|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Conversion of
Preferred Stock
|
|
After Conversion of
Preferred Stock
|
|
Name and Address of Beneficial Owner
|
|
Number of
Shares
|
|
Percent of
Class(1)
|
|
Number of
Shares
|
|
Percent of
Class(1)
|
|
Franklin Resources, Inc.(2)
|
|
|
34,261,424
|
|
|
36.7
|
%
|
|
34,261,424
|
|
|
23.1
|
%
|
Ares Management LLC(3)
|
|
|
18,357,256
|
|
|
19.7
|
%
|
|
21,117,256
|
|
|
14.2
|
%
|
Tyrus Capital S.A.M.(4)
|
|
|
9,126,652
|
|
|
9.7
|
%
|
|
13,956,652
|
|
|
9.4
|
%
|
Floyd C. Wilson(5)
|
|
|
1,160,149
|
|
|
1.2
|
%
|
|
1,160,149
|
|
|
*
|
|
Stephen W. Herod(6)
|
|
|
275,353
|
|
|
*
|
|
|
275,353
|
|
|
*
|
|
Mark J. Mize(7)
|
|
|
269,553
|
|
|
*
|
|
|
269,553
|
|
|
*
|
|
William J. Campbell(8)
|
|
|
17,264
|
|
|
*
|
|
|
17,264
|
|
|
*
|
|
James W. Christmas(9)
|
|
|
53,340
|
|
|
*
|
|
|
53,340
|
|
|
*
|
|
Michael L. Clark(10)
|
|
|
17,264
|
|
|
*
|
|
|
17,264
|
|
|
*
|
|
Thomas R. Fuller(11)
|
|
|
27,685
|
|
|
*
|
|
|
27,685
|
|
|
*
|
|
Darryl Schall(12)
|
|
|
|
|
|
*
|
|
|
|
|
|
*
|
|
Ronald D. Scott(13)
|
|
|
17,264
|
|
|
*
|
|
|
17,264
|
|
|
*
|
|
Eric Takaha(14)
|
|
|
17,264
|
|
|
*
|
|
|
17,264
|
|
|
*
|
|
Nathan W. Walton(15)
|
|
|
|
|
|
*
|
|
|
|
|
|
*
|
|
All directors and executive officers as a group (13 individuals)
|
|
|
2,616,147
|
|
|
2.8
|
%
|
|
2,616,147
|
|
|
1.7
|
%
|
-
*
-
Less
than 1%.
-
(1)
-
Unless
otherwise indicated, each stockholder has sole voting and investment power with respect to all shares of common stock indicated as being beneficially owned by
such stockholder. Shares of common stock that are not outstanding, but which a designated stockholder has the right to acquire within 60 days, are included in the number of shares beneficially
owned by such stockholder and are deemed to be outstanding for purposes of determining the percentage of outstanding shares beneficially owned by such stockholder, but not for purposes of determining
the percentage of outstanding shares beneficially owned by any other designated stockholder. In all instances where ownership of unvested restricted stock is reported below, the individual has the
sole power to vote such shares but no investment power.
-
(2)
-
According
to, and based solely upon, Schedule 13D/A filed by Franklin Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin
Advisers, Inc. (collectively, "Franklin") with the SEC on November 14, 2016. The business address for Franklin is One Franklin Parkway, San Mateo, CA 94403.
-
(3)
-
According
to, and based solely upon, Schedule 13D/A filed by AF IV Energy II AIV B1, L.P., Ares Management LLC, Ares Management
Holdings L.P., Ares Holdco LLC, Ares Holdings Inc., Ares Management, L.P., Ares Management GP LLC and Ares Partners Holdco LLC (collectively, "Ares")
with the SEC on January 26, 2017. The business address for Ares is 2000 Avenue of the Stars, 12
th
Floor, Los Angeles, CA 90067.
-
(4)
-
According
to, and based solely upon, Schedule 13G/A filed by Tyrus Capital S.A.M.. and Tony Chendraoui. (collectively, "Tyrus") with the SEC on
February 14, 2017. The business address for Tyrus is 4 Avenue Roqueville, Monaco, MC 98000.
-
(5)
-
Includes
465,625 shares of unvested restricted stock. Also includes 7,019 shares held in seventeen trusts for the benefit of Mr. Wilson's children and
grandchildren, of which Mr. Wilson is the
8
trustee
and disclaims beneficial ownership of such shares. Does not include 6,583 shares held in three trusts for the benefit of Mr. Wilson's children, of which Mr. Wilson's wife is the
trustee and he disclaims beneficial ownership of such shares.
-
(6)
-
Includes
121,875 shares of unvested restricted stock. Does not include 2,749 shares held in trusts for the benefit of Mr. Herod's minor children, of which
Mr. Herod disclaims beneficial ownership of such shares and has no dispositive or voting power with respect to the shares held by such trusts.
-
(7)
-
Includes
121,875 shares of unvested restricted stock. 1,964 shares held by Mr. Mize are pledged.
-
(8)
-
The
business address for Mr. Campbell is 820 Gessner, Suite 1460, Houston, TX 77024.
-
(9)
-
Does
not include 177 shares of common stock held in three trusts for his children. Mr. Christmas has no dispositive or voting power with respect to the shares
held by such trusts. The business address for Mr. Christmas is c/o Halcón Resources Corporation, 1000 Louisiana Street, Suite 6700, Houston, Texas 77002.
-
(10)
-
The
business address for Mr. Clark is c/o Halcón Resources Corporation, 1000 Louisiana Street, Suite 6700, Houston, Texas 77002.
-
(11)
-
The
business address for Mr. Fuller is 19500 SH 249, Suite 640, Houston, TX 77070.
-
(12)
-
The
business address for Mr. Schall is c/o Halcón Resources Corporation, 1000 Louisiana Street, Suite 6700, Houston, Texas 77002.
-
(13)
-
The
business address for Mr. Scott is 1030 Andrews Highway, Suite 200, Midland, TX 79703.
-
(14)
-
The
business address for Mr. Takaha is c/o Halcón Resources Corporation, 1000 Louisiana Street, Suite 6700, Houston, Texas 77002.
-
(15)
-
The
business address for Mr. Walton is 2000 Avenue of the Stars, 12
th
Floor, Los Angeles, CA 90067.
DESCRIPTION OF OUR CAPITAL STOCK
Set forth below is a description of the material terms of our capital stock. However, this description is not complete and is qualified by
reference to our certificate of incorporation and bylaws. Copies of our certificate of incorporation (including our certificate of designation) and bylaws have been filed with the SEC and are
incorporated by reference into this Information Statement. Please read "Where You Can Find More Information" and "Incorporation by Reference." You should also be aware that the summary below does not
give full effect to the provisions of statutory or common law that may affect your rights as a stockholder.
Authorized Capital Stock
Our authorized capital stock consists of 1,000,000,000 shares of common stock, par value of $0.0001 per share, and 1,000,000 shares of Preferred
Stock, par value $0.0001 per share. As of February 28, 2017, we had approximately 93.0 million shares of common stock and 5,518 shares of Preferred Stock outstanding.
Common Stock
Voting rights.
Each share of common stock is entitled to one vote in the election of directors and on all other matters submitted to a
vote of
stockholders. Stockholders do not have the right to cumulate their votes in the election of directors.
9
Dividends, distributions and stock splits.
Holders of common stock are entitled to receive dividends if, as and when such dividends are
declared by
the board of directors out of assets legally available therefor after payment of dividends required to be paid on shares of preferred stock, if any. Our existing debt arrangements restrict our ability
to pay cash dividends.
Liquidation.
In the event of any dissolution, liquidation, or winding up of our affairs, whether voluntary or involuntary, after
payment of debts and
other liabilities and making provision for any holders of its preferred stock who have a liquidation preference, our remaining assets will be distributed ratably among the holders of common stock.
Fully paid.
All shares of common stock outstanding are fully paid and nonassessable.
Other rights.
Holders of common stock have no redemption or conversion rights and no preemptive or other rights to subscribe for our
securities.
Warrants
On September 9, 2016, we entered into a warrant agreement with U.S. Bank National Association as warrant agent, pursuant to which we
issued warrants to purchase up to 4,736,842 shares of our common stock, exercisable for a four-year period at an exercise price of $14.04 per share. The warrant agreement includes customary
anti-dilution provisions that take effect in the event of a stock split, stock dividend, recapitalization, reclassification, reorganization or merger.
Preferred Stock
Our board of directors has the authority to issue up to 1,000,000 shares of preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rates, voting rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting any series or the designation of that series, which may be superior to those of the common stock, without further vote or action by the stockholders. One of the effects
of undesignated preferred stock may be to enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger
or otherwise, and as a result to protect the continuity of our management. The issuance of shares of the preferred stock by the board of directors as described above may adversely affect the rights of
the holders of common stock. For example, preferred stock issued by us may rank superior to the common stock as to dividend rights, liquidation preference or both, may have full or limited voting
rights and may be convertible into shares of common stock. Accordingly, the issuance of shares of preferred stock may discourage bids for our common stock or may otherwise adversely affect the market
price of our common stock.
Automatically Convertible Preferred Stock
Each share of Preferred Stock will automatically convert into 10,000 shares of common stock and each fractional share of Preferred Stock will
convert into a proportionate number of shares of common stock on the day following the occurrence of certain events described below. If conversion has not occurred on or before June 1, 2017,
holders of the Preferred Stock will be entitled to receive quarterly dividends accruing from the date of initial issuance at a rate of 8% per annum. The following discussion summarizes some, but not
all, provisions of the certificate of designation governing the Preferred Stock. The certificate of designation governing the Preferred Stock was filed with the Secretary of State of the State of
Delaware on February 27, 2017.
10
Ranking.
The Preferred Stock ranks, with respect to dividend rights and rights upon liquidation, dissolution or winding
up:
-
-
Junior to any other class or series of stock that has terms providing that such class or series will rank senior to the Preferred Stock;
-
-
On parity with any other class or series of stock that has terms providing that such class or series will rank on parity with the Preferred
Stock (which we refer to as "parity securities"); and
-
-
Senior to our common stock, and each other class or series of stock that has terms providing that such class or series will rank junior to the
Preferred Stock (which we refer to as "junior securities").
Dividend Rights.
No dividends will be payable on the Preferred Stock if automatic conversion occurs on or before June 1, 2017. See
"Conversion." However, if the Preferred Stock has not been converted into common stock on or before June 1, 2017, then each holder of Preferred Stock will be entitled to receive
dividends at an annual rate of 8% of the initial liquidation preference per share from the date of issuance. If a cash dividend is not declared and paid on any dividend payment date, then the
liquidation preference per share of Preferred Stock will be increased by the amount of the unpaid dividend. An increase in the liquidation preference will have the effect of increasing the number of
shares of common stock into which the Preferred Stock is convertible, the price at which it is redeemable and the amount of the liquidation preference. Upon such an increase in the liquidation
preference, we will have no further obligation with respect to the dividend that was accrued and payable with respect to the applicable dividend payment date.
Dividends
will be payable quarterly on March 31, June 30, September 30 and December 31 of each year, beginning June 30, 2017 (each, a "dividend payment
date"), to holders of record as they appear in our stock records at the close of business on the tenth business day immediately preceding the respective dividend payment date, or such other record
date as may be fixed by our board of directors in advance of a dividend payment date, provided that no such record date shall be less than ten nor more than 60 calendar days preceding such
date. Dividends payable on shares of Preferred Stock for any period other than a full quarterly period are computed on the basis of a 360-day year consisting of twelve 30-day months.
We
may not, without the prior consent of the holders of a majority of the Preferred Stock voting as a separate class, declare or pay any dividend or distribution, whether in liquidation
or otherwise, to the
holders of, or purchase, redeem or otherwise acquire for value prior to its stated maturity:
-
-
any junior securities, or
-
-
any parity securities, unless such dividends or distribution is allocated (i) to pay all accrued and unpaid dividends on the Preferred
Stock and the parity securities, pro rata, based on the unpaid amount thereof, if there are any accrued and unpaid dividends on the Preferred Stock or such parity securities, and (ii) to pay
the holders of Preferred Stock and the parity securities, pro rata based on their respective liquidation preferences, if there are no accrued and unpaid dividends on the Preferred Stock or such parity
securities.
Liquidation Rights.
Upon our voluntary or involuntary liquidation, dissolution or winding up, holders of Preferred Stock will be
entitled to receive
a liquidation preference equal to the original issuance price plus the amount attributable to any increase in the liquidation preference as described under "Dividend Rights," together
with any accrued and unpaid dividends to the date of payment, before any payment or distribution is made to holders of common stock or other junior securities. If, upon our voluntary or involuntary
liquidation, dissolution or winding up, the amounts payable with respect to shares of Preferred Stock and all parity securities are not paid in full, the holders of shares of Preferred Stock and the
holders of the parity securities will share equally and ratably in any
11
distribution
of our assets in proportion to the full liquidation preference and the amount equal to all accrued and unpaid dividends to which each such holder is entitled.
Unless
the holders of two-thirds of the outstanding Preferred Stock agree otherwise, each of the following events would be deemed a liquidation, dissolution or winding up for purposes of
determining the rights of holders of Preferred Stock:
-
-
Our approval of the sale of substantially all of our assets;
-
-
Approval by our stockholders of our merger or consolidation with another entity in certain circumstances; or
-
-
The acquisition by any person or group, other than a holder of 5% or more of our common stock on the initial issue date of the Preferred Stock,
of securities (excluding shares of common stock issuable upon conversion of the Preferred Stock) representing more than 35% of the voting power of our equity securities.
Conversion.
The Preferred Stock will automatically convert into common stock on the 20th calendar day after we mail this
Information Statement
to our stockholders notifying them that our majority stockholders have consented to the issuance of common stock upon conversion of the Preferred Stock. In accordance with Section 312.03 of the
NYSE Listed Company Manual, holders of a majority of our outstanding common stock consented to the issuance of common stock upon conversion of the Preferred Stock, prior to the sale of shares of
Preferred Stock in the private placement.
Each
share of Preferred Stock will be convertible into a number of shares of common stock determined by dividing the liquidation preference of the Preferred Stock, which is equal to the
initial liquidation preference plus the amount of any accrued and unpaid dividends through the date of conversion, by the conversion price. Initially, the liquidation preference is equal to
$72,500.00, and the conversion price is $7.25. Thus, initially, each share of Preferred Stock will be convertible into 10,000 shares of common stock and each fractional share of Preferred Stock will
be convertible into a proportionate number of shares of common stock. The initial conversion price is subject to adjustment in certain circumstances, including stock splits, stock dividends, rights
offerings, or combinations of our common stock. The liquidation preference will be increased if any accrued dividend is not paid in cash on the applicable dividend payment date, by an amount equal to
the amount of the unpaid dividend, as described under "Dividend Rights." Any decrease in the conversion price or increase in the liquidation preference will result in a corresponding
increase in the conversion rate of the Preferred Stock, and any increase in the conversion price will result in a corresponding decrease in the conversion rate. Upon conversion of the Preferred Stock,
the holders will surrender to us or the transfer agent the certificate or certificates for the shares to be converted, and we will deliver to each such holder the certificate or certificates for the
number of shares of our common stock to which the holder is entitled.
No
fractional shares of common stock will be issued upon conversion of shares of Preferred Stock. All shares, including fractional shares, of common stock issuable to a holder of
Preferred Stock will be aggregated. If after such aggregation, the conversion would result in the issuance of a fractional share of common stock, the fraction will be rounded up or down to the nearest
whole number of shares.
Upon
any reorganization or reclassification of our capital stock, any consolidation or merger with or into another company or any sale of all or substantially all of our assets to
another company (if such transaction is not treated as a liquidation), we or such successor entity, as the case may be, will make appropriate provision so that each share of Preferred Stock then
outstanding will be convertible into the kind and amount of securities, cash and other property receivable upon such reorganization, reclassification, consolidation, merger or sale by a holder or the
number of shares of common stock into which such share of Preferred Stock might have been converted immediately before such
12
transaction,
subject to such adjustment as shall be as nearly equivalent as may be practicable to the adjustments described above.
Redemption.
We will be required to redeem all of the outstanding shares of Preferred Stock if the Preferred Stock has not been
converted into common
stock on or before July 28, 2022. We will notify holders of record of Preferred Stock upon the occurrence of such event, and the redemption must occur within 30 days following such
event. Upon redemption, each holder of Preferred Stock will be entitled to receive, upon surrender of Preferred Stock certificates, cash in the amount of the then-current liquidation preference,
including all accrued and unpaid dividends through the date of redemption.
Consent Rights and Voting Rights.
The holders of the Preferred Stock are entitled to vote, together as a single class, with the holders
of
outstanding common stock, with respect to all matters, and will represent 1% of the total voting power of our voting stock. We will reduce the voting power of the holders of our Preferred Stock, as
needed, to comply with the rules of the New York Stock Exchange. If the automatic conversion of the Preferred Stock has not occurred by July 1, 2017, the holders of the Preferred Stock, voting
separately as a class, will be entitled to elect two additional members to our board of directors.
We
may not, without the approval of holders of two-thirds of our Preferred Stock, undertake any of the following:
-
-
amend, alter, waive, repeal or modify (whether by merger, consolidation or otherwise) any provision of our certificate of incorporation, as
amended (including any filing or amending of a certificate of designation for any senior security or parity security) or, as amended, so as to adversely affect or otherwise impair any of the rights,
preferences, privileges, qualifications, limitations or restrictions of, or applicable to, the Preferred Stock;
-
-
authorize, issue or increase the authorized amount of any class of senior securities or parity securities;
-
-
increase or decrease (other than by redemption or conversion) the authorized number of shares of our Preferred Stock; or
13
-
-
enter into any agreement regarding, or any transaction or series of transactions resulting in, a change of control, unless provision is made in
the agreement effecting such transaction for the redemption of our Preferred Stock in cash in accordance with the certificate of designation for the Preferred Stock.
Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions
Our certificate of incorporation, bylaws and the DGCL contain certain provisions that could discourage potential takeover attempts and make it
more difficult for stockholders to change management or receive a premium for their shares.
Delaware law.
Under Section 203 of the DGCL, a corporation is prohibited from engaging in any business combination with a
stockholder who,
together with its affiliates or associates, owns (or who is an affiliate or associate of the corporation and within a three-year period did own) 15% or more of the corporation's outstanding voting
stock (which we refer to as an "interested stockholder") for a
three-year period following the time the stockholder became an interested stockholder, unless:
-
-
prior to the time the stockholder became an interested stockholder, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an interested stockholder;
-
-
the interested stockholder owned at least 85% of the voting stock of the corporation, excluding specified shares, upon consummation of the
transaction which resulted in the stockholder becoming an interested stockholder; or
-
-
at or subsequent to the time the stockholder became an interested stockholder, the business combination is approved by the board of directors
of the corporation and authorized by the affirmative vote, at an annual or special meeting, and not by written consent, of at least 66
2
/
3
% of the outstanding voting shares of the
corporation, excluding shares held by that interested stockholder.
A
business combination generally includes:
-
-
mergers and consolidations with or caused by an interested stockholder;
-
-
sales or other dispositions of 10% or more of the assets of a corporation to an interested stockholder;
-
-
specified transactions resulting in the issuance or transfer to an interested stockholder of any capital stock of the corporation or its
subsidiaries; and
-
-
other transactions resulting in a disproportionate financial benefit to an interested stockholder.
The
provisions of Section 203 of the DGCL do not apply to a corporation if, subject to certain requirements, the certificate of incorporation or bylaws of the corporation contain
a provision expressly electing not to be governed by the provisions of the statute or the corporation does not have voting stock listed on a national securities exchange or held of record by more than
2,000 stockholders. Because our certificate of incorporation and bylaws do not include any provision to "opt-out" of Section 203 of the DGCL, the statute will apply to business combinations
involving us.
Charter and bylaw provisions.
Delaware law permits any Delaware corporation to classify its board of directors into as many as three
(3) classes with staggered terms of office. After initial implementation of a classified board, one class will be elected at each annual meeting of the stockholders to serve for a term of three
(3) years (depending upon the number of classes into which directors are classified) or until their successors are elected and take office. Our amended and restated certificate of
incorporation, which was duly adopted pursuant to the Amended Joint Prepackaged Plan of Reorganization, dated September 2, 2016 and confirmed by the United States Bankruptcy Court for
14
the
District of Delaware entered September 8, 2016 and thereby approved pursuant to Section 303 of the DGCL effective as of September 9, 2016 (the "Plan of Reorganization"), and
our amended and restated bylaws, as amended, provide for a classified board of directors divided into three (3) classes, with Class A initially consisting of two directions elected for a
term expiring at the annual meeting of stockholders to be held in 2017, Class B initially consisting of four directors elected for a term expiring at the annual meeting of stockholders to be
held in 2018, and Class C initially consisting of three directors elected for a term expiring at the annual meeting of stockholders to be held in 2019, and each class subsequently serving for a
term of three (3) years or until their successors are elected and qualified. Under Delaware law, stockholders of a corporation with a classified board of directors may only remove a director
"for cause" unless the certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation provides that any director may be removed, with or without cause, by a
majority of the shares entitled to vote at an election of directors, other than the director designated by the Requisite Unsecured Noteholders (as defined in the Plan of Reorganization),
which may only be removed prior to the expiration of such director's initial term "for cause." The likely effect of the classification of the board of directors and the limitations on the removal of
directors is an increase in the time required for the stockholders to change the composition of the board of directors. For example, because only approximately one-third of the directors may be
replaced by stockholder vote at each annual meeting of stockholders, stockholders seeking to replace a majority of the members of our board of directors will need at least two annual meetings of
stockholders to effect this change.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Broadridge Corporate Issuer Solutions, 1717 Arch Street, Suite 1300,
Philadelphia, PA 19103. Its phone number is (877) 830-4936.
REGISTRATION RIGHTS
Shelf Registration Statement
Each of the Investors has entered into a registration rights agreement with the Company. Pursuant to the registration rights agreement, we have
agreed, at our expense, to (i) file with the SEC a registration statement covering resales of the common stock issuable upon conversion of the Preferred Stock as promptly as reasonably
practicable and in any event on or before March 31, 2017 and (ii) use commercially reasonable efforts to cause such registration statement to be declared effective within 90 days
following the date of the filing thereof and to remain continuously effective until the first to occur of:
-
-
the sale pursuant to a registration statement of all of the shares covered by the registration statement;
-
-
the sale, transfer or other disposition pursuant to Rule 144 under the Securities Act of all of the shares covered by the registration
statement;
-
-
such time as all of the shares covered by the registration statement and not held by affiliates of us are, in the opinion of our counsel,
eligible for sale pursuant to Rule 144 (or any successor or analogous rule) under the Securities Act without regard to the requirement that we be current in our Exchange Act reporting;
-
-
such time as all of the shares covered by the registration statement have been sold to us or any of our subsidiaries; or
-
-
the second anniversary of the initial effective date of the registration statement.
15
Although
we intend to file the registration statement described above in accordance with the provisions of the registration rights agreement, there can be no assurance that the
registration statement will be filed or, if filed, that it will become effective.
We
will also notify each holder of registrable shares when the registration statement has become effective, provide to such holder, upon request, a copy of the prospectus that is a part
of the registration statement, and take certain other actions as are required to permit unrestricted resales. A holder who sells such registered shares under the registration statement generally will
be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the
Securities Act in connection with the sales, and will be bound by the provisions of the registration rights agreement that are applicable to the holder (including certain indemnification and
contribution rights and obligations). Generally, the prospectus delivery requirements may be satisfied by disclosing to a selling broker the existence of the requirement to sell shares in accordance
with the registration statement covering the shares. In
addition, each holder of the Preferred Stock has delivered information to be used in connection with the registration statement.
Underwritten Offering
Holders of registrable shares can request an underwritten offering under the registration statement, provided that such holders include at least
$50.0 million of registrable shares in the offering. The holder or holders that request an underwritten offering must give notice to us and the other holders of registrable shares, and the
other holders may request that their registrable shares be included in the underwritten offering on the same terms and conditions as the holders that requested underwritten offering. Holders that
participate in the underwritten offering are subject to a pro rata cutback of registrable shares to be included in the offering if the managing underwriters determine that a limitation is needed on
the total number of shares offered.
Delay in Effectiveness of Registration Statement
If the registration statement is not declared effective by the SEC on or prior to June 27, 2017, then for each day following such date,
until but excluding the date the SEC declares the registration statement effective, we shall, for each such day, (a) if our Preferred Stock has converted to common stock, pay each holder of
record of shares of our common stock issued upon conversion of the shares of Preferred Stock, as liquidated damages and not as a penalty, an aggregate amount in cash equal to (i) 0.25% of the
price at which we sold the Preferred Stock accruing daily, for the first 60 days, (ii) an additional 0.25% of the price at which we sold the Preferred Stock for each subsequent
60 days and (iii) up to a maximum of 5.0% of the price at which we sold the Preferred Stock, in each case multiplied by the aggregate number of shares of Preferred Stock that were held
of record by such holder prior to conversion and with each percentage being expressed as a rate per 30-day period and (b) if our Preferred Stock has not converted to common stock, pay each
record holder of shares of Preferred Stock, as liquidated damages and not as a penalty, an aggregate amount in cash equal to (i) 0.25% of the price at which we sold the Preferred Stock accruing
daily, for the first 60 days, (ii) an additional 0.25% of the price at which we sold the Preferred Stock for each subsequent 60 days and (iii) up to a maximum of 5.0% of
the price at which we sold the Preferred Stock, in each case multiplied by the aggregate number of shares of Preferred Stock held of record by such holder and with each percentage being expressed as a
rate per 30-day period. In the event that we determine that it is necessary and advisable to delay the filing or effectiveness of the registration statement as a result of pending discussions relating
to a transaction or the occurrence of an event (a) that would require additional disclosure of material information in the registration statement that has not been so disclosed, and
(b) as to which we have a bona fide business purpose for preserving confidentiality, then
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our
obligation to pay any such liquidated damages will be suspended for so long as we determine such delay is necessary but in no event longer than 45 days.
Suspension Period
We have the right to direct holders upon written notice to suspend sales of registrable shares under the registration statement if any of the
following events occur: (1) an underwritten public offering of common stock by us, if we are advised by the underwriters that the concurrent resale of registrable shares by the holders pursuant
to the registration statement would have a material adverse effect on our offering; or (2) pending discussions relating to a transaction or the occurrence of an event (A) that would
require additional disclosure of material information in the registration statement and that has not been so disclosed, and (B) as to which we have a bona fide business purpose for preserving
confidentiality. We may not require that sales be suspended for more than 60 days in any 90-day period or more than an aggregate of 90 days in any 12-month period.
Expenses and Indemnification
We will bear certain expenses incident to our registration obligations upon exercise of these registration rights, including the payment of SEC
and state blue sky registration fees, except that we will not bear any underwriting discounts or commissions or transfer taxes relating to the sale of shares of our common stock. We will agree to
indemnify each selling stockholder for certain violations of federal or state securities laws in connection with any registration statement in which such selling stockholder sells its shares of our
common stock pursuant to these registration rights. Each selling stockholder will in turn agree to indemnify us for federal or state securities law violations that occur in reliance upon written
information it provides to us for inclusion in the registration statement.
Lock-Up Agreements
Directors and Executive Officers
All of our directors and executive officers have agreed that, without the prior written consent of the placement agents and except with respect
to certain customary permitted transfers, they will not directly or indirectly, offer, pledge, announce the intention to sell, sell, contract to sell, sell an option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of any of our common stock or any securities which may be converted into or exchanged
for any of our common stock or enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock for a period ending
60 days from the date on which our registration statement first becomes effective.
The Company
We are also subject to a lock-up period. Until April 28, 2017, we may not, directly or indirectly, (i) offer for sale, sell,
pledge or otherwise dispose of (or enter into any transaction that would result in the disposition by us at any time in the future of) any shares of our common stock or securities convertible into or
exchangeable for our common stock, or sell or grant options, rights or warrants with respect to any shares of our common stock or securities convertible into or exchangeable for our common stock, or
(ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such shares of our common stock,
in each case without the prior written consent of the placement agents. During this lock-up period, however, we may grant options, restricted stock, and similar awards under our equity compensation
plans.
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