As filed with the Securities and Exchange Commission on October 8, 2015
Registration No. 333-206496
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 to
Form S-1
REGISTRATION STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
SUPERCONDUCTOR TECHNOLOGIES INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware |
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3663 |
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77-0158076 |
(State or other jurisdiction of incorporation or organization) |
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(Primary Standard Industrial Classification Code Number) |
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(I.R.S. Employer Identification No.) |
9101 Wall Street, Suite 1300
Austin, TX 78754
(512)
334-8900
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Jeffrey A. Quiram
President and Chief Executive Officer
Superconductor Technologies Inc.
9101 Wall Street, Suite 1300
Austin, TX 78754
(512) 334-8900
(Name,
address, including zip code, and telephone number, including area code, of agent for service)
Copy to:
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Ben D. Orlanski, Esq. Matthew S. OLoughlin, Esq. Manatt, Phelps & Phillips, LLP 11355 West Olympic Blvd. Los Angeles, California
90064 (310) 312-4000 (310) 312-4224 Facsimile |
(Approximate date of commencement of proposed sale to the public) As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933 check the following box. x
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this Form is a post-effective
amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act (Check one):
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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¨ (Do not check if a smaller reporting company) |
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Smaller reporting company |
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x |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration
Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Explanatory Note
This Amendment No. 2 to the Registration Statement on Form S-1 (File No. 333-206496) of Superconductor Technologies Inc. is being filed solely to
refile Exhibits 4.3, 4.10, and 4.11. This Amendment No. 2 does not modify any provision of the prospectus that forms a part of the Registration Statement. Accordingly, a preliminary prospectus has been omitted.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. |
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION |
The following table
sets forth the various expenses to be incurred in connection with the sale and distribution of our securities being registered hereby, all of which will be borne by us. All amounts shown are estimates except the SEC registration fee and the FINRA
filing fee.
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SEC registration fee |
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$ |
4,357.50 |
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FINRA filing fee |
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6,125 |
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Printing and engraving expenses |
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20,000 |
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Legal fees and expenses |
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75,000 |
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Accounting fees and expenses |
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20,000 |
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Transfer Agent Fees |
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1,000 |
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Miscellaneous fees and expenses |
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2,500 |
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Total |
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128,982.50 |
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ITEM 14. |
INDEMNIFICATION OF DIRECTORS AND OFFICERS |
Section 145 of the
Delaware General Corporation Law, or the Delaware Law, provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys fees), judgments, fines and amounts paid
in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation a derivative action), if they acted in
good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar
standard is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys fees) incurred in connection with defense or settlement of such action, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. Under Section 145, a corporation shall indemnify an agent of the corporation for expenses actually and reasonably
incurred if and to the extent such person was successful on the merits in a proceeding or in defense of any claim, issue or matter therein.
Section 145 of the Delaware Law provides that it is not exclusive of other indemnification that may be granted by a corporations
charter, bylaws, disinterested director vote, stockholders vote, agreement or otherwise. The limitation of liability contained in our restated certificate of incorporation, as amended, and the indemnification provision included in our amended and
restated bylaws, as amended, are consistent with Delaware Law Sections 102(b)(7) and 145. We have purchased directors and officers liability insurance.
Section 145 of the Delaware Law authorizes the court to award, or a corporations board of directors to grant, indemnity to
directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933. Our restated certificate of
incorporation, as amended, and amended and restated bylaws, as amended, provide for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by the Delaware Law. In addition, we have entered into
indemnification agreements with our officers and directors.
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Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling our company pursuant to such provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in such
Act and is therefore unenforceable.
ITEM 15. |
RECENT SALES OF UNREGISTERED SECURITIES |
On March 25, 2015,
the Company issued an aggregate of 1,531,395 investor warrants to purchase common stock at an exercise price of $1.6325 per share, exercisable until five years and six months from the date of issuance. The warrants are exercisable for cash or,
solely in the absence of an effective registration statement or prospectus, by cashless exercise. The exercise of the warrants is subject to certain beneficial ownership and other limitations set forth in the warrants. Such warrants were issued in a
private placement that was conducted concurrently with a registered offering of 3,062,790 shares of its common stock. In connection with such registered offering, the Company issued to the placement agent in such registered offering five-year
warrants equal to 5% of the aggregate number of shares of common stock sold in the registered offering, at an exercise price of $2.0406. The issuance of the foregoing warrants were issued in transactions exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended, and Rule 506(b) promulgated thereunder.
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(a) |
Exhibits. The exhibits are incorporated by reference from the Exhibit Index attached hereto. |
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
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(a) |
To include any prospectus required by Section 10(a)(3) of the Securities Act; |
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(b) |
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement; |
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(c) |
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
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(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating
to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used
II-2
after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated
or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was
made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser in the initial distribution of the
securities: the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if
the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; (ii) any free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned registrant; (iii) the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities
provided by or on behalf of the undersigned registrant; and (iv) any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the indemnification provisions described herein, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus as filed as
part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Amendment No. 2 to Registration
Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Austin, State of Texas, on this 8th day of October, 2015.
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SUPERCONDUCTOR TECHNOLOGIES INC. |
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By: |
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/s/ Jeffrey A. Quiram |
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Jeffrey A. Quiram President and Chief
Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 2 to
Registration Statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.
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Signature |
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Title |
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Date |
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/s/ Jeffrey A. Quiram
Jeffrey A. Quiram |
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President, Chief Executive Officer and Director (Principal Executive Officer) |
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October 8, 2015 |
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/s/ William J. Buchanan
William J. Buchanan |
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Chief Financial Officer
(Principal Accounting Officer)
(Principal Financial Officer) |
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October 8, 2015 |
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/s/ * Martin
A. Kaplan |
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Chairman of the Board |
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October 8, 2015 |
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/s/ * Dan L.
Halvorson |
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Director |
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October 8, 2015 |
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Lynn J. Davis |
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Director |
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, 2015 |
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*By: |
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/s/ Jeffrey A. Quiram |
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Jeffrey A. Quiram
Attorney-in-fact |
S-1
EXHIBIT INDEX
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EXHIBIT
NUMBER |
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DESCRIPTION OF DOCUMENT |
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3.1 |
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Restated Certificate of Incorporation of Registrant as amended through March 1, 2006. (15) |
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3.2 |
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Certificate of Amendment of Restated Certificate of Incorporation of Registrant, filed March 11, 2013. (25) |
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3.3 |
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Amended and Restated Bylaws of Registrant. (15) |
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3.4
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Amendment adopted March 29, 2010 to Amended and Restated Bylaws of Registrant. (16) |
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3.5 |
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Amendment adopted October 28, 2013 to Amended and Restated Bylaws of Registrant. (27) |
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4.1 |
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Form of Common Stock Certificate. (14) |
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4.2 |
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Certificate of Designations of Registrant of Series A Convertible Preferred Stock of Registrant filed November 13, 2007. (13) |
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4.3 |
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Certificate of Designations of Registrant of Series B Convertible Preferred Stock of Registrant and form of Series B Convertible Preferred Stock Certificate v |
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4.4 |
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Form of Warrant to Purchase Common Stock issued by Registrant on February 22, 2012. (1) |
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4.5 |
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Form of Warrant to Purchase Common Stock issued by Registrant on November 26, 2012. (22) |
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4.6 |
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Form of Warrant to Purchase Common Stock issued by Registrant on December 18, 2012. (23) |
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4.7
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Forms of Series A and Series B Warrants to Purchase Common Stock issued by Registrant on April 26, 2013. (26) |
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4.8 |
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Form of Warrant to Purchase Common Stock issued by Registrant on August 9, 2013. (28) |
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4.9 |
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Form of Warrant Exercise Agreement dated February 14, 2015. (29) |
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4.10 |
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Form of Securities Purchase Agreement. v |
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4.11 |
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Form of Warrant to Purchase Common Stock. v |
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4.12 |
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Form of Warrant to be issued to the placement agent. * |
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5.1 |
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Opinion of Manatt, Phelps & Phillips, LLP regarding the validity of the common stock being registered. * |
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10.1 |
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Form of Change in Control Agreement dated March 28, 2003. (2)*** |
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10.2 |
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Form of Amendment No. 1 to Change in Control Agreement dated as of May 24, 2005. (8)*** |
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10.3 |
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Form of Amendment No. 2 to Change in Control Agreement dated as of December 31, 2006. (10)*** |
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10.4 |
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Patent License Agreement by and between Registrant and Lucent Technologies GRL LLC. (3)** |
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10.5 |
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License Agreement between Registrant and Sunpower dated May 2, 2005. (4)** |
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10.6 |
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Employment Agreement between Registrant and Jeffrey Quiram dated as of February 14, 2005. (5)*** |
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10.7 |
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Stock Option Grant and 2003 Equity Incentive Plan Option Agreement between Registrant and Jeffrey Quiram dated February 14, 2005. (5)*** |
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10.8 |
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Amendment to Employment Agreement between Registrant and Jeffrey Quiram dated as of December 31, 2006. (10)*** |
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10.9 |
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2003 Equity Incentive Plan As Amended May 25, 2005. (7)*** |
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10.10 |
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Form of Notice of Grant of Stock Options and Option Agreement for 2003 Equity Incentive Plan. (5)*** |
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10.11 |
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Management Incentive Plan (July 24, 2006). (9)*** |
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EXHIBIT
NUMBER |
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DESCRIPTION OF DOCUMENT
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10.12 |
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Compensation Policy for Non-Employee Directors dated March 18, 2005. (6)*** |
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10.13 |
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Form of Director and Officer Indemnification Agreement. (31)*** |
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10.14 |
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Lease Agreement between the Registrant and 1200 Enterprises LLC dated as of June 1, 2001. (1) |
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10.15 |
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First Amendment to Lease between Registrant and 1200 Enterprises LLC dated October 1, 2007. (17) |
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10.16 |
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Second Amendment to Lease Agreement between the Registrant and 1200 Enterprises LLC dated January 19, 2009. (15) |
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10.17 |
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Third Amendment to Lease between the Registrant and 1200 Enterprises LLC dated October 26, 2011. (20) |
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10.18 |
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Lease Agreement between the Registrant and Prologis Texas III LLC dated December 5, 2011. (19) |
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10.19 |
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First Amendment to Lease Agreement between the Registrant and Prologis Texas III LLC dated August 23, 2012. (21) |
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10.20
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Second Amendment to Lease Agreement between Registrant and Prologis Texas III LLC dated July 18, 2014. (30) |
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10.21 |
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Agreement between Registrant and Hunchun BaoLi Communication Co., Ltd. (BAOLI) dated August 17, 2007. (11) |
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10.22 |
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First Amendment to Agreement between Registrant and BAOLI dated November 1, 2007. (12) |
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10.23 |
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Second Amendment to Agreement between Registrant and BAOLI dated January 7, 2008. (12) |
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10.24 |
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Framework Agreement between Registrant and BAOLI dated November 8, 2007. (12) |
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10.25 |
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Sino-Foreign Equity Joint Venture Contract between Superconductor Investments (Mauritius) Limited and BAOLI dated December 8, 2007 (Exhibit A to Framework Agreement with BAOLI). (12) |
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10.26 |
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Form of Technology and Trademark License Agreement between Superconductor Investments (Mauritius) Limited, Registrant and BAOLI (Exhibit B to Framework Agreement). (12) |
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21 |
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List of Subsidiaries. (31) |
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23.1 |
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Consent of Marcum, LLP, Independent Registered Public Accounting Firm.* |
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23.2 |
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Consent of Manatt, Phelps & Phillips, LLP (included in Exhibit 5.1).* |
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24.1 |
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Powers of Attorney (included in the signature page to the Registration Statement). |
(1) |
Incorporated by reference from Registrants Quarterly Report on Form 10-Q for the quarter ended March 30, 2002, filed May 6, 2002. |
(2) |
Incorporated by reference from Registrants Quarterly Report on Form 10-Q for the quarter ended March 29, 2003, filed May 13, 2003. |
(3) |
Incorporated by reference from Registrants Annual Report on Form 10-K for the year ended December 31, 2003, filed March 11, 2004. |
(4) |
Incorporated by reference from Registrants Quarterly Report on Form 10-Q for the quarter ended October 2, 2004, filed November 10, 2004. |
(5) |
Incorporated by reference from Registrants Annual Report on Form 10-K for the year ended December 31, 2004, filed March 16, 2005. |
(6) |
Incorporated by reference from Registrants Quarterly Report on Form 10-Q for the quarter ended April 2, 2005, filed May 6, 2005. |
(7) |
Incorporated by reference from Registrants Current Report on Form 8-K filed May 27, 2005. |
(8) |
Incorporated by reference from Registrants Annual Report on Form 10-K for the year ended December 31, 2005, filed March 8, 2006. |
(9) |
Incorporated by reference from Registrants Current Report on Form 8-K filed July 28, 2006. |
(10) |
Incorporated by reference from Registrants Annual Report on Form 10-K for the year ended December 31, 2006, filed April 2, 2007. |
(11) |
Incorporated by reference from Registrants Quarterly Report on Form 10-Q for the quarter ended September 29, 2007, filed November 13, 2007. |
(12) |
Incorporated by reference from Registrants Annual Report on Form 10-K for the year ended December 31, 2007, filed March 27, 2008. |
(13) |
Incorporated by reference from Registrants Current Report on Form 8-K/A filed February 25, 2008. |
(14) |
Incorporated by reference as Exhibit 4.1 to Registrants Form 10-K filed March 28, 2014. |
(15) |
Incorporated by reference from Registrants Annual Report on Form 10-K for the year ended December 31, 2009, filed March 17, 2010. |
(16) |
Incorporated by reference from Registrants Current Report on Form 8-K filed April 2, 2010. |
(17) |
Incorporated by reference from Registrants Annual Report on Form 10-K for the year ended December 31, 2010, filed March 21, 2011. |
(18) |
Incorporated by reference from Registrants Current Report on Form 8-K/A filed February 22, 2012. |
(19) |
Incorporated by reference from Registrants Annual Report on Form 10-K for the year ended December 31, 2011, filed March 30, 2012. |
(20) |
Incorporated by reference from Registrants Current Report on Form 8-K filed May 10, 2012. |
(21) |
Incorporated by reference from Registrants Quarterly Report on Form 10-Q for the quarter ended September 29, 2012, filed November 9, 2012. |
(22) |
Incorporated by reference from Registrants Current Report on Form 8-K filed November 27, 2012. |
(23) |
Incorporated by reference from Registrants Current Report on Form 8-K filed December 19, 2012. |
(25) |
Incorporated by reference from Registrants Current Report on Form 8-K filed March 14, 2013. |
(26) |
Incorporated by reference from Registrants Current Report on Form 8-K filed April 30, 2013. |
(27) |
Incorporated by reference from Registrants Current Report on Form 8-K filed October 31, 2013. |
(28) |
Incorporated by reference as Exhibit 4.8/9 to Registrants Form S-1A filed August 2, 2013. |
(29) |
Incorporated by reference from Registrants Current Report on Form 8-K filed February 17, 2015. |
(30) |
Incorporated by reference from Registrants Annual Report on Form 10-K for the year ended December 31, 2014, filed March 12, 2015. |
** |
Confidential treatment has been previously granted for certain portions of these exhibits. |
*** |
This exhibit is a management contract or compensatory plan or arrangement. |
Exhibit 4.3
SUPERCONDUCTOR TECHNOLOGIES INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES B CONVERTIBLE
PREFERRED STOCK
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
The
undersigned, Jeffrey A. Quiram and William J. Buchanan, do hereby certify that:
1. They are the Chief Executive Officer and Chief
Financial Officer, respectively, of Superconductor Technologies Inc., a Delaware corporation (the Corporation).
2. The
Corporation is authorized to issue 2,000,000 shares of preferred stock.
3. The following resolutions were duly adopted by the board of
directors of the Corporation (the Board of Directors) as required by Section 151(g) of the Delaware General Corporation Law:
WHEREAS, the certificate of incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, consisting
of 2,000,000 shares, $0.001 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 (as defined herein), up to 10,000 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. Designation, Amount and Par Value. The series of preferred stock shall be designated as its Series B Convertible
Preferred Stock (the Preferred Stock) and the number of shares so designated shall consist of 10,000 shares (which shall not be subject to increase without the written consent of all of the holders of the Preferred Stock (each, a
Holder and collectively, the Holders)). Each share of Preferred Stock shall have a par value of $0.001 per share and a stated value equal to $1,000, subject to increase set forth in Section 3 below (the
Stated Value).
1
Section 2. Definitions. For the purposes hereof, the following terms
shall 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.
Alternate Consideration shall have the meaning set forth in Section 7(e).
Beneficial Ownership Limitation shall have the meaning set forth in Section 6(d).
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.
Buy-In shall have the meaning set forth in Section 6(c)(iv).
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 Holders obligations to pay the Subscription Amount and (ii) the Corporations obligations to deliver the Securities have been
satisfied or waived.
Commission means the United States Securities and Exchange Commission.
Common Stock means the Corporations common stock, par value $0.001 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 Amount means the sum of the Stated Value at issue.
Conversion Date shall have the meaning set forth in Section 6(a).
Conversion Price shall have the meaning set forth in Section 6(b).
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Conversion Shares means, collectively, the shares of Common
Stock issuable upon conversion of the shares of Preferred Stock in accordance with the terms hereof.
Escrow
Agent means Signature Bank, a New York State chartered bank and having an office at 261 Madison Avenue, New York, New York 10016.
Escrow Agreement means the escrow agreement entered into prior to the date of the Purchase Agreement, by and
among the Corporation and the Escrow Agent pursuant to which the Holder shall deposit Subscription Amounts with the Escrow Agent to be applied to the transactions contemplated hereunder.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Fundamental Transaction shall have the meaning set forth in Section 7(e).
GAAP means United States generally accepted accounting principles.
Holder shall have the meaning given such term in Section 2.
Liquidation shall have the meaning set forth in Section 5.
New York Courts shall have the meaning set forth in Section 8(d).
Notice of Conversion shall have the meaning set forth in Section 6(a).
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.
Preferred Stock shall have the meaning set forth in Section 2.
Purchase Agreement means the Securities Purchase Agreement, dated as of the Original Issue Date, among the
Corporation and the other parties thereto including the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.
Securities means the Shares, 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.
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Series A Warrants means, collectively, the Series A Common
Stock purchase warrants delivered to the Holder at the Closing in accordance with Section 2.2(a) of the Purchase Agreement, which Warrants shall be exercisable immediately and have a term of exercise equal to six (6) months, in the form of
Exhibit B-1 attached to the Purchase Agreement
Series B Warrants means, collectively, the
Series B Common Stock purchase warrants delivered to the Holder at the Closing in accordance with Section 2.2(a) of the Purchase Agreement, which Warrants shall be exercisable immediately and have a term of exercise equal to five
(5) years, in the form of Exhibit B-2 attached to the Purchase Agreement
Shares means
the shares of Common Stock issued or issuable to each purchaser party to the Purchase Agreement on the Closing Date.
Share Delivery Date shall have the meaning set forth in Section 6(c).
Stated Value shall have the meaning set forth in Section 2, as the same may be increased pursuant to
Section 3.
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 Holders 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.
Subsidiary means any subsidiary of the Corporation as set forth on
Schedule 3.1(a) of the Purchase Agreement and shall, where applicable, also include any direct or indirect subsidiary of the Corporation formed or acquired after the date of the Purchase Agreement.
Successor Entity shall have the meaning set forth in Section 7(e).
Trading Day means a day on which the principal Trading Market is open for business.
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 any successors to any of the foregoing).
Transaction Documents means this Certificate of Designation, the Purchase Agreement, the Warrants, the
Escrow Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated pursuant to the Purchase Agreement.
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Transfer Agent means Computershare, the current transfer agent
of the Corporation, with a mailing address of 250 Royall St, Canton, MA 02021 and a facsimile number of (781) 298-2866, and any successor transfer agent of the Corporation.
Underlying Shares means the shares of Common Stock issued and issuable upon conversion of the Preferred
Stock and upon exercise of the Warrants.
Warrants means, collectively, the Series A Warrants and the
Series B Warrants.
Warrant Shares means the shares of Common Stock issuable upon exercise of the
Warrants.
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 Rights. Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall
have no voting rights. However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Preferred Stock, (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, or (d) enter into any agreement with respect to any of the foregoing.
Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or
involuntary (a Liquidation), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation the same amount that a holder of Common Stock would receive if the Preferred Stock were
fully converted (disregarding for such purposes any conversion limitations hereunder) to Common Stock which amounts shall be paid pari passu with all holders of Common Stock. The Corporation shall mail written notice of any such Liquidation,
not less than 45 days prior to the payment date stated therein, to each Holder.
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 (subject to the limitations set forth in Section 6(d)) 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
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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) Conversion Price. The conversion price for the Preferred Stock shall equal
$ , subject to adjustment herein (the Conversion Price).
(c) Mechanics of Conversion.
i. Delivery of Conversion Shares 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) the number of Conversion Shares being acquired upon the conversion of the Preferred Stock, which Conversion
Shares shall be free of restrictive legends and trading restrictions and (B) a bank check in the amount of accrued and unpaid dividends, if any, in accordance with Section 3. The Corporation shall deliver the Conversion Shares
electronically through the Depository Trust Company or another established clearing corporation performing similar functions.
ii. Failure to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares 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 Conversion Shares, 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 Conversion Shares issued to such Holder pursuant to
the rescinded Conversion Notice.
iii. Obligation Absolute; Partial Liquidated Damages. The Corporations
obligation to issue and deliver the Conversion Shares upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce
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the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the
Corporation of any such action that the Corporation may have against such Holder. In the event a Holder shall elect to convert any or all of the Stated Value of its Preferred Stock, the Corporation may not refuse conversion based on any claim that
such Holder or any one associated or affiliated with such Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining conversion of all or
part of the Preferred Stock of such Holder shall have been sought and obtained, and the Corporation posts a surety bond for the benefit of such Holder in the amount of 150% of the Stated Value of Preferred Stock which is subject to the injunction,
which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the
Corporation shall issue Conversion Shares and, if applicable, cash, upon a properly noticed conversion. If the Corporation fails to deliver to a Holder such Conversion Shares pursuant to Section 6(c)(i) on the second Trading Day after the Share
Delivery Date applicable to such conversion, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $5,000 of Stated Value of Preferred Stock being converted, $50 per Trading Day (increasing to $100
per Trading Day on the third Trading Day and increasing to $200 per Trading Day on the sixth Trading Day after such damages begin to accrue) for each Trading Day after such second Trading Day after the Share Delivery Date until such Conversion
Shares are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holders right to pursue actual damages for the Corporations failure to deliver Conversion Shares within the period specified herein and such Holder
shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit a Holder from
seeking to enforce damages pursuant to any other Section hereof or under applicable law.
iv. Compensation for Buy-In on
Failure to Timely Deliver Conversion Shares Upon Conversion. In addition to any other rights available to the Holder, if the Corporation fails for any reason to deliver to a Holder the applicable Conversion Shares by the Share Delivery Date
pursuant to Section 6(c)(i), and if after such Share Delivery Date such Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holders brokerage firm otherwise purchases, shares of Common
Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a Buy-In),
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then the Corporation shall (A) pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount, if any, by which (x) such Holders
total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at
issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of such Holder, either reissue (if surrendered) the
shares of Preferred Stock equal to the number of shares of Preferred Stock submitted for conversion (in which case, such conversion shall be deemed rescinded) or deliver to such Holder the number of shares of Common Stock that would have been issued
if the Corporation had timely complied with its delivery requirements under Section 6(c)(i). For example, if a Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of shares of Preferred Stock with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the
immediately preceding sentence, the Corporation shall be required to pay such Holder $1,000. The Holder shall provide the Corporation written notice indicating the amounts payable to such Holder in respect of the Buy-In and, upon request of the
Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holders 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 Corporations failure to timely deliver the Conversion Shares upon conversion of the shares of Preferred Stock as required pursuant to the terms hereof.
v. Reservation of Shares Issuable Upon Conversion. 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 (subject to the terms and conditions set forth in the Purchase Agreement) 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.
vi. 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.
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vii. Transfer Taxes and Expenses. The issuance of Conversion Shares 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 Conversion Shares, 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 Conversion Shares 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 Conversion Shares 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 and all fees to the Depository Trust Company (or another established clearing corporation
performing similar functions) required for same-day electronic delivery of the Conversion Shares.
(d) Beneficial
Ownership Limitation. The Corporation shall not effect any conversion of the Preferred Stock, and a Holder shall not have the right to convert any portion of the Preferred Stock, to the extent that, after giving effect to the conversion set
forth on the applicable Notice of Conversion, such Holder (together with such Holders Affiliates, and any Persons acting as a group together with such Holder or any of such Holders Affiliates) would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable
upon conversion of the Preferred Stock with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Stated Value of Preferred
Stock beneficially owned by such Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation subject to a limitation on conversion or exercise analogous to
the limitation contained herein (including, without limitation, the Preferred Stock or the Warrants) beneficially owned by such Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this
Section 6(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Corporation is not representing
to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this
Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in relation to other securities owned by such Holder together with any Affiliates) and of how many shares of Preferred Stock are convertible shall be in the
sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holders determination of whether the shares of Preferred Stock may be converted (in relation to other securities owned by such Holder
together with any Affiliates) and how many shares of the Preferred Stock are convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the
Corporation each time it
9
delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Corporation shall have no obligation to verify or confirm the
accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For
purposes of this Section 6(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Corporations
most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation or the Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Corporation shall within two Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including the Preferred Stock, by such Holder or its Affiliates
since the date as of which such number of outstanding shares of Common Stock was reported. The Beneficial Ownership Limitation shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect
to the issuance of shares of Common Stock issuable upon conversion of Preferred Stock held by the applicable Holder. A Holder, upon notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this
Section 6(d) applicable to its Preferred Stock provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of
Common Stock upon conversion of this Preferred Stock held by the Holder and the provisions of this Section 6(d) shall continue to apply. Any such increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Corporation and shall only apply to such Holder and no other Holder. The provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 6(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make
changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of Preferred Stock.
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
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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) [Reserved].
(c) 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 of 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 Holders Preferred Stock (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the
Holders right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).
(d) Pro Rata Distributions. During such time as this Preferred
Stock is outstanding, if the Corporation 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 Preferred Stock, 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 conversion of this Preferred Stock (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a
record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent
that the Holders right
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to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such
extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(e) Fundamental Transaction.
If, at any time while this Preferred Stock is outstanding, (i) the Corporation, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the
Corporation, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and
has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Corporation, directly or indirectly, in one or more related transactions
consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50%
of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase
agreement or other business combination) (each a Fundamental Transaction), then, upon any subsequent conversion of this Preferred Stock, the Holder shall have the right to receive, for each Conversion Share that would have been
issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 6(d) on the conversion of this Preferred Stock), the number of shares of Common Stock of the
successor or acquiring corporation or of the Corporation, if it is the surviving corporation, and any additional consideration (the Alternate Consideration) receivable by holders of Common Stock as a result of such Fundamental
Transaction for each share of Common Stock for which this Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 6(d) on the conversion of this Preferred Stock). For
purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in
such Fundamental Transaction, and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Preferred
Stock following such Fundamental Transaction. To the
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extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the
same terms and conditions and issue to the Holders new preferred stock consistent with the foregoing provisions and evidencing the Holders right to convert such preferred stock into Alternate Consideration. The Corporation shall cause any
successor entity in a Fundamental Transaction in which the Corporation is not the survivor (the Successor Entity) to assume in writing all of the obligations of the Corporation under this Certificate of Designation and the other
Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 7(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without
unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Preferred Stock, deliver to the Holder in exchange for this Preferred Stock a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Preferred Stock which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and
receivable upon conversion of this Preferred Stock (without regard to any limitations on the conversion of this Preferred Stock) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such
shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion
price being for the purpose of protecting the economic value of this Preferred Stock immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the
occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Certificate of Designation and the other
Transaction Documents referring to the Corporation shall refer instead to the Successor Entity), and may exercise every right and power of the Corporation and shall assume all of the obligations of the Corporation under this Certificate
of Designation and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Corporation herein.
(f) 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.
(g) Notice to the Holders.
i. 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.
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ii. Notice to Allow Conversion by Holder. If (A) the Corporation
shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize
the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in
connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the
Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Stock, and shall cause to be delivered to each Holder at its last address as it shall appear upon the stock books of the
Corporation at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the
delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Corporation or
any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Conversion Amount of this Preferred Stock (or any part
hereof) during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
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 personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at the address set forth above
Attention: Chief Financial Officer, facsimile number [ ], e-mail address
[ ] or such other facsimile number, email address, or address as the Corporation may specify for such purposes by notice to
the
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Holders delivered in accordance with this Section 8. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Corporation, or if no such facsimile number or address
appears on the books of the Corporation, at the principal place of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section 8 prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date
of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section 8 on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the
second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
(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 liquidated damages and 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 Holders 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. Each party agrees that all
legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers,
shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the New York Courts). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient
venue for such proceeding. Each party hereby irrevocably waives personal
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service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this Certificate of Designation and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Certificate of Designation or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
(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
B Convertible Preferred Stock.
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Signature page to Certificate of Designation
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
day of 2015.
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Jeffrey A. Quiram |
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William J. Buchanan |
Chief Executive Officer |
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Chief Financial Officer |
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Signature page to Certificate of Designation
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
B Convertible Preferred Stock indicated below into shares of common stock, par value $0.001 per share (the Common Stock), of Superconductor Technologies Inc., 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:
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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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Address for Delivery:
or
DWAC Instructions:
Broker no:
Account
no:
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Exhibit 4.10
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this Agreement) is dated as of
, 2015, between Superconductor Technologies Inc., a Delaware corporation (the Company), and each purchaser identified on the signature pages hereto (each,
including its successors and permitted assigns, a Purchaser and collectively the Purchasers).
WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the Securities Act), 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: (a) capitalized terms that are not otherwise
defined herein have the meanings given to such terms in the Certificate of Designation (as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:
Action shall have the meaning ascribed to such term in Section 3.1(j).
Affiliate means any Person that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 promulgated 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.
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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 Companys obligations to
deliver the Securities, in each case, have been satisfied or waived, but in no event later than the third Trading Day following the date hereof.
Commission means the United States Securities and Exchange Commission.
Common Stock means the common stock of the Company, par value $0.001 per share, and any other class of
securities into which such securities may hereafter be reclassified or changed.
Common Stock
Equivalents means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other
instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
Company Counsel means Manatt, Phelps & Phillips, LLP, with offices located at 11355 W. Olympic
Blvd., Los Angeles, CA, 90064.
Conversion Price shall have the meaning ascribed to such term in the
Certificate of Designation.
Conversion Shares means, collectively, the shares of Common Stock issuable
upon conversion of the shares of Preferred Stock in accordance with the terms hereof.
Disclosure
Schedules means the Disclosure Schedules of the Company delivered concurrently herewith, if any.
EGS means Ellenoff Grossman & Schole LLP, with offices located at 1345 Avenue of the Americas, New
York, New York 10105-0302.
Escrow Agent means Signature Bank, a New York State chartered bank, with
offices at 261 Madison Avenue, New York, New York 10016.
Escrow Agreement means the escrow agreement
which may be entered into prior to the Closing, by and among the Company, the Escrow Agent and the Placement Agent pursuant to which the Purchasers shall deposit Subscription Amounts with the Escrow Agent to be applied to the transactions
contemplated hereunder.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
Exempt Issuance means the issuance of (a) shares of
Common Stock or options to consultants, employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, by the Board of Directors, including a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b)
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securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion
price of such securities, (c) securities issued by the Company or any subsidiary thereof pursuant to acquisitions or strategic transactions, carve-outs or spin offs approved by the Board of Directors, including a majority of the disinterested
directors of the Company and (d) securities issued by the Company with the consent of the Placement Agent.
FCPA means the Foreign Corrupt Practices Act of 1977, as amended.
GAAP shall have the meaning ascribed to such term in Section 3.1(h).
Intellectual Property Rights shall have the meaning ascribed to such term in Section 3.1(p).
Liens means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction (other than restrictions on transfer under securities laws).
Material Adverse
Effect shall have the meaning assigned to such term in Section 3.1(b).
Material Permits
shall have the meaning ascribed to such term in Section 3.1(n).
Per Share Purchase Price for the
Shares equals $ , 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.
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.
Placement Agent means H.C. Wainwright & Co., LLC.
Preferred Stock means shares of the Companys Series B 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.
Preliminary Prospectus means the preliminary prospectus dated
[ ], 2015.
Proceeding means an
action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), that has been commenced or to the Companys knowledge threatened.
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Prospectus means the final prospectus filed for the
Registration Statement.
Purchaser Party shall have the meaning ascribed to such term in
Section 4.7.
Registration Statement means the effective registration statement with Commission
file No. 333-206496 which registers the sale of the Shares, the Preferred Stock, the Warrants and the Underlying Shares to the Purchasers.
Required Approvals shall have the meaning ascribed to such term in Section 3.1(e).
Required Minimum means, as of any date, the maximum aggregate number of shares of Common Stock then issued
or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise in full of all Warrants or conversion in full of all shares of Preferred Stock, ignoring any conversion or exercise
limits set forth therein, and that any previously unconverted shares of Preferred Stock are held until the third anniversary of the Closing Date.
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 Reports shall have the meaning ascribed to such term in Section 3.1(h).
Securities means the Shares, the Preferred Stock, the Warrants and the Underlying Shares.
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
Series A Warrants means, collectively, the Series A Common Stock purchase warrants
delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof and the other Series A Warrants contemplated under Section 2.1 to be issued concurrently at the Closing, which Series A Warrants shall be exercisable
beginning immediately and have a term of exercise equal to six (6) months, in the form of Exhibit B-1 attached hereto.
Series B Warrants means, collectively, the Series B Common Stock purchase warrants delivered to the
Purchasers at the Closing in accordance with Section 2.2(a) hereof and the other Series B Warrants contemplated under Section 2.1 to be issued concurrently at the Closing, which Series B Warrants shall be exercisable beginning immediately
and have a term of exercise equal to five (5) years, in the form of Exhibit B-2 attached hereto.
Shares means the shares of Common Stock issued or issuable to certain Purchasers on the Closing Date
pursuant to this Agreement.
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Short Sales means all short sales as defined in
Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).
Stated Value means $1,000 per share of Preferred Stock.
Subscription Amount means, as to each Purchaser, the aggregate amount to be paid for the Shares or Preferred
Stock, as applicable to such Purchaser, and the Warrants purchased hereunder as specified below such Purchasers 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 any significant subsidiary of the Company as defined
under Regulation S-X of the Securities Act, and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof but before the Closing Date.
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 OTCQB or OTCQX (or any successors to any of the foregoing).
Transaction Documents means this Agreement, the Certificate of Designation, the Warrants and, if applicable,
the Escrow Agreement.
Transfer Agent means Computershare, the current transfer agent of the Company,
with a mailing address of 250 Royall St, Canton, MA 02021 and a facsimile number of (781) 298-2866, 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 and upon exercise of the Warrants.
Warrants means, collectively, the Series A Warrants and the
Series B Warrants.
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 $ of Shares and Warrants as determined by pursuant
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to Section 2.2(a); provided, however, that, to the extent a Purchaser determines, in its sole discretion, that such Purchaser (together with such Purchasers Affiliates, and any Person
acting as a group together with such purchaser or any of such Holders Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation, in lieu of purchasing Shares, such Purchaser may elect the Preferred Stock at the Stated
Value in lieu of Shares (provided that no fractional shares of the Preferred Stock will be issued). The Beneficial Ownership Limitation shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of the Securities on the Closing Date. Each Purchaser shall deliver to the Escrow Agent, via wire transfer or a certified check, immediately available funds equal to its Subscription Amount, and the Company shall deliver to
each Purchaser its respective Shares or shares of Preferred Stock (as applicable to such Purchaser) and Warrants, as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in
Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of EGS or such other location as the parties shall mutually agree. The Company
covenants that, if the Purchaser delivers a Notice of Conversion (as defined in the Certificate of Designation) at least one (1) Trading Day prior to the Closing to convert any shares of Preferred Stock between the date hereof and the Closing
Date, the Company shall deliver Conversion Shares to the Purchaser on the Closing Date in connection with such Notice of Conversion. Each Purchaser acknowledges that concurrently with the Closing and pursuant to the Prospectus, the Company may sell
additional shares of Common Stock to purchasers not party to this Purchase Agreement and will issue to each such purchaser of such additional shares of Common Stock the Warrants in the same form and amount per share of Common Stock or Conversion
Share as issued to a Purchaser hereunder. Unless otherwise directed by the Placement Agent, settlement of the Shares shall occur via Delivery Versus Payment (DVP) (i.e., on the Closing Date, the Company shall issue the
Shares registered in the Purchasers names and addresses and released by the Transfer Agent directly to the account(s) at the Placement Agent identified by each Purchaser; upon receipt of such Shares, the Placement Agent shall promptly
electronically deliver such Shares to the applicable Purchaser, and payment therefor shall be made by the Placement Agent (or its clearing firm) by wire transfer to the Company).
2.2 Deliveries.
(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a legal opinion of Company Counsel, substantially in the form of Exhibit C attached hereto addressed to the
Placement Agent;
(iii) subject to the last sentence of Section 2.1, as to a Purchaser purchasing Shares hereunder, a
copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver on an expedited basis via The Depository Trust Company Deposit or Withdrawal at Custodian system (DWAC) Shares equal to such Purchasers
Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser;
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(iv) for each Purchaser, as applicable, who has elected to purchase the Preferred
Stock, a certificate evidencing a number of shares of Preferred Stock equal to, in aggregate, such Purchasers Subscription Amount divided by the Stated Value, registered in the name of such Purchaser and evidence of the filing and acceptance
of the Certificate of Designation from the Secretary of State of Delaware;
(v) a Series A Warrant registered in the name
of such Purchaser to purchase up to a number of shares of Common Stock equal to 100% of such Purchasers Subscription Amount divided by the Per Share Purchase Price, with an exercise price equal to
$ , subject to adjustment therein (such Series A Warrant certificate may be delivered within three Trading Days of the Closing Date);
(vi) a Series B Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to
75% of such Purchasers Subscription Amount divided by the Per Share Purchaser Price, with an exercise price equal to $ , subject to adjustment therein (such Series B
Warrant certificate may be delivered within three Trading Days of the Closing Date); and
(vii) the Preliminary Prospectus
and the Prospectus (which may be delivered in accordance with Rule 172 promulgated under the Securities Act).
(b) On or
prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company or the Escrow Agent, as applicable, the following:
(i) this Agreement duly executed by such Purchaser; and
(ii) subject to the last sentence of Section 2.1, such Purchasers Subscription Amount by wire transfer to the
account specified in the Escrow Agreement.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with the Closing are subject to only the following conditions being
met:
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by
materiality or Material Adverse Effect, in all respects) on the 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
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(iii) the delivery by each Purchaser of the items set forth in
Section 2.2(b) of this Agreement.
(b) The respective obligations of each Purchaser hereunder in connection with the
Closing are subject to only the following conditions being met:
(i) the accuracy in all material respects (or, to the
extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date
therein);
(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 delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof;
and
(v) from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the
Commission or the Companys principal Trading Market, and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules or disclosed in the SEC Reports
(other than Sections 3(b), (c), (d), (e) and (f)), both of which shall qualify any representation made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules or as reasonably evident in the SEC
Reports, the Company hereby represents and warrants to each Purchaser as of the date hereof and as of the Closing Date (other than representations and warranties that speak as of another specified date which speak as of such date):
(a) Subsidiaries. All of the direct and indirect Subsidiaries of the Company required to be referenced in the SEC
Reports are set forth on the SEC Reports. 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. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in
the Transaction Documents shall be disregarded.
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(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 corporate 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, would 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 (whether or not
significant), taken as a whole, or (iii) a material adverse effect on the Companys 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. 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 Companys stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except
(i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(d) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction
Documents to which 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 Companys or any
Subsidiarys certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) subject to obtaining the Required Approvals, 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
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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 each of clauses (ii) and (iii), such as would 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) the filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Prospectus and any amendment to the Registration Statement permitted by
Rule 462(b) promulgated under the Securities Act, (iii) application(s) to each applicable Trading Market for the listing of the Shares and Warrant Shares for trading thereon in the time and manner required thereby, (iv) such filings as are
required to be made under applicable state securities laws and (v) in all other cases, where failure to obtain such consent, waiver, authorization or order, or to give such notice or make such filing or registration would not have a Material
Adverse Effect (collectively, the Required Approvals).
(f) Issuance of the Securities;
Registration. The Securities are duly authorized and, the Shares, the Preferred Stock and the Warrants, 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. 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. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock for issuance of the Underlying Shares at least equal to the Required Minimum on the date hereof. The Company has
prepared and filed the Registration Statement in conformity with the requirements of the Securities Act, which became effective on , 2015 (the Effective
Date), including the Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement. The Registration Statement is effective under the Securities Act and no stop order preventing or
suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Preliminary Prospectus or the Prospectus has been issued by the Commission and no proceedings for that purpose have been instituted or, to the
knowledge of the Company, are threatened by the Commission. The Company, if required by the rules and regulations of the Commission, proposes to file the Prospectus, with the Commission pursuant to Rule 424(b). At the time the Registration Statement
and any amendments thereto became effective, at the date of this Agreement and at the
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Closing Date, the Registration Statement and any amendments thereto conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain
any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Preliminary Prospectus and the Prospectus and any amendments or supplements
thereto, at time the Preliminary Prospectus or the Prospectus, as applicable, or any amendment or supplement thereto was issued and at the Closing Date, conformed and will conform in all material respects to the requirements of the Securities Act
and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
(g) Capitalization. The capitalization of the Company is as set forth in the Preliminary Prospectus and the Prospectus.
The Company has not issued any capital stock since its most recently filed periodic or current report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Companys stock option plans, the issuance of
shares of Common Stock to employees pursuant to the Companys employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under
the Exchange Act. Other than the Placement Agent, no Person has any Company-granted right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.
Except as a result of the purchase and sale of the Securities or as set forth in the Preliminary Prospectus or the Prospectus or incorporated by reference therein, 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. The issuance and sale of the Securities will not obligate the Company
to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such
securities. There are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or phantom stock plans or agreements or any similar plan or agreement. All of the
outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance in all material respects 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 granted by the Company. 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 Companys capital stock to which the Company is a party or, to the knowledge of the Company, between or
among any of the Companys stockholders.
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(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, since January 1, 2014 (or such shorter period as the
Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with the Preliminary Prospectus and the Prospectus, 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) promulgated 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. 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. Neither the Company nor any Subsidiary, nor any director or officer thereof, is
or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or
contemplated, any 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.
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(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) is required to be disclosed and is not disclosed in the SEC Reports. Neither the Company nor any Subsidiary, nor, the Companys knowledge any director or officer thereof, is or has been within the past three
(3) years the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. To the knowledge of the Company, there has not been and 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 would reasonably be expected to result in a Material Adverse Effect. None of the Companys or its
Subsidiaries employees is a member of a union that relates to such employees 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 that would have a Material Adverse Effect. To the knowledge of the Company, 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, except where the failure to be in compliance would not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(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) to the knowledge of the Company is or
has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without
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limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters,
except in each case as would not have or reasonably be expected to result in a Material Adverse Effect.
(m)
Environmental Laws. The Company and its Subsidiaries (i) are in compliance with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, Hazardous
Materials) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands,
or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (Environmental Laws); (ii) have received all permits
licenses or other approvals required of them under applicable Environmental Laws tic induct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval where in each clause (i),
(ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
(n) Regulatory Permits. To the knowledge of the Company, 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 would 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.
(o) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real
property owned by them and good and marketable title in all tangible 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, (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, and (iii) except as would not reasonably be expected to result in a Material Adverse Effect. 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 except as would not reasonably be expected to
result in a Material Adverse Effect.
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(p) 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 as described in the SEC Reports and which the failure to so have would reasonably be expected to result in a Material Adverse Effect (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 that would reasonably be expected to result in a Material Adverse Effect. 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, except as would not reasonably be expected to have a Material Adverse Effect.
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 that would reasonably be expected to have a Material Adverse
Effect. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(q) 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, including, but not limited to,
directors and officers insurance. 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.
(r) Transactions With
Affiliates and Employees. Except as set forth in the SEC Reports, there are no transactions that are required by Item 404 to be set forth in the SEC Reports that are not set forth in such reports.
(s) Sarbanes-Oxley; Internal Accounting Controls. The Company and the Subsidiaries are in material 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 rules and regulations applicable to smaller reporting companies promulgated by the Commission thereunder that are effective
as of the date hereof and as of the Closing Date.
(t) Certain Fees. Except as set forth in the Preliminary
Prospectus or the Prospectus, no brokerage or finders 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. To the Companys knowledge, the
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Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by the Transaction Documents.
(u) Investment Company. The Company is
not, and is not an Affiliate of, and immediately after receipt of payment for the Shares and Preferred Stock, will not be or be an Affiliate of, an investment company within the meaning of the Investment Company Act of 1940, as amended.
(v) Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of
the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that
the Commission is contemplating terminating such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of such Trading Market, except such as has been cured. The Company is 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.
(w) Anti-Takeover Matters. The Company has not adopted any shareholder rights
agreement, rights plan, poison pill or other similar agreement or plan.
(x) Disclosure. Except with
respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf (it being understood that the Placement Agent is not acting on
its behalf in this regard) has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might reasonably constitute material, non-public information which is not otherwise disclosed in the
Prospectus. The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. To the Companys knowledge, none of the representations made by the Company
in this Agreement, as modified by the Disclosure Schedule and the SEC Reports, taken as a whole, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that no
Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.
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(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 any applicable shareholder approval provisions of any Trading Market on which any of the
securities of the Company are listed or designated.
(z) Solvency. Based on the consolidated financial condition of
the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, and subject to the disclosures in the SEC Reports concerning the Companys liquidity requirements
and financial condition (i) the fair saleable value of the Companys assets exceeds the amount that will be required to be paid on or in respect of the Companys existing debts and other liabilities (including known contingent
liabilities) as they mature, (ii) the Companys assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular
capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not
intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). Based on the consolidated financial condition of the Company as of the Closing
Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, and subject to the disclosures in the SEC Reports concerning the Companys liquidity requirements and financial condition, the
Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date.
(aa) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all 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.
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(bb) Foreign Corrupt Practices. Neither the Company nor any Subsidiary,
nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any
provision of FCPA.
(cc) Accountants. The Companys accounting firm is Marcum, LLP. 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 Companys Annual Report
for the fiscal year ending December 31, 2015.
(dd) Acknowledgment Regarding Purchasers Purchase of
Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arms 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 Companys 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.
(ee) Acknowledgement Regarding Purchasers Trading Activity. Anything in this Agreement or
elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f) and 4.12 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been asked by the Company to agree, nor has any Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or derivative securities based on securities issued by the Company or to hold the Securities for any specified term; (ii) past or future
open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or derivative transactions, before or after the closing of this or future private placement transactions, may negatively impact
the market price of the Companys publicly-traded securities; (iii) any Purchaser, and counter-parties in derivative transactions to which any such Purchaser is a party, directly or indirectly, presently may have a
short position in the Common Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with
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or control over any arms length counter-party in any derivative transaction. The Company further understands and acknowledges (subject to Sections 3.2(f) and 4.12) that
(y) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding and (z) such hedging activities (if any) could reduce the value of the existing stockholders equity
interests in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that, subject to compliance with Section 3.2(f) and 4.12, such aforementioned hedging activities do not constitute a
breach of any of the Transaction Documents.
(ff) Regulation M Compliance. Within the past 30 days, 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 Companys 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 Companys 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 Purchasers 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 or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money
Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.
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3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and for
no other Purchaser, hereby represents and warrants to the Company as of the date hereof and as of the Closing Date (other than representations and warranties that speak as of another specified date which speak as of such date):
(a) Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership limited liability company or similar power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out his, her or 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 corporate or shareholder 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) Understandings or Arrangements. Such Purchaser is acquiring the Securities as principal for his, her or its own
account and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation and warranty not limiting such Purchasers 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 or converts any shares of Preferred Stock, it will be an accredited investor as defined in Rule 501 promulgated under the Securities Act.
(d) Experience of Such Purchaser. Such Purchaser, either alone or together with his, her or 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.
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(e) 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 Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and its financial condition, results of
operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort
or expense that is necessary to make an informed investment decision with respect to the investment. Such Purchaser acknowledges and agrees that neither the Placement Agent nor any Affiliate of the Placement Agent has provided such Purchaser
with any information or advice with respect to the Securities nor is such information or advice necessary or desired. Neither the Placement Agent nor any Affiliate has made or makes any representation as to the Company or the quality of the
Securities and the Placement Agent and any Affiliate may have acquired non-public information with respect to the Company which such Purchaser agrees need not be provided to it. In connection with the issuance of the Securities to such
Purchaser, neither the Placement Agent nor any of its Affiliates has acted as a financial advisor or fiduciary to such Purchaser.
(f) Certain Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such
Purchaser has not and will not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed or agreed to enter into, and will not enter into, any purchase, sale or other transaction in
securities of the Company, including, without limitation Short Sales, during the period commencing as of the time that such Purchaser first received information (written or oral) from the Company or any other Person representing the Company
setting forth the material pricing 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 Purchasers assets and the portfolio managers have no material knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchasers
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, 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).
(g) Each Purchaser hereby acknowledges that it is acting independently from any other Purchaser (and has engaged separate legal
counsel) in connection with this Agreement, and that it is not acting as a member of a group (as such term is defined in Rule 13d promulgated under the Exchange Act) with any other investor in connection with the transactions
contemplated hereby.
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(h) Such Purchaser has no present intent to effect a change of
control of the Company as such term is understood under the rules promulgated pursuant to Section 13(d) of the Exchange Act.
The Company
acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchasers right to rely on the Companys representations and warranties contained in this Agreement (except to the
extent any breach of any representation or warranty by a Purchaser renders any representation or warranty of the Company untrue or incapable of being true).
ARTICLE IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Underlying Shares. The shares of Common Stock underlying the Preferred Stock shall be issued
free of legends. If all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the issuance or resale of the Warrant Shares or if the Warrant is exercised via cashless exercise, the Warrant
Shares issued pursuant to any such exercise shall be issued free of all legends. If at any time following the date hereof the Registration Statement (or any subsequent registration statement registering the sale or resale of the Warrant Shares) is
not effective or is not otherwise available for the sale or resale of the Warrant Shares, the Company shall immediately notify the holders of the Warrants in writing that such registration statement is not then effective and thereafter shall
promptly notify such holders when the registration statement is effective again and available for the sale or resale of the Warrant Shares (it being understood and agreed that the foregoing shall not limit the ability of the Company to issue, or any
Purchaser to sell, any of the Warrant Shares in compliance with applicable federal and state securities laws). The Company shall use best efforts to keep a registration statement (including the Registration Statement) registering the issuance or
resale of the Warrant Shares effective during the term of the Warrants.
4.2 Furnishing of Information. Until the earlier of
(a) the time that no Purchaser owns Securities or (b) the two year anniversary of the Closing Date, 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 even if the Company is not then subject to the reporting requirements of the Exchange Act.
4.3 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.
4.4
Securities Laws Disclosure; Publicity. The Company shall (a) on the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current Report on Form 8-K, including the
Transaction Documents as exhibits thereto, with the Commission within the time required by the Exchange Act. From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly
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disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents in
connection with the transactions contemplated by the Transaction Documents. In addition, effective upon the issuance of such press release, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any
agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates on the one hand, and any of the Purchasers or any of their Affiliates on the other hand,
shall terminate. The Company and the Placement Agent shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby. No Purchaser shall issue any such press release nor otherwise make any such
public statement without the prior consent of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with
prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law in connection with the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure
is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b).
4.5 Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the
Transaction Documents, which shall be disclosed pursuant to Section 4.4, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that
constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto such Purchaser shall have consented to the receipt of such information and agreed with the Company to keep such information
confidential. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company delivers any material, non-public information to
a Purchaser without such Purchasers consent, the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors,
agents, employees or Affiliates, or a duty to the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates not to trade on the basis of, such material, non-public information, provided that the
Purchaser shall remain subject to applicable law. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
4.6 Use of Proceeds. The Company shall use the net proceeds from the sale of the Shares, the Preferred Stock and the Warrants
hereunder consistent with the Use of Proceeds section in the Prospectus.
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4.7 Indemnification of Purchasers. Subject to the provisions of this Section 4.6, the
Company will indemnify and hold each Purchaser and his, her or its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding
a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a Purchaser Party)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys fees and costs of investigation that any
such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any
action instituted against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated
by the Transaction Documents (unless such action is based upon a breach of such Purchaser Partys representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with
any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of
its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the employment thereof at the expense of the Company has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in the reasonable written opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in
which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel but only to the extent necessary to comply with clauses (i), (ii) or (iii) of this sentence. The Company will not be
liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Companys prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent that a
loss, claim, damage or liability is attributable to any Purchaser Partys breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The
indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.
4.8 Listing of Common Stock. The Company hereby agrees concurrently with the Closing, to apply to list or quote all of the Shares and
Warrant Shares on such Trading Market and promptly secure the listing of all of the Shares and Warrant Shares on such Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any
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other Trading Market, it will then include in such application all of the Shares and Warrant Shares, and will take such other action as is necessary to cause all of the Shares and Warrant Shares
to be listed or quoted on such other Trading Market as promptly as possible. For as long as the Warrants remain outstanding, the Company will take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading
Market and will comply in all respects with the Companys reporting, filing and other obligations under the bylaws or rules of the Trading Market. The Company agrees to maintain the eligibility of the Common Stock for electronic transfer
through the Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such
electronic transfer.
4.9 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.
(b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the
Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Companys certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at
least the Required Minimum at such time, as soon as possible and in any event not later than the 75th day after such date.
(c) The Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and
file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application, (ii) take all steps necessary to cause such shares of
Common Stock to be approved for listing or quotation on such Trading Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing or quotation and (iv) maintain the listing or quotation of such Common
Stock on any date at least equal to the Required Minimum on such date on such Trading Market or another Trading Market. The Company agrees to maintain the eligibility of the Common Stock for electronic transfer through the Depository Trust Company
or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic transfer.
4.10 Subsequent Equity Sales.
(a) From the date hereof until 90 days after the Closing Date, neither the Company nor any Subsidiary shall issue, enter into
any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents.
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(b) From the date hereof until such time as no Purchaser holds any of the
Warrants, the Company shall be prohibited from effecting or entering into an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents (or a combination of units thereof) involving a
Variable Rate Transaction. Variable Rate Transaction means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right
to receive additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time
after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the
occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby
the Company may issue securities at a future determined price. Any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.
(c) Notwithstanding the foregoing, this Section 4.10 shall not apply in respect of an Exempt Issuance.
4.11 Equal Treatment of Purchasers. Subject to Section 5.5, no consideration (including any modification of any Transaction
Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same consideration is also offered to all of the parties to this Agreement. Subject to
Section 5.5, for clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and
shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.
4.12 Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that
neither he, she or it nor any Affiliate acting on his, her or its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales of any of the Companys securities during the period commencing with
the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.4, such Purchaser will
maintain the confidentiality of the existence and terms of this transaction and the information included in the Disclosure Schedules. Notwithstanding the foregoing, and notwithstanding anything contained in this Agreement to the contrary, the
Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions
contemplated by this Agreement are first publicly announced pursuant to the initial
26
press release as described in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with
applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4 and (iii) no Purchaser shall have any
duty of confidentiality to the Company or its Subsidiaries that arises under this Agreement after the issuance of the initial press release as described in Section 4.4. 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 Purchasers assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing
other portions of such Purchasers assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this
Agreement.
4.13 Capital Changes. Until the six-month anniversary of the Closing Date, the Company shall not undertake a reverse or
forward stock split or reclassification of the Common Stock without the prior written consent of the Purchasers holding a majority in interest of the Shares except to the extent required to enable the Company with comply with required listing
standards of the Companys principal Trading Market.
4.14 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,
respectively. 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.
ARTICLE V.
MISCELLANEOUS
5.1
Termination. This Agreement may be terminated by any Purchaser, as to such Purchasers 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 , 2015; provided, however, that no such termination will affect the right of any party
to sue for any breach by any other party (or parties).
5.2 Fees and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of their 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), stamp taxes and other similar taxes and
duties levied in connection with the delivery of any Securities to the Purchasers.
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5.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules
thereto and the Preliminary Prospectus and the Prospectus, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to
such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all
notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is
delivered via facsimile or email attachment at the facsimile number or email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile or email attachment at the facsimile number or email address as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New
York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon
actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. To the extent that any notice provided pursuant to any Transaction
Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K
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 the Purchasers who hold at least 51% in interest of the Shares and shares of Preferred Stock, determined as a single class, then outstanding and held by the Purchasers or their permitted
assigns or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought; provided, that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of
Purchasers), the consent of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise
of any such right. Any proposed amendment or waiver that disproportionately, materially and adversely affects the rights and obligations of any Purchaser relative to the comparable rights and obligations of the other Purchasers shall require the
prior written consent of such adversely affected Purchaser, Any amendment effected in accordance with accordance with this Section 5.5 shall be binding upon each Purchaser and holder of Securities and the Company.
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.
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5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their successors and permitted assigns. The Company may assign this Agreement and any rights or obligations hereunder without the prior written consent of the Purchasers to any successor of the Company. Each Purchaser may assign
any or all of their respective rights under this Agreement without the prior written consent of the Company to an Affiliate of such Purchaser in connection with a transfer of Securities to such Affiliate, provided that such Affiliate transferee
agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the Purchasers. Any rights of a Purchaser under this Agreement shall terminate upon a transfer by a
Purchaser of their respective Securities to a person other than an Affiliate in accordance with this Section 5.7.
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 4.7 or to the extent that the Placement Agent is permitted to rely on the representations and warranties of the Company and the Purchasers made pursuant to Sections 3.1 and 3.2 hereunder.
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 New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees or
agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of
Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under
Section 4.7, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.
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5.10 Survival. The representations and warranties contained herein shall survive the
Closing and the delivery of the Securities; provided, that all non-fundamental representations shall expire on the one year anniversary of the Closing Date. The non-fundamental representations are all representations made under this
Agreement by the Company, except the following: Section 3.1(a), (b), (c), (d), (f)first sentence only and (g)first sentence only.
5.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one
and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is
delivered by 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.
5.12 Severability. If any term,
provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
5.13 Rescission and Withdrawal Right. Notwithstanding
anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or
in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of a conversion of the Preferred Stock or exercise of a Warrant, the applicable Purchaser shall be required to return any shares of
Common Stock subject to any such rescinded conversion or exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company for such shares and the restoration of such Purchasers right to acquire
such shares pursuant to such Purchasers Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).
5.14 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and a customary indemnity. 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.
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5.15 Remedies. In addition to being entitled to exercise all rights provided herein or
granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
5.16 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 his, her or its rights including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and (unless deemed an indispensible party under applicable law) 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 his, her or its own separate legal counsel in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, each Purchaser and his, her or its respective counsel have chosen to communicate with the Company through EGS. EGS does not represent any of the Purchasers and only represents H.C. Wainwright & Co., LLC. The
Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It is expressly understood and agreed that
each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.
5.17 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.
5.18 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.
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5.19 Liquidated Damages. The Companys obligations to pay any partial liquidated
damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the
instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.
5.20 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER
PARTY UNDER THIS AGREEMENT, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.
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SUPERCONDUCTOR TECHNOLOGIES INC. |
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Address for Notice: |
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By: |
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Superconductor Technologies Inc. |
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Name: Title: |
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9101 Wall Street, Suite 1300 Austin, TX
78754 |
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With a copy to (which shall not constitute notice): |
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Manatt, Phelps & Phillips, LLP 11355 West
Olympic Blvd. Los Angeles, CA 90064 Attention: Ben Orlanski,
Esq, Matthew OLoughlin, Esq. Fax:
310-312-4224 |
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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[PURCHASER SIGNATURE PAGES TO SCON 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 Common Stock:
Shares of Preferred
Stock:
Warrant Shares:
EIN Number:
¨Notwithstanding anything contained in this Agreement to the contrary, by checking this box the above-signed
agrees that the obligations of the above-signed to purchase the securities set forth in this Agreement to be purchased from the Company by the above-signed shall be unconditional and all conditions to Closing in favor of the above-signed shall be
disregarded. Notwithstanding the foregoing, in the event the Company accepts the above-signeds subscription for the Companys securities and any conditions to Closing contemplated by this Agreement that required delivery by the Company or
the above-signed of any agreement, instrument, certificate or the like or purchase price (as applicable) are not satisfied as of the Closing, such deliverable shall be an unconditional obligation of the Company or the above-signed (as applicable) to
deliver such agreement, instrument, certificate or the like or purchase price (as applicable) to such other party on the Closing Date.
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[SIGNATURE PAGES CONTINUE]
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Exhibit 4.11
SUPERCONDUCTOR TECHNOLOGIES INC.
Warrant
Shares:
Initial Exercise Date: , 2015
THIS SERIES [A][B] COMMON STOCK PURCHASE WARRANT (the Warrant) certifies that, for value received,
or its assigns (the Holder) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or
after , 2015 (the Initial Exercise Date) and on or prior to the close of business on ,
202[ ]1 (the Termination Date) but not thereafter, to subscribe for and purchase from Superconductor Technologies Inc., a Delaware corporation (the
Company), up to shares (as subject to adjustment hereunder, the Warrant Shares) of Common Stock. The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1.
Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the Purchase Agreement), dated
, 2015, among the Company and the purchasers signatory thereto.
Section 2. Exercise.
(a) Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or
after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing
on the books of the Company) of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise Form annexed hereto. Within three (3) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the
aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashiers check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in
the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to
the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder
shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total
number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount
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6 months from Initial Exercise Date for Series A; 5 years from Initial Exercise Date for Series B.
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1
equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The
Company shall deliver any objection to any Notice of Exercise Form within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of
this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
(b) Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be
$ , subject to adjustment hereunder (the Exercise Price).
(c) Cashless Exercise. If, and only if, at the time of exercise hereof there is no effective registration statement
registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may be exercised, in whole or in part, at such time by means of a cashless exercise in which the
Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
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(A) |
= the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a cashless exercise, as set forth in the applicable Notice of Exercise;
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(B) |
= the Exercise Price of this Warrant, as adjusted hereunder; and |
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= the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
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VWAP means, for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then
listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the OTC Bulletin Board or OTCQB is not a Trading Market, the volume weighted average price of
the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board or OTCQB, as applicable, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board or OTCQB and if prices for the Common
Stock are then reported in the Pink Sheets published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or
(d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to
the Company, the fees and expenses of which shall be paid by the Company.
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(d) Mechanics of Exercise.
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Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holders or its
designees balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (DWAC) if the Company is then a participant in such system and either (A) there is an effective registration
statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the
Companys share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is
three (3) Trading Days after the delivery to the Company of the Notice of Exercise (such date, the Warrant Share Delivery Date). The Warrant Shares shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if
permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to
a Notice of Exercise by the Warrant Share Delivery Date (provided that the Company has received the payment, unless by cashless exercise, with respect to such Exercise Notice on or before such date), the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on
the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. |
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at
the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by
this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
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iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon
Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after
such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holders brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such exercise (a Buy-In), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holders total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the
exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares
for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery
obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in
respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holders 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 Companys failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
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vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made
without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the
name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall
pay all Transfer Agent fees required for same-day processing of any Notice of Exercise.
vii. Closing of Books. The
Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
(e) Holders Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall
not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with
the Holders Affiliates, and any other Persons acting as a group together with the Holder or any of the Holders Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of
the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is
being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise
or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the
Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to
other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holders
determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation,
and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the
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Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on
the number of outstanding shares of Common Stock as reflected in (A) the Companys most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a
more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in
writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The Beneficial Ownership Limitation shall be 4.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon
exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the
61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this
Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
Section 3. Certain Adjustments.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock
dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into
a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of
shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or
re-classification.
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(b) [Reserved].
(c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the
Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of 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 exercise
of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holders right to participate
in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock
as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation).
(d) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall
declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a Distribution), at any time after the issuance of this Warrant,
then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete
exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is
taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holders right to participate in any such
Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result
of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation). To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised
this Warrant.
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(e) Fundamental Transaction. If, at any time while this Warrant is
outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease,
license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding
Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a
Fundamental Transaction), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence
of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company,
if it is the surviving corporation, and any additional consideration (the Alternate Consideration) receivable by holders of Common Stock as a result of such Fundamental Transaction for each share of Common Stock for which this
Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among
the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a
Fundamental Transaction in which the Company is not the survivor (the Successor Entity) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the
provisions of this Section
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3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and
shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a
corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of
such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after
the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the Company shall refer instead to the Successor Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
(f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of
a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
(g) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this
Section 3, the Company shall promptly mail to the Holder a notice or file with the Commission a Current Report on Form 8-K setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and
setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If
(A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company
shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a
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party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or
property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed a notice to the Holder at its last address
as it shall appear upon the Warrant Register of the Company or file with the Commission a Current Report on Form 8-K, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to provide such notice or any defect therein shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or
contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise
this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
Section 4. Transfer of Warrant.
(a) Transferability. This Warrant and all rights hereunder (including, without limitation, any registration rights) are
transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name
of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant
shall promptly be cancelled. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
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(b) New Warrants. This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
(c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that
purpose (the Warrant Register), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or
any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
Section 5.
Miscellaneous.
(a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.
(b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory
to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of
like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
(c) Saturdays, Sundays,
Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding
Business Day.
(d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority
to
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its officers who are charged with the duty of executing stock certificates to execute and issue the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The
Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the
Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder,
the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable
therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon
the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to
perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of
Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
(e) Jurisdiction. All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.
(f)
Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holders rights, powers or remedies. Without
limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any
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material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys
fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
(g) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the
Company shall be delivered in accordance with the notice procedures of the Purchase Agreement to such address provided by a Holder to the Company including if such Holder is not a party to the Purchase Agreement.
(h) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise
this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
(i) Remedies. The Holder, in addition to being
entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
(j) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced
hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from
time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
(k) Amendment. The
provisions of this Warrant and all of the other Warrants issued under the Purchase Agreement and otherwise issued to investors not party to the Purchase Agreement on the same original issuance date as this Warrant in the forms of the Series A
Warrants and Series B Warrants may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Persons holding
Warrants representing not less than a majority of the Common Stock obtainable upon exercise of all such Warrants then outstanding treating the Series A Warrants and Series B Warrants as a single class; provided, that the number of Warrant Shares
subject to this Warrant, the Exercise Price, the Initial Exercise Date and the Termination Date may not be amended, and the right to exercise this Warrant may not be altered or waived, without the written consent of the Holder. Any such amendment
shall apply to all Warrants and be binding upon all registered holders of such Warrants whether or not they have consented (except only for those amendments that, pursuant the preceding sentence, require the written consent of the Holder).
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(l) Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
(m)
Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************
(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto
duly authorized as of the date first above indicated.
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SUPERCONDUCTOR TECHNOLOGIES INC. |
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By: |
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Name: Title: |
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NOTICE OF EXERCISE
TO: |
SUPERCONDUCTOR TECHNOLOGIES INC. |
(1) The undersigned hereby elects to purchase
Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together
with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set
forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account Number:
[SIGNATURE OF HOLDER]
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Name of Investing Entity:
Signature of Authorized Signatory of Investing Entity:
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Name of Authorized Signatory:
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Title of Authorized Signatory:
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Date:
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ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, [ ] all of or
[ ] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to
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Dated: ,
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Holders
Signature:
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Holders
Address:
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