CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND
LIMITATIONS
OF
NON-VOTING SERIES A CONVERTIBLE PREFERRED
STOCK
PURSUANT TO SECTION 78.1955 OF THE
NEVADA REVISED STATUTE
1.
Name of corporation:
Lightbridge Corporation
2.
By resolution of the board of
directors pursuant to a provision in the articles of incorporation this
certificate establishes the following regarding the voting powers, designations,
preferences, limitations, restrictions and relative rights of the following
class or series of stock.
WHEREAS, the articles of
incorporation of the Corporation (the “
Articles
”) provides for a class of
its authorized stock known as preferred stock, consisting of 10,000,000 shares,
$0.001 par value per share, issuable from time to time in one or more series;
WHEREAS, the Articles authorizes
the Board of Directors to fix and determine the designations, qualifications,
preferences, limitations and terms of the shares of any series of preferred
stock; and
WHEREAS, it is the desire of the
Board of Directors, pursuant to its authority as aforesaid, to fix and determine
designations, qualifications, preferences, limitations and terms relating to a
series of the preferred stock, which shall consist of 1,020,000 shares of the
preferred stock which the Corporation has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED,
that the Board of Directors does hereby provide for the issuance of a series of
preferred stock for cash or exchange of other securities, rights or property and
does hereby fix and determine the rights, preferences, restrictions and other
matters relating to such series of preferred stock as follows:
TERMS OF PREFERRED STOCK
Section 1.
Definitions
.
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.
“
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.
“
Call Option
” shall have
the meaning set forth in Section 7(a).
“
Call Option Notice
” shall
have the meaning set forth in Section 7(b).
“
Common Stock
” means the
Corporation’s 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 Event
” shall
have the meaning set forth in Section 6(e).
“
Conversion Date
” shall
have the meaning set forth in Section 6(b)(ii).
“
Conversion Price
” shall
have the meaning set forth in Section 6(a).
1
“
Conversion Shares
” means,
collectively, the shares of Common Stock issuable upon conversion of the shares
of Preferred Stock in accordance with the terms hereof.
“
Dividend Payment Date
”
shall have the meaning set forth in Section 3(a).
“
Exchange Act
” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“
Holder
” shall have the
meaning given such term in Section 2.
“
Investors Rights
Agreement
” means the Investors Rights Agreement, dated August 2, 2016,
between the Corporation and the original Holder.
“
Liquidation
” shall have
the meaning set forth in Section 5.
“
Liquidation Preference
”
shall have the meaning set forth in Section 2, as the same may be increased
pursuant to Section 3.
“
Mandatory Conversion
Notice
” shall have the meaning set forth in Section 6(c).
“
Mandatory Conversion Notice
Date
” shall have the meaning set forth in Section 6(c).
“
Nasdaq
” means the Nasdaq
Stock Market LLC.
“
Notice of Conversion
”
shall have the meaning set forth in Section 6(b)(ii).
“
Original Issue Date
”
shall mean, with respect to any shares of Preferred Stock, the date on which
such share of Preferred Stock was issued by the Corporation.
“
Permitted Transfer
” shall
have the meaning set forth in Section 8.
“
Permitted Transferee
”
shall have the meaning set forth in Section 8.
“
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 June 28, 2016, between the Corporation
and the original Holder, as amended, modified or supplemented from time to time
in accordance with its terms.
“
Redemption Date
” shall
mean the date upon which a redemption effected pursuant to the exercise of a
Call Option shall be consummated.
“
Securities Act
” means the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
“
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, OTCQB or OTCQX (or any successors to any of the foregoing).
2
“
Transaction Documents
”
means this Certificate of Designation, the Purchase Agreement, the Investors
Rights 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.
“
Transfer
” shall have the
meaning set forth in Section 8.
Section 2.
Designation, Amount
and Par Value
. The series of preferred stock shall be designated as
Non-Voting Series A Convertible Preferred Stock (the “
Preferred Stock
”)
and the number of shares so designated shall be 1,020,000 (which shall not be
subject to increase, subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization with
respect to the Preferred Stock, 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 an original issue price of $2.7451 per share (the
“
Liquidation Preference
”), subject to increase set forth in Section 3
below.
Section 3.
Dividends
.
(a)
Dividends in Kind
.
From and after the Original Issue Date of any share of Preferred Stock,
cumulative dividends on such Preferred Stock shall accrue, whether or not
declared by the Board of Directors and whether or not there are funds legally
available for the payment of dividends, on a daily basis in arrears at the rate
of 7% per annum on the sum of the Liquidation Preference thereof, payable
annually on the last day of March, June, September and December of each calendar
year beginning on the first such date after the Original Issue Date and on each
Conversion Date (with respect only to Preferred Stock then being converted)
(each such date, a “
Dividend Payment Date
”). All accrued dividends shall
be paid in kind by increasing the Liquidation Preference of the Preferred Stock,
in an amount equal to the accrued but unpaid interest due to a Holder on the
Dividend Payment Date. All accrued and accumulated dividends on the Preferred
Stock shall be prior and in preference to any dividend on the Common Stock or
other equity securities of the Company and shall be fully declared and paid
before any dividends are declared and paid, or any other distributions or
redemptions are made, on the Common Stock or other equity securities of the
Company, other than to (a) declare or pay any dividend or distribution payable
on the Common Stock in shares of Common Stock or (b) repurchase Common Stock
held by employees or consultants of the Corporation upon termination of their
employment or services pursuant to agreements providing for such repurchase.
(b)
Dividend Calculations
.
Dividends on the Preferred Stock shall be calculated on the basis of a 360-day
year, consisting of twelve 30 calendar day periods, and shall accrue daily
commencing on the Original Issue Date.
(c)
Participating
Dividends
. In addition to the dividends accruing on the Preferred Stock
pursuant to Section 3(a) hereof, if the Corporation declares or pays a dividend
or distribution on the Common Stock, whether such dividend or distribution is
payable in cash, securities or other property, including the purchase or
redemption by the Corporation or any of its subsidiaries of shares of Common
Stock for cash, securities or property, but excluding (i) any dividend or
distribution payable on the Common Stock in shares of Common Stock and (ii) any
repurchases of Common Stock held by employees or consultants of the Corporation
upon termination of their employment or services pursuant to agreements
providing for such repurchase, the Corporation shall simultaneously declare and
pay a dividend on the Preferred Stock on a pro rata basis with the Common Stock
determined on an as-converted basis assuming all shares of Preferred Stock had
been converted pursuant to Section 6 as of immediately prior to the record date
of the applicable dividend (or if no record date is fixed, the date as of which
the record holders of Common Stock entitled to such dividends are to be
determined).
Section 4.
Voting Rights; Protective Provisions
.
(a)
General
. Except as
otherwise required by law, the Preferred Stock shall have no voting rights.
3
(b)
Protective Provisions
.
As long as 255,000 shares of Preferred Stock, subject to appropriate adjustment
in the event of any stock dividend, stock split, combination or other similar
recapitalization with respect to the Preferred Stock, are outstanding, except
for clause (10) below, which shall require that at least 510,000 shares of
Preferred Stock, subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization with
respect to the Preferred Stock, are outstanding, the Corporation shall not
either directly or indirectly by amendment, merger, consolidation or otherwise,
do any of the following without (in addition to any other vote required by law
or the Articles) the written consent or affirmative vote of the Holders of at
least a majority of the outstanding shares of Preferred Stock:
(1) alter or change the rights, preferences or privileges of the Preferred Stock;
(2) increase or decrease (other than by redemption or conversion) the authorized
number of shares of Preferred Stock;
(3) amend or waive any provision of the Articles or bylaws of the Corporation;
(4) authorize, create, issue, or reclassify any existing security into any class of
equity security that is senior or pari passu to the Preferred Stock;
(5) repurchase or redeem Common Stock except from employees, officers, directors, or
consultants upon termination of their employment or other relationship or in
accordance with any existing repurchase or redemption program that has been
approved by the board of directors;
(6) declare or pay any dividend other than a dividend payable solely in stock or
other securities of the Corporation;
(7) acquire any entity (regardless of the structure of any such acquisition,
including if such acquisition is structured as a license, lease, merger,
reorganization, acquisition of assets or equity or other business combination or
similar corporate transaction) for a consideration of $3 million or more;
(8) materially alter the general nature of the business of the Corporation;
(9) enter into any sale, license, lease or other disposition of assets of the
Corporation having a book value of at least $10 million that is effected outside
of the ordinary course of the business of the Corporation; or
(10) effect any event for which the Liquidation Preference would become payable.
Section 5.
Liquidation
.
Upon any liquidation, dissolution, or winding down of the Corporation (a
“
Liquidation
”), the Holders shall be entitled to receive out of the
assets, whether capital or surplus, of the Corporation an amount equal to the
Liquidation Preference, plus any accrued and unpaid dividends thereon, for each
share of Preferred Stock before any distribution or payment shall be made to the
holders of Common Stock, and if the assets of the Corporation shall be
insufficient to pay in full such amounts, then the entire assets to be
distributed to the Holders shall be ratably distributed among the Holders in
accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full. The Corporation shall mail
written notice of any such Liquidation, not less than 10 days prior to the
payment date stated therein, to each Holder.
Section 6.
Conversion
. The
outstanding shares of Preferred Stock shall be convertible into Common Stock as
follows:
(a)
Conversions Price
. The
conversion price for the Preferred Stock shall equal $2.7451, subject to
adjustment herein (the “
Conversion Price
”).
4
(b)
Optional Conversion
.
(1) 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
and without the payment of additional consideration, subject to applicable
Trading Market rules and the limitations set forth in the Investor Rights
Agreement, into that number of shares of Common Stock determined by dividing the
Liquidation Preference of such share of Preferred Stock by the Conversion
Price.
(2) Each holder of Preferred Stock who elects to convert the same into shares of
Common Stock shall give written notice to the Corporation by providing the
Corporation with the written notice (a “
Notice of Conversion
”). Each
Notice of Conversion shall specify the number of shares of Preferred Stock to be
converted, the number of shares of Preferred Stock owned prior to the conversion
at issue, the number of shares of Preferred Stock owned subsequent to the
conversion at issue and the date on which such conversion is to be effected,
which date may not be prior to the date the applicable Holder delivers by
facsimile such Notice of Conversion to the Corporation (such date, the
“
Conversion Date
”). Thereupon, the Corporation shall promptly deliver the
Conversion Shares required to be delivered by the Corporation to such Holder.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such delivery of shares of Common Stock, and the
person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock on such date.
(c)
Mandatory Conversion
.
Notwithstanding anything herein to the contrary, if at any time the trading
price of the Corporation’s Common Stock (i) is greater than two times the
Conversion Price before the third anniversary of the Original Issue Date or (ii)
is greater than three times the Conversion Price, the Corporation may deliver a
written notice to all Holders (a “
Mandatory Conversion Notice
” and the
date such notice is delivered to all Holders, the “
Mandatory Conversion
Notice Date
”) to cause each Holder to convert all or part of such Holder’s
Preferred Stock (as specified in such Mandatory Conversion Notice) plus all
accrued but unpaid dividends thereon. The Corporation shall promptly deliver the
Conversion Shares required to be delivered by the Corporation under this Section
6(c) to each Holder. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such delivery of
shares of Common Stock, and the person entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder of such shares of Common Stock on such date.
(d)
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.
(e)
Adjustment Upon Common
Stock Event
. Upon the happening of a Common Stock Event (as hereinafter
defined), the Conversion Price of the Preferred Stock shall, simultaneously with
the happening of such Common Stock Event, be adjusted by multiplying the
Conversion Price of the Preferred Stock in effect immediately prior to such
Common Stock Event by a fraction, (i) the numerator of which shall be the number
of shares of Common Stock issued and outstanding immediately prior to such
Common Stock Event, and (ii) the denominator of which shall be the number of
shares of Common Stock issued and outstanding immediately after such Common
Stock Event, and the product so obtained shall thereafter be the Conversion
Price for the Preferred Stock. The Conversion Price for the Preferred Stock
shall be readjusted in the same manner upon the happening of each subsequent
Common Stock Event. As used herein, the term “
Common Stock Event
” shall
mean (i) the issue by the Corporation of additional shares of Common Stock as a
dividend or other distribution on outstanding Common Stock, (ii) a subdivision
of the outstanding shares of Common Stock into a greater number of shares of
Common Stock, or (iii) a combination of the outstanding shares of Common Stock
into a smaller number of shares of Common Stock.
5
Section 7.
Call Option
.
(a)
The Corporation shall have
the option (the “
Call Option
”) at any time after the third anniversary of
the Original Issue Date to redeem some or all of the outstanding Preferred Stock
for cash, for an amount equal to the Liquidation Preference, plus the amount of
any accrued but unpaid dividends, of the Preferred Stock being redeemed.
(b)
The exercise of the Call
Option by the Corporation shall be subject to the transmission of a written
notice of the exercise of the Call Option to the Holders (the “
Call Option
Notice
”) 30 days prior to the applicable Redemption Date which shall specify
the number of shares Preferred Stock being redeemed.
(c)
With respect to exercises of
the Call Option, the Corporation shall remit the applicable cash consideration
in one installment to the Holder between the 31st and 60th day after delivery of
the Call Option Notice.
(d)
The Holder shall maintain the
right to convert the Preferred Stock into shares of Common Stock pursuant to
Section 6(a) prior to the Redemption Date.
Section 8.
Transfer
Restrictions
. No Holder of Preferred Stock may sell, assign, transfer,
pledge, encumber or in any manner dispose of the shares of Preferred Stock or
any right or interest therein (including without limitation a voting proxy),
whether voluntarily or by operation of law, or by gift or otherwise (a
“
Transfer
”), other than by means of a Permitted Transfer. Any Transfer,
or purported Transfer, of Preferred Stock of the Corporation other than a
Permitted Transfer shall be null and void, and of no force or effect; provided
that the Board of Directors may at its sole discretion waive any or all of the
foregoing conditions through prior written consent. The only transaction that is
a “
Permitted Transfer
” is a Transfer that meets the following conditions:
(i) the Transfer by a Holder must be to an Affiliate of such Holder (a
“
Permitted Transferee
”) or to the Corporation, (ii) if the Transfer is to
a Permitted Transferee, such Permitted Transferee must become a party to that
certain Investors Rights Agreement, and (iii) the Transfer must comply with all
applicable securities laws including, without limitation, the federal securities
laws of the United States.
Section 9.
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, Attention:
Seth Grae, 11710 Plaza America Drive, Suite 2000, Reston, VA 20190, facsimile
number (571) 730-1260, or such other facsimile number or address as the
Corporation may specify for such purposes by notice to the Holders delivered in
accordance with this Section. 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 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 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)
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 Nevada, without
regard to the principles of conflict of laws thereof.
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.
6
(c)
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.
(d)
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.
(e)
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.
(f)
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.
(g)
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 Non-Voting Series A Convertible Preferred Stock.
RESOLVED, FURTHER, that the
president or any vice-president, and the secretary or any assistant secretary,
of the Corporation be and they hereby are authorized and directed to prepare and
file this Certificate of Designation of Preferences, Rights and Limitations in
accordance with the foregoing resolution and the provisions of Nevada law.
3.
Effective date of filing: (optional)
4.
Signature: (required)
/s/ Seth Grae
Signature of
Officer
7
INVESTORS RIGHTS AGREEMENT
THIS INVESTORS RIGHTS AGREEMENT
(this “
Agreement
”), is made as of August 2, 2016, by and among
Lightbridge Corporation, a Nevada corporation (the “
Company
”), and the
investor listed on the signature page hereto (the “
Investor
”) and any
other Permitted Transferee (as defined in the Certificate of Designation) that
becomes a party to this Agreement, each of which is referred to in this
Agreement as a “
Holder
” and collectively as the “
Holders
”.
WHEREAS, in order to induce the
Company to enter into the Securities Purchase Agreement dated June 28, 2016 (the
“
SPA
”), and to induce the Investor to invest funds in the Company
pursuant to the SPA, the Company and the Investor hereby agree that this
Agreement shall govern the rights of the Holders to cause the Company to
register shares of Common Stock issuable to the Holders, to receive certain
information from the Company, and to participate in future equity offerings by
the Company, and shall govern certain other matters as set forth in this
Agreement.
NOW, THEREFORE, the Company and
the Holders agree as follows:
1.
Definitions
. For
purposes of this Agreement:
“
Affiliate
” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 405 under the Securities Act.
“
Certificate of
Designation
” means the Certificate of Designation of Preferences, Rights and
Limitations filed July 29, 2016 by the Company with the Secretary of State of
Nevada.
“
Common Stock
” means
shares of the Company’s common stock, par value $0.001 per share.
“
Conversion Date
” shall
have the meaning ascribed to it in the Certificate of Designation.
“
Conversion Rights
” shall
mean the rights of the Holder to convert Series A Preferred Stock into Common
Stock pursuant to the Certificate of Designation.
“
Damages
” means any loss,
damage, claim or liability (joint or several) to which a party hereto may become
subject under the Securities Act, the Exchange Act, or other federal or state
law, insofar as such loss, damage, claim or liability (or any action in respect
thereof) arises out of or is based upon: (i) any untrue statement or alleged
untrue statement of a material fact contained in any registration statement of
the Company, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto; (ii) an omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; or (iii) any violation
or alleged violation by the indemnifying
party (or any of its agents or
Affiliates) of the Securities Act, the Exchange Act, any state securities law,
or any rule or regulation promulgated under the Securities Act, the Exchange
Act, or any state securities law.
“
Exchange Act
” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“
Excluded Registration
”
means (i) a registration relating to the sale of securities to employees of the
Company or a subsidiary pursuant to an equity incentive plan, stock purchase
plan, or similar plan; (ii) a registration relating to an SEC Rule 145
transaction; (iii) a registration on any form that does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities; or (iv)
a registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities that are also being registered.
“
Form S-1
” means such form
under the Securities Act as in effect on the date hereof or any successor
registration form under the Securities Act subsequently adopted by the SEC.
“
Form S-3
” means such form
under the Securities Act as in effect on the date hereof or any registration
form under the Securities Act subsequently adopted by the SEC that permits
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
“
Immediate Family Member
”
means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law,
or
sister-in-law, including, adoptive
relationships, of a natural person referred to herein.
“
Initiating Holders
”
means, collectively, Holders who properly initiate a registration request under
this Agreement.
“
Nasdaq Rules
” means the
rules promulgated by the Nasdaq Stock Market LLC.
“
New Securities
” means,
collectively, newly issued equity securities of the Company, whether or not
currently authorized, as well as rights, options, or warrants to purchase such
equity securities, or securities of any type whatsoever that are, or may become,
convertible or exchangeable into or exercisable for such equity securities.
“
Person
” means any
individual, corporation, partnership, trust, limited liability company,
association or other entity.
“
Registrable Securities
”
means (i) the Common Stock issuable or issued upon conversion of th
e
Series A Preferred Stock; and (ii) any Common Stock issued as (or issuable
upon the conversion or exercise of any warrant, right, or other security that is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, the shares referenced in clause
(i)
above;
excluding in all cases, however, any Registrable Securities sold by a Person in
a transaction in which the applicable
rights under this Agreement are not
assigned pursuant to
Section 7.1
, and excluding for purposes of
Section 2
any shares for which registration rights have terminated
pursuant to
Section 2.12
of this Agreement.
“
Registrable Securities then
outstanding
” means the number of shares determined by adding the number of
shares of outstanding Common Stock that are Registrable Securities and the
number of shares of
Common Stock issuable (directly or indirectly)
pursuant to then exercisable and/or convertible securities that are Registrable
Securities.
“
Restricted Securities
”
means the securities of the Company required to be notated with the legend set
forth in
Section 2.11(b)
hereof.
“
SEC
” means the Securities
and Exchange Commission.
“
SEC Rule 144
” means Rule
144 promulgated by the SEC under the Securities Act.
“
SEC Rule 145
” means Rule
145 promulgated by the SEC under the Securities Act.
“
Securities Act
” means the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
“
Selling Expenses
” means
all underwriting discounts, selling commissions, and stock transfer taxes
applicable to the sale of Registrable Securities, and fees and disbursements of
counsel for any Holder.
“
Series A Preferred Stock
”
means shares of the Company’s Non-Voting Series A Preferred Stock, par value
$0.001 per share.
2
2.
Registration Rights
.
The Company covenants and agrees as follows:
2.1
Registration Rights
.
(a)
Registration Demand
. If at any time after the first anniversary of this
Agreement, the Company receives a request from Holders of at least 25% of the
Registrable Securities then outstanding that the Company file a registration
statement
with respect to outstanding Registrable Securities of such
Holders, then the Company shall (x) within ten (10) days after the date such
request is given, give notice thereof (the “
Demand Notice
”) to all
Holders other than the Initiating Holders; and (y) as soon as practicable, and
in any event within sixty (60) days after the date such request is given by the
Initiating Holders, file a registration statement under the Securities Act
covering all Registrable Securities that the Initiating Holders requested
to be registered and any additional Registrable Securities requested to be
included in such registration by any other Holders, as specified by notice given
by each such Holder to the Company within twenty (20) days of the date the
Demand Notice is given, and in each case, subject to the limitations of
Sections 2.1(b)
and
2.3
. The Company shall determine in its sole
discretion whether to implement the registration using Form S-1 or Form S-3.
(b) Notwithstanding the foregoing obligations, if the Company furnishes to Holders
requesting a registration pursuant to this
Section 2.1
a certificate
signed by the Company’s chief executive officer stating that in the good faith
judgment of the Company’s Board of Directors it would be materially detrimental
to the Company and its stockholders for such registration statement to either
become effective or remain effective for as long as such registration statement
otherwise would be required to remain effective, because such action would (i)
materially interfere with a significant acquisition, corporate reorganization,
or other similar transaction involving the Company; (ii) require premature
disclosure of material information that the Company has a bona fide business
purpose for preserving as confidential; or (iii) render the Company unable to
comply with requirements under the Securities Act or Exchange Act, then the
Company shall have the right to defer taking action with respect to such filing,
and any time periods with respect to filing or effectiveness thereof shall be
tolled correspondingly, for a period of not more than one hundred twenty (120)
days after the request of the Initiating Holders is given;
provided
,
however
, that the Company may not invoke this right more than twice in
any twelve (12) month period.
(c) The Company shall not be obligated to effect, or to take any action to effect,
any registration pursuant to
Section 2.1(a)
during the period that is
sixty (60) days before the Company’s good faith estimate of the date of filing
of, and ending on a date that is one hundred eighty (180) days after the
effective date of, a Company-initiated registration,
provided
that the
Company is actively employing in good faith commercially reasonable efforts to
cause such registration statement to become effective.
2.2
Company Registration
. If at any time after the first anniversary of this
Agreement, the Company proposes to register (including, for this purpose, a
registration effected by the Company for stockholders other than the Holders)
any of its Common Stock under the Securities Act in connection with the public
offering of such securities solely for cash (other than in an Excluded
Registration), the Company shall, at such time, promptly give each Holder notice
of such registration. Upon the request of each Holder given within twenty (20)
days after such notice is given by the Company, the Company shall, subject to
the provisions of
Section 2.3
, cause to be registered all of the
Registrable Securities that each such Holder has requested to be included in
such registration. The Company shall have the right to terminate or withdraw any
registration initiated by it under this
Section 2.2
before the effective
date of such registration, whether or not any Holder has elected to include
Registrable Securities in such registration. The expenses (other than Selling
Expenses) of such withdrawn registration shall be borne by the Company in
accordance with
Section 2.6
.
2.3
Underwriting Requirements
.
(a) If, pursuant to
Section 2.1
, the Initiating Holders intend to distribute
the Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 2.1
, and the Company shall include such information in the Demand
Notice. The underwriter(s), if any, will be selected by the Company and shall be
reasonably acceptable to a majority in interest of the Initiating Holders. In
such event, the right of any Holder to include such Holder’s Registrable
Securities in such registration shall be conditioned upon such Holder’s
participation in such underwriting and the inclusion of such Holder’s
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company as provided in
Section 2.4(e)
) enter into an
underwriting agreement in customary form with the underwriter(s) selected for
such underwriting. Notwithstanding any other provision of this
Section
2.3
, if the underwriter(s) advise(s) the Initiating Holders in writing that
marketing factors require a limitation on the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities that otherwise would be underwritten pursuant hereto, and
the number of Registrable Securities that may be included in the underwriting
shall be allocated among such Holders of Registrable Securities, including the
Initiating Holders, in proportion (as nearly as practicable) to the number of
Registrable Securities owned by each Holder or in such other proportion as shall
mutually be agreed to by all such selling Holders;
provided
,
however
, that the number of Registrable Securities held by the Holders to
be included in such underwriting shall not be reduced unless all other
securities are first entirely excluded from the underwriting. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest one hundred (100) shares.
3
(b)
In connection with any offering involving an underwriting of shares of the
Company’s capital stock pursuant to
Section 2.2
, the Company shall not be
required to include any of the Holders’ Registrable Securities in such
underwriting unless the Holders accept the terms of the underwriting as agreed
upon between the Company and its underwriters, and then only in such quantity as
the underwriters in their sole discretion determine will not jeopardize the
success of the offering by the Company. If the total number of securities,
including Registrable Securities, requested by stockholders to be included in
such offering exceeds the number of securities to be sold (other than by the
Company) that the underwriters in their reasonable discretion determine is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters and the Company in their sole
discretion determine will not jeopardize the success of the offering. If the
underwriters determine that less than all of the Registrable Securities
requested to be registered can be included in such offering, then the
Registrable Securities that are included in such offering shall be allocated
among the selling Holders in proportion (as nearly as practicable) to the number
of Registrable Securities owned by each selling Holder or in such other
proportions as shall mutually be agreed to by all such selling Holders. To
facilitate the allocation of shares in accordance with the above provisions, the
Company or the underwriters may round the number of shares allocated to any
Holder to the nearest one hundred (100) shares. Notwithstanding the foregoing,
in no event shall (i) the number of Registrable Securities included in the
offering be reduced unless all other securities (other than securities to be
sold by the Company) are first entirely excluded from the offering, or (ii) the
number of Registrable Securities included in the offering be reduced below
twenty percent (20%) of the total number of securities included in such
offering, For purposes of the provision in this
Section 2.3(b)
concerning
apportionment, for any selling Holder that is a partnership, limited liability
company, or corporation, the partners, members, retired partners, retired
members, stockholders, and Affiliates of such Holder, or the estates and
Immediate Family Members of any such partners, retired partners, members, and
retired members and any trusts for the benefit of any of the foregoing Persons,
shall be deemed to be a single “selling Holder,” and any pro rata reduction with
respect to such “selling Holder” shall be based upon the aggregate number of
Registrable Securities owned by all Persons included in such “selling Holder,”
as defined in this sentence.
2.4
Obligations of the Company
. Whenever required under this Section 2 to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with respect to such
Registrable Securities and use its commercially reasonable efforts to cause such
registration statement to become effective and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to one year or, if earlier,
until the distribution contemplated in the registration statement has been
completed;
provided
,
however
, that (i) such one year period shall
be extended for a period of time equal to the period the Holder refrains, at the
request of an underwriter of Common Stock (or other securities) of the Company,
from selling any securities included in such registration, and (ii) in the case
of any registration of Registrable Securities on Form S-3 that are intended to
be offered on a continuous or delayed basis, subject to compliance with
applicable SEC rules, such one year period shall be extended for up to one
hundred eighty (180) days, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold;
4
(b) prepare and file with the SEC such amendments and supplements to such
registration statement, and the prospectus used in connection with such
registration statement, as may be necessary to comply with the Securities Act in
order to enable the disposition of all securities covered by such registration
statement;
(c) furnish to the selling Holders such numbers of copies of a prospectus, including
a preliminary prospectus, as required by the Securities Act, and such other
documents as the Holders may reasonably request in order to facilitate their
disposition of their Registrable Securities;
(d) use its commercially reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or blue-sky
laws of such jurisdictions as shall be reasonably requested by the selling
Holders;
provided
that the Company shall not be required to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act;
(e) in the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the underwriter(s) of such offering;
(f) use its commercially reasonable efforts to cause all such Registrable Securities
covered by such registration statement to be listed on a national securities
exchange or trading system and each securities exchange and trading system (if
any) on which similar securities issued by the Company are then listed;
(g) promptly make available for inspection by the selling Holders, any
underwriter(s) participating in any disposition pursuant to such registration
statement, and any attorney or accountant or other agent retained by any such
underwriter or selected by the selling Holders, all financial and other records,
pertinent corporate documents, and properties of the Company, and cause the
Company’s officers, directors, employees, and independent accountants to supply
all information reasonably requested by any such seller, underwriter, attorney,
accountant, or agent, in each case, as necessary or advisable to verify the
accuracy of the information in such registration statement and to conduct
appropriate due diligence in connection therewith;
(h) notify each selling Holder, promptly after the Company receives notice thereof,
of the time when such registration statement has been declared effective or a
supplement to any prospectus forming a part of such registration statement has
been filed; and
(i) after such registration statement becomes effective, notify each selling Holder
of any request by the SEC that the Company amend or supplement such registration
statement or prospectus.
In
addition, the Company shall ensure that, at all times after any registration
statement covering a public offering of securities of the Company under the
Securities Act shall have become effective, its insider trading policy shall
provide that the Company’s directors may implement a trading program under Rule
10b5-1 of the Exchange Act.
2.5
Furnish Information
. It shall be a condition precedent to the obligations
of the Company to take any action pursuant to this
Section 2
with respect
to the Registrable Securities of any selling Holder that such Holder shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as is reasonably required to effect the registration of such Holder’s
Registrable Securities.
2.6
Expenses of Registration
. All expenses (other than Selling Expenses)
incurred in connection with registrations, filings, or qualifications pursuant
to
Section 2
, including all registration, filing, and qualification fees,
printers’ and accounting fees, and fees and disbursements of counsel for the
Company, shall be borne and paid by the Company. All Selling Expenses relating
to Registrable Securities registered pursuant to this
Section 2
shall be
borne and paid by the Holders pro rata on the basis of the number of Registrable
Securities registered on their behalf.
5
2.7
Delay of Registration
. No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any registration pursuant to
this Agreement as the result of any controversy that might arise with respect to
the interpretation or implementation of this
Section 2
.
2.8
Indemnification
. If any Registrable Securities are included in a
registration statement under this
Section 2
:
(a) To the extent permitted by law, the Company will indemnify and hold harmless
each selling Holder, and the partners, members, officers, directors, and
stockholders of each such Holder; legal counsel and accountants for each such
Holder; any underwriter (as defined in the Securities Act) for each such Holder;
and each Person, if any, who controls such Holder or underwriter within the
meaning of the Securities Act or the Exchange Act, against any Damages, and the
Company will pay to each such Holder, underwriter, controlling Person, or other
aforementioned Person any legal or other expenses reasonably incurred thereby in
connection with investigating or defending any claim or proceeding from which
Damages may result, as such expenses are incurred;
provided
,
however
, that the indemnity agreement contained in this
Section
2.8(a)
shall not apply to amounts paid in settlement of any such claim or
proceeding if such settlement is effected without the consent of the Company,
which consent shall not be unreasonably withheld, nor shall the Company be
liable for any Damages to the extent that they arise out of or are based upon
actions or omissions made in reliance upon and in conformity with written
information furnished by or on behalf of any such Holder, underwriter,
controlling Person, or other aforementioned Person expressly for use in
connection with such registration.
(b) To the extent permitted by law, each selling Holder, severally and not jointly,
will indemnify and hold harmless the Company, and each of its directors, each of
its officers who has signed the registration statement, each Person (if any),
who controls the Company within the meaning of the Securities Act, legal counsel
and accountants for the Company, any underwriter (as defined in the Securities
Act), any other Holder selling securities in such registration statement, and
any controlling Person of any such underwriter or other Holder, against any
Damages, in each case only to the extent that such Damages arise out of or are
based upon actions or omissions made in reliance upon and in conformity with
written information furnished by or on behalf of such selling Holder expressly
for use in connection with such registration; and each such selling Holder will
pay to the Company and each other aforementioned Person any legal or other
expenses reasonably incurred thereby in connection with investigating or
defending any claim or proceeding from which Damages may result, as such
expenses are incurred;
provided
,
however
, that the indemnity
agreement contained in this
Section 2.8(b)
shall not apply to amounts
paid in settlement of any such claim or proceeding if such settlement is
effected without the consent of the Holder, which consent shall not be
unreasonably withheld; and
provided
further
that in no event shall
the aggregate amounts payable by any Holder by way of indemnity or contribution
under
Sections 2.8(b)
and
2.8(d)
exceed the proceeds from the
offering received by such Holder (net of any Selling Expenses paid by such
Holder), except in the case of fraud or willful misconduct by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.8
of notice of the commencement of any action (including any governmental
action) for which a party may be entitled to indemnification hereunder, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this
Section 2.8
, give the indemnifying party
notice of the commencement thereof. The indemnifying party shall have the right
to participate in such action and, to the extent the indemnifying party so
desires, participate jointly with any other indemnifying party to which notice
has been given, and to assume the defense thereof with counsel mutually
satisfactory to the parties; provided,
however
, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such action.
(d) To provide for just and equitable contribution to joint liability under the
Securities Act in any case in which either: (i) any party otherwise entitled to
indemnification hereunder makes a claim for indemnification pursuant to this
Section 2.8
but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
this
Section 2.8
provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any party
hereto for which indemnification is provided under this
Section 2.8
,
then, and in each such case, such parties will contribute to the aggregate
losses, claims, damages, liabilities, or expenses to which they may be subject
(after contribution from others) in such proportion as is appropriate to reflect
the relative fault of each of the indemnifying party and the indemnified party
in connection with the statements, omissions, or other actions that resulted in
such loss, claim, damage, liability, or expense, as well as to reflect any other
relevant equitable considerations. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to, among other
things, whether the untrue or allegedly untrue statement of a material fact, or
the omission or alleged omission of a material fact, relates to information
supplied by the indemnifying party or by the indemnified party and the parties’
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission;
provided
,
however
, that, in
any such case (x) no Holder will be required to contribute any amount in excess
of the public offering price of all such Registrable Securities offered and sold
by such Holder pursuant to such registration statement, and (y) no Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation; and
provided
further
that in no event shall a Holder’s liability pursuant to this
Section
2.8(d)
, when combined with the amounts paid or payable by such Holder
pursuant to
Section 2.8(b)
, exceed the proceeds from the offering
received by such Holder (net of any Selling Expenses paid by such Holder),
except in the case of willful misconduct or fraud by such Holder.
6
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control.
(f) Unless otherwise superseded by an underwriting agreement entered into in
connection with the underwritten public offering, the obligations of the Company
and Holders under this
Section 2.8
shall survive the completion of any
offering of Registrable Securities in a registration under this
Section
2
, and otherwise shall survive the termination of this Agreement.
2.9
Reports Under Exchange Act
. With a view to making available to the
Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC
that may at any time permit a Holder to sell securities of the Company to the
public without registration or pursuant to a registration on Form S-3, the
Company shall:
(a) use commercially reasonable efforts to make and keep available adequate current
public information, as those terms are understood and defined in SEC Rule 144,
at all times;
(b) use commercially reasonable efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act (at any time after the Company has become subject to such
reporting requirements); and
(c) furnish to any Holder, so long as the Holder owns any Registrable Securities,
forthwith upon request (i) to the extent accurate, a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144,
the Securities Act, and the Exchange Act (at any time after the Company has
become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time at
which the Company so qualifies); (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company; and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC that permits the
selling of any such securities without registration (at any time after the
Company has become subject to the reporting requirements under the Exchange Act)
or pursuant to Form S-3 (at any time after the Company so qualifies to use such
form).
2.10
“Market Stand-off” Agreement
. Each Holder hereby agrees that it will not,
without the prior written consent of the managing underwriter, during the period
commencing on the date of the final prospectus relating to the registration by
the Company for its own behalf of shares of its Common Stock or any other equity
securities under the Securities Act on a
registration statement on Form
S-1 or Form S-3 and ending on the date specified by the Company and the managing
underwriter (such period not to exceed 120 days, or such other period as may be
requested by the Company or an underwriter to accommodate regulatory
restrictions on (1) the publication or other distribution of research reports,
and (2) analyst recommendations and opinions, including, but not limited to, the
restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any
successor provisions or amendments thereto), (i) lend; offer; pledge; sell;
contract to sell; sell any 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, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable
(directly or indirectly) for Common Stock (whether such shares or any such
securities are then owned by the Holder or are thereafter acquired) or (ii)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of such securities,
whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Stock or other securities, in cash, or otherwise.
The foregoing provisions of this Section 2.10 shall not apply to the sale of any
shares to an underwriter pursuant to an underwriting agreement, or the transfer
of any shares to any trust for the direct or indirect benefit of the Holder or
the immediate family of the Holder,
provided
that the trustee of the
trust agrees to be bound in writing by the restrictions set forth herein, and
provided
further
that any such transfer shall not involve a
disposition for value, and shall be applicable to the Holders only if all
officers and directors are subject to the same restrictions. The underwriters in
connection with such registration are intended third-party beneficiaries of this
Section 2.10
and shall have the right, power and authority to enforce the
provisions hereof as though they were a party hereto. Each Holder further agrees
to execute such agreements as may be reasonably requested by the underwriters in
connection with such registration that are consistent with this
Section
2.10
or that are necessary to give further effect thereto.
7
2.11
Restrictions on Transfer
.
(a) The Series A Preferred Stock and the Registrable Securities shall not be sold,
pledged, or otherwise transferred, and the Company shall not recognize and shall
issue stop-transfer instructions to its transfer agent with respect to any such
sale, pledge, or transfer, except upon the conditions specified in this
Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. A transferring Holder will cause any proposed
purchaser, pledgee, or transferee of the Series A Preferred Stock and, if
required by applicable law, the Registrable Securities held by such Holder to
agree to take and hold such securities subject to the provisions and upon the
conditions specified in this Agreement.
(b) Each certificate, instrument, or book entry representing (i) the Series A
Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities
issued in respect of the securities referenced in clauses (i) and (ii), upon any
stock split, stock dividend, recapitalization, merger, consolidation, or similar
event, shall (unless otherwise permitted by the provisions of
Section
2.11(c)
) be notated with a legend substantially in the following form:
|
[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH
THIS SECURITY IS CONVERTIBLE] HAS [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS
SECURITY [AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY]
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT
IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
|
8
|
[THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND
THE STOCKHOLDER, AND THE CERTIFICATE OF DESIGNATION, COPIES OF WHICH ARE
ON FILE WITH THE SECRETARY OF THE COMPANY.]
|
The
Holders consent to the Company making a notation in its records and giving
instructions to any transfer agent of the Restricted Securities in order to
implement the restrictions on transfer set forth in this
Section 2.11
.
(c) The holder of such Restricted Securities, by acceptance of ownership thereof,
agrees to comply in all respects with the provisions of this
Section 2
.
Before any proposed sale, pledge, or transfer of any Restricted Securities,
unless there is in effect a registration statement under the Securities Act
covering the proposed transaction, the Holder thereof shall give notice to the
Company of such Holder’s intention to effect such sale, pledge, or transfer.
Each such notice shall describe the manner and circumstances of the proposed
sale, pledge, or transfer in sufficient detail and, if reasonably requested by
the Company, shall be accompanied at such Holder’s expense by either (i) a
written opinion of legal counsel who shall, and whose legal opinion shall, be
reasonably satisfactory to the Company, addressed to the Company, to the effect
that the proposed transaction may be effected without registration under the
Securities Act; (ii) a “no action” letter from the SEC to the effect that the
proposed sale, pledge, or transfer of such Restricted Securities without
registration will not result in a recommendation by the staff of the SEC that
action be taken with respect thereto; or (iii) any other evidence reasonably
satisfactory to counsel to the Company to the effect that the proposed sale,
pledge, or transfer of the Restricted Securities may be effected without
registration under the Securities Act, whereupon the Holder of such Restricted
Securities shall be entitled to sell, pledge, or transfer such Restricted
Securities in accordance with the terms of the notice given by the Holder to the
Company. The Company will not require such a legal opinion or “no action” letter
(x) in any transaction in compliance with SEC Rule 144; or (y) in any
transaction in which such Holder distributes Restricted Securities to an
Affiliate of such Holder for no consideration, provided that each such Affiliate
agrees in writing to be subject to the terms of this
Section 2.11
. Each
certificate, instrument, or book entry representing the Restricted Securities
transferred as above provided shall be notated with, except if such transfer is
made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in
Section 2.11(b)
, except that such certificate instrument, or book entry
shall not be notated with such restrictive legend if, in the opinion of counsel
for such Holder and the Company, such legend is not required in order to
establish compliance with any provisions of the Securities Act.
2.12
Termination of Registration Rights
. The right of any Holder to request
registration or inclusion of Registrable Securities in any registration pursuant
to
Sections 2.1
or
2.2
shall terminate upon such time as SEC Rule
144 or another similar exemption under the Securities Act is available for the
sale of
all of such Holder’s shares without limitation during a
three-month period without registration.
3.
Confidentiality
. Each
Holder agrees that such Holder will keep confidential and will not disclose,
divulge, or use for any purpose (other than to monitor its investment in the
Company) any confidential information obtained from the Company (including
notice of the Company’s intention to file a registration statement), unless such
confidential information (a) is known or becomes known to the public in general
(other than as a result of a breach of this
Section 3
by such Holder),
(b) is or has been independently developed or conceived by the Holder without
use of the Company’s confidential information, or (c) is or has been made known
or disclosed to the Holder by a third party without a breach of any obligation
of confidentiality such third party may have to the Company;
provided
,
however
, that a Holder may disclose confidential information (i) to its
attorneys, accountants, consultants, and other professionals to the extent
necessary to obtain their services in connection with monitoring its investment
in the Company; (ii) to any prospective purchaser of any Registrable Securities
from such Holder, if such prospective purchaser agrees to be bound by the
provisions of this
Section 3
;
(iii) to any existing or prospective
Affiliate, partner, member, stockholder, or wholly owned subsidiary of such
Holder in the ordinary course of business,
provided
that such Holder
informs such Person that such information is confidential and directs such
Person to maintain the confidentiality of such information; or (iv) as may
otherwise be required by law,
provided
that the Holder promptly notifies
the Company of such disclosure and takes reasonable steps to minimize the extent
of any such required disclosure.
9
4.
Investor Participation in
Future Equity Financings
. Subject to the terms and conditions of this
Section 4
and applicable securities laws, if the Company proposes to
offer or sell any New Securities, the Company shall first offer such New
Securities to the Investor.
(a) The Company shall give notice (the “
Offer Notice
”) to the Investor,
stating (i) its bona fide intention to offer such New Securities, (ii) the
number of such New Securities to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such New Securities.
(b) By notification to the Company within twenty (20) days after the Offer Notice is
given, the Investor may elect to purchase or otherwise acquire, at the price and
on the terms specified in the Offer Notice, up to that portion of such New
Securities which equals the proportion that the Common Stock then held by the
Investor and its Affiliates (including all shares of Common Stock then issuable
(directly or indirectly) upon conversion and/or exercise, as applicable, of the
Series A Preferred Stock then held by the Investor and its Affiliates) bears to
the total Common Stock of the Company then outstanding (assuming full conversion
and/or exercise, as applicable, of all Series A Preferred Stock). The closing of
any sale pursuant to this
Section 4(b)
shall occur within the later of
thirty (30) days of the date that the Offer Notice is given and the date of
initial sale of New Securities pursuant to
Section 4(c)
.
(c) If all New Securities referred to in the Offer Notice are not elected to be
purchased or acquired as provided in
Section 4(b)
, the Company may,
during the ninety (90) day period following the expiration of the periods
provided in
Section 4(b)
, offer and sell the remaining unsubscribed
portion of such New Securities to any Person or Persons at a price not less
than, and upon terms no more favorable to the offeree than, those specified in
the Offer Notice. If the Company does not enter into an agreement for the sale
of the New Securities within such period, or if such agreement is not
consummated within thirty (30) days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such New Securities shall not be
offered unless first reoffered to the Investor in accordance with this
Section 4
.
(d) The right of first offer in this
Section 4
shall not be applicable to (i)
any equity securities issued in connection with the conversion of any
convertible security outstanding as of the Original Issue Date, as defined in
the Certificate of Designation, (ii) any exercise of a warrant or option
outstanding as of the Original Issue Date, as defined in the Certificate of
Designation, (iii) any options or shares of Common Stock issued pursuant to any
plan adopted by the Company for the benefit of its employees, executive
officers, directors or consultants, (iv) any shares of Common Stock issued in
connection with an acquisition, asset purchase agreement or joint venture
agreement, (v) any issuance of Common Stock to Aspire Capital Fund, LLC, and
(vi) any issuance of Common Stock in connection with a stock split or in
connection with a dividend payable in Common Stock.
(e) Notwithstanding any provision hereof to the contrary, in lieu of complying with
the provisions of this
Section 4
, the Company may elect to give notice to
the Investor within thirty (30) days after the issuance of New Securities. Such
notice shall describe the type, price, and terms of the New Securities. The
Investor shall have twenty (20) days from the date notice is given to elect to
purchase up to the number of New Securities that would, if purchased by the
Investor, maintain the Investor’s percentage-ownership position, calculated as
set forth in
Section 4(b)
before giving effect to the issuance of such
New Securities. The closing of such sale shall occur within sixty (60) days of
the date notice is given to the Investor.
(f) The covenants set forth in
Section 4
shall terminate and be of no further
force or effect immediately upon the third (3
rd
) anniversary of the
date hereof.
5.
Voting Rights
. The
Investor hereby grants an irrevocable proxy (which proxy is coupled with an
interest) to the Company’s Board of Directors authorizing and directing the
Board of Directors to vote all Excess Shares (as defined below) at any
stockholders’ meeting or in an action by written consent in the same proportion
as the shares of Common Stock that are voted at such meeting or by such written
consent which are not beneficially owned by the Investor on the record date for
such meeting or such written consent. “
Excess Shares
” shall mean the
number of shares of Common Stock held or voted by the Investor and its
Affiliates or any member of a “group” (as defined under Section 13(d) of the
Exchange Act) including the Investor or its Affiliates or other parties acting
in concert with the Investor or its Affiliates, in the aggregate, that is in
excess of 9.99% of the issued and outstanding Common Stock of the Company.
10
6.
Additional Covenants
.
6.1
Volume Limitations
. Each Holder (together with its Affiliates) shall be
prohibited from lending, offering, pledging, selling, contracting to sell, or
otherwise transferring or disposing of, directly or indirectly, any shares of
Common Stock issued upon conversion of the Series A Preferred Stock as
follows:
(a) on and prior to the first anniversary of the applicable Conversion Date, each
Holder (together with its Affiliates) may only sell up to 51,000 shares of
Common Stock issued upon conversion of the Series A Preferred Stock in any
ninety (90) consecutive day period; and
(b) after the first anniversary of the Conversion Date, each Holder may freely
transfer shares of Common Stock.
6.2
Compliance with Nasdaq
Rules
.
(a) No Holder shall exercise its Conversion Rights at any time, if the exercise of
the Conversion Rights would cause such Holder (together with its Affiliates) to
own greater than 19.99% of the issued and outstanding shares of Common Stock
prior to the time that the Company shall have received stockholder approval in
accordance with Nasdaq Rules.
(b) The Company shall seek stockholder approval for the issuance of Common Stock to
the Holders in excess of 19.99% of the issued and outstanding shares of Common
Stock at the earlier of (i) the Company’s next annual meeting of stockholders,
or (ii) any earlier special meeting of stockholders unless the Company’s Board
of Directors determines that soliciting approval at such special meeting in
connection with this
Section 6.2
would be materially detrimental to the
approval of the other proposals to be considered thereat.
7.
Miscellaneous
.
7.1
Successors and Assigns
. The rights under this Agreement may be
assigned (but only with all related obligations) by a Holder to a transferee
of Registrable Securities that is an Affiliate of a Holder;
provided
,
however
, that (x) the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee and the Registrable Securities with respect to which such rights are
being transferred; and (y) such transferee agrees in a written instrument
delivered to the Company to be bound by and subject to the terms and conditions
of this Agreement, including the provisions of
Section 2.10
. The terms
and conditions of this Agreement inure to the benefit of and are binding upon
the respective successors and permitted assignees of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and permitted assignees
any rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
7.2
Governing Law
. This Agreement shall be governed by the internal law of
the State of New York.
7.3
Counterparts
. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Counterparts may be
delivered via facsimile, electronic mail (including pdf or any electronic
signature complying with the U.S. federal ESIGN Act of 2000,
e.g.
,
www.docusign.com) or other transmission method and any counterpart so delivered
shall be deemed to have been duly and validly delivered and be valid and
effective for all purposes
.
7.4
Titles and Subtitles
. The titles and subtitles used in this Agreement are
for convenience only and are not to be considered in construing or interpreting
this Agreement.
7.5
Notices
. All notices and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed effectively given upon
the earlier of actual receipt or (i) personal delivery to the party to be
notified; (ii) when sent, if sent by electronic mail or facsimile during the
recipient’s normal business hours, and if not sent during normal business hours,
then on the recipient’s next business day; (iii) five (5) days after having been
sent by registered or certified mail, return receipt requested, postage prepaid;
or (iv) one (1) business day after the business day of deposit with a nationally
recognized overnight courier, freight prepaid, specifying next-day delivery,
with written verification of receipt. All communications shall be sent to the
respective parties at their addresses as set forth on
Schedule A
hereto
(as may be updated from time to time), or to the principal office of the Company
and to the attention of the Chief Executive Officer, in the case of the Company,
or to such email address, facsimile number, or address as subsequently modified
by written notice given in accordance with this
Section 7.5
. If notice is
given to the Company, a copy shall also be sent to Hogan Lovells US LLP, Attn:
David Crandall, One Tabor Center, Suite 1500, 1200 Seventeenth Street, Denver,
Colorado 80202 and if notice is given to Investors, a copy shall also be given
to Bernard & Yam, LLP, Attn: Mr. Mann Yam, 140-75 Ash Avenue, Suite 2D,
Flushing, New York 11355.
11
7.6
Amendments and Waivers
. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance, and either retroactively or prospectively) only with the
written consent of the Company and Holders holding a majority of the Registrable
Securities then outstanding;
provided
that the Company may in its sole
discretion waive compliance with
Section 2.11(c)
; and
provided
further
that any provision hereof may be waived by any waiving party on
such party’s own behalf, without the consent of any other party. Notwithstanding
the foregoing, this Agreement may not be amended or terminated and the
observance of any term hereof may not be waived with respect to any Holder
without the written consent of such Holder, unless such amendment, termination,
or waiver applies to all Holders in the same fashion. The Company shall give
prompt notice of any amendment or termination hereof or waiver hereunder to any
party hereto that did not consent in writing to such amendment, termination, or
waiver. Any amendment, termination, or waiver effected in accordance with this
Section 7.6
shall be binding on all parties hereto, regardless of whether
any such party has consented thereto. No waivers of or exceptions to any term,
condition, or provision of this Agreement, in any one or more instances, shall
be deemed to be or construed as a further or continuing waiver of any such term,
condition, or provision.
7.7
Severability
. In case any one or more of the provisions contained in this
Agreement is for any reason held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect any
other provision of this Agreement, and such invalid, illegal, or unenforceable
provision shall be reformed and construed so that it will be valid, legal, and
enforceable to the maximum extent permitted by law.
7.8
Aggregation of Stock
. All shares of Registrable Securities held or
acquired by Affiliates shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement and such
Affiliated persons may apportion such rights as among themselves in any manner
they deem appropriate.
7.9
Additional Investors
. Notwithstanding anything to the contrary contained
herein, a Permitted Transferee, as defined in the Certificate of Designation,
may become a party to this Agreement by executing and delivering an additional
counterpart signature page to this Agreement, and thereafter shall be deemed a
“Holder” for all purposes hereunder. No action or consent by the Holders shall
be required for such joinder to this Agreement by such additional Holder, so
long as such additional Holder has agreed in writing to be bound by all of the
obligations as a “Holder” hereunder.
7.10
Entire Agreement
. This Agreement (including any Schedules and Exhibits
hereto) constitutes the full and entire understanding and agreement among the
parties with respect to the subject matter hereof, and any other written or oral
agreement relating to the subject matter hereof existing between the parties is
expressly canceled.
7.11
Dispute Resolution
. The parties (a) hereby irrevocably and
unconditionally submit to the jurisdiction of the state and federal courts
sitting in the City of New York, Borough of Manhattan for the purpose of any
suit, action or other proceeding arising out of or based upon this Agreement,
(b) agree not to commence any suit, action or other proceeding arising out of or
based upon this Agreement except in the state and federal courts sitting in the
City of New York, Borough of Manhattan, and (c) hereby waive, and agree not to
assert, by way of motion, as a defense, or otherwise, in any such suit, action
or proceeding, any claim that it is not subject personally to the jurisdiction
of the above-named courts, that its property is exempt or immune from attachment
or execution, that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such
court.
12
WAIVER OF JURY TRIAL:
EACH PARTY HEREBY WAIVES ITS
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE
SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND
ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED
BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY
EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH
PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
7.12
Delays or Omissions
. No delay or omission to exercise any right, power,
or remedy accruing to any party under this Agreement, upon any breach or default
of any other party under this Agreement, shall impair any such right, power, or
remedy of such nonbreaching or nondefaulting party, nor shall it be construed to
be a waiver of or acquiescence to any such breach or default, or to any similar
breach or default thereafter occurring, nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. All remedies, whether under this Agreement or by law or
otherwise afforded to any party, shall be cumulative and not alternative.
[Remainder of Page Intentionally Left Blank]
13
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
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COMPANY:
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LIGHTBRIDGE CORPORATION
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By: /s/ Seth Grae
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Name:
|
Seth Grae
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Title:
|
Chief Executive Officer
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INVESTOR:
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GENERAL INTERNATIONAL HOLDINGS,
INC.
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By: /s/ Xingping Hou
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Name:
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Xingping Hou
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Title:
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President
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[Signature Page to Investors Rights Agreement]
SCHEDULE A
Holders
General International Holdings, Inc.
Address: 219-3 Northern Blvd, Suite
201
Bayside,
NY 11361
Fax:
212-219-3604
