EVLV Evolv Technologies Holdings Inc

DESCRIPTION OF SECURITIES

Our articles of incorporation provide that we may issue up to 100,000,000 shares of capital stock, par value $0.01 per share in the case of common stock, and having a par value as determined by the board of directors in the case of preferred stock. As of April 7, 2017, there were outstanding (i) 60,968,092 shares of common stock and (ii) Option Warrants to purchase 873,175 shares of common stock. In addition, as of April 7, there were 6,598,729 shares of common stock that may be issued upon the exercise of outstanding stock options (number includes both vested and unvested stock options and unvested restricted stock grants) issued pursuant to the Company’s 2011, 2004 and 2001 Incentive Stock Option Plans, and rights to purchase up to 400,000 shares of Series A Junior Participating Cumulative Preferred Stock.

Pursuant to the Purchase Agreement, we were required to register the shares of common stock sold in the Private Placement, as well as the shares of common stock issuable upon exercise of the Warrants, Options and Option Warrants (collectively, the “registrable securities”) for resale or other disposition. Pursuant to the Prior Registration Statement, the registrable securities, other than the Option Warrants, were registered with the SEC.

With respect to the shares issuable upon exercise of the Option Warrants, we are required to (i) file a registration statement covering such shares within 30 days following the earlier of the exercise of all five of the Options or the expiration of the exercise period for the Options; (ii) cause the shelf registration statement to be declared effective by the SEC as soon as possible after the initial filing, and in any event no later than 90 days after the closing date (or 120 days in the event of a full review of the shelf registration statement by the SEC); and (iii) keep the shelf registration statement effective until the earlier of the second anniversary of the closing, such time as all registrable securities may be sold pursuant to Rule 144 under the Securities Act of 1933 during any three-month period without the need for the Company to be in compliance with the current public information requirement of Rule 144 or such time as all registrable securities have been sold pursuant to an effective registration statement or Rule 144. If we are unable to comply with any of the above covenants, we will be required to pay liquidated damages to the selling shareholders in the amount of 1% of the average of closing stock prices of the unregistered securities for every 30 days until such non-compliance is cured (subject to a 12% cap), with such liquidated damages payable in cash.

A description of the material terms and provisions of our capital stock is set forth below. The description is intended as a summary and is qualified in its entirety by reference to our articles of incorporation and bylaws incorporated herein by reference. We have filed our articles of incorporation and bylaws as exhibits to the registration statement of which this prospectus is a part. You should read our articles of incorporation and bylaws for additional information before you buy any capital stock.

The following is a summary of the material features of our capital stock:

Common Stock

Holders of our common stock are entitled to one vote per share in the election of directors and on all other matters on which shareholders are entitled or permitted to vote. Holders of common stock are not entitled to cumulative voting rights. Subject to the terms of any outstanding series of preferred stock, the holders of common stock are entitled to dividends in amounts and at times as may be declared by the board of directors out of funds legally available therefor. Upon our liquidation or dissolution, holders of common stock are entitled to share ratably in all net assets available for distribution to shareholders after payment of any liquidation preferences to holders of preferred stock. Holders of common stock have no redemption, conversion or preemptive rights.

Pursuant to standstill agreements entered into by each selling shareholder as required by the Purchase Agreement, each of the selling shareholders agreed that for a period of 1 year from the closing date, such selling shareholder would not, individually or in concert with any group, purchase or otherwise acquire securities of the Company which would cause such selling shareholder, or the group with which such selling shareholder became associated, to beneficially own greater than 19.999% of the Company’s outstanding common stock.

Preferred Stock

Our articles of incorporation permit us to issue shares of preferred stock, from time to time, in one or more series and with such designation and preferences for each series as are stated in the resolutions providing for the designation and issue of each such series adopted by our board of directors. Our articles of incorporation authorize our board of directors to determine the number of shares, voting, dividend, redemption and liquidation preferences and limitations pertaining to such series. The board of directors, without shareholder approval, may issue preferred stock with voting rights and other rights that could adversely affect the voting power of the holders of our common stock and outstanding preferred stock could have certain anti-takeover effects. The ability of the board of directors to issue preferred stock without shareholder approval could have the effect of delaying, deferring or preventing a change in control of our company or the removal of existing management. We currently do not have shares of preferred stock outstanding; however, we have authorized up to 400,000 Series A Junior Participating Cumulative Preferred Stock,   $0.01   par value, in connection with the Shareholder Rights Plan described below, and pursuant to which we granted rights to purchase shares of the Series A Junior Participating Cumulative Preferred Stock . A description of the Series A Junior Participating Cumulative Preferred Stock can be found in our registration statement on Form 8-A filed on July 13, 2015.

Description of Option Warrants to Purchase Common Stock Pursuant to Which Common Stock May Be Issued

Through the Private Placement, we issued common stock, five Warrants and five Options, which are further described in the Prior Registration Statement. Prior to their expiration, four of the five Options were exercised in whole or in part, resulting in the issuance of four Option Warrants which are outstanding as of the date of this prospectus. Shares underlying the outstanding Option Warrants are being registered for resale under the shelf registration statement of which this prospectus forms a part.

The exercise price for the Option Warrants was calculated as the price per share equal to a 50% premium to the Company’s closing stock price on the Nasdaq Global Market on the trading day most recently ended prior to the announcement of the exercise of the corresponding Option pursuant to which such Option Warrant was issued, subject to adjustment for stock splits, stock dividends, combinations or similar events. The term of each Option Warrant is five years from the date of issuance and an Option Warrant may not be exercised for the first six months after issuance.

The selling shareholders exercised their Options in whole or in part prior to the Options’ expiration and were accordingly issued four Option Warrants. Two selling shareholders exercised their Options in full on November 10, 2016, and were issued Option Warrants to purchase an aggregate of 333,873 shares of common stock with an exercise price of $3.00 per share and an expiration date of November 10, 2021. One selling shareholder exercised his entire Option on January 23, 2017 and was issued an Option Warrant to purchase 489,302 shares of common stock with an exercise price of $1.76 per share and an expiration date of January 23, 2022.

One selling shareholder, TH Media Partners, LLC (“TH Media”), entered into a First Amended and Restated Option (the “Amended Option”) with the Company on March 16, 2017. Pursuant to the Amended Option, TH Media was granted the right to exercise its Option in two tranches. The first tranche was required to be exercised on March 16, 2017 and reflected rights to purchase 150,000 shares of common stock, issuable in the form of 100,000 shares of common stock, and an Option Warrant to purchase 50,000 shares of common stock. The Option Warrant has an exercise price of $1.92 per share and an expiration date of March 16, 2022. Its exercise price was calculated as the price per share equal to a 50% premium to the closing price of the Company’s common stock on the Company’s principal trading market on the trading day immediately preceding the exercise of the first tranche of the Amended Option.

The second tranche reflects rights to purchase up to 1,073,945 shares of common stock, which are issuable in the form of 715,963 common shares and a warrant to purchase an additional 357,982 common shares. The second tranche must be exercised on or before September 16, 2017. The shares issuable upon the exercise of the warrants issuable pursuant to the second tranche of the Amended Option are not required to be registered.

Provisions Regarding Aliens

Except as otherwise provided by law, not more than 20% of the aggregate voting power of all shares outstanding entitled to vote on any matter shall be at any time voted by or for the account of aliens as defined in the Communications Act of 1934, or their representatives, or by or for the account of a foreign government or representative thereof, or by or for the account of any corporation organized under the laws of a foreign country.

Except as otherwise provided by law, aliens, foreign governments, or corporations organized under the laws of a foreign country, or the representatives of such aliens, foreign governments, or corporations organized under the laws of a foreign country, shall not own, directly or through a third party who holds the stock for the account of such alien, foreign government, or corporation organized under the laws of a foreign country: (1) more than 20% of the number of shares of our outstanding stock, or (2) shares representing more than 20% of the aggregate voting power of all of our outstanding shares of voting stock.

Shares of stock shall not be transferable on our books to aliens, foreign governments, or corporations organized under the laws of foreign countries, or to the representatives of, or persons holding for the account of, such aliens, foreign governments, or corporations organized under the laws of foreign countries, unless, after giving effect to such transfer, the aggregate number of shares of stock owned by or for the account of aliens, foreign governments, and corporations organized under the laws of foreign countries, and any representatives thereof, will not exceed 20% of the number of shares of outstanding stock, and the aggregate voting power of such shares will not exceed twenty percent 20% of the aggregate voting power of all outstanding shares of our voting stock.

If, notwithstanding these restrictions on transfer, the aggregate number of shares of stock owned by or for the account of aliens, foreign governments, and corporations organized under the laws of foreign countries, exceed 20% of our shares of outstanding stock, or if the aggregate voting power of such shares exceed 20% of the aggregate voting power of all outstanding shares of our voting stock, we have the right to redeem shares of all classes of capital stock, at their then fair market value, on a pro rata basis, owned by or for the account of all aliens, foreign governments, and corporations organized under the laws of foreign countries, in order to reduce the number of shares and/or percentage of voting power held by or for the account of aliens, foreign governments, and corporations organized under the laws of foreign countries, and their representatives to the maximum number or percentage allowed under our articles of incorporation or as otherwise required by applicable federal law.

The board of directors shall make such rules and regulations as it deems necessary or appropriate to enforce the provisions of this section.

Anti-Takeover Provisions Contained in Our Articles of Incorporation, Shareholder Rights Plan and the Minnesota Business Corporation Act

Our shareholder rights plan, as well as certain provisions of our articles of incorporation and of Minnesota law described below could have an anti-takeover effect. These provisions are intended to provide management flexibility, to enhance the likelihood of continuity and stability in the composition of our board of directors and in the policies formulated by our board of directors and to discourage an unsolicited takeover of our company, if our board of directors determines that such a takeover is not in our best interests or the best interests of our shareholders. However, these provisions could have the effect of discouraging certain attempts to acquire us that could deprive our shareholders of opportunities to sell their shares of our stock at higher values.

Shareholder Rights Plan

During the second quarter of fiscal 2015, we adopted a shareholder rights plan to preserve the value of certain deferred tax benefits, including those generated by net operating losses. On July 10, 2015, we declared a dividend distribution of one purchase right (a “Right”) for each outstanding share of our common stock to shareholders of record as of the close of business on July 23, 2015 and issuable as of that date, and on July 13, 2015, we entered into a shareholder rights plan (the “Rights Plan”) with Wells Fargo Bank, N.A., a national banking association, with respect to the Rights. Except in certain circumstances set forth in the Rights Plan, each Right entitles the holder to purchase from us one one-thousandth of a share of Series A Junior Participating Cumulative Preferred Stock, $0.01 par value, of the Company (“Preferred Stock” and each one one-thousandth of a share of Preferred Stock, a “Unit”) at a price of $9.00 per Unit.

The Rights initially trade together with the common stock and are not exercisable. Subject to certain exceptions specified in the Rights Plan, the Rights will separate from the common stock and become exercisable following (i) the tenth calendar day after a public announcement or filing that a person or group has become an “Acquiring Person,” which is defined as a person who has acquired, or obtained the right to acquire, beneficial ownership of 4.99% or more of the common stock then outstanding, subject to certain exceptions, or (ii) the tenth calendar day (or such later date as may be determined by the board of directors) after any person or group commences a tender or exchange offer, the consummation of which would result in a person or group becoming an Acquiring Person. If a person or group becomes an Acquiring Person, each Right will entitle its holders (other than such Acquiring Person) to purchase one Unit at a price of $9.00 per Unit. A Unit is intended to give the shareholder approximately the same dividend, voting and liquidation rights as would one share of common stock, and should approximate the value of one share of common stock. At any time after a person becomes an Acquiring Person, the board of directors may exchange all or part of the outstanding Rights (other than those held by an Acquiring Person) for shares of common stock at an exchange rate of one share of common stock (and, in certain circumstances, a Unit) for each Right. We will promptly give public notice of any exchange (although failure to give notice will not affect the validity of the exchange).

The Rights will expire upon certain events described in the Rights Plan, including the close of business on the date of the third annual meeting of shareholders following the last annual meeting of our shareholders at which the Rights Plan was most recently approved by shareholders, unless the Rights Plan is re-approved by shareholders at that third annual meeting of shareholders. However, in no event will the Rights Plan expire later than the close of business on July 13, 2025. Until the close of business on the tenth calendar day after the day a public announcement or a filing is made indicating that a person or group has become an Acquiring Person, we may in our sole and absolute discretion amend the Rights or the Rights Plan agreement without the approval of any holders of the Rights or shares of common stock in any manner, including without limitation, amendments that increase or decrease the purchase price or redemption price or accelerate or extend the final expiration date or the period in which the Rights may be redeemed. We may also amend the Rights Plan after the close of business on the tenth calendar day after the day such public announcement or filing is made to cure ambiguities, to correct defective or inconsistent provisions, to shorten or lengthen time periods under the Rights Plan or in any other manner that does not adversely affect the interests of holders of the Rights. No amendment of the Rights Plan may extend its expiration date.

Statutory Provisions

Section 302A.671 of the Minnesota Business Corporation Act applies, with certain exceptions, to any acquisitions of our voting stock from a person other than us, and other than in connection with certain mergers and exchanges to which we are a party and certain tender offers or exchange offers approved in advance by a disinterested board committee, resulting in the beneficial ownership of 20% or more of the voting power of our then outstanding stock. Section 302A.671 requires approval of the granting of voting rights for the shares received pursuant to any such acquisitions by a vote of our shareholders holding a majority of the voting power of our outstanding shares and a majority of the voting power of our outstanding shares that are not held by the acquiring person, our officers or those non-officer employees, if any, who are also our directors. Similar voting requirements are imposed for acquisitions resulting in beneficial ownership of 33-1/3% or more or a majority of the voting power of our then outstanding stock. In general, shares acquired without this approval are denied voting rights in excess of the 20%, 33-1/3% or 50% thresholds and, to that extent, can be called for redemption at their then fair market value by us within 30 days after the acquiring person has failed to deliver a timely information statement to us or the date our shareholders voted not to grant voting rights to the acquiring person’s shares.

Section 302A.673 of the Minnesota Business Corporation Act generally prohibits any business combination by us, or any subsidiary of ours, with any shareholder that beneficially owns 10% or more of the voting power of our outstanding shares (an “interested shareholder”) within four years following the time the interested shareholder crosses the 10% stock ownership threshold, unless the business combination is approved by a committee of disinterested members of our board of directors before the time the interested shareholder crosses the 10% stock ownership threshold.

Section 302A.675 of the Minnesota Business Corporation Act generally prohibits an offeror from acquiring our shares within two years following the offeror’s last purchase of our shares pursuant to a takeover offer with respect to that class, unless our shareholders are able to sell their shares to the offeror upon substantially equivalent terms as those provided in the earlier takeover offer. This statute will not apply if the acquisition of shares is approved by a committee of disinterested members of our board of directors before the purchase of any shares by the offeror pursuant to the earlier takeover offer.

Authorized But Unissued Shares of Common Stock and Preferred Stock

Our authorized but unissued shares of common stock and preferred stock are available for our board of directors to issue without shareholder approval. We may use these additional shares for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. In addition, our articles of incorporation permit us to issue shares of preferred stock, from time to time, in one or more series and with such designation and preferences for each series as are stated in the resolutions providing for the designation and issue of each such series adopted by our board of directors. Our articles of incorporation authorize our board of directors to determine the number of shares, voting, dividend, redemption and liquidation preferences and limitations pertaining to such series. The board of directors, without shareholder approval, may issue common stock or preferred stock with voting rights and other rights that could adversely affect the voting power of the holders of our common stock could have certain anti-takeover effects. We currently do not have any shares of preferred stock outstanding and have no present plans to issue any shares of preferred stock. The ability of the board of directors to issue common stock or preferred stock without shareholder approval could have the effect of delaying, deferring or preventing a change in control of our company or the removal of existing management.