Item 1.01 Entry into a Material Definitive Agreement.
On July 10, 2017, NeuroMetrix, Inc. (the “Company”), entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a single institutional investor (the “Investor”) providing for the issuance of (i) 7,000 shares of Series F convertible preferred stock (the “Series F Preferred Stock”) at a price of $1,000 per share (the “Offering”). The Company expects to receive gross proceeds from the Offering of $7.0 million, in an initial tranche of $3.5 million and a second tranche of $3.5 million. The first tranche of the Offering, which will include the issuance of 3,500 shares of Series F Preferred Stock, is expected to close on or about July 13, 2017, subject to satisfaction of customary closing conditions set forth in the Purchase Agreement (the “First Tranche Issuance”). The second tranche of the Offering, which will also include the issuance of 3,500 shares of Series F Preferred Stock, will occur within five trading days of registration by the Company of the Common Stock underlying the Series F Preferred Stock for resale with the Securities and Exchange Commission (the "Commission"), and is also subject to the requirement to obtain shareholder approval. The Series F convertible preferred stock will be convertible at any time into an aggregate of approximately 2,661,597 shares of common stock at a conversion price of $2.63, subject to certain ownership limitations. The Series F convertible preferred stock is only entitled to dividends in the event dividends are paid on the Company's common stock and will not have any preferences over the Company's common stock, including liquidation rights. The Company will issue no new warrants in connection with the Offering. At the shareholder meeting, shareholders will also be asked to approve amendments to 14,053 shares of Series D convertible preferred stock and 7,000 shares of Series E convertible preferred stock held by the Investor, which are convertible into an aggregate of 3,759,451
shares of common stock, to provide that the conversion price of such preferred shares will be reset to $2.63 per share retroactively as of July 10, 2017.
The Purchase Agreement also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.
Also on July 10, 2017, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with the Investor. In the Exchange Agreement, the Company has agreed to issue an aggregate of 3,621 shares of Series F convertible preferred stock at a conversion price of $2.63 per share in exchange for warrants to purchase 4,184,483 shares of its common stock currently held by the Investor, which will be forfeited and retired. These warrants have been determined by an independent valuation firm to have an aggregate fair value of $3,622,220. Following this exchange, the Company will have 660,702 outstanding warrants to purchase its common stock at a weighted average exercise price of $32.13 per share.
The shares of Series F Preferred Stock described above have not been registered under the Securities Act of 1933, as amended.
The Company has also entered into a Registration Rights Agreement with the investor pursuant to which the Company is obligated to file a registration statement to register the resale of the shares of Common Stock issuable upon conversion of the Series F Preferred Stock within thirty calendar days.
In connection with the Company’s entry into the Purchase Agreement and the Registration Rights Agreement, the Company will also enter into Amendment No. 9 to the Company’s Shareholder Rights Agreement (“Amendment No. 9”) with American Stock Transfer & Trust Company, LLC, dated as of March 7, 2007, as amended (the “Shareholder Rights Agreement”), in order to exempt the issuances of securities that will be issued to the purchaser under the Purchase Agreement from the operation of the Shareholder Rights Agreement.
The foregoing descriptions of the Purchase Agreement, the Registration Rights Agreement, the Series F Preferred Stock (and the Certificate of Designation of Preferences, Rights and Limitations of Series F Convertible Preferred Stock referred to in Item 3.03 below), Amendment No. 9 and the Exchange Agreement are subject to, and qualified in their entirety by, such documents attached hereto as Exhibits 10.1, 10.2, 3.1, 4.1, and 10.3, respectively, which are incorporated herein by reference.