” means the initial Registration Statement covering the Registrable Securities filed pursuant to this Agreement.
“Person”
means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.
“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
“Prospectus”
means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated
by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to
be incorporated by reference in such Prospectus.
“Registrable
Securities” means (a) all of the Common Stock underlying the Series A Stock sold pursuant to the Purchase Agreement,
(b) all Warrant Shares, and (c) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization
or similar event with respect to the foregoing, provided that “Registrable Securities” shall not include any
shares of Common Stock owned by any Purchaser which are then the subject of an effective Registration Statement or otherwise eligible
to be sold without volume limitations pursuant to Rule 144(b).
“Registration
Statement” means any registration statement required to be filed hereunder pursuant to Section 2 hereof, including the
Prospectus, amendments and supplements to any such registration statement or Prospectus, including pre- and post-effective amendments,
all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any such registration
statement.
“Rule 415”
means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time
to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect
as such Rule.
“Rule 424”
means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time
to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect
as such Rule.
“SEC Guidance”
means any publicly-available written or oral guidance, comments, requirements or requests of the Commission staff, including the
Commission’s Compliance and Disclosure Interpretations and Manual of Publicly Available Telephone Interpretations.
“Securities
Act” means the Securities Act of 1933 and the rules promulgated thereunder, as amended.
“Series A
Stock” means the Series A Convertible Preferred Stock of the Company, par value $0.0001 per share, issued pursuant to
the Purchase Agreement.
"Warrants"
means the warrants issued the Purchasers pursuant to the Purchase Agreement.
“Warrant Shares”
means the Common Stock issuable upon exercise of the Warrants.
2. Registration
(a) Mandatory
Registration. On or prior to the Filing Date, the Company shall prepare and file with the Commission the Initial Registration
Statement covering the resale of all of the Registrable Securities for a resale offering to be made on a continuous basis. Subject
to the terms of this Agreement, the Company shall use its reasonable best efforts to cause a Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to the applicable Effectiveness
Date, and shall use its reasonable best efforts to keep such Registration Statement, with respect to each Holder, continuously
effective under the Securities Act until the earlier to occur of (i) the date on which such Holder may sell all Registrable Securities
then held without restriction by volume limitations of Rule 144 promulgated under the Securities Act of 1933 (“Rule 144”),
or (ii) all Registrable Securities covered by such Registration Statement have been sold by such Holder (the “Effectiveness
Period”).
(b) Registration
Penalties. If: (i) the Initial Registration Statement is not filed on or prior to its Filing Date, or (ii) the Initial Registration
Statement is not declared effective by the Commission on or prior to its required Effectiveness Date (either such failure or breach
being referred to as an “Event,” and the date on which such Event occurs being referred to as “Event
Date”), then in addition to any other rights the Holders may have hereunder or under applicable law: on each such Event
Date, and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date)
until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and
not as a penalty, equal to one percent (1.0%) of the aggregate investment amount paid by such Holder for Securities pursuant to
the Purchase Agreement, up to a maximum of ten percent (10%) of such aggregate investment amount. Liquidated damages payable by
the Company pursuant to this Section 2 shall be payable within ten (10) Business Days of an Event Date and the first (1st)
Trading Day of each thirty (30) day period following an Event Date. The parties agree that the Company shall not be liable for
liquidated damages under this Agreement with respect to any Registrable Securities that the Company was not permitted to include
on such Registration Statement by the Commission as contemplated by Section 2(e) hereof.
(c) Demand
Registration Rights.
(i) Subject
to Section 2(c)(iii), the Purchasers holding a majority of the Registrable Securities (in this context, the “Initiating
Purchasers”) shall have the right to request in writing that the Company register all or part of their Registrable Securities
(a “Request”) by filing with the SEC a Demand Registration Statement and to request that the offering be underwritten
by an underwriter or underwriters reasonably selected by the Initiating Purchasers.
(A) Each
Request shall specify the amount of Registrable Securities intended to be disposed of by the Initiating Purchasers and the intended
method of disposition thereof.
(B) As
promptly as practicable, but no later than five (5) days after receipt of a Request, the Company shall give written notice of such
requested registration to all other Purchasers.
(C) Subject
to Section 2(c)(iii), the Company shall include in a Demand Registration (i) the Registrable Securities intended to be disposed
of by the Initiating Purchasers and (ii) the Registrable Securities intended to be disposed of by any other Purchaser which shall
have made a written request (which request shall specify the amount of Registrable Securities to be registered and the intended
method of disposition thereof) to the Company for inclusion thereof in such registration within ten (10) days after the receipt
of such written notice from the Company.
(D) The
Company, as expeditiously as possible, but in any event within thirty (30) calendar days following a Request, shall cause to be
filed with the Commission a Demand Registration Statement providing for the registration under the Securities Act of the Registrable
Securities which the Company has been so requested to register by all such Purchasers, to the extent necessary to permit the disposition
of such Registrable Securities so to be registered in accordance with the intended methods of disposition thereof specified in
such Request or further requests.
(E) If
the Demand Registration Statement is for an underwritten offering and the underwriter determines in good faith that marketing factors
require a limitation of the number of shares (including Registrable Securities) to be underwritten, the number of shares that may
be included in the underwriting shall be allocated, first, to the Holders pro rata based on the total number of respective Registrable
Securities to be included in such registration by the Holders; second, to the Company, and third, to any shareholder of the Company
(other than a Holder) pro-rata, based on the total number of shares requested to be included in such registration by such shareholder.
Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration.
(F) The
Company shall use its reasonable best efforts to have such Demand Registration Statement declared effective by the Commission as
soon as practicable following filing and to keep such Demand Registration Statement continuously effective during the Effectiveness
Period.
(ii) The
registration rights granted pursuant to the provisions of this Section 2.1 shall be in addition to the registration rights granted
pursuant to the other provisions of Section 2 hereof.
(iii) Limitations
on Demand Registrations. The rights of the Purchasers to request Demand Registrations pursuant to Section 2.1(c) are subject
to the following limitations:
(A) in
no event shall the Company be required to effect more than two (2) Demand Registrations;
(B) in
no event shall the Company be required to effect more than one (1) Demand Registration in any 12-month period; and
(C) in
no event shall the Company be required to effect a Demand Registration if the Registrable Securities in question (1) are covered
by another Registration Statement filed hereunder or otherwise by the Company or (2) may be sold without restriction or limitation
under Rule 144.
(iv) Effective
Registration Statement; Suspension. A Demand Registration Statement shall not be deemed to have become effective (and the related
registration will not be deemed to have been effected) (i) unless it has been declared effective by the Commission or (ii) if the
offering of any Registrable Securities pursuant to such Demand Registration Statement is interfered with by any stop order, injunction
or other order or requirement of the Commission or any other governmental agency or court.
(d) Incidental
Registration Rights.
(i) Subject
to the provisions of this Section 2.2(d), if the Company at any time or from time to time following the Closing Date proposes to
register any of its securities under the Securities Act (other than in a registration on Form S-4 (solely as to the issuance of
the shares in the applicable business combination) or S-8 or any successor form to such forms) whether or not pursuant to registration
rights granted to other holders of its securities and whether or not for sale for its own account, the Company shall deliver prompt
written notice (which notice shall be given at least fifteen (15) calendar days prior to such proposed registration) to all Purchasers
of its intention to undertake such registration, describing in reasonable detail the proposed registration and distribution and
of such Purchasers’ right to participate in such registration under this Section 2(d) as hereinafter provided. Subject to
the other provisions of this Section 2(d), upon the written request of any Purchaser made within ten (10) calendar days after the
receipt of such written notice (which request shall specify the amount of Registrable Securities to be registered and the intended
method of disposition thereof), the Company shall effect the registration under the Securities Act of all Registrable Securities
requested by Purchasers to be so registered (an “Incidental Registration”), to the extent requisite to permit
the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered,
by inclusion of such Registrable Securities in the Registration Statement which covers the securities which the Company proposes
to register and shall cause such Registration Statement to become and remain effective with respect to such Registrable Securities
in accordance with the registration procedures set forth in Section 3.
(ii) If
the registration statement relating to the Incidental Registration is for an underwritten offering, the Company shall so advise
the Holders of Registrable Securities as part of its notice made pursuant to Section 2(d)(i). If the underwriter determines
in good faith that marketing factors require a limitation of the number of shares (including Registrable Securities) to be underwritten,
the number of shares that may be included in the underwriting shall be allocated, first, to the Company, and second, to the Holders
pro rata based on the total number of respective Registrable Securities to be included in such registration by the Holders; and
third, to any shareholder of the Company (other than a Holder) pro-rata, based on the total number of shares requested to be included
in such registration by such shareholder. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded
and withdrawn from the registration.
(iii) If
at any time after giving written notice of its intention to register any securities and prior to the Effective Date of the Incidental
Registration Statement filed in connection with such registration, the Company shall determine for any reason not to register or
to delay registration of such securities, the Company may, at its election, give written notice of such determination to the applicable
Purchasers and, thereupon, (A) in the case of a determination not to register, the Company shall be relieved of its obligation
to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration
Expenses incurred in connection therewith), without prejudice, however, to the rights of the Purchasers to cause such registration
to be effected as a registration under Section 2(c), and (B) in the case of a determination to delay such registration, the Company
shall be permitted to delay the registration of such Registrable Securities for the same period as the delay in registering such
other securities; provided, however, that if such delay shall extend beyond ninety (90) days from the date the Company
received a request to include Registrable Securities in such Incidental Registration, then the Company shall again give the Purchasers
the opportunity to participate therein and shall follow the notification procedures set forth in the preceding paragraph.
(iii) Subject
to the terms and conditions of this Section 2(d), there is no limitation on the number of such Incidental Registrations pursuant
to this Section 2(d) which the Company is obligated to effect.
(iv) In
no event shall the Company be required to effect an Incidental Registration if the Registrable Securities in question (1) are covered
by another Registration Statement filed hereunder or otherwise by the Company or (2) may be sold without restriction or limitation
under Rule 144.
(v) The
registration rights granted pursuant to the provisions of this Section 2(d) shall be in addition to the registration rights granted
pursuant to the other provisions of Section 2 hereof.
(e) In
the event that the Commission does not permit the Company to register in any Registration Statement all of the Registrable Securities,
the Company shall amend such Registration Statement to register such maximum portion as permitted by SEC Guidance (provided that
the Company shall use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities
in accordance with the SEC Guidance, that are not then registered on an effective Registration Statement). Notwithstanding any
other provision of this Agreement, if any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted
to be registered on a particular Registration Statement (and notwithstanding that the Company used diligent efforts to advocate
with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing
by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement
will be reduced pro-rata among all other Holders, and unless otherwise directed in writing by a Holder as to its Registrable Securities,
the number of Registrable Securities to be registered on such Registration Statement will first be reduced by Registrable Securities
represented by the Warrant Shares (applied, in the case that some Warrant Shares may already be registered, to the Holders on a
pro rata basis based on the total number of unregistered Warrant Shares held by such Holders), and second by Registrable Securities
represented by the Common Stock underlying the Series A Stock (applied, in the case that some Common Stock may already be registered,
to the Holders on a pro rata basis based on the total number of unregistered Shares held by such Holders).
(f) In
connection with any filing of any Registration Statement hereunder, a Holder shall provide to the Company a singed selling stockholder
questionnaire in the form attached hereto as Annex A.
3. Registration
Procedures.
In connection with
the Company’s registration obligations hereunder, the Company shall:
(a) Prepare
and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus
supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii)
respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement
or any amendment thereto, and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period
in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth
in such Registration Statement as so amended or in such Prospectus as so supplemented.
(b) Notify
the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied
by an instruction to suspend the use of the Prospectus (entirely or in a particular jurisdiction, as the case may be) until the
requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one (1) Trading
Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement
is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration
Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to a Registration
Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other
federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional
information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings
for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening
of any Proceeding for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included
in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or
any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any
revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus,
as the case may be, it 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, in light of the circumstances under which they were made, not misleading
and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes
may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued
availability of a Registration Statement or Prospectus, provided that, any and all of such information shall remain confidential
to each Holder until such information otherwise becomes public, unless disclosure by a Holder is required by law; provided,
further, that notwithstanding each Holder’s agreement to keep such information confidential, each such Holder makes
no acknowledgement that any such information is material, non-public information, and provided further, that no such
suspension period shall exceed fifteen (15) consecutive days and during any three hundred sixty five (365) day period such suspension
periods shall not exceed an aggregate of forty five (45) days, and the first day of any suspension period must be at least five
(5) trading days after the last day of any prior suspension period.
(c) Use
its reasonable best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending
the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of
any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.
(d) Subject
to the terms of this Agreement, consent to the use of such Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto, except after the giving of any notice pursuant to Section 3(b) until the delivery of the Advice contemplated
by Section 9(b).
(e) Cooperate
with any broker-dealer through which a Holder proposes to resell its Registrable Securities in effecting a filing with the FINRA
Corporate Financing Department pursuant to NASD Rule 2710, as requested by any such Holder, and pay the filing fee required by
such filing within two (2) Trading Days of request therefor.
(f) Prior
to any resale of Registrable Securities by a Holder, use its reasonable best efforts to register or qualify or cooperate with the
selling Holders in connection with the registration or qualification (or exemption from the registration or qualification) of such
Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United
States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by each Registration Statement; provided, however, that the Company
shall not be required in connection therewith or as a condition thereto to (1) qualify to do business in any jurisdiction where
it would not otherwise be required to qualify but for this Section 3(f), (2) subject itself to general taxation in any such jurisdiction,
or (3) file a general consent to service of process in any such jurisdiction.
(g) If
requested by a Holder, cooperate with such Holders to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, and to enable such Registrable Securities
to be in such denominations and registered in such names as any such Holder may request.
(h) Upon
the occurrence of any event contemplated by Section 3(b), as promptly as reasonably possible under the circumstances taking into
account the Company’s good faith assessment of any adverse consequences to the Company and its shareholders of the premature
disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file
any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the
Holders in accordance with clauses (iii) through (vi) of Section 3(b) above to suspend the use of any Prospectus until the requisite
changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its reasonable
best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.
| (i) | Comply with all applicable rules and regulations of the Commission. |
(j) Require
each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned
by such Holder and the natural persons thereof that have voting and dispositive control over the shares. In the event of the failure
by such Holder to comply with the Company’s request within fifteen (15) days from the date of such request, the Company shall
be permitted to exclude such Holder from a Registration Statement, without being subject to the payment of liquidated damages to
such Holder. At such time that such Holder complies with the Company’s request the Company shall use its reasonable best
efforts to include such Holder on the Registration Statement.
(k) Within
five (5) Trading Days after a Registration Statement which covers the Registrable Securities is ordered effective by the Commission,
deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities confirmation
that such Registration Statement has been declared effective by the Commission.
(l) In
the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering.
(m) Use
its reasonable best efforts to cooperate with the sellers in the disposition of the Registrable Securities covered by such registration
statement, including without limitation in the case of an underwritten offering, using reasonable best efforts to cause key executives
of the Company and its subsidiaries to participate under the direction of the managing underwriter in a “road show”
scheduled by such managing underwriter in such locations and of such duration as in the judgment of such managing underwriter are
appropriate for such underwritten offering.
(n) In
connection with the preparation and filing of each Registration Statement registering Registrable Securities under the Securities
Act, and before filing any such Registration Statement or any other document in connection therewith, give the participating Holders
of Registrable Securities and their respective counsel, the opportunity to (i) review any such Registration Statement, each prospectus
included therein or filed with the SEC, each amendment thereof or supplement thereto and any other document to be filed, including
the Company's response to SEC comments, and (ii) provide comments to such documents if necessary to cause the description relating
to such Holders to be accurate.
(o) In
the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall
(i) register the resale of the Registrable Securities on Form S-1 and (ii) undertake to register the Registrable Securities on
Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement
then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective
by the SEC.
4. Registration
Expenses. All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred
to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made
with the Commission, (B) with respect to filings required to be made with any trading market on which the Common Stock is then
listed for trading, (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in
writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications
or exemptions of the Registrable Securities) and (D) with respect to any filing that may be required to be made by any broker through
which a Holder intends to make sales of Registrable Securities with the FINRA pursuant to NASD Rule 2710, so long as the broker
is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance,
(vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated
by this Agreement and (vii) reasonable fees and disbursements of
a single special counsel for the Holders (selected by Holders of the majority of the Registrable Securities requesting such registration),
up to $15,000 for each registration. In addition, the Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees
and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder.
In no event shall the Company be responsible for any broker or similar commissions of any Holder.
5. Indemnification.
(a) Indemnification
by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder,
the officers, directors, members, partners, agents and 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 each of them, each Person who controls
any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors,
members, stockholders, partners, agents and 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 each such controlling Person, to the fullest extent permitted
by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable
attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1)
any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of
any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation
thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent,
that (i) such untrue statements or omissions are based upon information regarding such Holder furnished to the Company by such
Holder for use therein (including the information included on Annex A hereto), or to the extent that such information relates
to such Holder’s proposed method of distribution of Registrable Securities or (ii) the Holder used an outdated or defective
Prospectus which the Company had previously notified such Holder was outdated or defective pursuant to Sections 3(b)(iii)-(vi)
and for which the Company had not yet provided the Advice contemplated in Section 9(b). The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this
Agreement of which the Company is aware.
(b) Indemnification
by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted
by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s
failure to comply with the prospectus delivery requirements of the Securities Act or (y) any untrue or alleged untrue statement
of a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading (i) to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished by such Holder to the Company for inclusion in such Registration
Statement or such Prospectus (including the information included on Annex A) or (ii) to the extent that such information
relates to such Holder’s proposed method of distribution of Registrable Securities set forth in such Prospectus or in any
amendment or supplement thereto or (iii) the use by such Holder of an outdated or defective Prospectus after the Company has notified
such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated
in Section 9(b). In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of
the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.
(c) Conduct
of Indemnification Proceedings.
(i) If
any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”),
such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”)
in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof;
provided, that, the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a
court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have prejudiced
the Indemnifying Party.
(ii) An
Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying
Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3)
the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and counsel to the Indemnified Party shall reasonably believe that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one (1) separate
counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any
such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying
Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect
of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
(iii) Subject
to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with
this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Trading Days of written notice thereof to the
Indemnifying Party; provided, that, the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such
fees and expenses applicable to such actions for which such Indemnified Party is judicially determined not to be entitled to indemnification
hereunder.
(d) Contribution.
(i) If
the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party
harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party,
in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether
any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party,
and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement
or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations
set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with
any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for
in this Section was available to such party in accordance with its terms.
(ii) The
parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in
the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute,
in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of
all of such Holder’s Registrable Securities pursuant to such Registration Statement or Prospectus exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission.
(e) Remedies
Not Exclusive. The indemnity and contribution agreements contained in this Section are in addition to any liability that the
Indemnifying Parties may have to the Indemnified Parties.
6. Preconditions
to Participation in Underwritten Registrations. No Holder of Registrable Securities may participate in any underwritten registration
hereunder unless such Holder (i) agrees to enter into a written underwriting agreement with the managing underwriter and containing
such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the
Company's size and investment stature, and (ii) provides any relevant information and completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements, and other documents required under the terms of such underwriting arrangements,
provided, however, that (i) the representations and warranties by, and the other agreements on the part of, the Company to and
for the benefit of the underwriters shall also be made to and for the benefit of such Holders of Registrable Securities and (ii)
no such Holder shall be required to make, and the Company shall use its reasonable best efforts to ensure that no underwriter requires
any Holder to make, any representations and warranties to, or agreements with, any underwriter in a registration effected pursuant
to this Agreement other than customary representations, warranties and agreements relating to such Holder's title to Registrable
Securities and authority to enter into the underwriting agreement.
7. Subsequent
Registration Rights. Without the consent of the Purchasers holding a majority of the Registrable Securities (such consent not
to be unreasonably withheld), the Company may not grant, or enter into any other agreement with any holder or prospective holder
of any securities of the Company that would grant such holder, registration rights, except for rights inferior to those granted
hereunder; provided, however, that the Company shall not allow such holder of securities of the Company: (i) to include such securities
in any Incidental Registration, unless under the terms of such agreement such holder may include such securities in any such registration
only to the extent that the inclusion of such securities will not reduce the amount of the Registrable Securities of the Holders
that are included; or (ii) to demand underwritten registration of their securities.
8. Reports
Under the Exchange Act. With a view to making available to the Purchasers the benefits of Rule 144, the Company agrees to:
(a) make
and keep public information available, as those terms are understood and defined in Rule 144 for so long as any Holder of Registrable
Securities is an “affiliate” as such term is defined under Rule 144; and
(b) furnish
to each Purchaser so long as such Purchaser owns Registrable Securities, promptly upon request: (i) a written statement by the
Company, if true or applicable, that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange
Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by
the Company (it being understood that if such documents are available via the Commission’s website, such documents need not
be provided), and (iii) such other information as may be reasonably requested to permit the Purchasers to sell such securities
pursuant to Rule 144 without registration, it being understood and agreed that the foregoing shall not constitute an obligation
of the Company to remain publicly reporting under the Exchange Act.
9. Miscellaneous.
(a) Compliance.
Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable
to it in connection with sales of Registrable Securities pursuant to a Registration Statement.
(b) Discontinued
Disposition. By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company
of the occurrence of any event of the kind described in Section 3(b)(iii) through (vi), such Holder will forthwith discontinue
disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”)
by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company
will use its reasonable best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.
(c) Amendments
and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of a
majority in interest of the then outstanding Registrable Securities (including, for this purpose, any Registrable Securities issuable
upon exercise of the Warrants) or conversion of Series A Stock. If a Registration Statement does not register all of the Registrable
Securities pursuant to a waiver or amendment done in compliance with the previous sentence or otherwise, then the number of Registrable
Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to
designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder
or some Holders and that does not directly or indirectly affect the rights of other Holders may be given by such Holder or Holders
of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions
of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of
this Section 9(c).
(d) Assignment
of Registration Rights. The rights of each Holder hereunder, including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be automatically assignable by each Holder to any Person who acquires
all or a portion of the Registrable Securities if such assignment shall be undertaken in accordance with Section 5.7
of the Purchase Agreement. Such rights to assignment and related obligations shall apply to the Holders (and to subsequent) successors
and assigns.
(e) Successors
and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each
of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger or similar transaction)
its rights or obligations hereunder without the prior written consent the Holders of a majority of the then outstanding Registrable
Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under the Purchase
Agreement.
(f) No
Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the
Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities,
that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions
hereof.
(g) Execution
and Counterparts. This Agreement may be executed in two (2) 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 by e-mail delivery of a “.pdf” format data file, such signature shall create
a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect
as if such facsimile or “.pdf” signature page were an original thereof.
(h) Governing
Law; Disputes. All questions concerning the governing law, construction, validity, enforcement and interpretation of and disputes
regarding this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.
(i) 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.
(j) Headings.
The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit
or affect any of the provisions hereof.
(k) Independent
Nature of Holders’ Obligations and Rights. The Company acknowledges that the obligations of each Holder under this Agreement
are several and not joint with the obligations of any other Holder, and no Holder shall be responsible in any way for the performance
of the obligations of any other Holder under this Agreement. The Company acknowledges that nothing contained herein, and no action
taken by any Holder pursuant hereto (including, but not limited to, the (i) inclusion of a Holder in the Registration Statement
and (ii) review by, and consent to, such Registration Statement by a Holder) shall be deemed to constitute the Holders as a partnership,
an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in
concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. The Company acknowledges
that each Holder shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising
out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding
for such purpose. The Company acknowledges that it has elected to provide all Holders with the same terms for the convenience of
the Company and not because it was required or requested to do so by the Holders. The Company acknowledges that such procedure
with respect to this Agreement in no way creates a presumption that the Holders are in any way acting in concert or as a group
with respect to this Agreement or the transactions contemplated hereby.
(Signature Pages Follow)
IN WITNESS WHEREOF, the parties have executed
this Registration Rights Agreement as of the date first written above.
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LABSTYLE INNOVATIONS CORP. |
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By: |
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Name: |
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Title: |
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
FOR PURCHASERS]
Name of Purchaser: __________________________
Signature of Authorized Signatory of Purchaser: __________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
[SIGNATURE PAGES CONTINUE]
Annex A
LABSTYLE
INNOVATIONS CORP.
Selling Stockholder Questionnaire
The undersigned beneficial
owner of common stock (the “Registrable Securities”) of LabStyle Innovations Corp., a corporation organized
under the laws of the State of Delaware (the “Company”), understands that the Company has filed or intends to
file with the Securities and Exchange Commission (the “Commission”) a registration statement (the “Registration
Statement”) for the registration and resale under the Securities Act of 1933, as amended (the “Securities Act”),
of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “Registration Rights
Agreement”) to which this document is annexed. All capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Registration Rights Agreement.
Certain legal consequences
arise from being named as a selling stockholder in the Registration Statement and the related prospectus. Accordingly, holders
and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences
of being named or not being named as a selling stockholder in the Registration Statement and the related prospectus.
1. |
Name. |
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(a) |
Full Legal Name of Selling Stockholder |
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(b) |
Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held: |
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(c) |
Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by this Questionnaire): |
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2. Address for Notices to Selling
Stockholder:
3. Broker-Dealer Status:
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(a) |
Are you a broker-dealer? |
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Yes ¨ No ¨ |
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(b) |
If “yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company? |
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Yes ¨ No ¨ |
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Note: |
If “no” to Section 3(b), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement. |
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(c) |
Are you an affiliate of a broker-dealer (i.e., registered representative, principals, control person)? |
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Yes ¨ No ¨ |
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(d) |
If you are an affiliate of a broker-dealer, do you certify that you purchased the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities? |
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Yes ¨ No ¨ |
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Note: |
If “no” to Section 3(d), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement. |
4. Beneficial Ownership of Securities
of the Company Owned by the Selling Stockholder.
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Except as set forth below in this Item 4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Purchase Agreement. |
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(a) |
Type and Amount of other securities beneficially owned by the Selling Stockholder: |
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5. Relationships with the Company:
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Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years. |
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The undersigned agrees
to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the
date hereof at any time while the Registration Statement remains effective.
By signing below, the
undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 5 and the inclusion
of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto. The undersigned
understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration
Statement and the related prospectus and any amendments or supplements thereto.
IN WITNESS WHEREOF
the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person
or by its duly authorized agent.
PLEASE FAX A COPY (OR EMAIL A .PDF COPY)
OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
Exhibit 4.2
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
TO THE COMPANY TO SUCH EFFECT.
Warrant No. 9/2014-_____ |
September 23, 2014 |
LABSTYLE INNOVATIONS CORP.
Common
Stock Purchase Warrant
THIS CERTIFIES THAT,
for value received, [ ]
(the “Holder”), is entitled to subscribe for and purchase, at the Exercise Price (as defined below), from
LabStyle Innovations Corp., a Delaware corporation (the “Company”), shares of the Company’s common stock,
par value $0.0001 (the “Common Stock”), at any time prior to 5:00 p.m., New York time, on the September 23,
2018 (the “Warrant Exercise Term”).
This Warrant is issued
in accordance with, and subject to, the terms and conditions described in the Securities Purchase Agreement, dated September 23,
2014, between the initial Holder and the Company (the “Purchase Agreement”) entered into in connection with
the private placement offering of the Company (the “Offering”) described in the Purchase Agreement.
All capitalized terms
used but not defined herein shall have the meanings ascribed to them in the Purchase Agreement.
This Warrant is subject to the following
terms and conditions:
1. Shares.
The Holder has, subject to the terms set forth herein, the right to purchase up to an aggregate of [50% coverage] shares
of Common Stock (the “Warrant Shares”) at a per share exercise price of $0.951, subject to adjustment
as provided for herein (the “Exercise Price”).
2. Exercise
of Warrant.
(a) Exercise.
This Warrant may be exercised by the Holder at any time prior to the Warrant Exercise Term, in whole or in part, by delivering
the notice of exercise attached as Exhibit A hereto (the “Notice of Exercise”), duly executed by the
Holder to the Company at its principal office, or at such other office as the Company may designate, accompanied by payment, by
wire transfer of immediately available funds to the order of the Company to an account designated by the Company, of the amount
obtained by multiplying the number of Warrant Shares designated in the Notice of Exercise by the Exercise Price (the “Purchase
Price”). For purposes hereof, “Exercise Date” shall mean the date on which all deliveries required
to be made to the Company upon exercise of this Warrant pursuant to this Section 2(a) shall have been made. The
Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. No originals of the Notice
of Exercise shall be required to be delivered, nor shall any medallion guarantee (or any other type of guarantee or notarization)
of any Notice of Exercise shall be required.
(b) Cashless
Exercise. Notwithstanding anything contained herein to the contrary, if and only if the Registration Statement (as
defined in the Registration Rights Agreement) covering the resale of all or any portion of the Warrant Shares is not available
for the resale of such Warrant Shares (such unregistered portion of the Warrant Shares, the “Unavailable Warrant Shares”),
the Holder may, in its sole discretion, exercise this Warrant solely with respect to the Unavailable Warrant Shares (it being acknowledged,
for the avoidance of doubt, that this Warrant may only be exercisable with respect to registered Warrant Shares pursuant to Section
2(a) hereof) and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment
of the Aggregate Exercise Price for such Unavailable Warrant Shares, elect instead to receive upon such exercise the "Net
Number" of shares of Common Stock determined according to the following formula (a "Cashless Exercise"):
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the number of Warrant Shares to be issued to the Holder |
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the number of Unavailable Warrant Shares with respect to which the Warrant is being exercised |
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the fair value per share of Common Stock on the date of exercise of this Warrant |
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the then-current Exercise Price of the Warrant |
Solely for the purposes
of this paragraph, “fair value” per share of Common Stock shall mean (A) the average of the closing sales prices on
the Trading Market for the twenty (20) trading days immediately preceding the date on which the Notice of Exercise is deemed to
have been sent to the Company, or (B) if the Common Stock is not publicly traded as set forth above, as reasonably and in good
faith determined by the Board of Directors of the Company as of the date which the Notice of Exercise is deemed to have been sent
to the Company.
For purposes of Rule
144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a Cashless
Exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for such shares shall be deemed
to have commenced, on the date this Warrant was originally issued.
(c) Issuance
of Certificates. As soon as practicable after the exercise of this Warrant, in whole or in part, in accordance with Section
2(a) or 2(b) hereof (and in no event later than two (2) Trading Days following the delivery of the Notice of Exercise), the Company,
at its expense, shall cause to be issued in the name of and delivered to the Holder: (i) a certificate or certificates for (or,
if applicable, by delivery through the facilities of the Depository Trust Company in electronic form of) the number of fully paid
and non-assessable Warrant Shares to which the Holder shall be entitled upon such exercise and, if applicable, (ii) a new warrant
of like tenor to purchase all of the Warrant Shares that may be purchased pursuant to the portion, if any, of this Warrant not
exercised by the Holder. The Holder shall for all purposes hereof be deemed to have become the Holder of record of such Warrant
Shares on the date on which the Notice of Exercise and payment of the Purchase Price in accordance with Section 2(a) hereof were
delivered and made, respectively, irrespective of the date of delivery of such certificate or certificates, except that if the
date of such delivery, notice and payment is a date when the stock transfer books of the Company are closed, such person shall
be deemed to have become the holder of record of such Warrant Shares at the close of business on the next succeeding date on which
the stock transfer books are open.
(d) Company's
Failure to Timely Deliver Securities. If (i) the Company shall fail for any reason or for no reason to issue to the Holder
on or prior to the fifth (5th) Trading Day following the delivery of a Notice of Exercise (the "Share Delivery
Date"), a certificate for the number of shares of Common Stock to which the Holder is entitled and (if such shares are
registered for resale or eligible for sale under Rule 144) register such shares of Common Stock on the Company's share register
or to credit the Holder's balance account with Depository Trust Company (“DTC”) for such number of shares of
Common Stock to which the Holder is entitled upon the Holder's exercise of this Warrant or (II) if the Registration Statement (as
defined in the Registration Rights Agreement) covering the resale of the Warrant Shares that are the subject of the Notice of Exercise
(the "Unavailable Warrant Shares") is not available for the resale of such Unavailable Warrant Shares and the
Company fails to promptly, but in no event later than as required pursuant to the Registration Rights Agreement so notify the Holder
(the event described in the immediately foregoing clause (II) is hereinafter referred as a "Notice Failure" and
together with the event described in clause (I) above, an "Exercise Failure"), then, in addition to all other
remedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and
during such Exercise Failure an amount equal to 1.5% of the product of (A) the sum of the number of shares of Common Stock not
issued to the Holder on or prior to the Share Delivery Date and to which the Holder is entitled and (B) the Closing Sale Price
of the Common Stock on the second (2nd) Trading Day immediately following the date of delivery of the Notice of Exercise
and (Y) the Holder, upon written notice to the Company, may void its Notice of Exercise with respect to, and retain or have returned,
as the case may be, any portion of this Warrant that has not been exercised pursuant to such Notice of Exercise; provided that
the voiding of a Notice of Exercise shall not affect the Company's obligations to make any payments which have accrued prior to
the date of such notice pursuant to this Section 2(d) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery
Date (I) the Company shall fail to issue and deliver a certificate to the Holder and register such shares of Common Stock on the
Company's share register or credit the Holder's balance account with DTC for the number of shares of Common Stock to which the
Holder is entitled upon the Holder's exercise hereunder or pursuant to the Company's obligation pursuant to clause (ii) below or
(II) a Notice Failure occurs, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such exercise
that the Holder anticipated receiving from the Company (a "Buy-In"), then the Company shall, within three (3)
Trading Days after the Holder's request and in the Holder's discretion, either (i) pay cash to the Holder in an amount equal to
the Holder's total purchase price (including brokerage commissions and other reasonable and customary out-of-pocket expenses, if
any) for the shares of Common Stock so purchased (the "Buy-In Price"), at which point the Company's obligation
to deliver such certificate (and to issue such shares of Common Stock) or credit such Holder's balance account with DTC for such
shares of Common Stock shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates
representing such shares of Common Stock or credit such Holder's balance account with DTC and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing
Sale Price on the date of exercise. Nothing shall limit the Holder's right to pursue any other remedies available to it hereunder,
at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the
Company's failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares
of Common Stock) upon the exercise of this Warrant as required pursuant to the terms hereof.
(e) Taxes.
The issuance of the Warrant Shares upon the exercise of this Warrant, and the delivery of certificates or other instruments representing
such Warrant Shares, shall be made without charge to the Holder for any tax or other charge of whatever nature in respect of such
issuance and the Company shall bear any such taxes in respect of such issuance.
3. Adjustment
of Exercise Price.
(a) Adjustment
for Reclassification, Consolidation or Merger. If while this Warrant, or any portion hereof, remains outstanding and unexpired
there shall be (i) a reorganization or recapitalization (other than a combination, reclassification, exchange or subdivision of
shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation or other
entity in which the Company shall not be the surviving entity, or a reverse merger in which the Company shall be the surviving
entity but the shares of the Company’s capital stock outstanding immediately prior to the merger are converted by virtue
of the merger into other property, whether in the form of securities, cash or otherwise, or (iii) a sale or transfer of the Company’s
properties and assets as, or substantially as, an entirety to any other corporation or other entity in one transaction or a series
of related transactions, then, as a part of such reorganization, recapitalization, merger, consolidation, sale or transfer, unless
otherwise directed by the Holder, all necessary or appropriate lawful provisions shall be made so that the Holder shall thereafter
be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price
then in effect, the greatest number of shares of capital stock or other securities or property that a holder of the Warrant Shares
deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, recapitalization, merger,
consolidation, sale or transfer if this Warrant had been exercised immediately prior to such reorganization, recapitalization,
merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 3. If the per share consideration
payable to the Holder for Warrant Shares in connection with any such transaction is in a form other than cash or marketable securities,
then the value of such consideration shall be determined in good faith by the Company’s Board of Directors. The foregoing
provisions of this paragraph shall similarly apply to successive reorganizations, recapitalizations, mergers, consolidations, sales
and transfers and to the capital stock or securities of any other corporation that are at the time receivable upon the exercise
of this Warrant. In all events, appropriate adjustment shall be made in the application of the provisions of this Warrant with
respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be
applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable or issuable
after such reorganization, recapitalization, merger, consolidation, sale or transfer upon exercise of this Warrant.
(b) Adjustments
for Split, Subdivision or Combination of Shares. If while this Warrant, or any portion hereof, remains outstanding and unexpired
the Company shall subdivide (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise)
the shares of Common Stock subject to acquisition hereunder, then, upon the effective date of such subdivision, the Exercise Price
in effect immediately prior to such subdivision will be proportionately reduced and the number of shares of Common Stock subject
to acquisition upon exercise of the Warrant will be proportionately increased. If the Company at any time combines (by reverse
stock split, recapitalization, reorganization, reclassification or otherwise) the shares of Common Stock subject to acquisition
hereunder, then, upon the effective date of such combination, the Exercise Price in effect immediately prior to such combination
will be proportionately increased and the number of shares of Common Stock subject to acquisition upon exercise of the Warrant
will be proportionately decreased.
(c) Notice
of Adjustments. Upon any adjustment of the Exercise Price and any increase or decrease in the number of Warrant Shares purchasable
upon the exercise of this Warrant, then, and in each such case, the Company, within 15 days thereafter, shall give written notice
thereof to the Holder at the address of such Holder as shown on the books of the Company, which notice shall state the Exercise
Price as adjusted and, if applicable, the increased or decreased number of Warrant Shares purchasable upon the exercise of this
Warrant, setting forth in reasonable detail the method of calculation of each.
4. Participation
Rights.
(a) Rights
upon Distribution of Assets. Except with respect to such events in which an adjustment to the Exercise Price has been made
pursuant to Section 3 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to
acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation,
any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"), at any time after the issuance
of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that
the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete
exercise of this Warrant immediately before the date of which a record is taken for such Distribution, or, if no such record is
taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution.
(b) Purchase
Rights. In addition to any adjustments pursuant to Section 3 above, if at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants, securities or other property, in each case pro rata to the
record holders of any class of Common Stock (the "Purchase Rights"), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
4. Notices.
Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be delivered in accordance
with Section 5.4 of the Purchase Agreement.
5. Legends.
Unless the Warrant Shares are registered for resale with the Commission, each certificate evidencing the Warrant Shares issued
upon exercise of this Warrant shall be stamped or imprinted with a legend required pursuant to the Purchase Agreement.
6. Removal
of Legend. Upon request of a holder of a certificate with the legends required by Section 5 hereof, the Company shall issue
to such holder a new certificate therefor free of any transfer legend, if, with such request, the Company shall have received an
opinion of counsel satisfactory to the Company in form and substance to the effect that any transfer by such holder of the Warrant
Shares evidenced by such certificate will not violate the Securities Act or any applicable state securities laws.
7. Fractional
Shares. No fractional Warrant Shares will be issued in connection with any exercise hereunder. Instead, the Company shall round
up, as nearly as practicable to the nearest whole Share, the number of Warrant Shares to be issued.
8. Rights
of Stockholders. Except as expressly provided herein, the Holder, as such, shall not be entitled to vote or be deemed the holder
of the Warrant Shares or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose,
nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification
of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or otherwise
until this Warrant shall have been exercised and the Warrant Shares purchasable upon the exercise hereof shall have been issued,
as provided herein.
9. No
Transfer. This Warrant shall be assignable and transferable, provided that no such assignment and transfer shall be valid unless
(a) the same shall be valid under and undertaken in accordance with applicable law, rule or regulation and (b) the provisions of
Section 5.7 of the Purchase Agreement shall be adhered to as a condition to such transfer or assignment.
10. Miscellaneous.
(a) This
Warrant and disputes arising hereunder shall be governed by and construed and enforced in accordance with the laws of the State
of Delaware applicable to agreements made and to be performed wholly within such State, without regard to its conflict of law rules.
(b) The
headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.
(c) The
covenants of the respective parties contained herein shall survive the execution and delivery of this Warrant.
(d) The
terms of this Warrant shall be binding upon and shall inure to the benefit of any successors or permitted assigns of the Company
and of the Holder and of the Warrant Shares issued or issuable upon the exercise hereof.
(e) This
Warrant and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the
parties with regard to the subject hereof.
(f) The
Company shall not, by amendment of its Certificate of Incorporation or Bylaws, or through any other means, directly or indirectly,
avoid or seek to avoid the observance or performance of any of the terms of this Warrant and shall at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder contained herein against impairment.
(g) Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount
to the Company, or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company, at its expense,
will execute and deliver to the Holder, in lieu thereof, a new Warrant of like date and tenor.
(h) This
Warrant and any provision hereof may be amended, waived or terminated only by an instrument in writing signed by the Company and
the Holder.
(i) The
remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the
other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder
and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach
or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.
11. Certain
Defined Terms.
(a) "Closing
Sale Price" means, for any security as of any date, the last closing trade price for such security on an Eligible Market
that is the principal market for such security, as reported by Bloomberg, or, if the Eligible Market that is the principal market
for such security begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade
price of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Eligible Market for such security
is not the principal securities exchange or trading market for such security, the last trade price, respectively, of such security
on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no last trade price is reported for such security by Bloomberg, the average
of the ask prices of any market makers for such security as reported in the OTC Link or "pink sheets" by OTC Markets
Group Inc. (formerly Pink OTC Markets Inc.). If the Closing Sale Price cannot be calculated for a security on a particular date
on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually
determined by the Company and the Required Holders. If the Company and the Required Holders are unable to agree upon the fair market
value of such security, then such dispute shall be resolved pursuant to Section 1(c). All such determinations to be appropriately
adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction during the applicable
calculation period.
(b) "Eligible
Market" means the OTC Bulletin Board, OTCQX Market and/or OTCQB Market operated by OTC Markets Group, Inc., the NYSE MKT
LLC, The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market or The New York Stock Exchange, Inc.
(c) "Required
Holders" means the holders of Warrants issued pursuant to the Purchase Agreement representing at least a majority of the
shares of Common Stock underlying such Warrants then outstanding.
(d) "Trading
Day" means any day on which the Common Stock is traded on an Eligible Market that is the principal market for such security;
provided that "Trading Day" shall not include any day on which the Common Stock is scheduled to trade on such
exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of
trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on
such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).
IN WITNESS WHEREOF,
the Company has caused this Warrant to be signed by its duly authorized officer.
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LABSTYLE INNOVATIONS CORP. |
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Exhibit A
NOTICE OF EXERCISE
TO: LabStyle Innovations Corp., attention:
President
The undersigned hereby
elects to purchase the below referenced shares (the “Warrant Shares”) of Common Stock of LabStyle Innovations Corp.
(the “Company”) pursuant to the terms of this Warrant, and tenders herewith payment of the purchase price of such Warrant
Shares in full. Payment of the purchase price is being made by (check one):
____________ a
cash exercise with respect to _________________ Warrant Shares; or
____________ a
"cashless exercise" with respect to _______________ Warrant Shares (if permitted pursuant to Section 2(b) of the Warrant).
Please issue a certificate
or certificates representing said shares in the name of the undersigned or in such other name as is specified below:
1. Name:
__________________________________________________
2. Address:
________________________________________________
3. DWAC
Instructions (if applicable): ___________________________________________
The undersigned
hereby represents and warrants the following:
(a) It (i) has
such knowledge and experience in financial and business affairs that he/she/it is capable of evaluating the merits and risks involved
in purchasing the Warrant Shares, (ii) is able to bear the economic risks involved in purchasing the Warrant Shares, and (iii)
is an “accredited investor,” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933,
as amended;
(b) In
making the decision to purchase the Warrant Shares, it has relied solely on independent investigations made by it and has had the
opportunity to ask questions of, and receive answers from, the Company concerning the Warrant Shares, the financial condition,
prospective business and operations of the Company and has otherwise had an opportunity to obtain any additional information, to
the extent that the Company possess such information or could acquire it without unreasonable effort or expense;
(c) Its overall
commitment to investments that are not readily marketable is not disproportionate to its net worth and income, and the purchase
of the Warrant Shares will not cause such overall commitment to become disproportionate; it can afford to bear the loss of the
purchase price of the Warrant Shares;
(d) It
has no present need for liquidity in its investment in the Warrant Shares; and
(e) It
acknowledges that the transaction contemplated in connection with the purchase of the Warrant Shares has not been reviewed or approved
by the Securities and Exchange Commission or by any administrative agency charged with the administration of the securities laws
of any state, and that no such agency has passed on or made any recommendation or endorsement of any of the securities contemplated
hereby.
Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This SECURITIES
PURCHASE AGREEMENT (this “Agreement”) is dated as of September 23, 2014, between LabStyle Innovations Corp.,
a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).
WHEREAS, subject
to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended
(the “Securities Act”), and Rule 506(b) promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, 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 Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement, the following capitalized terms have the meanings set forth in this
Section 1.1:
“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.
“Board
of Directors” means the board of directors of the Company.
“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to
close.
“Certificate
of Designation” means the Certificate of Designation to be filed prior to the Closing by the Company with the Secretary
of State of Delaware, in the form of Exhibit A attached hereto.
“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1.
“Closing
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii)
the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived.
“Commission”
means the United States Securities and Exchange Commission.
“Common
Stock” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.
“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument
that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
“Edery”
means David Edery, or his controlled Affiliates, including Dicilyon Consulting and Investments Ltd.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended.
“Liens”
means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Preferred
Stock” means the up to 60,000 shares of the Company’s Series A Convertible Preferred Stock issued hereunder having
the rights, preferences and privileges set forth in the Certificate of Designation, in the form of Exhibit A hereto.
“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
“Registration
Rights Agreement” means the Registration Rights Agreement, dated the date hereof, among the Company and the Purchasers,
in the form of Exhibit B attached hereto.
“Registration
Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and
covering the resale of the Underlying Shares by each Purchaser as provided for in the Registration Rights Agreement.
“Reverse
Split” means a five-for-one reverse stock split of the Common Stock which has been previously authorized by the Company’s
stockholders. All share number and similar references in this Agreement are made without taking into account the Reverse Split.
It is expressly acknowledged and agreed that all representations and warranties of the Company contained herein regarding (a) the
due authorization and reservation of the Securities and (b) the due authorization by the Company and the Board of Directors of,
and the power and authority of the Company to enter into, this Agreement, the Transaction Documents and the transactions contemplated
hereby and thereby are subject to and qualified in their entirety by the requirement of the Company to implement the Reverse Split.
“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.
“Securities”
means the Preferred Stock, the Warrants, the Warrant Shares and the Underlying Shares.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act.
“Stated
Value” means $100 per share of Preferred Stock.
“Subscription
Amount” shall mean, as to each Purchaser, the aggregate amount to be paid for the Preferred Stock purchased hereunder
as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately available funds.
“Subsidiary”
means (i) LabStyle Innovation Ltd., an Israeli company and (ii) LabStyle Innovations US LLC, a Delaware limited liability company,
and “Subsidiaries” means each Subsidiary collectively.
“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 NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange or the OTC Bulletin Board or OTCQB Marketplace operated by OTC Markets Group, Inc. (or any successors to any
of the foregoing).
“Transaction
Documents” means this Agreement, the Certificate of Designation, the Warrants, the Registration Rights 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 VStock Transfer, LLC, the current transfer agent of the Company, and any successor transfer agent of the
Company.
“Underlying
Shares” means the shares of Common Stock issued and issuable upon conversion of the Preferred Stock or upon exercise
of the Warrants.
“Warrants”
means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
hereof, which Warrants shall be exercisable immediately and have a term of exercise equal to four (4) years, in the form of Exhibit
C attached hereto.
“Warrant
Shares” means the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing.
On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution
and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly,
agree to purchase, up to an aggregate of $6,000,000 of shares of Preferred Stock with an aggregate value for each Purchaser equal
to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser, and Warrants
as determined by pursuant to Section 2.2(a). The aggregate number of shares of Preferred Stock sold hereunder shall be up to 60,000.
Prior to Closing, each Purchaser shall deliver to the Company, via wire transfer of immediately available funds, cash equal to
its Subscription Amount, and as of the Closing (i) the Company shall deliver to each Purchaser its respective shares of Preferred
Stock and Warrants as determined pursuant to Section 2.2(a), and (ii) the Company and each Purchaser shall deliver the other items
set forth in Section 2.2 deliverable at the Closing, provided that it shall not be a condition for the Closing as to any Purchaser
that any other Purchaser shall have delivered the items set forth in Section 2.2 to be delivered by such other Purchaser. Upon
satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of legal
counsel to the Company or such other location as the parties shall mutually agree (and such Closing may be undertaken remotely
by electronic exchange of documentation).
2.2 Deliveries.
(a) In
connection with the Closing, the Company shall deliver or cause to be delivered to each Purchaser the following:
(i) on
or prior to the Closing Date, this Agreement duly executed by the Company;
(ii) within
five (5) Business Days of the Closing Date, a stock certificate evidencing a number of shares of Preferred Stock equal to such
Purchaser’s Subscription Amount divided by the Stated Value, registered in the name of such Purchaser (it being agreed, however,
that each Purchaser shall, upon consummation of the Closing, be the record holder of such shares of Preferred Stock);
(iii) within
five (5) Business Days of the Closing Date, a Warrant registered in the name of such Purchaser to purchase up to a number of shares
of Common Stock equal to 50% of the shares of Common Stock underlying the Preferred Stock purchased by such Purchaser hereunder,
with an exercise price per share equal to $0.914, subject to adjustment as provided for therein; and
(iv) on
or prior to the Closing Date, the Registration Rights Agreement duly executed by the Company.
(b) On
or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:
(i) this
Agreement duly executed by such Purchaser; and
(ii) the
Registration Rights Agreement duly executed by such Purchaser.
2.3 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:
(i) the
accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers 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 each Purchaser required to be performed at or prior to the Closing Date shall have been
performed; and
(iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.
(b) The
respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being
met:
(i) the
accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained
herein (unless as of a specific date therein, which shall be true and correct as of such specified date), and the Purchasers shall
have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by the Purchasers in the form attached hereto as Exhibit
D;
(ii) all
obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;
(iii) the
Company shall have received all governmental, regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities;
(iv) the
Purchasers shall have received the opinion of Ellenoff Grossman & Schole LLP, the Company's outside counsel, dated as of the
Closing Date, in a customary form agreed to by counsel to Edery;
(v) the
Purchasers shall have received a certificate, executed by the Secretary of the Company and dated as of the Closing Date, as to
(i) the resolutions consistent with Sections 3.1(c) and (tt), Section 4.7 and Section 4.9 below as adopted by the Company's Board
of Directors in a form reasonably acceptable to Edery, (ii) the undertakings provided for in Section 4.9(d), (iii) the Certificate
of Incorporation and (iv) the Bylaws, each as in effect at the Closing, in the form attached hereto as Exhibit E;
(vi) the
Purchasers shall have received from the Company a certified copy of the Certificate of Designation from the Secretary of State
of the State of Delaware; and
(vii) the
delivery by the Company of the items set forth in Section 2.2(a) of this Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations
and Warranties of the Company. The Company hereby makes the following representations and warranties to each Purchaser:
(a) Subsidiaries.
The Subsidiaries are the only direct or indirect subsidiaries of the Company. The Company owns, directly or indirectly, all of
the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities.
(b) Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation,
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 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 Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
(c) Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated
by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder
and to issue the Securities in accordance with the term hereof and thereof. The execution and delivery of this Agreement and each
of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company,
the Board of Directors or the Company’s stockholders in connection herewith or therewith, other than in connection with the
Required Approvals and the requirement of the Company to implement the Reverse Split. 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 law.
(d) No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to
which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby
and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter documents, (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, 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, rule, regulation, order, judgment, injunction, decree or other restriction of any court
or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations),
or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of clause (ii), such
as could not have or reasonably be expected to result in a Material Adverse Effect.
(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)
notices to existing investors in connection with affording such investors any existing pre-emptive or participation rights held
by such existing investors (the “Participation Rights”), (ii) the filings required pursuant to Section 4.6 of
this Agreement, (iii) the filing with the Commission required under the Registration Rights Agreement, (iv) the notice and/or application(s)
to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Shares and Warrant Shares
for trading thereon in the time and manner required thereby, and (iv) the filing of Form D with the Commission and such filings
as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).
(f) Issuance
of the Securities. Subject to the requirement to implement the Reverse Split: (i) the Securities 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 nonassessable,
free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents
and (ii) the Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for
in the Transaction Documents and (iii) the Company has reserved from its duly authorized capital stock a number of shares of Common
Stock for issuance of the Underlying Shares.
(g) Capitalization.
As of the date hereof the authorized capital stock of the Company consists of (i) 80,000,000 shares of Common Stock, of which,
79,529,254 are issued and outstanding and 22,312,647 shares are reserved for issuance pursuant to securities (other than
the Warrants) exercisable or exchangeable for, or convertible into, shares of Common Stock and (ii) 5,000,000 shares of preferred
stock, none of which are issued and outstanding. No shares of Common Stock are held in treasury. All of such outstanding shares
are duly authorized and have been, or upon issuance will be, validly issued and are fully paid and nonassessable. 862,500 shares
of the Company's issued and outstanding Common Stock are as of the date hereof owned by Persons who are "affiliates"
(as defined in Rule 405 of the 1933 Act) of the Company or any of its Subsidiaries. Except as set forth on Schedule 3(g)
hereto or 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 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. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued,
fully paid and nonassessable, 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.
There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.
(h) 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) (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 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 Commission 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 notes 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.
(i) Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (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 Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property
to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v)
the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock
option or incentive plans.
(j) Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities
or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. There
has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act
or the Securities 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 U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours.
(l) Compliance.
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 statute, rule, ordinance or regulation
of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and employment and labor matters.
(m) 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 proceedings relating to the revocation
or modification of any Material Permit.
(n) 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.
(o) Intellectual
Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights
and similar rights necessary or required for use in connection with their respective businesses(collectively, the “Intellectual
Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that
any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be
abandoned, within two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has received, since the
date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any
knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person. To the knowledge of the Company,
all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual
Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties.
(p) 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.
(q) Transactions
With Affiliates and Employees. Except as set forth in Schedule 3(q) hereto, none of the officers or directors 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 too 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,
or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case
in excess of $120,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan
of the Company.
(r) Sarbanes-Oxley;
Internal Accounting Controls. 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 Commission thereunder that are effective as of the date hereof and as of the 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 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 Commission’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) of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal
control over financial reporting of the Company and its Subsidiaries.
(s) Certain
Fees. Except as disclosed on Schedule 3(s), no brokerage or finder’s fees or commissions are or will be payable
by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank
or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation
with respect to, and the Company shall hold the Purchasers harmless from, any fees, liabilities or losses or with respect to any
claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with
the transactions contemplated by the Transaction Documents.
(t) Private
Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated
hereby.
(u) Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, 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 shall conduct its business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.
(v) Registration
Rights. Other than each of the Purchasers and except as disclosed in the SEC Reports, no Person has any right to cause the
Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.
(w) Listing
and Maintenance Requirements. 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. 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.
(x) Disclosure.
All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their
respective businesses and the transactions contemplated hereby 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 light of the circumstances under which they were made, not misleading.
(y) No
Integrated Offering. Assuming the accuracy of the Purchasers’ 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 the Securities Act which would require the
registration of any such securities under the Securities Act.
(z) Tax
Status. The Company and its Subsidiaries each (i) has made or filed all United States federal, state and local income and all
foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has
paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material
taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary
know of no basis for any such claim.
(aa) No
General Solicitation. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities
by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchasers
and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.
(bb) Foreign
Corrupt Practices. Neither the Company nor any Subsidiary, nor any director, officer, employee, 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 any provision of FCPA.
(cc) Accountants.
The Company’s independent registered public accounting firm is Kost Forer Gabbay & Kasierer, a member of Ernst &
Young Global. To the knowledge and belief of the Company, such accounting firm: (i) is a registered public accounting firm as required
by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s
Annual Report for the fiscal year ending December 31, 2014.
(dd) 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.
(ee) Acknowledgment
Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated
thereby. The Company further acknowledges that no Purchaser is 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 any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to
each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based
solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(ff) Regulation
M Compliance. The Company has not, and to its 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.
(gg) 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”).
(hh) 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 Purchaser’s
request.
(ii) 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, five percent (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.
(jj) 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 (collectively, the “Money
Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body
or any arbitrator involving the Company and any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge
of the Company or any Subsidiary, threatened.
(rr) No
Disqualification Events. With respect to the Securities to be offered and sold hereunder in reliance on Rule 506 under
the Securities Act, none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other
officer of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under
the Securities Act) connected with the Company in any capacity at the time of sale (each, an "Issuer Covered Person"
and, together, "Issuer Covered Persons") is subject to any of the "Bad Actor" disqualifications described
in Rule 506(d)(1)(i) to (viii) under the Securities Act (a "Disqualification Event"), except for a Disqualification
Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person
is subject to a Disqualification Event.
(ss) Other
Covered Persons. The Company is not aware of any person (other than any Issuer Covered Person) that has been or will be paid
(directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Securities.
(tt) Application
of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any,
in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including,
without limitation, any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of
Incorporation, Bylaws or other organizational documents or the laws of the jurisdiction of its formation which is or could become
applicable to any Purchaser as a result of the transactions contemplated by this Agreement, including, without limitation, the
Company's issuance of the Securities and any Purchaser's ownership of the Securities. The Company and its Board of Directors have
taken all necessary action, if any, in order to render inapplicable any stockholder rights plan or similar arrangement relating
to accumulations of beneficial ownership of shares of Common Stock or a change in control of the Company or any of its Subsidiaries.
(uu) Off
Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries
and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its Exchange Act filings
and is not so disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.
(vv) Shell
Company Status. The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i).
3.2 Representations
and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as
of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):
(a) Organization;
Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and (where such
concept is applicable) in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate,
partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated
by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of
the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the
part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered
by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(b) Own
Account. Such Purchaser understands that the Securities are “restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account
and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act
or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business.
(c) Purchaser
Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on
which it exercises any Warrants for cash, it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1),
(a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act.
(d) Experience
of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment. Such Purchaser
acknowledges that as of the date hereof, the Company has very limited financial resources, and thus an investment in the Securities
is subject to significant risk.
(e) General
Solicitation. Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented
at any seminar or any other general solicitation or general advertisement.
(f) Access
to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including
all exhibits and schedules thereto) and the SEC Reports and has been afforded (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering
of the Shares and the merits and risks of investing in the Shares; (ii) access to information about the Company and its financial
condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision with respect to the investment. Such Purchaser
acknowledges and agrees that neither the Company nor any Affiliate of the Company has provided such Purchaser with any information
or advice with respect to the Securities nor is such information or advice necessary or desired.
(g) Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not directly
or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases
or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser
first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material
terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing,
in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions
of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio
managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered
by this Agreement. Other than to other Persons party to this Agreement or its legal counsel or other advisors, such Purchaser has
maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms
of this transaction).
(h) Other
Company Holdings. As of the Closing Date, and prior to the consummation of the transactions contemplated by this Agreement,
such Purchaser is not, collectively with its Affiliates or any Person with whom such Purchaser is acting in concert, a holder of
Common Stock or Common Stock Equivalents in an amount equal to more than one percent (1%) of the outstanding shares of Common Stock
(assuming full exercise or conversion of any such Common Stock Equivalents).
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with U.S. state and U.S. federal securities laws. In connection with any transfer
of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser
or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of
such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to
be bound by the terms of this Agreement and the Registration Rights Agreement and shall have the rights and obligations of a Purchaser
under this Agreement and the Registration Rights Agreement.
(b) The
Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following
form:
[NEITHER] THIS SECURITY [NOR
THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE COMPANY TO SUCH EFFECT.
(c) Certificates
evidencing the Underlying Shares shall not be required to contain any legend (including the legend set forth in Section 4.1(b)
hereof): (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective
under the Securities Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144, (iii) if such Underlying Shares
are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information
required under Rule 144 as to such Underlying Shares and without volume or manner-of-sale restrictions or (iv) if such legend is
not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued
by the staff of the Commission).
(d) Each
Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell any Securities
pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom, and that if Securities are sold pursuant to a Registration Statement, they will be sold in compliance
with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.
(e) Each
Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will not sell, transfer,
assign, hypothecate or otherwise dispose of any Securities or any direct or indirect interest therein for a period of sixty (60)
days following the Closing Date.
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. 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 any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.
4.3 Furnishing
of Information. For so long as any Purchaser is an “affiliate” (as defined in Rule 144) of the Company, the Company
covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required
to be filed by the Company after the date hereof pursuant to the Exchange Act, and the Company shall not terminate its status as
an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would
no longer require or otherwise permit such termination, and the Company shall take all reasonable actions to maintain its eligibility
to register the Common Stock and Warrant Shares for resale by the Purchasers on Form S-3.
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.
4.5 Conversion
and Exercise Procedures. Each of the form of Notice of Exercise included in the Warrants and the form of Notice of Conversion
included in the Certificate of Designation set forth the totality of the procedures required of the Purchasers in order to exercise
the Warrants or convert the Preferred Stock. 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 Notice of Conversion form be required in order to exercise the Warrants or convert the Preferred Stock. No additional
legal opinion, other information or instructions shall be required of the Purchasers to exercise their Warrants or convert their
Preferred Stock. The Company shall honor exercises of the Warrants and conversions of the Preferred Stock and shall deliver Underlying
Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.
4.6 Use
of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes
and shall not use such proceed: (a) for the satisfaction of any portion of the Company’s debt (other than payment of trade
payables in the ordinary course of the Company’s business and prior practices), (b) for the redemption of any Common Stock
or Common Stock Equivalents, (c) for the settlement of any outstanding litigation or (d) in violation of FCPA or OFAC regulations.
4.7 Reverse
Stock Split. The Company covenants that it shall, within fifteen (15) calendar days of the Closing, implement the Reverse Split.
4.8 Preemptive
Rights of Edery.
(a) For
a period of two (2) years from the Closing, Edery shall have the right of first refusal to
purchase his Pro Rata Share (as defined below) of all (or any part) of any New Securities (as defined below) that the Company may
from time to time issue during such period.
(b) Edery’s
“Pro Rata Share” for purposes of this Section 4.8 shall be equal to the ratio of (a) the number of shares of
Common Stock on a Fully Diluted Basis which the Edery is deemed to hold immediately prior to the issuance of such New Securities
to (b) the total number of shares of outstanding Common Stock on a Fully Diluted Basis immediately prior to the issuance of the
New Securities. For purposes of this Section 4.8, the term “Fully Diluted Basis” shall mean at the time of determination,
the total number of shares of Common Stock then issued and outstanding, plus the number of shares underlying Common Stock Equivalents
then issued and outstanding; provided, however, that for purposes of this Section 4.8 only, the term Common Stock Equivalents shall
only include those whose exercise or conversion prices are greater than the then market value of the Common Stock (i.e., “in
the money”).
(c) For
purposes of this Section 4.8, the term “New Securities” means any Common Stock or Common Stock Equivalents,
whether now authorized or not, but only those issued pursuant to a private placement offering; provided, however, that the
term “New Securities” does not include: (i) any securities issued or issuable pursuant to current or future stock option,
stock incentive or similar plans or agreements approved by the Board of Directors; (ii) any shares of Common Stock issuable upon
conversion or exercise of the Securities issued hereunder; (iii) any shares of Common Stock issuable upon conversion or exercise
of any Common Stock Equivalents issued and outstanding as of the date hereof; (iv) any shares of the Common Stock Common Stock
Equivalents issued in connection with any forward or reverse stock split or stock dividend or similar event; or (v) any securities
issued by the Company (A) in connection with the establishment of credit facilities approved by the Board of Directors, (B) pursuant
to the acquisition approved by the Board of Directors of another Person by the Company or its Affiliates by way of consolidation,
merger, purchase of all or substantially all of the assets, or other reorganization in which the Company or such Affiliate acquires,
in a single transaction or series of related transactions, all or substantially all of the assets of such other Person or at least
fifty-one percent (51%) or more of the voting power of such other Person or at least fifty-one percent (51%) or more of the equity
ownership of such other Person or (C) pursuant to acquisitions or strategic transactions approved by the Board of Directors with
the affirmative vote of the Edery Nominees (as defined below) then serving, provided that
any such issuance shall only be to a Person (or to the equity holders of such Person) which is, itself or through its subsidiaries,
an operating company or an owner of an asset in a business synergistic with the business of the Company or its Subsidiaries and
shall provide to the Company or its Subsidiaries significant additional benefits in addition to the investment of funds, but shall
not include (except as set forth above) a transaction in which the Company is issuing securities for the purpose of raising capital
or to a Person whose primary business is investing in securities.
4.9 Edery
Board Nomination Rights.
(a) For
so long as Edery or his Affiliates beneficially own 10.0% or more of the total number of shares of Common Stock outstanding, Edery
shall have the right (but not the obligation) pursuant to this Agreement to nominate one (1) individual to serve as a director
on the Board of Directors, and the Company shall include, and shall use its best efforts to cause the Company’s directors,
whether acting through the Nominating and Corporate Governance Committee of the Board of Directors or otherwise, to include, in
the slate of nominees recommended to stockholders of the Company for election as a director at any annual or special meeting of
such stockholders (or, if permitted, by any action by written consent of such stockholders) at or by which directors of the Company
are to be elected, the one (1) individual identified in writing and in advance by Edery.
(b) For
so long as Edery or his Affiliates beneficially own 15.0% or more of the total number of shares of Common Stock outstanding, the
Edery shall have the right (but not the obligation) pursuant to this Agreement to nominate two (2) individuals to serve as directors
on the Board of Directors, and the Company shall include, and shall use its best efforts to cause the Company’s directors,
whether acting through the Nominating and Corporate Governance Committee of the Board of Directors or otherwise, to include, in
the slate of nominees recommended to stockholders of the Company for election as directors at any annual or special meeting of
such stockholders (or, if permitted, by any action by written consent of such stockholders) at or by which directors of the Company
are to be elected, the two (2) individuals identified in writing and in advance by Edery.
(c) For
so long as Edery or his Affiliates beneficially own 25.0% or more of the total number of shares of Common Stock outstanding, Edery
shall have the right (but not the obligation) pursuant to this Agreement to nominate three (3) individuals to serve as directors
on the Board of Directors, and the Company shall include, and shall use its best efforts to cause the Company’s directors,
whether acting through the Nominating and Corporate Governance Committee of the Board of Directors or otherwise, to include, in
the slate of nominees recommended to stockholders of the Company for election as a director at any annual or special meeting of
such stockholders (or, if permitted, by any action by written consent of such stockholders) at or by which directors of the Company
are to be elected, the three (3) individuals identified in writing and in advance by Edery. The individuals nominated to the Board
of Directors by Edery pursuant to this Section 4.9 are referred to as the “Edery Nominees.”
(d) Simultaneously
with the Closing (and, in the case of subclauses (d)(iii) and (iv) below, at all applicable times following the Closing), the Company
shall ensure that:
(i) the
Board of Directors shall set the number of members of the Board of Directors of the Company at seven (7);
(ii) each
of the members of the Board of Directors immediately prior the Closing shall provide an undertaking to Edery to resign from the
Board and the committees thereof at such time as indicated by Edery in his sole discretion such that following Edery's acceptance
of one or more such undertakings, there shall be (A) up to three (3) vacancies on the Board of Directors (as requested by Edery)
if Section 4.9(c) shall be applicable, (B) up to two (2) vacancies on the Board of Directors (as requested by Edery) if Section
4.9(b) shall be applicable, and (C) one vacancy on the Board of Directors (as requested by Edery) if Section 4.9(a) shall be applicable;
(iii) the
applicable Edery nominees shall be appointed by the Board of Directors to fill the applicable vacancies on the Board of Directors
occurring as a result of the application of subclause (d)(ii) above;
(iv) two
Edery Nominees (or, if there is only one Edery Nominees, one Edery nominee until such time as there are two Edery Nominees) shall
be appointed to serve on the Compensation Committee of the Board of Directors and the Nominating and Corporate Governance Committee.
Each such committee shall be comprised of no more than three members. It is agreed that the applicability of this subclause (d)(iv)
shall be subject to the independence and other listing requirements of the Commission or any Trading Market on which the Common
Stock is traded or quoted from time to time, and if the application of this subclause (d)(iv) shall be contrary to such requirements,
the Company shall afford Edery the maximum possible representation on such committees without violating such requirements or subjecting
the Company to potential delisting from a Trading Market.
(e) Vacancies
arising through the death, resignation or removal of any Edery Nominee who was nominated to the Board of Directors pursuant to
this Section 4.9, may be filled by the Board of Directors only with an Edery Nominee, and the director so chosen shall hold
office until the next election and until his or her successor is duly elected and qualified, or until his or her earlier death,
resignation or removal.
(f) Notwithstanding
the provisions of this Section 4.9, Edery shall not be entitled to designate an individual as a nominee to the Board of Directors
upon a written determination by the Nominating and Corporate Governance Committee of the Company or the Board of Directors (which
determination shall set forth in writing reasonable grounds for such determination) that such individual would not be qualified
under any applicable law, rule or regulation to serve as a director of the Company. In such an event, Edery shall be entitled to
select an individual as a replacement nominee and the Company shall use its best efforts to cause such individual to be nominated
as the Edery Nominee at the same meeting (or, if permitted, pursuant to the same action by written consent of the Company’s
stockholders) as such initial individual was to be nominated. Other than with respect to the issue set forth in the preceding sentence,
neither the Company nor any other party to this Agreement shall have the right to object to any Edery Nominee.
(g) In
the event that Edery cease to have the right to designate an individual to serve as a director pursuant to this Section 4.9,
Edery shall use its best efforts to cause the applicable Edery Nominee to immediately resign from the Board of Directors, any committee
thereof, or any other position with the Company, any Subsidiary or any Affiliate of the Company.
4.10 Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither
it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including
Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending
at such time that the transactions contemplated by this Agreement are first publicly announced. Each Purchaser, severally
and not jointly with the other Purchasers, and the Company covenants that until such time as the transactions contemplated by this
Agreement are publicly disclosed by the Company, it will maintain the confidentiality of the existence and terms of this transaction
and the information included in the Transaction Documents.
4.11 Form
D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof, promptly upon request of any Purchaser. 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 Purchasers
at the 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 Purchaser.
4.12 Listing.
The Company shall promptly secure the listing of all of the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed (subject
to official notice of issuance) and shall maintain such listing of all Registrable Securities from time to time issuable under
the terms of the Transaction Documents. The Company shall maintain the authorization for quotation of the Common Stock on the Trading
Market. Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the
delisting or suspension of the Common Stock on the Trading Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4.12.
ARTICLE V.
MISCELLANEOUS
5.1 Termination.
This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before 5:00 p.m., New York time, on September 24, 2014; provided, however, that such
termination will not affect the right of any party to sue for any breach by any other party (or parties).
5.2 Fees
and Expenses. At the Closing, the Company agrees to reimburse Edery for its actual, accountable legal fees and expenses, up
to a maximum of $50,000. Following the Closing, the Company shall promptly reimburse Edery, from time to time, for its actual,
accountable legal fees and expenses reasonably incurred in connection with Edery’s investment in the Company, up to a maximum
of $40,000 in any twelve (12) month period (which amount shall include the cost of any Rule 144 legal opinions requested by Edery).
Except as expressly set forth in this Section 5.2, 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 a
Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.
5.3 Entire
Agreement. The Transaction Documents, together with the exhibits 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 and exhibits.
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 date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number or email attachment as set forth on the signature pages attached hereto (or, with respect
to an assignee or transferee of Securities as contemplated by Section 5.7, at the contact information of such Person provided to
the Company in connection with such assignment or transfer) at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b)
the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile
number or email attachment as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required
to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.
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 Edery 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.
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. Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided that such transferee agrees in writing as a pre-condition to such assignment or transfer to
be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”
5.8 No
Third-Party Beneficiaries. 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.
5.9 Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the
principles of conflicts of law thereof.
5.10 Arbitration
of Claims. Any dispute, controversy or claim arising in relation to this this Agreement or any Transaction Document, including
with regard to their validity, invalidity, breach, enforcement or termination, will be referred to a single arbitrator, who shall
be appointed by the Head of the Israel Bar Association. The arbitrator will not be bound by rules of evidence or procedure and
will give the reasons for his or her judgment in writing. Any such arbitration shall be conducted in Tel Aviv, Israel. The arbitrator's
decision shall be final and enforceable in any court. This Section 5.10 shall constitute an arbitration agreement between the parties.
5.11 Survival.
The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.
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 facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.
5.13 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 Replacement
of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or
in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory
to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
5.15 Independent
Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several
and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance
or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers
are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser
to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own separate
legal counsel in its review and negotiation of the Transaction Documents.
5.16 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.
5.17 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.
(Signature Pages Follow)
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.
LABSTYLE INNOVATIONS CORP. |
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By: |
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Name: |
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Title: |
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Address for Notice: |
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9 Halamish Street |
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Caesarea Industrial Park |
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38900, Israel |
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Fax Number: +(972)-(4) 770 4059 |
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With a copy to (which shall not constitute notice): |
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Ellenoff Grossman & Schole LLP |
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1345 Avenue of the Americas, 11th Floor |
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New York, NY 10105 |
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Fax Number: (646) 895-7204 |
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Attention: Lawrence A. Rosenbloom, Esq. |
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
[PURCHASER SIGNATURE PAGES TO LABSTYLE
INNOVATIONS CORP.
SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF,
the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as
of the date first indicated above.
Name of Purchaser: ___________________________________________________________________
Signature of Authorized Signatory of Purchaser: ____________________________________________
Name of Authorized Signatory: _________________________________________________________
Title of Authorized Signatory: _____________________________________
Email Address of Authorized Signatory: ___________________________________________
Facsimile Number of Authorized Signatory: _________________________________________
Address for Notice to Purchaser:
Address for Delivery of Securities to Purchaser (if not same
as address for notice):
Subscription Amount: ____________
Shares of Preferred Stock: ____________
Warrant Shares: ________________
EIN Number (if applicable): _______________________
[SIGNATURE PAGES CONTINUE]
Exhibit 99.1
Contacts: |
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Press |
Investor Relations |
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Brenda Zeitlin
LabStyle Innovations |
Booke and Company Inc.
1 212 490 9095 |
1 800 896 9062 |
admin@bookeandco.com |
Brenda@mydario.com |
|
LabStyle Innovations Closes $4.2 Million
Non-Brokered
Private Placement Financing
Proceeds to drive manufacturing, sales
and marketing programs for LabStyle’s DarioTM in Europe and elsewhere as well as ongoing FDA efforts
CAESAREA, Israel — September 23,
2014 /PRNewswire/ – LabStyle Innovations Corp. (OTCQB:DRIO), developer of the Dario™ Diabetes Management
Solution, today announced that it has closed a $4.2 million private placement offering consisting of shares of preferred stock
and warrants. No placement agent was used for this financing. After estimated offering expenses, LabStyle expects to secure net
proceeds of approximately $4.1 million from this financing.
LabStyle intends to use the net proceeds
from the offering to leverage the positive feedback from the company’s 2014 soft launch of Dario™ in the United Kingdom
and New Zealand to ramp up manufacturing and sales efforts in existing and new markets and to continue ongoing regulatory work
associated with its pending FDA 510(k) application for Dario™, as well as for general working capital. LabStyle is working
towards a possible FDA clearance of Dario™ in early 2015.
The lead investor in the offering is Dicilyon
Consulting and Investment Ltd., an affiliate of Israeli investor David Edery, which has invested $3.0 million in the financing.
The remaining investors were all institutional or accredited investors.
Pertinent terms of the financing are:
| · | LabStyle issued shares of preferred stock which are convertible at any time into an aggregate of
53,418,264 shares of common stock based on a conversion price of $0.07928 per share, representing a 20% discount to the volume
weighted average of LabStyle’s publicly traded common stock for the period from August 21, 2014 through September 22, 2014
(which equaled $0.0991). Such conversion price is not subject to any future price-based anti-dilution adjustments. The preferred
stock does not carry any fixed coupon or dividend rights and votes on an as converted basis with LabStyle’s common stock.
If the preferred stock were converted immediately, the investors in this offering would hold approximately 40% of LabStyle’s
primary outstanding shares. |
| · | The warrants issued in the financing are exercisable for an aggregate of 26,709,132 shares of common
stock (or 50% warrant coverage) at a price of $0.0951 per share for a period of four years from closing. Such exercise price is
also not subject to any future price-based anti-dilution adjustments. |
| · | As of the closing, LabStyle’s board has appointed Mr. Rami Yehudiha, the Founder and Chief
Executive Officer of LEAD, a top 10 Israeli advertising and marketing agency. Mr. Yehudiha is an appointee of Mr. Edery, and following
this financing, and depending on his percentage ownership of LabStyle’s common stock from time to time, Mr. Edery shall have
the right to appoint between 1 and 3 members of LabStyle’s 7 person board of directors. |
Commenting on the financing Mr. Edery stated
“After thorough due diligence, we are very pleased to make this fundamental and strategic investment in LabStyle. The Dario
Diabetes Management Solution is a novel and cutting edge mobile health software and medical device platform that represents a significant
evolution in the diabetes management market. I believe in the future of digital health medicine, where patients are more engaged
and empowered by using mobile technologies, and I believe that LabStyle has the right product at the right time to be an important
player in digital health market. LabStyle’s prospects are driven by significant worldwide market potential, current and pending
regulatory approvals, patented intellectual property and the company’s strong team of professionals. We are optimistic that
this investment will help meet LabStyle’s near term requirements and lay the foundation for the achievement of the company’s
long term goal of transforming the way people with diabetes manage their daily lives. I am very much looking forward to working
with LabStyle in the coming months and years as we seek to make this goal a reality.”
Erez Raphael, president and chief executive
officer of LabStyle, stated “We are delighted to have identified the lead investor for this financing and to have David’s
support and experience going forward. His participation represents a significant vote of confidence in both the present and future
prospects for our company. With this infusion of capital, we now have a renewed opportunity to drive value for our stockholders.
Our 2014 soft launch provides us with confidence that Dario has the potential to create a real difference to diabetic patients
and help them improve their overall performance in managing diabetes effectively.”
Gadi Levin, chief financial officer of
LabStyle, stated “This financing adds credibility to our business model and jump starts our ability to execute on our plans.
We will be focusing our near term efforts on ramping up manufacturing to meet potential customer demand for Dario in the territories
where the product is approved as well as accompanying sales and marketing efforts. We will also press on with our regulatory programs
as we seek FDA clearance of Dario.”
In order to accommodate the number of shares
of common stock underlying the preferred stock and warrants issued in the financing, LabStyle announced that it will, under authority
previously granted by the company’s stockholders, effect a 5 for 1 reverse stock split of its outstanding common stock. This
stock split will implemented within two weeks, and the company will make a further announcement regarding the exact timing for
the stock split.
Roth Capital Partners, LLC acted as LabStyle’s
financial advisor for the financing.
Further details of the financing will be
available in a Current Report on Form 8-K to be filed by LabStyle with the Securities and Exchange Commission.
About LabStyle Innovations Corp.
LabStyle Innovations Corp. (OTCQB:DRIO)
develops and commercializes patented technology providing consumers with laboratory-testing capabilities using smart mobile devices.
LabStyle's flagship product is the Dario™ Diabetes Management Solution. Dario™ received CE mark
certification in September 2013 and began a world rollout in select countries in December 2013. LabStyle filed a Premarket Notification
Application, also known as a 510(k), with the US Food and Drug Administration (FDA) for the Dario™ smart meter (Dario™
Blood Glucose Monitoring System) in December 2013. LabStyle is pursuing patent applications in multiple areas covering the specific
processes related to blood glucose level measurement as well as more general methods of rapid tests of body fluids using mobile
devices and cloud-based services. For more information: www.mydario.com and http://mydario.investorroom.com.
Cautionary Note Regarding Forward-Looking
Statements
This
news release and the statements of representatives and partners of LabStyle Innovations Corp. (the “Company”) related
thereto contains or may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995. Statements that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as “plan,” “project,” “potential,” “seek,”
“may,” “will,” “expect,” “believe,” “anticipate,” “intend,”
“could,” “estimate” or “continue” are intended to identify forward-looking statements. Readers
are cautioned that certain important factors may affect the Company’s actual results and could cause such results to differ
materially from any forward-looking statements that may be made in this news release. Factors that may affect the Company’s
results include, but are not limited to, regulatory approvals, product demand, market acceptance, impact of competitive products
and prices, product development, commercialization or technological difficulties, the success or failure of negotiations and trade,
legal, social and economic risks, and the risks associated with the adequacy of existing cash resources. Additional factors that
could cause or contribute to differences between the Company’s actual results and forward-looking statements include, but
are not limited to, those risks discussed in the Company’s filings with the U.S. Securities and Exchange Commission. Readers
are cautioned that actual results (including, without limitation, the results of the financing described herein and the timing
for and results of the Company’s commercial and regulatory plans for Dario™ as described herein)
may differ significantly from those set forth in the forward-looking statements. The Company undertakes no obligation to publicly
update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by
applicable law.
© LabStyle Innovations Corp.
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