As
filed with the Securities and Exchange Commission on June 30, 2016
Registration
No. 333-________
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM
S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
_______________
ATOMERA
INCORPORATED
(Exact
name of registrant as specified in its charter)
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(State
or other jurisdiction of
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(Primary
Standard Industrial
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(I.R.S.
Employer
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incorporation
or organization)
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Classification
Code Number)
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Identification
No.)
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750
University Avenue, Suite 280
Los Gatos, California 95032
(408) 442-5248
(Address,
including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
Scott
A. Bibaud
Chief Executive Officer
Atomera Incorporated
750 University Avenue, Suite 280
Los Gatos, California 95032
(408) 442-5248
(Name,
address, including zip code, and telephone number,
including area code, of agent for service)
Copies
to:
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Daniel
K. Donahue
Greenberg Traurig, LLP
3161 Michelson Drive, Suite 1000
Irvine, California 92612
Telephone: (949) 732-6557
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Andrew
Hudders
Golenbock Eiseman Assor Bell & Peskoe LLP
437 Madison Avenue - 40
th
Floor
New York, New York 10022
Telephone: (212) 907-7349
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Approximate
date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933 check the following box.
¨
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration statement number of the earlier effective registration statement
for the same offering.
¨
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (check one):
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Large
accelerated filer
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Non-accelerated
filer
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Accelerated
filer
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Smaller
reporting company
x
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(Do
not check if a smaller
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reporting
company)
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CALCULATION
OF REGISTRATION FEE
Title
of Each Class of Securities to be Registered
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Proposed
Maximum Aggregate Offering Price
(1)(2)
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Amount
of Registration Fee
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Common
Stock, $0.001 par value per share
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$
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20,700,000
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$
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2,084.49
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Underwriter
Warrant
(3)(4)(5)
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$
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100
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—
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Shares
of Common Stock underlying Underwriter Warrant
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$
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2,587,500
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$
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260.51
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The
Registrant hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a further amendment,
which specifically states that this Registration Statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we
are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED JUNE 30, 2016
2,400,000
Shares of Common Stock
Atomera
Incorporated is offering 2,400,000 shares of common stock on a firm commitment basis. This is an initial public offering of our
common stock and there is presently no public market for our common stock. The initial public offering price is $7.50 per share.
The shares offered hereby will be listed for trading upon the Nasdaq Capital Market under the symbol “ATMR.”
We
have agreed to pay the underwriter a selling discount of $1.62 million, or 9%, of the gross proceeds of this offering. We have
also agreed to issue to the underwriter warrants to purchase shares of our common stock in an amount up to 10% of the shares of
common stock sold in the public offering, with an exercise price equal to 125% of the public offering price.
We
are an “emerging growth company” under the federal securities laws and will have the option to use reduced public
company reporting requirements. Please see “Risk Factors” beginning on page 6 to read about certain factors you should
consider before buying our securities.
Neither
the Securities and Exchange Commission nor any other regulatory body has approved or disapproved these securities or passed upon
the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
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Underwriting
Discounts and Commissions
(1)
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Per
Share
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$
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7.50
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$
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0.675
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$
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6.825
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Total
Offering
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$
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18,000,000
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$
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1,620,000
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$
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16,380,000
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The
underwriter may also purchase an additional 360,000 shares of our common stock amounting to 15% of the number of shares offered
to the public, within 45 days of the date of this prospectus, to cover over-allotments, if any, on the same terms set forth above.
The
underwriter expects to deliver the shares on or about _____________________, 2016.
National
Securities Corporation
The
date of this prospectus is ___________, 2016
Table
of Contents
Neither
we nor the underwriter has authorized anyone to provide any information or make any representations other than those contained
in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. Neither
we nor the underwriter takes responsibility for, and can provide no assurance as to the reliability of, any other information
that others may give you. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any sale of the common stock.
Through
and including ________, 2016 (the 25
th
day after the date of this prospectus),
all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver
a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with
respect to an unsold allotment or subscription.
For
investors outside of the United States: Neither we nor the underwriter has done anything that would permit this offering or possession
or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States.
Persons outside the United States are required to inform themselves about, and to observe any restrictions relating to, this offering
and the distribution of this prospectus outside of the United States.
i
Prospectus Summary
Investing
in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below,
together with all of the other information in this prospectus, including our financial statements and related notes, before investing
in our common stock. If any of the following risks materialize, our business, financial condition, operating results and prospects
could be materially and adversely affected. In that event, the price of our common stock could decline, and you could lose part
or all of your investment.
On
December 11, 2015, we effected a 1-for-15 reverse stock split of our common stock. All historical share amounts and share price
information presented in this prospectus have been proportionally adjusted to reflect the impact of this reverse stock split.
OUR
COMPANY
Overview
We
are engaged in the business of developing, commercializing and licensing proprietary processes and technologies for the $350+
billion semiconductor industry. Our lead technology, named Mears Silicon Technology™, or MST
®
,
is a thin film of reengineered silicon, typically 100 to 300 angstroms (or approximately 20 to 60 silicon atomic unit cells) thick.
MST
®
can be applied as a transistor channel enhancement to CMOS-type transistors,
the most widely used transistor type in the semiconductor industry. MST
®
is
our proprietary and patent-protected performance enhancement technology that we believe addresses a number of key engineering
challenges facing the semiconductor industry. We believe that by incorporating MST
®
,
transistors can be smaller, with increased speed, reliability and energy efficiency. In addition, since MST
®
is an additive and low cost technology, it can be deployed on an industrial scale, with machines commonly used in
semiconductor manufacturing. We believe that MST
®
can be widely incorporated
into the most common types of semiconductor products, including analog, logic, optical and memory integrated circuits.
We
do not intend to design or manufacture integrated circuits directly. Instead, we intend to develop and license technologies and
processes that will offer the designers and manufacturers of integrated circuits a low-cost solution to the industry need for
greater performance and lower power consumption.
In
the mid-1980s, our founder, Dr. Robert Mears, was part of a team that re-engineered silica optical fiber to invent the erbium-doped
fiber amplifier, or EDFA, a technology that increased the bandwidth of optical fiber more than 1,000 times. The invention of EDFA
helped to revolutionize the development of broadband and to this day remains a key technology in the optical communications industry.
Dr. Mears anticipated scaling problems for silicon semiconductors and founded Atomera Incorporated in order to address those problems
for the semiconductor industry.
Over
the last ten years, we have undertaken significant laboratory testing and engaged with a range of semiconductor industry and academic
technology leaders to evaluate MST
®
performance on test chips in industrial
fabrication environments. We believe this testing has demonstrated that MST
®
offers performance benefits beyond and in most cases additive to those provided by already successful semiconductor performance
enhancement technologies, such as dual stress liners and source/drain channel stressors, such as eSiGe/eSiC, and can be implemented
without significant additional cost or significant modification to the current semiconductor fabrication process.
We
are now in the process of transitioning MST
®
technology toward commercial
adoption. We are currently in the early stages of process qualification with leading integrated device manufacturers, or IDMs,
and foundries. The IDMs and foundries are our intended customers and by way of the process qualification stage they test and evaluate
the potential incorporation of our MST
®
technology into the integrated
circuits they produce. We are also partnering with manufacturers of semiconductor fabrication equipment and developers of modeling
tools. These parties are part of a semiconductor infrastructure supporting the industry with manufacturing capital equipment for
transistor production and transistor process modeling software, and we are in discussions with certain equipment manufacturers
and tool developers concerning their incorporation of our MST
®
technology
into the equipment and tools they offer to the industry. Assuming the timely and successful completion of process and subsequent
product qualification by customers and partners, we expect MST
®
enabled product revenue in 2017.
Private
Placement of Convertible Promissory Notes
On
March 17, 2015, we completed the private placement of $14.75 million in senior secured convertible promissory notes, and on April
1, 2016 we completed the private placement of an additional $5.96 million in senior secured convertible notes on the same terms
as the promissory notes placed in March 2015. We refer to these promissory notes in this prospectus as our “convertible
notes.” The convertible notes bear simple interest
1
at
10% per year. All interest and principal under the notes must be paid or converted into
shares of our common stock on or before May 31, 2017. Pursuant to the terms of our convertible
notes, all principal and accrued interest under the notes will automatically convert
into shares of our common stock concurrent with the completion of this offering, at the
conversion price of 50% of the initial public offering price, provided, however, in no
event shall the conversion price be greater than $7.362 nor less than $3.681 per share.
Assuming that this offering was completed on March 31, 2016 at a price of $7.50 per share,
and based on interest accrued through such date in the amount of $2,037,377, the convertible
notes would have been converted into 6,065,549 shares of our common stock.
Risks
Related to Our Business
Our
business is subject to numerous risks, the most significant of which are highlighted in the section entitled “Risk Factors”
immediately following this prospectus summary. Some of these risks include:
•
since we have a limited operating history, it is difficult for potential investors to evaluate our business;
•
we are a development stage company, have not yet commenced revenue producing operations and may never achieve or maintain
profitability;
•
while testing of MST
®
-based test chips have been successful to date,
qualification of a MST
®
-enabled integrated circuit product has not yet been
demonstrated;
•
the report of our independent registered public accounting firm for the year ended December 31, 2015 states that due to
our recurring and expected losses and cash on-hand there is substantial doubt about our ability to continue as a going concern;
•
we anticipate needing additional financing in addition to the proceeds of this offering to fully execute our business plan
and fund operations, which additional financing may not be available on reasonable terms or at all;
•
our proprietary technologies and processes are not yet verified on a commercial scale;
•
our proprietary rights may be difficult to enforce, which could enable others to copy or use aspects of our technologies
without compensating us, thereby eroding our competitive advantages and harming our business;
•
we may be subject to intellectual property rights claims by third parties, which are extremely costly to defend, could
require us to pay significant damages and could limit our ability to use certain technologies; and
•
our success will require timely expansion of our operations and if we are unable to manage future expansion effectively,
our business, operations and financial condition may suffer significantly, resulting in decreased productivity.
For
further discussion of these and other risks that you should consider before making an investment in our common stock, see the
section titled “Risk Factors” immediately following this prospectus summary.
Corporate
Information
Atomera
Incorporated was formed as a limited liability company in Delaware on April 26, 2001 under the name Nanovis LLC, which we changed
to R.J. Mears, LLC on July 10, 2003. On March 14, 2007, we converted to a Delaware corporation under the name Mears Technologies,
Inc. On January 12, 2016, we changed our name to Atomera Incorporated. Our offices are located at 750 University Avenue, Suite
280, Los Gatos, California and our telephone number is (408) 442-5248. Our website is
www.atomera.com
. Information contained
in, or accessible through, our website does not constitute part of this prospectus and inclusions of our website address in this
prospectus are inactive textual references only.
Unless
otherwise indicated, the terms “Atomera,” “Company,” “we,” “us,” and “our”
refer to Atomera Incorporated.
“Atomera,”
“MST” and “Mears” and Atomera’s logo are our trademarks. This prospectus contains additional trade
names, trademarks and service marks of ours and of other companies. We do not intend our use or display of other companies’
trade names, trademarks, or service marks to imply a relationship with these other companies, or endorsement or sponsorship of
us by these other companies. Other trademarks appearing in this prospectus are the property of their respective holders.
2
Emerging
Growth Company
The
Jumpstart Our Business Startups Act, or the JOBS Act, was enacted in April 2012 with the intention of encouraging capital formation
in the United States and reducing the regulatory burden on newly public companies that qualify as “emerging growth companies.”
We are an emerging growth company within the meaning of the JOBS Act. As an emerging growth company, we may take advantage of
certain exemptions from various public reporting requirements, including:
•
the requirement that our internal control over financial reporting be attested to by our independent registered public
accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002;
•
certain requirements related to the disclosure of executive compensation in this prospectus and in our periodic reports
and proxy statements;
•
the requirement that we hold a nonbinding advisory vote on executive compensation and any golden parachute payments; and
•
the ability to delay compliance with new or revised financial accounting standards until private companies are required
to comply with the new or revised financial accounting standard.
We
may take advantage of the exemptions under the JOBS Act discussed above until we are no longer an emerging growth company. We
will remain an emerging growth company until the earliest to occur of (1) the last day of the fiscal year in which we have $1.0
billion or more in annual revenue; (2) the date we qualify as a “large accelerated filer,” with at least $700 million
of equity securities held by non-affiliates; (3) the date on which we have issued, in any three-year period, more than $1.0 billion
in non-convertible debt securities; or (4) the last day of the fiscal year ending after the fifth anniversary of our initial public
offering.
We
may choose to take advantage of some, but not all, of the available benefits under the JOBS Act. We are choosing to irrevocably
“opt out” of the extended transition periods available under the JOBS Act for complying with new or revised accounting
standards, but we intend to take advantage of the other exemptions discussed above. Accordingly, the information contained herein
and in our subsequent filing with the Securities and Exchange Commission may be different than the information you receive from
other public companies in which you hold stock.
For
certain risks related to our status as an emerging growth company, see the disclosure elsewhere in this prospectus under “Risk
Factors — Risks Related to this Offering and Owning Our Common Stock — We are an ‘emerging growth company’
under the JOBS Act of 2012 and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies
will make our common stock less attractive to investors.”
3
THE
OFFERING
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Common
stock offered by us
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2,400,000
shares
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Common
stock to be outstanding after this offering
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10,303,044
shares
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Over-allotment
option offered by us
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360,000
shares
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Proposed
Nasdaq symbol
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“ATMR”
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Use
of proceeds
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Development
engineering, research, business development and general working capital
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The
number of shares of our common stock to be outstanding after this offering is based on 1,617,313 shares of common stock outstanding
as of the date of this prospectus, plus 220,182 shares of common stock to be issued as bonuses to certain officers and directors
upon the completion of this offering and 6,065,549 shares common stock issuable upon conversion of our convertible notes (including
accrued interest as of March 31, 2016), and excludes:
•
538,014 shares of our common stock issuable upon exercise of outstanding options granted pursuant to our 2007 Stock Incentive
Plan;
•
612,280 shares of our common stock underlying options to be granted to our chief executive officer and chief financial
officer upon the completion of this offering;
•
499,198 shares of our common stock issuable upon exercise of outstanding warrants;
•
up to 360,000 shares issuable pursuant to the underwriter’s over-allotment option;
•
shares of our common stock reserved for future grants pursuant to our 2007 Stock Incentive Plan; and
•
the shares of our common stock issuable upon exercise of the underwriter’s warrant.
Except
as otherwise indicated, all information in this prospectus assumes:
•
the automatic conversion of $20.71 million principal amount of our convertible notes, and $2,037,337 of accrued interest
thereon as of March 31, 2016, into an aggregate of 6,065,549 shares of common stock effective upon the completion of this offering;
•
no exercise of outstanding warrants or options subsequent to March 31, 2016; and
•
no exercise of the underwriter’s over-allotment option.
4
Summary
Financial Data
The
following tables summarize our financial data. You should read this summary financial data together with the section entitled
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements
and related notes that are included elsewhere in this prospectus. The financial information as of and for the fiscal years ended
December 31, 2015 and 2014 are derived from the audited financial statements that are included elsewhere in this prospectus. The
financial information as of March 31, 2016 and for the three months ended March 31, 2016 and 2015 is derived from our unaudited
financial statements that are included elsewhere in this prospectus. The unaudited financial statements were prepared on a basis
consistent with our audited financial statements and include, in management’s opinion, all adjustments, consisting only
of normal recurring adjustments that we consider necessary for a fair presentation of the financial information set forth in those
statements. Our historical results are not necessarily indicative of the results that may be expected in the future, and our interim
results are not necessarily indicative of the results to be expected for the full year or any other period.
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Three
Months Ended
March 31,
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(unaudited)
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(unaudited)
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Revenues
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$
|
—
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$
|
—
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$
|
—
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$
|
—
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Net
income (loss)
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$
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(9,512,141
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)
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$
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(3,817,734
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)
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$
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(2,488,187
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)
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$
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(2,460,749
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)
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Net
income (loss) per common share
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$
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(7.55
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)
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$
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(3.10
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)
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$
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(1.54
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)
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$
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(2.00
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)
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Pro
Forma as Adjusted
(2)
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(unaudited)
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(unaudited)
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(unaudited)
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Balance
Sheet Data:
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Cash
and cash equivalents
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$
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1,501,384
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$
|
6,968,039
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$
|
22,828,481
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Working
capital (deficit)
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$
|
(15,604,023
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)
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$
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6,519,678
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$
|
22,380,120
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|
Total
assets
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$
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1,799,805
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$
|
7,266,460
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$
|
22,946,460
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Convertible
notes
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$
|
16,657,046
|
|
|
$
|
—
|
|
$
|
—
|
|
Total
stockholders’ (deficit) equity
|
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$
|
(15,364,611
|
)
|
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$
|
6,759,090
|
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$
|
22,439,090
|
5
RISK FACTORS
Investing
in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below,
together with all of the other information in this prospectus, including our consolidated financial statements and related notes,
before investing in our common stock. If any of the following risks materialize, our business, financial condition, operating
results and prospects could be materially and adversely affected. In that event, the price of our common stock could decline,
and you could lose part or all of your investment.
Risks
Relating to Our Business
Since
we have not commenced revenue-producing operations, it is difficult for potential investors to evaluate our business
. We
have not commenced revenue-producing operations. To date, our operations have consisted of technology research and development,
testing, and joint development work with leading potential customers and strategic partners. Our limited operating history makes
it difficult for potential investors to evaluate our technology or prospective operations. As a development stage company, we
are subject to all the risks inherent in the initial organization, financing, expenditures, complications and delays in a new
business. Investors should evaluate an investment in us in light of the uncertainties encountered by developing companies in a
competitive environment. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain
profitability.
We
have a history of significant operating losses and anticipate continued operating losses for at least the near term
. For
the three months ended March 31, 2016 and the years ended December 31, 2015 and 2014, we have incurred net losses of $2,488,187,
$9,512,141 and $3,817,734, respectively, and our operations have used $1,650,576, $4,387,148 and $2,593,360 of cash, respectively.
As of March 31, 2016, December 31, 2015 and December 31, 2014, we had accumulated deficits of $85,874,810, $83,386,623 and $73,874,482,
respectively. We expect to continue to experience negative cash flows from operations until such time as we are able to secure
one or more IDMs or fabless semiconductor manufacturers to qualify and license MST
®
and start full-scale industrial production of a device that incorporates our MST
®
technology and otherwise generate revenue, and control expenses, at levels that will allow us to operate on a cash flow positive
basis. While management will endeavor to generate positive cash flows from the commercialization of our MST
®
technology, there can be no assurance that we will be successful in generating positive cash flows from operations.
If we are unable to generate positive cash flow within a reasonable period of time, we may be unable to further pursue our business
plan or continue operations, in which case you may lose your entire investment.
We
may need additional financing to execute our business plan and fund operations, which additional financing may not be available
on reasonable terms or at all.
March 31, 2016, we had total assets of $1,799,805 and a working capital deficit of
$15,604,022. On April 1, 2016, we received net proceeds of $5,465,970 from our sale of additional convertible notes. We believe
that we require a minimum of $15 million of additional capital in order to fund our current business plan, including the securing
of one or more foundries, IDMs or fabless semiconductor manufacturers to qualify and license our MST
®
and start full-scale industrial production of a device that incorporates our MST
®
technology. We have undertaken this initial public offering of our common shares to acquire the necessary capital
and through this offering we expect to receive net proceeds of approximately $15.6 million in addition to the conversion of approximately
$22.74 million of debt to equity. However, we may require additional capital, the receipt of which there can be no assurance.
In the event we require additional capital, we will endeavor to seek additional funds through various financing sources, including
the private sale of our equity and debt securities, licensing fees for our technology and joint ventures with industry partners.
In addition, we will consider alternatives to our current business plan that may enable to us to achieve revenue producing operations
and meaningful commercial success with a smaller amount of capital. However, there can be no guarantees that such funds will be
available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable
to further pursue our business plan and we may be unable to continue operations, in which case you may lose your entire investment.
The
report of our independent registered public accounting firm for the year ended December 31, 2015 states that due to our recurring
and expected losses and cash on-hand there is substantial doubt about our ability to continue as a going concern.
While
the preliminary testing of our MST
®
technology has
been successful to-date, there can be no assurance that we will be able to replicate the process, along with all of the expected
economic advantages, on a large commercial scale.
As of the date of this prospectus, we have done technology simulation
work on our MST
®
with universities and potential customers at nodes
from 180 nanometers (nm) to 7nm. Together with leading industry research facilities and in customer manufacturing facilities,
we have also built and tested test element group transistors using MST
®
.
The test element group transistors using MST
®
consistently demonstrated
increased speed, reliability and energy efficiency over test element group transistors without MST
®
.
While we believe that our development and testing to date has proven the effectiveness and benefits of our MST
®
technology, a MST
®
-enabled product has not been qualified
and manufactured on a commercial scale. Our plan
6
of
operations for the 12 months following this offering will focus on securing one or more foundries, IDMs or fabless semiconductor
manufacturers as a licensee-customer and start full-scale industrial production of a device that incorporates MST
®
technology. However, there can be no assurance that we will be able to secure the adoption of our technology by a
potential customer or, if we are successful in doing so, that a MST
®
enabled product manufactured on a commercial scale will provide the expected performance enhancements at the projected cost.
The
long-term success of our business is dependent on a royalty-based business model, which is inherently risky.
The long-term
success of our business is dependent on future royalties paid to us by licensee-customers. Royalty payments under our licenses
may be based, among other things, upon the number of silicon substrate, or wafers, onto which our MST
®
is deposited or a percentage of the net sales of a MST
®
- enabled
product or a fixed quarterly amount. We will depend upon our ability to structure, negotiate and enforce agreements for the determination
and payment of royalties, as well as upon our licensees’ compliance with their agreements. We face risks inherent in a royalty-based
business model, many of which are outside of our control, such as the following:
•
the rate of adoption and incorporation of our technology by semiconductor designers and manufacturers and the manufacturers
of semiconductor fabrication equipment;
•
the length of the design cycle and the ability to successfully integrate our MST
®
technology into integrated circuits;
•
the demand for products incorporating semiconductors that use our licensed technology;
•
the cyclicality of supply and demand for products using our licensed technology;
•
the impact of economic downturns; and
•
the timing of receipt of royalty reports may not meet our revenue recognition criteria resulting in fluctuation in our
results of operations.
Our
revenues may be concentrated in a few customers and if we lose any of these customers, or these customers do not pay us, our revenues
could be materially adversely affected.
If we are able to secure the adoption of our MST
®
by one or more foundries, IDMs or fabless semiconductor manufacturers and commence revenue producing operations,
we expect that for at least the first few years we will earn a significant amount of our revenues from a limited number of customers.
Due to the concentration and ongoing consolidation within the semiconductor industry, we may also find that over the longer term
our revenues are dependent on a relatively few customers. If we lose any of these customers, or these customers do not pay us,
our revenues could be materially adversely affected.
It
may be difficult for us to verify royalty amounts owed to us under our licensing agreements, and this may cause us to lose revenues
. We
will endeavor to provide that the terms of our license agreements require our licensees to document their use of our technology
and report related data to us on a regular basis. We will endeavor to provide that the terms of our license agreements give us
the right to audit books and records of our licensees to verify this information, however audits can be expensive, time consuming,
and may not be cost justified based on our understanding of our licensees’ businesses. We will endeavor to audit certain
licensees to review the accuracy of the information contained in their royalty reports in an effort to decrease the likelihood
that we will not receive the royalty revenues to which we are entitled under the terms of our license agreements, but we cannot
give assurances that such audits will be effective to that end.
We
expect that our product qualification and licensing cycle will be lengthy and costly, and our marketing, engineering and sales
efforts may be unsuccessful
. We expect to incur significant engineering, marketing and sales expenses prior to entering
into our license agreements, generating a license fee and establishing a royalty stream from each licensee. The length of time
it takes to establish a new licensing relationship, and for our customers to incorporate our technologies in their integrated
circuits, can take 18 to 36 months or longer. As such, we will incur significant expenses in any particular period before any
associated revenue stream begins. If our engineering, marketing and sales efforts are unsuccessful, then the expenses incurred
could have an adverse effect on our financial condition, results of operations and cash flows.
Our
business operations could suffer in the event of information technology systems’ failures or security breaches.
While
we believe that we have implemented adequate security measures within our internal information technology and networking systems,
our information technology systems may be subject to security breaches, damages from computer viruses, natural disasters, terrorism,
and telecommunication failures. Any system failure or security breach could cause interruptions in our operations in addition
to the possibility of losing proprietary information and trade secrets. To the extent that any disruption or
7
security
breach results in inappropriate disclosure of our confidential information, our competitive position may be adversely effected
and we may incur liability or additional costs to remedy the damages caused by these disruptions or security breaches.
If
we fail to protect and enforce our intellectual property rights and our confidential information, our business will suffer
. We
rely primarily on a combination of nondisclosure agreements and other contractual provisions and patent, trade secret and copyright
laws to protect our technology and intellectual property. If we fail to protect our technology and intellectual property, our
licensees and others may seek to use our technology and intellectual property without the payment of license fees and royalties,
which could weaken our competitive position, reduce our operating results and increase the likelihood of costly litigation. The
growth of our business depends in large part on our ability to secure intellectual property rights in a timely manner, our ability
to convince third parties of the applicability of our intellectual property rights to their products, and our ability to enforce
our intellectual property rights. In certain instances, we attempt to obtain patent protection for portions of our technology,
and our license agreements typically include both issued patents and pending patent applications. If we fail to obtain patents
in a timely manner or if the patents issued to us do not cover all of the inventions disclosed in our patent applications, others
could use portions of our technology and intellectual property without the payment of license fees and royalties.
We
also rely on trade secret laws rather than patent laws to protect other portions of our proprietary technology. However, trade
secrets can be difficult to protect. The misappropriation of our trade secrets or other proprietary information could seriously
harm our business. We protect our proprietary technology and processes, in part, through confidentiality agreements with our employees,
consultants, suppliers and customers. We cannot be certain that these contracts have not been and will not be breached, that we
will be able to timely detect unauthorized use or transfer of our technology and intellectual property, that we will have adequate
remedies for any breach, or that our trade secrets will not otherwise become known or be independently discovered by competitors.
If we fail to use these mechanisms to protect our technology and intellectual property, or if a court fails to enforce our intellectual
property rights, our business will suffer. We cannot be certain that these protection mechanisms can be successfully asserted
in the future or will not be invalidated or challenged.
Further,
the laws and enforcement regimes of certain countries do not protect our technology and intellectual property to the same extent
as do the laws and enforcement regimes of the U.S. In certain jurisdictions we may be unable to protect our technology and intellectual
property adequately against unauthorized use, which could adversely affect our business.
A
court invalidation or limitation of our key patents could significantly harm our business.
Our patent portfolio contains
some patents that are particularly significant to our MST
®
technology and other
business prospects. If any of these key patents are invalidated, or if a court limits the scope of the claims in any of these
key patents, the likelihood that companies will take new licenses and that any current licensees will continue to agree to pay
under their existing licenses could be significantly reduced. The resulting loss in license fees and royalties could significantly
harm our business. Moreover, our stock price may fluctuate based on developments in the course of ongoing litigation.
We
expect to continue to be involved in material legal proceedings in the future to enforce or protect our intellectual property
rights, which could harm our business
. From time to time, we identify products that we believe infringe our patents.
In that event, we initially seek to license the manufacturer of the infringing products, however if the manufacturer is unwilling
to enter into a license agreement, we may have to initiate litigation to enforce our patent rights against those products. As
disclosed in “Our Business – Litigation”, we are currently involved in a civil litigation against a manufacturer
of optical communication products we believe to be infringing one of our patents. Litigation stemming from that or other disputes
could harm our ability to gain new customers, who may postpone licensing decisions pending the outcome of the litigation or who
may, as a result of such litigation, choose not to adopt our technologies. Such litigation may also harm our relationships with
existing licensees, who may, as a result of such litigation, cease making royalty or other payments to us or challenge the validity
and enforceability of our patents or the scope of our license agreements.
In
addition, the costs associated with legal proceedings are typically high, relatively unpredictable and not completely within our
control. These costs may be materially higher than expected, which could adversely affect our operating results and lead to volatility
in the price of our common stock. Whether or not determined in our favor or ultimately settled, litigation diverts our managerial,
technical, legal and financial resources from our business operations. Furthermore, an adverse decision in any of these legal
actions could result in a loss of our proprietary rights, subject us to significant liabilities, require us to seek licenses from
others, limit the value of our licensed technology or otherwise negatively impact our stock price or our business and consolidated
financial position, results of operations and cash flows.
Even
if we prevail in our legal actions, significant contingencies may exist to their settlement and final resolution, including the
scope of the liability of each party, our ability to enforce judgments against the parties, the ability and willingness of the
8
parties
to make any payments owed or agreed upon and the dismissal of the legal action by the relevant court, none of which are completely
within our control. Parties that may be obligated to pay us royalties could be insolvent or decide to alter their business activities
or corporate structure, which could affect our ability to collect royalties from such parties.
Our
technologies may infringe on the intellectual property rights of others, which could lead to costly disputes or disruptions
.
The
semiconductor industry is characterized by frequent allegations of intellectual property infringement. Any allegation of infringement
could be time consuming and expensive to defend or resolve, result in substantial diversion of management resources, cause suspension
of operations or force us to enter into royalty, license, or other agreements rather than dispute the merits of such allegation.
Furthermore, third parties making such claims may be able to obtain injunctive or other equitable relief that could block our
ability to further develop or commercialize some or all of our technologies, and the ability of our customers to develop or commercialize
their products incorporating our technologies, in the U.S. and abroad. If patent holders or other holders of intellectual property
initiate legal proceedings, we may be forced into protracted and costly litigation. We may not be successful in defending such
litigation and may not be able to procure any required royalty or license agreements on acceptable terms or at all.
If
we are unable to manage future expansion effectively, our business, operations and financial condition may suffer significantly,
resulting in decreased productivity.
If our MST
®
proves to be
commercially valuable, it is likely that we will experience a rapid growth phase that could place a significant strain on our
managerial, administrative, technical, operational and financial resources. Our organization, procedures and management may not
be adequate to fully support the expansion of our operations or the efficient execution of our business strategy. If we are unable
to manage future expansion effectively, our business, operations and financial condition may suffer significantly, resulting in
decreased productivity.
If
integrated circuits incorporating our technologies are used in defective products, we may be subject to product liability or other
claims
.
If our MST
®
technology is used in defective or malfunctioning
products, we could be sued for damages, especially if the defect or malfunction causes physical harm to people. While we will
endeavor to carry product liability insurance and obtain indemnities from our customers, there can be no assurance that we will
be able to obtain insurance at satisfactory rates or in adequate amounts or that any insurance and customer indemnities will be
adequate to defend against or satisfy any claims made against us. The costs associated with legal proceedings are typically high,
relatively unpredictable and not completely within our control. Even if we consider any such claim to be without merit, significant
contingencies may exist, similar to those summarized in the above risk factor concerning intellectual property litigation, which
could lead us to settle the claim rather than incur the cost of defense and the possibility of an adverse judgment. Product liability
claims in the future, regardless of their ultimate outcome, could have a material adverse effect on our business, financial condition
and reputation, and on our ability to attract and retain licensees and customers.
Risks
Related to this Offering and Owning Our Common Stock
Prior
to the completion of our initial public offering, there was no public trading market for our common stock.
The offering
under this prospectus is an initial public offering of our common shares. Upon the completion of this offering, our common stock
will commence trading on the Nasdaq Capital Market, under the symbol “ATMR.” However, there can be no assurance that
we will be able to successfully develop a liquid market for our common shares. The stock market in general, and early stage public
companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of such companies. If we are unable to develop a market for our common shares, you may not be able
to sell your common shares at prices you consider to be fair or at times that are convenient for you, or at all.
We
are an “emerging growth company” under the JOBS Act of 2012 and we cannot be certain if the reduced disclosure requirements
applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging
growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we may take
advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not
“emerging growth companies” including, but not limited to:
•
not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
•
reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements;
•
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval
of any golden parachute payments; and
•
extended transition periods available for complying with new or revised accounting standards.
9
We
have chosen to “opt out” of the extended transition periods available for complying with new or revised accounting
standards, but we intend to take advantage of all of the other benefits available under the JOBS Act, including the exemptions
discussed above. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common
stock and our stock price may be more volatile.
We
will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues
exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of
our common stock that is held by non-affiliates exceeds $700 million as of any June 30.
Our
status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and when
we need it
. Because of the exemptions from various reporting requirements provided to us as an “emerging growth
company,” we may be less attractive to investors and it may be difficult for us to raise additional capital as and when
we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our reporting
is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it,
our financial condition and results of operations may be materially and adversely affected.
We
have not paid dividends in the past and have no immediate plans to pay dividends
. We plan to reinvest all of our
earnings, to the extent we have earnings, to cover operating costs and otherwise become and remain competitive. We do not plan
to pay any cash dividends with respect to our securities in the foreseeable future. We cannot assure you that we would, at any
time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend.
Therefore, you should not expect to receive cash dividends on the common stock we are offering.
We
will incur significant increased costs as a result of becoming a public company that reports to the Securities and Exchange Commission
and our management will be required to devote substantial time to meet compliance obligations.
As a public company
reporting to the Securities and Exchange Commission, we will incur significant legal, accounting and other expenses that we did
not incur as a private company. We will be subject to reporting requirements of the Securities Exchange Act of 1934 and the Sarbanes-Oxley
Act of 2002, as well as rules subsequently implemented by the Securities and Exchange Commission that impose significant requirements
on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes
in corporate governance practices. In addition, on July 21, 2010, the Dodd-Frank Wall Street Reform and Protection Act was enacted.
There are significant corporate governance and executive compensation-related provisions in the Dodd-Frank Act that are expected
to increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and may also
place undue strain on our personnel, systems and resources. Our management and other personnel will need to devote a substantial
amount of time to these compliance initiatives. In addition, we expect these rules and regulations to make it more difficult and
more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits
and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult
for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers.
Assuming
a market for our common stock develops, shares eligible for future sale may adversely affect the market for our common stock.
All
of our common shares outstanding prior to this offering, including the 6,065,549 common shares issuable upon conversion of our
convertible notes and the 220,182 common shares issuable to certain members of management upon the completion of this offering,
are subject to lock-up agreements whereby the holder has agreed not to sell, transfer or pledge, or offering to do any of the
same, directly or indirectly, any of our securities for a period 180 days following the close of this offering, subject to extensions
under certain circumstances of up to a total of 216 days following our IPO. On the 181
st
day following the close of this offering (subject to the potential extension described above) and on every subsequent 31
st
day thereafter, 15% of such holder’s securities shall be released from the lock-up until the 366
th
day following the close of this offering, as of which none of such holder’s securities shall be subject to
the lock-up. Notwithstanding the lock-up agreements, we have agreed to register for resale 6,065,549 shares of common stock expected
to be issued upon conversion of our convertible notes and 395,369 shares of common stock underlying warrants that are in addition
to the warrants we will issue to the underwriter in connection with this offering. Furthermore, commencing on the 90
th
day following the close of this offering, certain of our stockholders may be eligible to sell all or some of their
shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under
the Securities Act, subject to certain limitations. In general, pursuant to Rule 144, non-affiliate stockholders may sell freely
after six months subject only to the current public information requirement (which disappears after one year). Following the 180
th
day following the close of this offering, our stockholders will be eligible to begin publicly selling their shares
under Rule 144.
10
Any
substantial sale of our common stock pursuant to Rule 144 or pursuant to any resale prospectus (including sales by investors of
securities acquired in connection with this offering) may have a material adverse effect on the market price of our common stock.
You
will experience immediate dilution in the book value per share of the common stock you purchase.
Because the price
per share of our common stock being offered is substantially higher than the book value per share of our common stock, you will
experience substantial dilution in the net tangible book value of the common stock you purchase in this offering. Based on the
offering price of $7.50 per share, if you purchase shares of common stock in this offering, you will experience immediate and
substantial dilution of $5.27 per share in the net tangible book value of the common stock at March 31, 2016.
Our
charter documents and Delaware law may inhibit a takeover that stockholders consider favorable.
Upon the closing
of this offering, provisions of our Certificate of Incorporation (“Certificate”) and bylaws and applicable provisions
of Delaware law may delay or discourage transactions involving an actual or potential change in control or change in our management,
including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders
might otherwise deem to be in their best interests. The provisions in our Certificate and bylaws:
•
limit who may call stockholder meetings;
•
do not permit stockholders to act by written consent;
•
do not provide for cumulative voting rights; and
•
provide that all vacancies may be filled by the affirmative vote of a majority of directors then in office, even if less
than a quorum.
In
addition, once we become a publicly traded corporation, Section 203 of the Delaware General Corporation Law may limit our ability
to engage in any business combination with a person who beneficially owns 15% or more of our outstanding voting stock unless certain
conditions are satisfied. This restriction lasts for a period of three years following the share acquisition. These provisions
may have the effect of entrenching our management team and may deprive you of the opportunity to sell your shares to potential
acquirers at a premium over prevailing prices. This potential inability to obtain a control premium could reduce the price of
our common stock.
Our
bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain litigation that may
be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes
with the Company
. Our bylaws provide that, unless we consent in writing to the selection of an alternative forum,
the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding
brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or
other employees to us or our stockholders, (iii) any action asserting a claim against us or any our directors, officers or other
employees arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws,
or (iv) any action asserting a claim against us or any our directors, officers or other employees governed by the internal affairs
doctrine. This forum selection provision in our bylaws may limit our stockholders’ ability to obtain a favorable judicial
forum for disputes with us or any our directors, officers or other employees.
Our
board of directors may issue blank check preferred stock, which may affect the voting rights of our holders and could deter or
delay an attempt to obtain control of us.
Our board of directors is authorized, without stockholder approval, to
issue preferred stock in series and to fix and state the voting rights and powers, designation, preferences and relative, participating,
optional or other special rights of the shares of each such series and the qualifications, limitations and restrictions thereof.
Preferred stock may rank prior to our common stock with respect to dividends rights, liquidation preferences, or both, and may
have full or limited voting rights. Accordingly, issuance of shares of preferred stock could adversely affect the voting power
of holders of our common stock and could have the effect of deterring or delaying an attempt to obtain control of us.
11
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Our Business,”
contains forward-looking statements. The words “believe,” “may,” “will,” “potentially,”
“estimate,” “continue,” “anticipate,” “intend,” “could,” “would,”
“project,” “plan,” “expect” and similar expressions that convey uncertainty of future events
or outcomes are intended to identify forward-looking statements. These forward-looking statements include, but are not limited
to, statements concerning the following:
•
our future financial and operating results;
•
our intentions, expectations and beliefs regarding anticipated growth, market penetration and trends in our business;
•
the timing and success of our plan of commercialization;
•
our ability to operate our royalty-based business model;
•
the adequacy of the net proceeds of this offering;
•
the effects of market conditions on our stock price and operating results;
•
our ability to maintain our competitive technological advantages against competitors in our industry;
•
our ability to have our technology solutions gain market acceptance;
•
our ability to maintain, protect and enhance our intellectual property;
•
the effects of increased competition in our market and our ability to compete effectively;
•
our plans to use the proceeds from this offering;
•
costs associated with initiating and defending intellectual property infringement and other claims;
•
our expectations concerning our relationships with potential customers, partners and other third parties;
•
the attraction and retention of qualified employees and key personnel;
•
future acquisitions of or investments in complementary companies or technologies; and
•
our ability to comply with evolving legal standards and regulations, particularly concerning requirements for being a public
company.
These
forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk
Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment,
and new risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors
on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking
events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from
those anticipated or implied in our forward-looking statements.
You
should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected
in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance
or events and circumstances described in the forward-looking statements will be achieved or occur. Moreover, neither we nor any
other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation
to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements
to actual results or to changes in our expectations, except as required by law.
You
should read this prospectus and the documents that we reference in this prospectus and have filed with the Securities and Exchange
Commission as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual
future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
12
INDUSTRY AND MARKET DATA
This
prospectus contains statistical data, estimates, and forecasts that are based on independent industry, government and non-government
organization publications or other publicly available information, as well as other information based on our internal sources.
Although we believe that the third-party sources referred to in this prospectus are reliable, estimates as they relate to projections
involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including
those discussed under the section titled “Risk Factors” and elsewhere in this prospectus. These and other factors
could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
Certain
information in the text of this prospectus is contained in independent industry government and non-governmental organizational
publications. The sources of these publications are provided below:
•
IC Insights, Inc.,
The McClean Report 2016
•
IC Insights, Inc.,
Integrated Circuit Market Drivers 2016
•
IC Insights, Inc.,
Global Wafer Capacity 2015-2019
•
IC Knowledge LLC,
The Strategic Forecast Report 2015
13
OUR BUSINESS
General
We
are engaged in the business of developing, commercializing and licensing proprietary processes and technologies for the $350+
billion semiconductor industry. Our lead technology, named Mears Silicon Technology™, or MST
®
,
is a thin film of reengineered silicon, typically 100 to 300 angstroms (or approximately 20 to 60 silicon atomic unit cells) thick.
MST
®
can be applied as a transistor channel enhancement to CMOS-type transistors,
the most widely used transistor type in the semiconductor industry. MST
®
is
our proprietary and patent protected performance enhancement technology that we believe addresses a number of key engineering
challenges facing the semiconductor industry. We believe that by incorporating MST
®
,
transistors made with CMOS technology can be smaller, with increased speed, reliability and energy efficiency. In addition, since
MST
®
is an additive and low cost technology, it can be deployed on an industrial
scale, with machines commonly used in semiconductor manufacturing. We believe that MST
®
can be widely incorporated into the most common types of semiconductor products, including analog, logic, optical
and memory integrated circuits.
We
do not intend to design or manufacture integrated circuits directly. Instead, we intend to develop and license technologies and
processes that will offer the designers and manufacturers of integrated circuits a low-cost solution to the industry need for
greater performance and lower power consumption.
In
the mid-1980s, our founder, Dr. Robert Mears, was part of a team that re-engineered silica optical fiber to invent the erbium-doped
fiber amplifier, or EDFA, a technology that increased the bandwidth of optical fiber more than 1,000 times. The invention of EDFA
helped to revolutionize the development of broadband and to this day remains a key technology in the multi-hundred billion dollar
optical communications industry. Dr. Mears anticipated scaling problems for silicon semiconductors and founded Atomera Incorporated
in order to address those problems for the semiconductor industry.
Over
the last ten years, we have undertaken significant laboratory testing and engaged with a range of semiconductor industry and academic
technology leaders to evaluate MST
®
performance on test chips in
industrial fabrication environments. We believe this testing has demonstrated that MST
®
offers performance benefits, including increased speed, reliability and energy efficiency, beyond and in most cases
additive to those provided by already successful semiconductor performance enhancement technologies, such as dual stress liners
and source/drain channel stressors, such as eSiGe/eSiC, and can be implemented without significant additional cost or significant
modification to the current semiconductor fabrication process.
We
are now in the process of transitioning our MST
®
toward commercial
adoption. We are currently in the process qualification stage with leading integrated device manufacturers, or IDMs, and foundries.
The IDMs and foundries are our intended initial customers and by way of the process qualification stage they test and evaluate
the potential incorporation of our MST
®
technology into the integrated
circuits they produce. We are also partnering with manufacturers of semiconductor fabrication equipment and developers of modeling
tools. These parties are part of a semiconductor infrastructure supporting the industry with capital equipment for transistor
production and transistor process modeling software, and we are in discussions with certain equipment manufacturers and tool developers
concerning their incorporation of our MST
®
technology into the equipment
and tools they offer to the industry. We also intend to market our MST® technology to fabless semiconductor manufacturers
concerning their incorporation of MST® into the integrated circuits they design. Assuming the timely and successful completion
of process and the subsequent product qualification by customers and partners, we expect revenue based on sales of MST
®
enabled products in 2017.
We
believe that the technologies underlying MST
®
are part of a larger platform
of reengineered materials that have potential application beyond CMOS, including:
•
faster and more efficient nano-structured semiconductor materials for electronic applications;
•
enhanced nano-structured materials for application in photonics;
•
improved magnetic materials for advanced memory; and
•
more responsive “lead-free” piezo-electric materials (commonly used in antenna and transducers).
Industry
Overview
Semiconductors,
Generally
Recent
years have seen a remarkable proliferation of consumer and commercial products, especially in wireless, automotive and mobile
electronic devices. The growth of the Internet and cloud computing has provided people with new ways to create, store
14
and
share information. At the same time, the increasing use of electronics in cars, buildings, appliances and other consumer products
is creating a broad landscape of “smart” devices and the evolution of wearable technologies and The Internet of Things.
These
developments depend, in large part, on integrated circuits, or microchips, which are sets of electronic circuits on a single chip
of semiconductor material, normally silicon. It is common for a single semiconductor chip to combine many components (processor,
communications, memory, custom logic, input/output) resulting in highly complex chip designs. Transistors are the building blocks
of integrated circuits and the most complex semiconductor chips today contain more than a billion transistors, each of which may
have features that are much less than 1/1,000
th
the diameter of a human hair.
The
most widely used transistors in semiconductor chips today are based on the complementary metal-oxide-semiconductor, or CMOS, technology.
Among its many attributes, CMOS allows for a higher density of transistors on a chip and lower power usage than non-CMOS technologies.
The
Pursuit of Increased Semiconductor Performance
For
years, the semiconductor industry was able to almost double the number of transistors it can pack into a single microchip about
every two years, a rate of improvement commonly known as “Moore’s Law.” The semiconductor industry uses the
term “node” to describe the minimum line width or geometry on a semiconductor chip, expressed in nanometers (nm) for
today’s technologies. Historically, the smaller the node, the smaller the transistors and the more closely they are packed
together, producing chips that are denser and thus less costly on a per-transistor basis. Frequently, smaller nodes also correspond
to an improvement in chip performance, making them the mile markers of Moore’s Law, with each node marking a new generation
of chip-manufacturing technology.
Until
recently, the industry succeeded at maintaining the rate of improvement predicted by Moore’s Law by scaling the key transistor
parameters, such as shrinking feature sizes and operating voltages, thereby allowing more transistors to be packed onto a single
microchip. This trend was facilitated in large part by the development of the CMOS technologies. However, a discontinuity in the
rate of improvement delivered by scaling appeared a few years ago when transistor technology reached deep sub-micron levels with
transistor features below 100 nanometers. The industry responded with advanced materials to supplement the ongoing geometry shrinks.
Some of those materials advances included strained silicon, Silicon on Insulator and High-K/Metal Gate.
In
addition, due to the popularity of mobile devices and other electronic products, there is increasing demand for integrated circuits
and systems with greater functionality and performance, reduced size, and much less power consumption as key requirements.
The
designers and manufacturers of integrated circuits and systems — our potential customers — are facing intense pressure
to deliver innovative products at ever shorter times-to-market, as well as at lower prices. In other words, innovation in chip
and system design today often hinges on “better, sooner and cheaper.” We believe that the semiconductor industry has
accepted that to move forward in the nano-era, progress will require adoption of new innovations that extend the scaling formula,
including those based on the use of new engineered materials, a market opportunity our MST
®
technology seeks to address. Because shrinking geometries at the smaller nodes incurs higher capital and manufacturing
costs, only limited products can take on the increased cost burden and still be economically viable. We believe cost sensitive
devices will turn to engineered materials, like MST
®
, to solve this problem.
Disaggregation
of the Industry
In
trying to keep research and development costs manageable, while attempting to satisfy the demand for increasingly complex semiconductors,
certain designers and manufacturers of integrated circuits have transitioned to an open innovation model in which competing companies
and third-party providers actively collaborate to address performance issues through various alliances, joint ventures, and licensing
of externally developed technology.
Historically,
most semiconductor companies were vertically integrated. They designed, fabricated, packaged and tested their semiconductors using
internally developed software design tools and manufacturing processes and equipment. As the cost and skills required for designing
and manufacturing complex semiconductors have increased, the semiconductor industry has become disaggregated, with companies concentrating
on one or more individual stages of the semiconductor development and production process. This disaggregation has fueled the growth
of fabless semiconductor companies, design tool vendors, semiconductor equipment manufacturers, third-party semiconductor manufacturers
(or foundries), semiconductor assembly, package and test companies, and intellectual property companies that develop and license
technology to others.
15
While
specialization has enabled greater development and manufacturing efficiency, it has also created an opportunity for IP-based companies,
such as Atomera Incorporated, that develop and license technology to meet fundamental, industry-wide challenges. These intellectual
property companies have been able to gain broad adoption of their technology throughout the industry by working with companies
within the semiconductor supply chain to evaluate and integrate their technology. Oftentimes, the industry will share in the large
up-front development cost of these technologies in exchange for a lower licensing fee or royalty. We believe this collaboration
and integration benefits semiconductor companies by enabling them to bring new technology to market faster and more cost-effectively,
without having to make the investment alone.
Our
Initial Application of Mears Silicon Technology
The
initial application of our MST
®
will be for CMOS integrated circuits, the most
widely used type of integrated circuits in the semiconductor industry. As applied to CMOS-type transistors, MST
®
is a thin film of reengineered silicon, typically 100 to 300 angstroms (or approximately 20 to 60 silicon atomic
cell units) thick, that functions as a transistor channel enhancement. We believe MST
®
has the potential to overcome the key challenges found in the implementation of next generation nano-scale semiconductor devices
incorporating CMOS-type transistors, namely enhancing drive current, reducing gate leakage and reducing variability. In addition,
we believe that MST
®
has the potential to deliver these benefits through a
single technology that requires relatively minor modifications to the industry standard CMOS manufacturing flow. Consequently,
we believe that by incorporating MST
®
, designers can make transistors with
increased speed, reliability and energy efficiency, without significantly altering the current fabrication process or cost of
production.
As
illustrated by the accompanying diagram, MST
®
is a “silicon-on-silicon”
solution that provides multiple benefits through a relatively simple modification to the standard CMOS manufacturing flow. MST
®
improvements are delivered through our proprietary and patent protected silicon band engineering approach that is
based on the quantum mechanics of modern deep sub-micron devices. The MST
®
film creates channels that allow electrons to flow more freely in the plane of the transistor, thereby enhancing drive current,
while reducing electron flow or “leakage” in the transverse direction. Our MST
®
film can also create more controlled doping profiles which allow dopants to be held in the desired locations, thereby
reducing variability and improving production yield.
We
believe we have demonstrated in simulations and on test chips that MST
®
provides performance enhancements, including increased speed, reliability and energy efficiency, to most CMOS type transistors
equivalent to the enhancements enabled by approximately one-half to a full node of improvement depending on the device technology
and application and, therefore, it enables life extension to capital equipment and wafer fabrication facilities. We believe that
MST
®
CMOS compares favorably to other performance enhancing alternatives
as follows:
•
Strained Silicon and Silicon-on-Insulator, or SOI
: Unlike
strained silicon or SOI, we believe that MST
®
delivers in a single film multiple
benefits at once and in a cost effective manner, including enhanced transistor drive current, reduced leakage, and reduced variability.
Also, strained silicon tends to lose much of its effectiveness below 45nm, constraining its scalability, while the MST
®
thin film approach is expected to be scalable below 22nm. Also, based on our own research and development and third-party
evaluations, we believe that MST
®
can deliver improved cost-benefit performance,
in most cases in an additive manner, compared to already successful strain technologies, such as dual stress liners and SiGe.
16
•
High-K/Metal Gate, or HKMG
: Unlike HKMG, MST
®
is silicon-based. As a “silicon-on-silicon” solution, MST
®
does
not require new materials or equipment, which in our opinion makes it much easier and less costly to adopt than HKMG for devices
not requiring ultra-thin gate dielectrics. For devices with HKMG, we believe MST
®
still benefits transistor performance and variability in a similar manner to that observed in non-HKMG devices.
Because
of its physical characteristics in the channel region of the transistor, we believe MST
®
has the further benefit of being complementary and additive to the performance enhancing technologies noted above,
making MST
®
broadly applicable across multiple devices and process flows to
meet a wide variety of customer design objectives. Given the increasingly difficult economic challenges faced by the industry
while moving to more advanced technologies, we believe one of the most compelling aspect of MST
®
may be its cost/benefit profile. We believe that MST
®
will provide
a lower cost of production due to our technology’s potential to reduce die size while leveraging existing manufacturing
tools, thereby providing chip makers with increased performance at all process nodes with significantly fewer disruptions to manufacturing
processes and less incremental cost than other advanced technologies.
We
believe MST
®
properties can improve transistor performance in a variety of
device types including microprocessors; logic products; DRAM, SRAM, and other memory integrated circuits; as well as analog, radio
frequency, and mixed-signal devices. We have therefore developed different MST
®
product options that can be applied to the critical industry segments and technology nodes. As of the date of this prospectus,
we have done technology simulation work with universities and leading industry players at nodes from 180nm to 7nm. We have also
simulated devices with leading industry research facilities and built and electrically verified test chips using MST
®
in customer manufacturing facilities which have produced results that demonstrate many of the benefits described
above.
MST
®
Commercialization
We
do not intend to design or manufacture integrated circuits directly. Instead, we intend to develop and license technologies and
processes that will offer the designers and manufacturers of integrated circuits a low-cost solution to the industry need for
increased performance. Our customers and partners are expected to include:
•
integrated device manufacturers, or IDMs, which are the fully integrated designers and manufacturers of integrated circuits;
•
fabless semiconductor manufacturers, which are designers of integrated circuits who outsource the manufacture of their
chips to third-party contract semiconductor manufacturers, or foundries;
•
foundries, which manufacture integrated circuits on behalf of fabless manufacturers;
•
original equipment manufacturers, or OEMs, that manufacture the epitaxial, or EPI, machines used to deposit semiconductor
layers, such as the MST
®
onto the base silicon wafer; and
•
electronic design automation companies, which make tools used throughout the industry to simulate performance of semiconductor
products using different materials, design structures and process technologies.
We
intend to generate revenue through licensing arrangements whereby foundries and IDMs pay us a license fee for their use of MST
®
technology in the manufacture of silicon wafers as well as a royalty for each silicon wafer or device that incorporates
our MST
®
technology. We also intend to enter into licensing arrangements with
fabless semiconductor manufacturers pursuant to which we will charge them a royalty for each device they sell that incorporates
our MST® technology. The IDMs and fabless semiconductor manufacturers are the primary beneficiaries of our commercialization
activities, as they are producers and distributors of the integrated circuits onto which we will endeavor to incorporate our MST
®
technology. The foundries and OEMs also play an important role in our commercialization strategy in that these parties
have traditionally sought to provide new technologies to their customers, which in the case of the foundries are the fabless semiconductor
manufacturers and in the case of the OEMs are the IDMs and foundries that purchase EPI machines.
In
the semiconductor industry, new technologies are vetted thoroughly and carefully by early adopters but, once proven, tend to be
adopted broadly by the industry and, wherever possible, exploited for several generations until their full potential is reached.
Before introducing a new technology into its fabrication process, the customer will conduct a formal and rigorous multi-step product
qualification, which can range from 18 to 36 months. Major qualification steps typically include:
•
process qualification — the integration of process steps or process segments to deliver the expected electrical results
from test chips that provide the specification data base for design of integrated circuits;
17
•
wafer level reliability qualification — demonstration of reliability indices under accelerated test condition that
allow extraction of acceleration factors and life time predictions of specific process components for a given technology; and
•
product qualification — the qualification of packaged and fully functional integrated circuit devices including reliability
performance.
We
believe that our success is dependent upon the adoption of our MST
®
technology
by at least one IDM, foundry, or fabless semiconductor manufacturer. MST
®
is
currently undergoing process qualification by potential customers, including foundries and IDM manufacturers. Subject to process
and subsequent product qualifications that demonstrate, in commercial scale production, the enhancements we believe our MST®
technology offers, including increased speed, reliability and energy efficiency, we expect to license our MST
®
technology to the customer. We are also engaged at different stages of customer development with other potential
customers.
We
are also undergoing process development and equipment certification with OEMs. If we meet the development and certification requirements
of the OEMs, we believe they will promote the incorporation of our MST
®
technology in the OEM’s EPI machines as an option to their standard offering. By doing so, we believe they will simultaneously
stimulate additional sales of their capital equipment and encourage more customers to adopt MST
®
.
We
market our MST
®
technology directly to the semiconductor industry through our
significant industry contacts and relationships. We also sponsor academic research and participate in industry conferences and
associations. In certain foreign jurisdictions, we engage sales representatives to pursue and assist us in establishing relationships
with local customers.
Competition
Our
lead product, MST
®
, is a proprietary and patent protected performance enhancement
technology that we believe addresses a number of key engineering challenges facing the semiconductor industry. We compete with
IDMs, OEMs, foundries, fabless manufacturers of semiconductors and semiconductor IP licensing companies, for the development and
commercialization of technologies that improve the performance of semiconductors. Historically, when a new fabrication process
proves to be a low-cost improvement to the standard fabrication process, and is additive, rather than in place of other performance
technologies, it has been successfully adopted industry-wide. Good examples of such advances have been strained silicon, such
as SiGe. We believe that MST
®
has the potential to be one of these low-cost
additive technologies, in which case MST
®
would not be subject to significant
direct competition from other technologies.
Research
and Development
We
are focused on designing and developing engineered semiconductor material technologies and processes for the semiconductor and
other industries. We believe that our success depends in part on our ability to achieve the following in a cost-effective and
timely manner:
•
develop new technologies that meet the changing needs of the semiconductor industry;
•
improve our existing technologies to enable growth into new application areas; and
•
expand our intellectual property portfolio.
Our
research and development is conducted internally, however we work closely with third parties in the semiconductor industry to
evaluate and qualify our technology for incorporation into semiconductor products and fabrication equipment. During the 2015 and
2014 fiscal years, we incurred research and development expenses of $2,022,133 and $1,853,091, respectively. During the three
month periods ended March 31, 2016 and 2015, we incurred research and development expenses of $945,891 and $519,452, respectively.
Intellectual
Property Rights
We
regard the protection of our technologies and intellectual property rights as an important element of our business operations
and crucial to our success. We rely primarily on a combination of patent laws, trade secrets, confidentiality procedures, and
contractual provisions to protect our proprietary technology. We require our employees, consultants, and advisors to enter into
confidentiality agreements. These agreements provide that all confidential information developed or made known to the individual
during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties
except under specific circumstances. In the case of our employees and certain consultants, the agreements provide that all of
the technology that is conceived by the individual during the course of employment is our exclusive property. The development
of our technology and many of our processes are dependent upon the knowledge, experience, and skills of key scientific and technical
personnel.
18
We
have been issued a significant number of patents, with more than 50 patents granted in the U.S. and more than 50 abroad. Our core
patents relating to MST
®
cover materials, physical structures and
manufacturing processes. Our core patents relating to MST
®
were
filed beginning on August 22, 2003 and have grant dates beginning on December 14, 2004. Our MST patent portfolio begins
to expire commencing August 22, 2023. While we believe our core patents adequately block competitors from using our MST
®
without our approval, there can be no assurance that one or more of our core patents may not survive a legal challenge
to their scope, validity, or enforceability, or provide significant protection for us. The failure of our patents, or the failure
of trade secret laws, to adequately protect our technology, might make it easier for our competitors to offer similar products
or technologies. In addition, patents may not issue from any of our current or any future applications.
We
also hold registered trademarks in the United States for the mark “MST” and in China for the mark “Mears”.
We have applied with the U.S. Patent and Trademark Office for the registration of the mark “Atomera” in the United
States.
We
have entered into an Exclusive License and Collaboration Agreement dated March 3, 2010 with K2 Energy Limited, an energy resource
company located in Sydney, Australia, pursuant to which we have granted K2 Energy an exclusive, world-wide, royalty bearing license
to commercialize our MST
®
in the field of photovoltaic devices and all solar
energy applications. The license agreement is for a term co-terminus with the licensed patents and requires K2 Energy to pay us
royalties in the amount of 50% of all net revenue derived by K2 Energy under our license, with net revenue generally defined as
gross revenue less all costs associated with the production and sale of the licensed product. As part of the license agreement,
K2 Energy made a $1 million investment in our Company and funded $2.7 million of research into the solar applications of our technology.
We
have also entered into a License Agreement dated December 22, 2006 with ASM International, NV, a semiconductor OEM located in
Almere, The Netherlands, pursuant to which ASM has granted to us a non-exclusive, worldwide license to make, and sublicense others
to make, semiconductor devices using certain ASM patents. The ASM license restricts us and our sublicensees from using the ASM
licensed rights in the manufacture of EPI machines or any other machines used to manufacture semiconductors. The ASM license is
coterminous with patents licensed by ASM, which expires on January 8, 2019, and requires us to pay ASM a royalty of 5% of net
royalty revenue, generally defined as gross royalty revenue less certain customer offsets and credits, from the sale of any product
incorporating the ASM licensed patents not manufactured on ASM equipment and a royalty of 2.5% of net revenue from the sale of
any product incorporating ASM licensed patents manufactured on ASM equipment. As of the date of this prospectus, all semiconductor
devices incorporating our MST
®
technology manufactured prior to
January 8, 2019 will be subject to the ASM license royalty.
Employees
As
of the date of this prospectus, we employ 12 people on a full-time basis, including our four executive officers, seven technical
staff and one general and administrative employee.
Property
Our
executive offices are presently located in a 3,396 square foot facility in Los Gatos, California pursuant to a two-year lease,
expiring on January 31, 2018, at the rate of $12,395 per month, which will increase to $13,074 per month commencing February 1,
2017.
We
also lease approximately 1,730 square feet in Wellesley Hills, Massachusetts from which we conduct certain research activities.
The Wellesley Hills facilities are occupied pursuant to a one-year lease expiring November 30, 2016 at a lease rate of $4,613
per month.
Litigation
Except
as described below, there are no pending legal proceedings to which we or our properties are subject.
In
May 2013, we initiated a civil action in U.S. federal court against Finisar Corporation, a Sunnyvale, California based manufacturer
of optical communication products, alleging that Finisar’s manufacture and sale of certain products infringe on U.S. Patent
No. 6,141,361 owned by us. Mears Technologies, Inc. v. Finisar Corporation, No. 2:13-cv-00376 (E.D. Tex.). On December 30, 2014,
the court entered an order granting summary judgment in favor of Finisar on the issue of whether Finisar is infringing our patents,
and on December 14, 2015 the final judgment was entered and we agreed to pay approximately $47,000 for costs related to the lawsuit,
which we paid in January 2016. We have filed an appeal of that judgment with the United States Court of Appeals for the Federal
Circuit.
Following the trial
court’s entry of the December 2014 order granting summary judgment in favor of Finisar, in January 2015 Finisar filed a
motion with the court to recover from us its attorney’s fees and costs. The court denied Finisar’s motion for
reimbursement of fees and costs in December 2015. In January 2016, Finisar filed an appeal of the trial court’s denial
of its motion for fees and costs with the United States Court of Appeals for the Federal Circuit. As of the date of this
prospectus, we are unable to predict the outcome of our appeal of the judgment in Finisar’s favor.
19
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
We
are engaged in the business of developing, commercializing and licensing proprietary processes and technologies for the $350+
billion semiconductor industry. We were organized as a Delaware limited liability company under the name Nanovis LLC on November
26, 2001. On March 13, 2007, we converted to a Delaware corporation under the name Mears Technologies, Inc. On January 12, 2016,
we changed our name to Atomera Incorporated.
Since
our formation, we have focused our efforts on the research, development, patent protection, and commercialization of our processes
and technologies, including our proprietary and patent-protected MST
®
performance
enhancement technology. We have undertaken significant laboratory testing and engaged with a range of semiconductor industry technology
leaders to evaluate and characterize MST
®
performance in industrial fabrication
environments. We believe that this testing has demonstrated that MST
®
-enabled
transistors can be made smaller and with increased speed, reliability and energy efficiency. In addition, we believe that this
testing shows that MST
®
can be deployed on a low-cost, industrial scale using
machines already employed in semiconductor manufacturing.
On
March 17, 2015, we completed the private placement of $14.75 million in senior secured convertible promissory notes and on April
1, 2016 we completed the private placement of an additional $5.96 million in senior secured convertible notes on the same terms
as the promissory notes placed in March 2015. We refer to there promissory notes in this prospectus as our “convertible
notes.” We issued the March 2015 convertible notes for cash consideration of $7.4 million and the exchange for previously
issued promissory notes that at the time of exchange had principal and accrued interest in the aggregate amount of $7.35 million.
As a result, we have issued and outstanding convertible notes in the aggregate principal amount of $20,708,433 with accrued and
unpaid interest as of March 31, 2016 in the amount of $2,037,377.
Interest
on our convertible notes accrues on the unpaid principal at the rate of 10% per year, except during any event of default under
the convertible notes in which case the interest rate shall be 12% per year. All principal and interest under the convertible
notes are due and payable on May 31, 2017. All principal and interest under the convertible notes are convertible into shares
of common stock as follows:
•
Upon the consummation of an initial public offering by us, all principal and interest shall automatically convert at 50%
of the IPO price, provided, however, in no event shall the conversion price be greater than $7.362 nor less than $3.681 per share;
•
In the event of a subsequent private placement approved by the holders of 50% or more of the aggregate principal amount
of all convertible notes, all principal and interest shall automatically convert at 50% of the offer price in the subsequent private
placement, provided, however, in no event shall the conversion price be greater than $7.362 nor less than $3.681 per share; and
•
Until the 10
th
day prior to the consummation of an IPO by us, a holder of
a convertible note, at its option, may convert at a conversion price of $7.362 per share.
Pursuant
to the terms of our convertible notes, all principal and accrued interest under the notes will automatically convert into 6,065,549
shares of our common stock, at the conversion price of $3.75 per share, upon the completion of this offering.
During
O
ctober 2015, we conducted a recapitalization of our
outstanding options and warrants to purchase shares of our common stock. Pursuant to the recapitalization, we offered all holders
of our options and warrants as of December 31, 2014 a one-time opportunity to exchange their options and warrants for shares of
our common stock at a ratio of two options or warrants for one share of common stock regardless of exercise price. The offer resulted
in 166,230 options and 601,861 warrants converting to a total of 384,045 shares of common stock. In connection with the recapitalization,
we incurred a one-time non-cash charge of $2,088,542 in the fourth quarter of 2015 relating to our loss on the exchange of the
options and warrants for the common stock.
On
December 11, 2015, we effected a 1-for-15 reverse stock split of our common stock. All historical share amounts and share price
information presented in this prospectus have been proportionally adjusted to reflect the impact of this reverse stock split.
Plan
of Operations
Our
plan of operations for the 12 months following the completion of this offering will focus on securing one or more foundries, IDMs
or fabless semiconductor manufacturers to qualify and license our MST
®
technology and start full-scale industrial production of a device that incorporates our MST
®
technology. We will also continue our research into new applications and materials. We intend to develop marketing
tools to expand our potential customer base. These tools will include process and product simulation models which will help potential
customers understand the benefits of MST
®
and how to implement it
in their factories, as well as more comprehensive data showing the improvements that MST
®
can bring to specific classes of semiconductor devices. During the 12 months following this offering, we expect to
hire up to six additional employees, including four additional development engineers and two additional business development and
sales persons in order to support the increased marketing and qualification of our MST
®
technology to a wider set of customers and markets. We also intend to expand our patent portfolio through additional
patent applications, both US and foreign.
20
Results
of Operations
We
have not commenced revenue-producing operations. To date, our operations have
focused on the research, development, patent
protection, and commercialization of our processes and technologies, including our proprietary and patent-protected MST
®
performance enhancement technology,
and the development of our business plan.
For the fiscal years ended December 31, 2015 and 2014, we incurred $2,022,133 and $1,853,091, respectively, of research and development
expense related to ongoing efforts to evaluate and qualify our technology. Other expenses for the 2015 fiscal year were $4,020,270,
consisting of $2,088,542 loss on the exchange of our warrants and options into shares of common stock and $1,931,728 of interest
expense on our convertible notes. During the prior year period, other expenses consisted of $560,310 of interest expense related
to our convertible note financing. We also incurred during our 2015 fiscal year $3,441,149 of general and administrative expense,
consisting primarily of $1,435,977 of consulting expense, $1,015,848 of which represents the estimated fair value of the warrant
issued to Liquid Patent Advisors for advisory services performed in 2015, $699,094 of legal expense and $308,442 of payroll expense.
During the prior year period, we incurred $1,402,879 of general and administrative expense, consisting primarily of $509,197 of
legal fees, $385,613 of consulting expense and $191,480 of payroll expense.
We incurred a net loss of $9,512,141 for the
fiscal year ended December 31, 2015 and a net loss of $3,817,734 for the prior year period.
For
the three month periods ended March 31, 2016 and 2015, we incurred $945,891 and $519,452, respectively, of research and development
expense related to ongoing efforts to evaluate and qualify our technology. During the three months ended March 31, 2016, we incurred
$861,119 of general and administrative expense, consisting of $433,860 of payroll expense and $288,423 of professional services
for legal, audit and tax. Payroll expense for the three months ended March 31, 2016 includes $187,500 in bonus expense in connection
with the settlement of a loan to an officer as described further in “
Management-Related Party Transactions
.”
During the prior year period, we incurred $1,698,781 of general administrative expense, consisting of $1,113,737 of consulting
expense (of which $1,015,848 represented the fair value of the warrant granted to Liquid Patent Advisors), $222,743 of legal expense
and $54,390 of payroll expense. Other expenses for the three months ended March 31, 2016 and 2015 included $562,167 and $232,869,
respectively, of interest expense, net of interest income, relating to our convertible note financing. We incurred a net loss
of $2,488,187 for the three months ended March 31, 2016 and a net loss of $2,460,749 for the prior year period.
Financial
Condition
As
of March 31, 2016, we had total assets of $1,799,805 and a working capital deficit of $15,604,022. The assets and working capital
deficit do not include our placement of $5.96 million of convertible notes which closed on April 1, 2016 or our receipt of net
cash proceeds of $5.47 million from the sale of such notes. We believe that the net proceeds of this offering, combined with the
net proceeds of our placement of convertible notes on April 1, 2016 and the conversion of approximately $22.74 million of debt
to equity concurrent with the close of this offering, will be sufficient to fund our presently forecasted working capital requirements
over, at least, the 12 months following the date of this prospectus. We also believe that we require a minimum of $15 million
of additional capital in order to fund our current business plan, including securing one or more foundries, IDMs or fabless semiconductor
manufacturers to qualify and license our MST
®
technology and start full-scale
industrial production of a device that incorporates our MST
®
technology. However,
we may require additional capital in order to get to full-scale industrial production of a device that incorporates our MST
®
technology the receipt of which there can be no assurance. In the event we require additional capital over and above
the $15 million, we will endeavor to acquire additional funds through various financing sources, including follow-on equity offering,
debt financing, licensing fees for our technology and joint ventures with industry partners. In addition, we will consider alternatives
to our current business plan that may enable to us to achieve revenue producing operations and meaningful commercial success with
a smaller amount of capital. However, there can be no guarantees that such funds will be available on commercially reasonable
terms, if at all. If such financing is not available on satisfactory terms, we may be unable to further pursue our business plan
and we may be unable to continue operations.
The
report of our independent registered public accounting firm for the year ended December 31, 2015 states that due to our recurring
and expected losses and cash on-hand there is substantial doubt about our ability to continue as a going concern.
Off
Balance Sheet Transactions
We
do not have any off-balance sheet transactions.
21
MANAGEMENT
Set
forth below are our directors and officers:
|
|
|
|
|
|
|
John
Gerber
|
|
54
|
|
Chairman
of the Board
|
|
Scott
Bibaud
|
|
53
|
|
Chief
Executive Officer, President and Director
|
|
Erwin
Trautmann
|
|
68
|
|
Executive
Vice President of Strategic Business Development and Director
|
|
Dr.
Robert Mears
|
|
55
|
|
Chief
Technology Officer
|
|
Francis
Laurencio
|
|
47
|
|
Chief
Financial and Accounting Officer
|
|
C.
Rinn Cleavelin, Ph.D.
|
|
73
|
|
Director
|
|
Rolf
Stadheim
|
|
76
|
|
Director
|
John
Gerber
has served as a member of our board of directors since 2007 and chairman of the board since 2011. For the past five
years, Mr. Gerber has served as managing partner of Four Points, a specialty investment group with more than $1.8 billion of investment
and capital transaction experience across 40 real estate and venture capital investments. He has diversified experience in corporate
and project management, project and venture finance and development. Mr. Gerber has a BSE degree magna cum laude from Princeton
University and a masters degree from Harvard University.
Mr.
Gerber has experience as a director of multiple companies and has extensive investing experience, in addition to significant leadership
and strategic planning skills. As a result of these and other professional experiences, our board of directors has concluded that
Mr. Gerber is qualified to serve as a director.
Scott
Bibaud
has served as our president, chief executive officer and a director since October 2015. Mr. Bibaud has been active
in the semiconductor industry for over twenty years. From June 2012 to August 2015, he was senior vice president and general manager
of Altera’s Communications and Broadcast Division. Prior to that, he was executive vice president and general manager of
the mobile platforms group at Broadcom from June 2000 to May 2011. Mr. Bibaud received a B.S. degree in electrical engineering
from Rensselaer Polytechnic Institute and an MBA from Harvard University.
Mr.
Bibaud has extensive experience in and knowledge of the semiconductor industry. As a result of these and other professional experiences,
our board of directors has concluded that Mr. Bibaud is qualified to serve as a director.
Erwin
Trautmann
has served as our executive vice president of strategic business development since October 2015, and from September
2011 to October 2015 he served as our chief executive officer. Mr. Trautmann has also served as a member of our board of directors
since September 2011. Mr. Trautmann has held executive positions at several Fortune 500 companies. From November 1999 to December
2005, Mr. Trautmann served as a senior vice president for KLA-Tencor, where he was most recently responsible for the global service
and support division. From April 1980 to October 1998, Mr. Trautmann held various executive level positions with Texas Instruments,
including program manager responsible for the technology development and global fan-out of major design nodes, vice president
of global product engineering and vice president of global quality and reliability. During a short tenure at Micron Technologies,
from October 1998 to July 1999, Mr. Trautmann supported the integration of Texas Instruments’ world-wide product engineering
team into Micron Technologies. Mr. Trautmann received a Dipl. Engr. (FH) in chemical technology from Fachochschule Mannheim, Germany.
Mr.
Trautmann has extensive experience in and knowledge of the semiconductor industry. As a result of these and other professional
experiences, our board of directors has concluded that Mr. Trautmann is qualified to serve as a director.
Dr.
Robert Mears
is the founder of our company and has served as our chief technology officer since inception. Dr. Mears also
served as our president from inception to October 2015. Dr. Mears co-developed a transformative technology for long-distance optical
networks in the late 1980’s and has authored or co-authored approximately 150 publications and numerous patents. He is an
Emeritus Fellow of Pembroke College, Cambridge, England.
22
Francis
Laurencio
has served as our chief financial officer
since February 2016. Prior to joining Atomera, Mr. Laurencio served as chief financial officer of Sycomp, A Technology Company
Inc. from February 2013 to July 2015 and as general counsel to Sycomp from July 2015 to January 2016. Mr. Laurencio also
served as chief financial officer of Orbis Global, Inc. from January 2012 to December 2012 and chief financial officer of Smapper
Technologies, Inc. from December 2009 to December 2011. Mr. Laurencio holds an A.B., degree from Princeton University and a J.D.
from New York University School of Law.
C
.
Rinn Cleavelin
, Ph.D. has served as a member of our board of directors since December 2009. From July 2002 to November 2007,
Dr. Cleavelin served as manager for devices and manufacturing for external research and development for Texas Instruments. From
January 2000 to June 2002, Dr. Cleavelin served as chief operating officer of International SEMATECH, where he was responsible
for all technical programs and the advanced technology development facility. Previously, Dr. Cleavelin served as director of front
end processing at International SEMATECH from 1998 to 2000. Since November 2007, Dr. Cleavelin has engaged in consulting activities
on behalf of Atomera and other companies in the semiconductor industry. Dr. Cleavelin has a Ph.D. in Physics from Texas Tech University.
Dr.
Cleavelin has extensive experience in and knowledge of the semiconductor industry. As a result of these and other professional
experiences, our board of directors has concluded that Dr. Cleavelin is qualified to serve as a director.
Rolf
Stadheim
has served as a member of our board of directors since June 2010. Mr. Stadheim is founder and managing partner of
Stadheim & Grear, Ltd., a Chicago, Illinois law firm founded by Mr. Stadheim in 1990 specializing in intellectual property
law. Mr. Stadheim received his undergraduate degree from the University of Wisconsin and his law degree from the University of
Chicago.
Mr.
Stadheim has extensive experience in and knowledge of intellectual property law, including licensing and litigation of infringement
claims in the semiconductor industry. As a result of these and other professional experiences, our board of directors has concluded
that Mr. Stadheim is qualified to serve as a director.
Board
Composition
Our
board of directors may establish the authorized number of directors from time to time by resolution. Our board of directors currently
consists of five members, two of whom qualify as independent under the Nasdaq Stock Market rules.
Generally,
under the listing requirements and rules of the Nasdaq Stock Market, independent directors must comprise a majority of a listed
company’s board of directors within one year of the completion of this offering. Our board of directors has determined that
neither John Gerber nor Dr. Cleavelin has a relationship that would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director and that each is “independent” as that term is defined under the applicable
rules and regulations of the SEC and the listing requirements and rules of the Nasdaq Stock Market. In making this determination,
our board of directors considered the current and prior relationships Mr. Gerber and Dr. Cleavelin have with our company and all
other facts and circumstances our board of directors deemed relevant in determining their independence, including their beneficial
ownership of our capital stock. We intend to appoint additional independent directors to our board so that a majority of our directors
are independent, as required under applicable Nasdaq Stock Market rules.
Our
board of directors intends to establish an audit committee, a compensation committee, and a nominating and corporate governance
committee, each under a written charter that will satisfy the applicable rules of the SEC and the listing standards of the Nasdaq
Stock Market.
Compensation
Committee Interlocks and Insider Participation
None
of our independent directors is currently or has been at any time one of our officers or employees. None of our executive officers
currently serves, or has served during the last year, as a member of the board of directors or compensation committee of any entity
that has one or more executive officers serving as a member of our board of directors.
23
Executive
Compensation
Summary
Compensation Table
The
following table sets forth the compensation awarded to, earned by or paid to, our chief executive officer and our other two highest
paid executive officers for the years ended December 31, 2015 and 2014. In reviewing the table, please note that:
•
Mr. Trautmann served as our chief executive officer from September 2011 to October 2015;
•
Mr. Bibaud, our current chief executive officer, commenced his employment with us in October 2015; and
•
Ron Cope served as our chief operating officer from September 2011 to June 2016.
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
|
Option
Awards
(1)
|
|
|
All Other
Compensation
|
|
|
Total
|
|
Scott Bibaud,
Chief Executive Officer
|
|
2015
|
|
$
|
62,600
|
|
|
$
|
719,003
|
|
|
|
—
|
|
|
$
|
781,603
|
|
|
|
|
2014
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Erwin Trautmann,
Former Chief Executive Officer, Executive Vice President of Strategic Business Development
|
|
2015
|
|
$
|
228,000
|
|
|
$
|
110,679
|
|
|
|
—
|
|
|
$
|
338,679
|
|
|
|
|
2014
|
|
$
|
207,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
207,000
|
|
Robert Mears,
Chief Technology Officer
|
|
2015
|
|
$
|
220,000
|
|
|
$
|
41,070
|
|
|
|
—
|
|
|
$
|
261,070
|
|
|
|
|
2014
|
|
$
|
220,000
|
|
|
|
—
|
|
|
$
|
1,780
|
(2)
|
|
$
|
221,780
|
|
Ron Cope,
Former Chief Operating Officer
|
|
2015
|
|
$
|
156,000
|
|
|
$
|
93,170
|
|
|
|
—
|
|
|
$
|
249,170
|
|
|
|
|
2014
|
|
$
|
135,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
135,000
|
|
|
|
(1)
|
The dollar amounts in the Option Awards column
reflect the values of options as of the grant date in accordance with ASC 718, Compensation-Stock
Compensation and, therefore, do not necessarily reflect actual benefits received by the
individuals. Assumptions used in the calculation of these amounts are included in Note
11 to our audited financial statements.
|
|
|
(2)
|
Reflects payment by us of life insurance premiums
for the benefit of Dr. Mears.
|
Narrative
Disclosure to Summary Compensation Table
Bibaud
Employment Agreement
We
entered into an employment agreement with Mr. Bibaud, our chief executive officer, in October 2015. Pursuant to the employment
agreement, we compensate Mr. Bibaud at the annual rate of $250,000. Upon the completion of this offering, Mr. Bibaud’s employment
agreement entitles him to a $250,000 incentive bonus and an increase in base salary to $300,000. Mr. Bibaud is eligible to receive
an annual bonus of up to 50% of his base salary based on performance criteria set by our compensation committee and is also eligible
for participation in long-term incentive compensation plans. Mr. Bibaud’s employment agreement entitles him to reasonable
and customary health insurance and other benefits, at our expense, and a severance payment in the amount of eighteen months of
his base salary in the event of an involuntary termination of his employment.
In
connection with his employment agreement, we granted Mr. Bibaud options to purchase 303,002 shares of our common stock at an exercise
price of $5.70 per share. 138,515 of Mr. Bibaud’s options vest and become exercisable subject to the conversion of all principal
and accrued interest under our convertible notes into shares of our common stock on or before May 31, 2017 and, in addition to
the performance vesting condition, all of the 303,002 options vest and first become exercisable over a four-year period commencing
on the first anniversary of the date of grant. Upon the completion of this offering, Mr. Bibaud is entitled to receive additional
stock options, or the gross up options, to purchase 468,741 shares of our common stock which, together with the options discussed
above, will represent 6.3% of the outstanding shares of our common stock on a fully-diluted basis after giving effect to this
offering and the related stock issuances, at a strike price of the public offering price of this offering. The initial vesting
date of the gross up options vest on the later of the one year anniversary of the date of Mr. Bibaud’s employment or the
completion of this offering. A portion of the gross up options equal to the product of .25 times a fraction, the denominator of
which is 12 and the numerator of which is the lesser of 12 and the number of 30-day periods, or portions thereof, or the variable
number, between the date of Mr. Bibaud’s employment and the initial vesting date of the gross up options will vest on such
date, with the remainder vesting in equal monthly installments over 48 months less the variable number. Mr. Bibaud’s options
were and will be granted pursuant to our 2007 Stock Incentive Plan.
Additional
Executive Employment Agreements
In
January 2016, we entered into employment agreements with three other executive officers, Erwin Trautmann, Dr. Robert Mears and
Ron Cope. Pursuant to those employment agreements, we compensate Mr. Trautmann with an annual salary of $250,000 and compensate
Dr. Mears and compensated Mr. Cope with annual salaries of $220,000 each. Each officer is or was eligible for an annual
24
bonus
of up to a certain percentage amount of their annual salary (30% for Mr. Trautmann and 15% each for Dr. Mears and Mr. Cope) based
on performance criteria set by the compensation committee of our board of directors and to otherwise participate in all other
plans that we may establish from to time to time. The employment agreements entitle each officer to reasonable and customary
health insurance and other benefits, at our expense, and a severance payment in the amount of six months of their then annual
salary and related benefits in the event of our termination of their employment without cause or their resignation for good reason.
In
connection with our execution of the employment agreement with Dr. Mears, effective as of January 13, 2016 we awarded Dr. Mears
a bonus in the amount of $187,500, payable in the form of our cancellation of a note payable to us by Dr. Mears in the outstanding
principal amount of $187,500.
In
connection with the relocation of our corporate offices from Wellesley Hills, Massachusetts to Los Gatos, California, our board
of directors elected to eliminate the position of chief operating officer and dismiss Ron Cope effective as of June 30, 2016.
Pursuant to the terms of his employment agreement, Mr. Cope will receive six months severance from the effective date of termination.
In
February 2016, we entered into an employment agreement with Francis Laurencio. Pursuant to that employment agreement, we compensate
Mr. Laurencio with an annual salary of $225,000. Mr. Laurencio is eligible for an annual bonus of up to 30% of his annual salary
based on performance criteria set by the compensation committee of our board of directors and to otherwise participate in all
other plans that we may establish from to time to time. The employment agreement entitles Mr. Laurencio to reasonable and customary
health insurance and other benefits, at our expense, and a severance payment in the amount of six months of his then annual salary
and related benefits in the event of our termination of his employment without cause or his resignation for good reason.
In
connection with his employment agreement, we granted Mr. Laurencio options to purchase 21,834 shares of our common stock at an
exercise price of $5.70 per share. 5,661 of Mr. Laurencio’s options vest and become exercisable subject to the conversion
of all principal and accrued interest under our convertible notes into shares of our common stock on or before May 31, 2017 and,
in addition to the performance vesting condition, all of the 21,834 options vest and first become exercisable over a four-year
period commencing on the first anniversary of the date of grant. Upon the completion of our IPO, Mr. Laurencio is entitled to
receive additional stock options, or the gross up options, to purchase 143,539 shares of our common stock which, together with
the options discussed above, will represent 1.35% of the outstanding shares of our common stock on a fully-diluted basis after
giving effect to the IPO and the related stock issuances, at a strike price of the IPO price. The initial vesting date of the
gross up options vest on the later of the one year anniversary of the date of Laurencio’s employment or the completion of
the IPO. A portion of the gross up options equal to the product of .25 times a fraction, the denominator of which is 12 and the
numerator of which is the lesser of 12 and the number of 30-day periods, or portions thereof, or the variable number, between
the date of Mr. Laurencio’s employment and the initial vesting date of the gross up options will vest on such date, with
the remainder vesting in equal monthly installments over 48 months less the variable number. Laurencio’s options were and
will be granted pursuant to our 2007 Stock Incentive Plan.
The
employment agreements with our executive officers were unanimously approved by our full board of directors. No officer or
employee of our company was involved in the board’s deliberation over the employment agreements of our executive officers,
other than those directors who also serve as officers of our company, Scott Bibaud and Erwin Trautmann.
Management
Share Bonuses
We
have agreed to provide incentive bonuses to certain of our officers and directors, as set forth below, contingent upon the completion
of this offering and each individual’s continued engagement with us as an officer or director, as applicable, until the
completion of this offering; provided that we receive in this offering net proceeds of at least $15 million and realize a post-offering
valuation of our company of at least $50 million, and that the officer or director remains in service to us through the close
of the offering, except in cases where we terminate the officer without cause or the officer resigns for good reason. In June
2016, we dismissed Ron Cope, our former chief operating officer, without cause, and Mr. Cope will remain eligible to receive the
management share bonus. The bonuses total $1,651,369 and will be paid to the officers and directors upon the completion of this
offering in shares of our common stock at the rate of the public offering price of $7.50 per share, for a total of 220,182 shares
of our common stock. The common shares will be granted under our 2007 Stock Incentive Plan and each incentive bonus will be subject
to required tax withholding.
|
|
|
|
|
John
Gerber
|
|
$
|
750,000
|
|
Erwin
Trautmann
|
|
$
|
501,012
|
|
Ron
Cope
|
|
$
|
296,843
|
|
Dr.
Robert Mears
|
|
$
|
77,993
|
|
C.
Rinn Cleavelin, Ph.D.
|
|
$
|
25,521
|
Compensation
of Directors
We
do not compensate any of our executive directors for their service as a director and we have not adopted any policies or plans
with regard to the compensation of our independent directors. However, we reimburse our independent directors for their reasonable
expenses incurred in connection with attending meetings of our board of directors. We have engaged a member of our board, C. Rinn
Cleavelin, Ph.D., to provide consulting services to us from time to time. We have paid Dr. Cleavelin consulting fees of $10,000
during each of fiscal years 2014 and 2015.
Related
Party Transactions
On
January 14, 2005, we entered into a loan transaction with Dr. Robert Mears pursuant to which we loaned Dr. Mears $187,500. Pursuant
to the loan agreements, the loan to Dr. Mears bore interest at the rate of 3.67% per year and required the payment of interest
only until the loan maturity date, at which time all principal and accrued interest was payable. The loan was secured by shares
of our common stock owned by Dr. Mears. In December 2015, we agreed to extend the term of Dr. Mears’ loan to January 14,
2019, subject to acceleration in the event of the sale of our Company or our liquidation, bankruptcy or like event. Effective
as of January 13, 2016, we awarded Dr. Mears with a bonus in the amount of $187,500, payable in the form of our cancellation of
the outstanding principal amount under the note in the amount of $187,500. As of the date of the award, there was accrued
and unpaid interest under the note in the amount of $7,050, which Dr. Mears remains obligated to pay. In return for the cancellation
of the principal amount under the note, Dr. Mears was required to reimburse us for withholding taxes payable by us, in the amount
of $13,998, in connection with the $187,500 award.
Between
2013 and 2016, we conducted private placements of our convertible promissory notes. Certain of our officers and directors participated
in the placements and purchased convertible notes in the
25
aggregate
principal amount of $3,347,607, representing 16.2% of the convertibles notes sold by us, including notes in the principal amount
of $625,331 purchased by John Gerber, $985,115 purchased by Rolf Stadheim, $25,000 purchased by Scott Bibaud, $1,278,536 purchased
by K2 Energy Limited, an entity controlled by a former director, Samuel Gazal, and $433,625 purchased by a former director,
Rosalie Stahl.
A
member of our board of directors, Rolf Stadheim, is a partner of a law firm that serves as legal counsel to our company in connection
with our civil action against Finisar Corporation. See, “Our Business- Litigation.” Pursuant to our agreement
with Mr. Stadheim’s firm, the law firm is responsible for paying all of our out-of-pocket costs and expenses associated
with the Finisar litigation incurred after the date of this prospectus, including any claims by Finisar for the reimbursement
of its fees and costs involved in the action. During fiscal 2014 and 2015, the law firm billed us approximately $19,700 and $236,600,
respectively. During fiscal 2014 and 2015, we paid $-0- and $277,580, respectively, to the law firm. We owed the law firm $1,310
as of March 31, 2016.
In
April 2009, we acquired the rights to several US and foreign patents relating to optical communication technologies from our founder,
Dr Robert Mears, and three other co-inventors, none of whom are affiliated with us. The inventions covered by the assigned patents
had been developed by Dr. Mears and his co-inventors prior to Dr. Mears’s founding of our company’s business. Pursuant
to the patent assignment agreement, we are required to pay to Dr. Mears and the three other co-inventors 10% each of all revenue
derived by us from the assigned patents. The assigned patents do not relate to our core MST
®
technology, however they are the subject of certain litigation initiated by us against Finisar Corporation discussed
in “Our Business — Litigation”.
Except
as set forth above, we have not entered into any transactions with any of our directors, officers, beneficial owners of five percent
or more of our common shares, any immediate family members of the foregoing or entities of which any of the foregoing are also
officers or directors or in which they have a material financial interest, other than the compensatory arrangements described
elsewhere in this prospectus. We have adopted a policy that any transactions with directors, officers, beneficial owners of five
percent or more of our common stock, any immediate family members of the foregoing or entities of which any of the foregoing are
also officers or directors or in which they have a financial interest, will only be on terms consistent with industry standards
and approved by a majority of the disinterested directors of our board.
Limitation
of Liability of Directors and Indemnification of Directors and Officers
The
Delaware General Corporation Law provides that corporations may include a provision in their certificate of incorporation relieving
directors of monetary liability for breach of their fiduciary duty as directors, provided that such provision shall not eliminate
or limit the liability of a director (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payment of a dividend or unlawful stock purchase or redemption, or (iv) for any transaction from which the director derived
an improper personal benefit. Our certificate of incorporation provides that directors are not liable to us or our stockholders
for monetary damages for breach of their fiduciary duty as directors to the fullest extent permitted by Delaware law. In addition
to the foregoing, our certificate of incorporation provides that we may indemnify directors and officers to the fullest extent
permitted by law.
The
above provisions in our certificate of incorporation may have the effect of reducing the likelihood of derivative litigation against
directors and may discourage or deter stockholders or management from bringing a lawsuit against directors for breach of their
fiduciary duty, even though such an action, if successful, might otherwise have benefited us and our stockholders. However, we
believe that the foregoing provisions are necessary to attract and retain qualified persons as directors.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC, such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
26
PRINCIPAL STOCKHOLDERS
The
following table sets forth certain information regarding the beneficial ownership of our common stock as of the date of this prospectus
by:
•
each person who is known by us to be the beneficial owner of more than five percent (5%) of our issued and outstanding
shares of common stock;
•
each of our directors and executive officers; and
•
all directors and executive officers as a group.
The
beneficial ownership of each person was calculated based on 7,903,044 shares of common stock issued and outstanding prior to the
offering, including 1,617,313 shares issued and outstanding as of the date of this prospectus, our issuance of 220,182 shares
of common stock as bonuses to certain members of management upon completion of this offering and 6,065,549 shares issuable upon
the conversion of our outstanding convertible notes (including $2,037,337 of accrued interest as of March 31, 2016). The SEC has
defined “beneficial ownership” to mean more than ownership in the usual sense. For example, a person has beneficial
ownership of a share not only if he owns it, but also if he has the power (solely or shared) to vote, sell or otherwise dispose
of the share. Beneficial ownership also includes the number of shares that a person has the right to acquire within 60 days of
the date of this prospectus, pursuant to the exercise of options or warrants or the conversion of notes, debentures or other indebtedness.
Two or more persons might count as beneficial owners of the same share. Unless otherwise indicated, the address for each reporting
person is 750 University, Suite 280, Los Gatos, California 95032.
Name
of Director or Executive Officer
|
|
|
|
Percentage
Owned Prior to Offering
(1)
|
|
Percentage
Owned After Offering
(2)
|
|
John
Gerber
|
|
304,052
|
(3)
|
|
3.8
|
%
|
3.0
|
%
|
|
Scott
Bibaud
|
|
6,666
|
(4)
|
|
*
|
|
*
|
|
|
Erwin
Trautmann
|
|
128,567
|
(5)
|
|
1.6
|
%
|
1.2
|
%
|
|
Dr.
Robert Mears
|
|
56,534
|
(6)
|
|
*
|
|
*
|
|
|
Francis
Laurencio
|
|
—
|
(7)
|
|
—
|
|
—
|
|
|
C.
Rinn Cleavelin, Ph.D.
|
|
9,952
|
(8)
|
|
*
|
|
*
|
|
|
Rolf
Stadheim
|
|
292,341
|
(9)
|
|
3.7
|
%
|
2.8
|
%
|
|
Directors
and executive officers as a group
|
|
798,112
|
|
|
10.1
|
%
|
7.7
|
%
|
Name
and Address of 5% + Holders
|
|
|
|
Percentage
Owned Prior to Offering
(1)
|
|
Percentage
Owned After
Offering
(2)
|
|
Vulpes
Innovative Technologies Investment Company Pte Ltd.
One George Street
Floor 07, Unit 03
Singapore, 049145
|
|
673,777
|
(10)
|
|
8.5
|
%
|
6.5
|
%
|
|
K2
Energy Limited
Level 2, 27 Macquarie Place
Sydney NSW 2000
|
|
508,838
|
(11)
|
|
6.4
|
%
|
4.9
|
%
|
27
28
ESTIMATED USE OF PROCEEDS
After
the payment of underwriting discounts of 9% on the sale of the shares offered hereby and estimated offering expenses of $700,000,
the net proceeds of this offering will be approximately $15,680,000. We intend to apply the estimated net proceeds of the offering
as follows:
|
|
|
|
|
|
|
Development
engineering
|
|
$
|
10,160,680
|
|
64.8
|
%
|
|
Business
development, sales and marketing
|
|
$
|
2,446,080
|
|
15.6
|
%
|
|
Research
|
|
$
|
1,113,280
|
|
7.1
|
%
|
|
Working
Capital
|
|
$
|
1,960,000
|
|
12.5
|
%
|
|
Total
Net Proceeds
|
|
$
|
15,680,000
|
|
100
|
%
|
We
intend to apply approximately $10.2 million of the net proceeds of this offering towards development engineering, which will consist
primarily of our further development and qualification of MST
®
and the evaluation,
testing and engineering involved in the formal product qualification process undertaken by our potential customers. As our marketing
and business development efforts lead to a significant indication of interest on the part of a potential customer, we will engage
in development engineering for purposes of characterizing our solution to the goals and needs of the customer, and work with customer
to tune our MST
®
to their unique production process and equipment.
We
intend to apply approximately $2.4 million of the net proceeds of this offering towards business development, marketing and sales.
In the initial stages of our marketing and business development, we expect to spend a significant amount of time and capital in
defining the benefits of MST
®
for each target customer, including simulation,
modeling, data collection, marketing costs, market research, partnership development, and business development efforts.
We
intend to apply approximately $1.1 million of the net proceeds of this offering towards research spending, including long-term
investigation into additional advanced materials and techniques for our platform, efforts with our academic and scientific partners,
and maintenance of our patent portfolio.
The
net proceeds allocated towards working capital will be applied towards our costs of facilities, information technology, public
company related costs, including accounting and legal, along with normal recurring general and administrative expenses.
Our
estimated use of proceeds is based on our current assumptions and estimates concerning the costs and timelines of securing one
or more IDMs or fabless semiconductor manufacturers to qualify and license MST
®
technology and start full-scale industrial production of a device that incorporates our MST
®
technology. If our assumptions or estimates prove to be inaccurate, we may require additional funds in order to carry
out the activities described above. In addition, the expected allocation of net proceeds set forth above represents our best estimates
based upon our present plans and our assumptions regarding industry conditions and our anticipated future revenues and expenditures.
We may find it necessary to reallocate some of the proceeds within the above-described categories or to use portions thereof for
other purposes in order to carry out our business plan if those assumptions change.
If
the underwriter exercises its right to purchase additional 360,000 shares of common stock to cover over-allotments, we may receive
up to an additional $2,457,000, after deducting $243,000 for underwriting discounts. We intend to apply any net proceeds from
the exercise of the overallotment option to working capital. Pending the uses described above, we intend to invest the net proceeds
from this offering in short-term, investment-grade interest-bearing securities such as money market accounts, certificates of
deposit, commercial paper, and guaranteed obligations of the U.S. government.
29
CAPITALIZATION
The
following table sets forth our capitalization as of March 31, 2016 on:
•
an actual basis;
•
a pro forma basis, giving effect to our issuance of additional convertible notes in the aggregate principal amount of $5.96
million on April 1, 2016 and our receipt of net cash proceeds of $5.47 million and the automatic conversion of all $20.71 million
principal amount, net, of our convertible notes, and $2,037,337 of accrued interest thereon as of March 31, 2016, into 6,065,549
shares of common stock, effective immediately upon the consummation of this offering as if such conversion had occurred on March
31, 2016; and
•
a pro forma as adjusted basis to reflect, in addition, our sale of 2,400,000 shares of common stock in this offering at
the initial public offering price of $7.50 per share, after deducting underwriting discounts and commissions and estimated offering
expenses payable by us.
You
should read the information in this table together with our consolidated financial statements and related notes and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes, net
|
|
$
|
16,657,046
|
|
|
$
|
—
|
|
$
|
—
|
|
|
Stockholders’
(deficit) equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value, 47,500,000 shares authorized, 1,617,313 shares issued and outstanding,
actual; 7,682,862 shares issued and outstanding, pro forma; 10,082,862 shares issued
and outstanding, pro forma as adjusted
|
|
|
1,617
|
|
|
|
7,683
|
|
|
10,083
|
|
|
Preferred
stock, $0.001 par value, 2,500,000 shares authorized, no shares issued and outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
70,508,581
|
|
|
|
93,248,325
|
|
|
108,925,925
|
|
|
Accumulated
earnings (deficit)
|
|
|
(85,874,809
|
)
|
|
|
(86,496,918
|
)
|
|
(86,496,918
|
)
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ (deficit) equity
|
|
|
(15,364,611
|
)
|
|
|
6,759,090
|
|
|
22,439,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
capitalization
|
|
$
|
1,292,435
|
|
|
|
6,759,090
|
|
|
22,439,090
|
|
(1)
Our convertible notes consist of $14,750,000 of principal and $2,037,377 of accrued interest, net of debt discount representing
the unamortized commissions and warrant value.
The
number of shares of our common stock to be outstanding after this offering is based on 1,617,313 shares of our common stock outstanding
as of the date of this prospectus, plus 220,182 shares of common stock issuable as bonuses to certain members of management upon
completion of this offering and 6,065,549 shares common stock issuable upon conversion of our convertible notes as of March 31,
2016, and excludes:
•
538,014 shares of our common stock issuable upon exercise of outstanding options granted pursuant to our 2007 Stock Incentive
Plan;
•
612,280 shares of our common stock underlying options to be granted to our chief executive officer and chief financial
officer upon the completion of this offering;
•
499,198 shares of our common stock issuable upon exercise of outstanding warrants;
•
up to 360,000 shares issuable pursuant to the underwriter’s over-allotment option;
•
shares of our common stock reserved for future grants pursuant to our 2007 Stock Incentive Plan; and
•
the shares of our common stock issuable upon exercise of the underwriter’s warrant.
30
DILUTION
If
you invest in our common stock, your interest will be diluted to the extent of the difference between the amount per share paid
by purchasers of shares of common stock in this offering and the pro forma as adjusted net tangible book value per share of common
stock immediately after the completion of this offering.
As
of March 31, 2016, our pro forma net tangible book value was approximately $6,759,090, million, or $0.88 per share of common
stock. Our pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount
of our total liabilities and divided by the total number of shares of our common stock outstanding as of March 31, 2016, assuming
(i) our issuance of additional convertible notes in the aggregate principal amount of $5.96 million on April 1, 2016 and our receipt
of net cash proceeds of $5.47 million and the conversion of approximately $22.74 million of indebtedness relating to our convertible
notes and related interest into 6,065,549 shares of common stock the resulting elimination of the derivative liability related
to the debt effective upon the completion of this offering and (ii) our issuance of 220,182 shares of common stock as bonuses
to certain members of management upon completion of this offering.
After
giving effect to our sale in this offering of 2,400,000 shares of our common stock, at the initial public offering price of $7.50
per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma
as adjusted net tangible book value as of March 31, 2016 would have been approximately $22,439,090, or $2.23 per share
of our common stock. This represents an immediate increase in pro forma as adjusted net tangible book value of $1.35 per share
to our existing stockholders and an immediate dilution of $5.27 per share to investors purchasing shares in this offering.
The
following table illustrates this dilution:
|
Initial
public offering price per share
|
|
|
|
|
$
|
7.50
|
|
Pro
forma net tangible book value per share as of March 31, 2016, before giving effect to
this offering
|
|
$
|
0.88
|
|
|
|
|
Increase
in pro forma net tangible book value per share attributable to new investors purchasing
shares in this offering
|
|
|
1.35
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
forma as adjusted net tangible book value per share, after giving effect to this offering
|
|
|
|
|
$
|
2.23
|
|
|
|
|
|
|
|
|
|
Dilution
per share to new investors purchasing shares in this offering
|
|
|
|
|
$
|
5.27
|
If
the underwriter exercises its over-allotment option in full, the pro forma as adjusted net tangible book value per share of our
common stock would be $2.15 per share, and the dilution per share to new investors purchasing shares in this offering would be
$5.35 per share.
The
following table summarizes, on a pro forma as adjusted basis as of March 31, 2016 after giving effect to (i) our issuance of additional
convertible notes in the aggregate principal amount of $5.96 million on April 1, 2016 and our receipt of net cash proceeds of
$5.47 million and the automatic conversion of approximately $22.74 million principal amount of indebtedness related to our convertible
notes into shares of common stock and (ii) completion of this offering at the initial public offering price of $7.50 per share,
the difference between existing stockholders and new investors with respect to the number of shares of common stock purchased
from us, the total consideration paid to us and the average price per share paid, before deducting underwriting discounts and
commissions and estimated offering expenses:
|
|
|
|
|
|
|
Average
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Existing
stockholders
|
|
7,903,044
|
|
76.7%
|
|
$
|
81,731,612
|
|
82.0%
|
|
$
|
10.34
|
|
New
public investors
|
|
2,400,000
|
|
23.3%
|
|
|
18,000,000
|
|
18.0
|
%
|
|
$
|
7.50
|
|
Total
|
|
10,303,044
|
|
100.0
|
%
|
|
$
|
99,731,612
|
|
100.0
|
%
|
|
|
|
To
the extent that our outstanding warrants are exercised, investors will experience further dilution.
Except
as otherwise indicated, the above discussion and tables assume no exercise of the underwriter’s over-allotment option. If
the underwriter exercises its over-allotment option in full, our existing stockholders would own 74.2% and our new investors would
own 25.8% of the total number of shares of our common stock outstanding upon the completion of this offering.
31
The
number of shares of our common stock held by existing stockholders is based on 1,617,313 shares of common stock outstanding as
of the date of this prospectus, plus 220,182 shares of common stock to be issued as bonuses to certain members of management upon
completion of this offering and 6,065,549 shares common stock issuable upon conversion of our convertible notes (including accrued
interest as of March 31, 2016), and excludes:
•
538,014 shares of our common stock issuable upon exercise of outstanding options granted pursuant to our 2007 Stock Incentive
Plan;
•
612,280 shares of our common stock underlying options to be granted to our chief executive officer and chief financial
officer upon the completion of this offering;
•
499,198 shares of our common stock issuable upon exercise of outstanding warrants;
•
up to 360,000 shares issuable pursuant to the underwriter’s over-allotment option;
•
shares of our common stock reserved for future grants pursuant to our 2007 Stock Incentive Plan; and
•
the shares of our common stock issuable upon exercise of the underwriter’s warrant.
32
DESCRIPTION OF SECURITIES
Common
Stock
We
are authorized to issue 47,500,000 shares of $0.001 par value common stock. As of the date of this prospectus, there are 1,617,313
shares of our common stock issued and outstanding. Except as described below, there are no other agreements or outstanding options,
warrants or similar rights that entitle their holder to acquire from us any of our equity securities.
Holders
of shares of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders generally. Stockholders
are entitled to receive such dividends as may be declared from time to time by the board of directors out of funds legally available
therefore, and in the event of liquidation, dissolution or winding up of the company to share ratably in all assets remaining
after payment of liabilities. The holders of shares of common stock have no preemptive, conversion, subscription rights or cumulative
voting rights.
Record
Holders
As
of the date of this prospectus, our outstanding shares of common stock were held of record by approximately 278 stockholders.
Preferred
Stock
We
are authorized to issue 2,500,000 shares of preferred stock. Our board of directors is authorized to issue from time to time,
without stockholder authorization, in one or more designated series or classes, any or all of the authorized but unissued shares
of preferred stock with such dividend, redemption, conversion and exchange provisions as may be provided in the particular series.
Any series of preferred stock may possess voting, dividend, liquidation and redemption rights superior to that of the common stock.
The rights of the holders of common stock will be subject to and may be adversely affected by the rights of the holders of any
preferred stock that may be issued in the future. Issuance of a new series of preferred stock, while providing desirable flexibility
in connection with possible acquisition and other corporate purposes, could make it more difficult for a third party to acquire,
or discourage a third party from acquiring, a majority of the outstanding voting stock of our company. As of the date of this
prospectus, no class or series of preferred stock has been designated and no shares of preferred stock are issued.
Dividends
We
do not anticipate the payment of cash dividends on our common stock in the foreseeable future.
Senior
Secured Convertible Promissory Notes
On
March 17, 2015, we completed the private placement of $14.75 million of senior secured convertible promissory notes, and on April
1, 2016 we completed the private placement of an additional $5.96 million in senior secured convertible notes on the same terms
as the promissory notes placed in March 2015. We refer to these promissory notes in this prospectus as our “convertible
notes”. The interest accrues on the unpaid principal amount under the convertible notes at the rate of 10% per year, except
during any event of default under the convertible notes in which case the interest rate shall be 12% per year. All principal and
interest under the convertible notes are due and payable on May 31, 2017. All principal and interest under the convertible notes
are convertible into shares of common stock as follows:
•
Upon the consummation of an initial public offering by us, all principal and interest shall automatically convert at 50%
of the IPO price, provided, however, in no event shall the conversion price be greater than $7.362 nor less than $3.681 per share;
•
In the event of a subsequent private placement approved by the holders of 50% or more of the aggregate principal amount
of all convertible notes, all principal and interest shall automatically convert at 50% of the offer price in the subsequent private
placement, provided, however, in no event shall the conversion price be greater than $7.362 nor less than $3.681 per share; and
•
Until the 10
th
day prior to the consummation of an IPO by us, a holder of
the convertible note, at its option, may convert at a conversion price of $7.362 per share.
We
granted to the holders of the convertible notes one-time demand registration rights exercisable by the holders of 50% or more
of the aggregate principal amount of all notes and certain piggyback registration rights. However, the note holders have agreed
that in connection with the present offering not to sell, transfer or pledge, or offering to do any of the same, directly or
33
indirectly,
any of our securities for a period 180 days following the close of this offering, subject to extensions under certain circumstances
of up to a total of 216 days following this offering. On the 181
st
day following
the close of this offering (subject to the potential extension described above) and on every subsequent 31
st
day thereafter, 15% of such holder’s securities shall be released from the lock-up until the 366
th
day following the close of this offering, as of which none of such holder’s securities shall be subject to
the lock-up.
We
have issued and outstanding convertible promissory notes in the aggregate principal amount of $20.71 million, with accrued and
unpaid interest as of March 31, 2016 in the amount of approximately $2,037,337. Pursuant to the terms of our convertible notes,
all principal and accrued interest under the notes will automatically convert into shares of our common stock, at the conversion
price of $3.75 per share.
Management
Share Bonuses
We
have agreed to provide incentive bonuses to certain of our officers and directors, as set forth below, contingent upon the
completion of this offering and each individual’s continued engagement with us as an officer or director, as
applicable, until the completion of this offering; provided that we receive in this offering net proceeds of at least $15
million and realize a post-offering valuation of our company of at least $50 million, and that the officer or director
remains in service to us through the close of the offering, except in cases where we terminate the officer without cause or
the officer resigns for good reason. In June 2016, we dismissed Ron Cope, our former chief operating officer, without cause,
and Mr. Cope will remain eligible to receive the management share bonus. The bonuses total $1,651,369 and will be paid to
officers and directors upon the completion of this offering in shares of our common stock at the rate of the public offering
price of $7.50 per share, for a total of 220,182 shares of our common stock. The common shares will be granted under our
2007 Stock Incentive plan and each incentive bonus will be subject to required tax withholding.
|
|
|
|
|
John
Gerber
|
|
$
|
750,000
|
|
Erwin
Trautmann
|
|
$
|
501,012
|
|
Ron
Cope
|
|
$
|
296,843
|
|
Dr.
Robert Mears
|
|
$
|
77,993
|
|
Rinn
Cleavelin, Ph.D.
|
|
$
|
25,521
|
2007
Stock Incentive Plan
We
have adopted our 2007 Stock Incentive Plan providing for the grant of non-qualified stock options and incentive stock options
to purchase shares of our common stock and for the grant of restricted and unrestricted share grants. We currently have reserved
613,333 shares of our common stock under the plan; however, upon completion of this offering the number of shares reserved for
issuance under the plan shall increase to 15% of our outstanding shares of common stock calculated on a fully diluted basis. The
purpose of the plan is to provide eligible participants with an opportunity to acquire an ownership interest in our company. All
officers, directors, employees and consultants to our company are eligible to participate under the plan. The plan provides that
options may not be granted at an exercise price less than the fair market value of our common shares on the date of grant. As
of the date of this prospectus, we have outstanding options to purchase an aggregate of 538,014 shares of our common stock at
an average exercise price of $6.98 per share, exclusive of certain gross-up options to purchase 612,280 shares of common stock
to be granted to our chief executive officer and chief financial officer upon completion of this offering.
Warrants
Upon
the completion of this offering, we will have outstanding the following warrants to purchase shares of our common stock:
•
warrants to purchase 103,829 shares of our common stock at an average exercise price of $8.28 per share, which warrants
were issued in connection with past equity financings;
•
warrants to purchase 198,767 shares of our common stock, of which warrants to purchase 188,829 are exercisable at $0.87
per share and warrants to purchase 9,339 shares are exercisable at $0.15 per share. The warrants were issued on February 9, 2015
to Liquid Patent Advisors, LLC (formerly known as Liquid Patent Consulting, LLC) as consideration for consulting services, (some
of which warrants were subsequently transferred by Liquid Patent Advisors, LLC to other persons;
34
•
warrants
to purchase 196,602 shares of our common stock issued to National Securities Corporation on March 17, 2015 as placement agent compensation in connection with our March 2015 placement of convertible notes, which
equals 10% of our common stock issuable upon conversion of convertible notes in the original principal amount of
$7,372,557, sold in the placement by National Securities, at an exercise price equal to the note conversion price of $3.75 per share (some of
which warrants were subsequently transferred by National Securities Corporation to other persons); and
•
the underwriter’s warrant to purchase a number of shares of our common stock equal to 10% of the number of shares
of common stock sold in this offering, including the over-allotment, at an exercise price equal to 125% of the price of the common
stock sold in this offering.
The
warrants contain provisions for the adjustment of the exercise price and the number of shares issuable upon the exercise of the
warrants in the event of certain stock dividends, stock splits, reorganizations, reclassifications and consolidations. The holders
of the shares issuable upon exercise of the warrants issued to Liquid Patent Advisors, LLC and National Securities Corporation
are entitled to registration rights with respect to such shares as described in greater detail under the heading “Registration
Rights” below.
Registration
Rights
Following
the completion of this offering, certain holders of an aggregate of 6,577,659 shares of our common stock, or their permitted transferees,
are entitled to rights with respect to the registration under the Securities Act of their shares of common stock, including demand
registration rights and piggyback registration rights. These rights are provided under the terms of two registration rights agreements
between us and the holders of our capital stock. In any registration made pursuant to these agreements, all fees, costs and expenses
of the registrations will be borne by us, and all selling expenses, including estimated underwriting discounts and selling commissions,
will be borne by the holders of the shares being registered.
In
connection with our March 2015 and April 2016 convertible note financings, in which we issued $20.71 million principal amount
of our convertible notes, which notes will automatically convert into an aggregate of 6,065,549 shares of our common stock effective
upon the completion of this offering. We entered into a registration rights agreement with the convertible note purchasers pursuant
to which we will be required, upon the written request at any time more than 180 days after the completion of this offering by
the holders of at least 50% of the shares that are entitled to registration rights under the agreement, to register, as soon as
practicable, all or a portion of these shares for public resale. We are required to effect only one registration pursuant to this
provision of the registration rights agreement. These demand registration rights terminate as to each investor when their shares
subject to the registration rights agreement may be sold by the investor pursuant to Rule 144 under the Securities Act without
regard to both the volume limitations for sales as provided in Rule 144.
In
connection with our issuance to Liquid Patent Advisors, LLC of warrants to purchase 198,767 shares of our common stock and our
issuance to National Securities Corporation of warrants to purchase 196,602 shares of our common stock in connection
with the March 2015 private placement of convertible notes, we entered into a registration rights agreement with
Liquid Patent Advisors, LLC and National Securities Corporation pursuant to which we will be required, upon the written request
at any time more than 180 days after the completion of this offering by the holders of at least 50% of the shares that are entitled
to registration rights under that agreement and the registration rights agreement entered into with the convertible note investors,
as a group, to register, as soon as practicable, all or a portion of these shares for public resale. We are required to effect
only one registration pursuant to this provision of the registration rights agreement. These demand registration rights terminate
as to each stockholder when their shares subject to the registration rights agreement may be sold by the investor pursuant to
Rule 144 under the Securities Act without regard to both the volume limitations for sales as provided in Rule 144.
In
addition, the two above-mentioned registration rights agreements each contain piggyback registration rights with respect our capital
stock held by these investors. These piggyback registration rights terminate with respect to each stockholder when their shares
subject to the registration rights agreement may be sold by the stockholder pursuant to Rule 144 under the Securities Act without
regard to both the volume limitations for sales as provided in Rule 144.
If
we register any of our securities for our own account, after the completion of this offering, the holders of these shares are
entitled to include their shares in the registration. Both we and the underwriters of any underwritten offering have the right
to limit the number of shares registered by these holders for marketing reasons, subject to limitations set forth in the respective
agreements with these investors.
35
Anti-Takeover
Effects of Certain Provisions of Delaware Law and Our Charter Documents
The
following is a summary of certain provisions of Delaware law, our Certificate of Incorporation and our bylaws. This summary does
not purport to be complete and is qualified in its entirety by reference to the corporate law of Delaware and our Certificate
of Incorporation and bylaws.
Effect
of Delaware Anti-Takeover Statute.
We are subject to Section 203 of the Delaware General Corporation Law, an anti-takeover
law. In general, Section 203 prohibits a Delaware corporation from engaging in any business combination (as defined below) with
any interested stockholder (as defined below) for a period of three years following the date that the stockholder became an interested
stockholder, unless:
•
prior to that date, the board of directors of the corporation approved either the business combination or the transaction
that resulted in the stockholder becoming an interested stockholder;
•
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares of voting stock outstanding (but not the voting stock owned by the interested
stockholder) those shares owned by persons who are directors and officers and by excluding employee stock plans in which employee
participants do not have the right to determine whether shares held subject to the plan will be tendered in a tender or exchange
offer; or
•
on or subsequent to that date, the business combination is approved by the board of directors of the corporation and authorized
at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested stockholder.
Section
203 defines “business combination” to include the following:
•
any merger or consolidation involving the corporation and the interested stockholder;
•
any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested
stockholder;
•
subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock
of the corporation to the interested stockholder;
•
subject to limited exceptions, any transaction involving the corporation that has the effect of increasing the proportionate
share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or
•
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation.
In
general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding
voting stock of the corporation, or who beneficially owns 15% or more of the outstanding voting stock of the corporation at any
time within a three-year period immediately prior to the date of determining whether such person is an interested stockholder,
and any entity or person affiliated with or controlling or controlled by any of these entities or persons.
Our
Charter Documents.
Our charter documents include provisions that may have the effect of discouraging, delaying or preventing
a change in control or an unsolicited acquisition proposal that a stockholder might consider favorable, including a proposal that
might result in the payment of a premium over the market price for the shares held by our stockholders. Certain of these provisions
are summarized in the following paragraphs.
Effects
of authorized but unissued common stock.
One of the effects of the existence of authorized but unissued common stock
may be to enable our board of directors to make more difficult or to discourage an attempt to obtain control of our Company by
means of a merger, tender offer, proxy contest or otherwise, and thereby to protect the continuity of management. If, in the due
exercise of its fiduciary obligations, the board of directors were to determine that a takeover proposal was not in our best interest,
such shares could be issued by the board of directors without stockholder approval in one or more transactions that might prevent
or render more difficult or costly the completion of the takeover transaction by diluting the voting or other rights
36
of
the proposed acquirer or insurgent stockholder group, by putting a substantial voting block in institutional or other hands that
might undertake to support the position of the incumbent board of directors, by effecting an acquisition that might complicate
or preclude the takeover, or otherwise.
Effects
of authorized but unissued preferred stock
Our board of directors is authorized, without stockholder approval, to issue
preferred stock in series and to fix and state the voting rights and powers, designation, preferences and relative, participating,
optional or other special rights of the shares of each such series and the qualifications, limitations and restrictions thereof.
Preferred stock may rank prior to our common stock with respect to dividends rights, liquidation preferences, or both, and may
have full or limited voting rights. Accordingly, issuance of shares of preferred stock could adversely affect the voting power
of holders of our common stock and could have the effect of deterring or delaying an attempt to obtain control of us.
Cumulative
Voting.
Our Certificate of Incorporation does not provide for cumulative voting in the election of directors, which would
allow holders of less than a majority of the stock to elect some directors.
Vacancies.
Our
Certificate of Incorporation provides that all vacancies may be filled by the affirmative vote of a majority of directors then
in office, even if less than a quorum.
Special
Meeting of Stockholders and Stockholder Action by Written Consent.
A special meeting of stockholders may only be called
by our president, board of directors or such officers or other persons as our board may designate at any time and for any purpose
or purposes as shall be stated in the notice of the meeting. Our charter documents do not allow stockholders to take action by
written consent. Therefore, stockholders, without the assistance of management, will be unable to propose a vote on any transaction
that would delay, defer or prevent a change of control, even if the transaction were in the best interests of our stockholders.
Forum
Selection.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court
of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought
on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees
to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation
Law or our certificate of incorporation or bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine.
Transfer
Agent and Registrar
Upon
the closing of this offering, the transfer agent and registrar for our common stock will be VStock Transfer, LLC, located at 18
Lafayette Place, Woodmere, New York 11598.
37
SHARES ELIGIBLE FOR FUTURE SALE
Prior
to this offering, there has been no public market for shares of our common stock. Future sales of substantial amounts of shares
of common stock, including shares issued upon the exercise of outstanding warrants and options, in the public market after this
offering, or the possibility of these sales occurring, could adversely affect the prevailing market price for our common stock
or impair our ability to raise equity capital.
Upon
the completion of this offering, a total of 10,303,044 shares of common stock will be outstanding, assuming (i) the
automatic conversion of all outstanding convertible notes into 6,065,549 shares of common stock in connection with the
completion of this offering and (ii) our issuance of 220,182 shares of common stock as bonuses to certain members of
management upon completion of this offering. All 2,400,000 shares of common stock sold in this offering by us, plus any
shares sold upon exercise of the underwriter’s over-allotment option, will be freely tradable in the public market
without restriction or further registration under the Securities Act, unless these shares are held by
“affiliates,” as that term is defined in Rule 144 under the Securities Act.
The
remaining 7,903,044 shares of common stock will be “restricted securities,” as that term is defined in Rule 144 under
the Securities Act. These restricted securities are eligible for public sale only if they are registered under the Securities
Act or if they qualify for an exemption from registration under Rules 144 or 701 under the Securities Act, which are summarized
below.
Subject
to the lock-up agreements described below and the provisions of Rules 144 and 701 under the Securities Act, these restricted securities
will be available for sale in the public market beginning more than 180 days after the date of this prospectus.
Rule
144
In
general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least
90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the
90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the
holding period of any prior owner other than our affiliates, is entitled to sell such shares without complying with the manner
of sale, volume limitation, or notice provisions of Rule 144, subject to compliance with the public information requirements of
Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding
period of any prior owner other than our affiliates, then such person is entitled to sell such shares without complying with any
of the requirements of Rule 144.
In
general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled
to sell upon expiration of the lock-up agreements described below, within any three-month period beginning 90 days after the date
of this prospectus, a number of shares that does not exceed the greater of:
•
1% of the number of shares of common stock then outstanding; or
•
the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on
Form 144 with respect to such sale.
Sales
under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale
provisions and notice requirements and to the availability of current public information about us.
Rule
701
Rule
701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract
and who is not deemed to have been one of our affiliates during the immediately preceding 90 days to sell these shares in reliance
upon Rule 144, but without being required to comply with the public information, holding period, volume limitation, or notice
provisions of Rule 144. Rule 701 also permits our affiliates to sell their Rule 701 shares under Rule 144 without complying with
the holding period requirements of Rule 144. However, all holders of Rule 701 shares are required to wait until 90 days after
the date of this prospectus before selling such shares pursuant to Rule 701.
Lock-Up
Agreements
We,
all of our directors, officers, employees and the holders of substantially all of our common stock or securities exercisable for
or convertible into our common stock outstanding immediately prior to this offering have agreed in connection with the present
38
offering,
that, without the prior written consent of National Securities Corporation, not to sell, transfer or pledge, or offering to do
any of the same, directly or indirectly, any of our securities for a period 180 days following the close of this offering, subject
to extensions under certain circumstances of up to a total of 216 days following this offering. On the 181
st
day following the close of this offering (subject to the potential extension described above) and on every subsequent
31
st
day thereafter, 15% of such holder’s securities shall be released from
the lock-up until the 366
th
day following the close of this offering, as of which
none of such holder’s securities shall be subject to the lock-up.
In
connection with our issuance of warrants to purchase shares of our common stock to Liquid Patent Advisors, LLC and National Securities
Corporation, including the underwriter warrant to be issued to National Securities upon the completion of this offering, Liquid
Patent Advisors and National Securities have agreed not to sell, transfer or pledge, or offering to do any of the same, directly
or indirectly, the share of common stock issuable upon exercise of such warrants for a period of 12 months days following the
close of this offering
Registration
Statements on Form S-8
We
intend to file a registration statement on Form S-8 under the Securities Act to register all of the shares of common stock to
be issued or reserved for issuance under our 2007 Stock Incentive plan. Shares covered by this registration statement will be
eligible for sale in the public market, upon the expiration or release from the terms of the lock-up agreements and subject to
vesting of such shares.
39
UNDERWRITING
We
are offering the shares of common stock described in this prospectus through the underwriter, National Securities Corporation,
which is acting as lead managing underwriter of the offering. National Securities Corporation has rendered advisory services to
us in the past and has acted as our placement agent in connection with the placements of our senior secured convertible promissory
notes in March 2015 and April 2016.
We
have agreed to enter into an underwriting agreement with the underwriter prior to the closing of this offering. Subject to the
terms and conditions of the underwriting agreement, we will agree to sell to the underwriter, and the underwriter will agree to
purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus,
as it may be supplemented, shares of common stock.
The
underwriter is committed to purchase all of the common shares offered by us, other than those covered by the option to purchase
additional shares described below, if they purchase any shares. The underwriting agreement provides that the underwriter’s
obligations to purchase shares of our common stock are subject to conditions contained in the underwriting agreement. A copy of
the underwriting agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part.
We
have been advised by the underwriter that the underwriter proposes to offer shares of our common stock directly to the public
at the public offering price set forth on the cover page of this prospectus and to certain dealers that are members of the Financial
Industry Regulatory Authority, or FINRA. Any securities sold by the underwriter to such securities dealers will be sold at the
public offering price less a selling concession not in excess of $_____ per share. After the public offering of the shares, the
offering price and other selling terms may be changed by the underwriter.
None
of our securities included in this offering may be offered or sold, directly or indirectly, nor may this prospectus and any other
offering material or advertisements in connection with the offer and sales of any of our common stock, be distributed or published
in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that
jurisdiction. Persons who receive this prospectus are advised to inform themselves about and to observe any restrictions relating
to this offering of our common stock and the distribution of this prospectus. This prospectus is neither an offer to sell nor
a solicitation of any offer to buy any of our common stock included in this offering in any jurisdiction where that would not
be permitted or legal.
The
underwriter has advised us that it does not intend to confirm sales to any accounts over which they exercise discretionary authority.
Underwriting
Discount and Expenses
The
following table summarizes the underwriting discount and commission to be paid to the underwriter by us.
|
|
|
|
|
|
|
Public
offering price
|
|
$
|
7.50
|
|
$
|
7.50
|
|
Underwriting
discount to be paid to the underwriter
|
|
$
|
1,620,000
|
|
$
|
1,863,000
|
|
Net
proceeds, before other expenses
|
|
$
|
16,380,000
|
|
$
|
18,837,000
|
In
addition to the discount set forth in the above table, we have agreed to issue to the underwriter and its designees a warrant
to purchase up to 10% of the shares of common stock sold in this offering. The terms of the underwriter’s warrant are more
fully described in this section under the caption, “Underwriter Warrant.”
We
estimate the total expenses payable by us for this offering to be approximately $2.32 million, which amount includes (i) the underwriting
discount of $1.62 million (approximately $1.863 million if the underwriter’s over-allotment option is exercised in full),
(ii) a non-accountable expense in the amount of $185,000 being paid by us to the underwriter, and (iii) other estimated company
expenses of approximately $515,000, which includes legal, accounting, printing costs and various fees associated with the registration
and listing of our shares.
Over-Allotment
Option
We
have granted to the underwriter an option, exercisable not later than 45 days after the date of this prospectus, to purchase up
to an additional 360,000 shares of our common stock (up to 15% of the shares firmly committed in this offering) at
40
the
public offering price, less the underwriting discount, set forth on the cover page of this prospectus. The underwriter may exercise
the option solely to cover over-allotments, if any, made in connection with this offering. If any additional shares of our common
stock are purchased pursuant to the over-allotment option, the underwriter will offer these additional shares of our common stock
on the same terms as those on which the other shares of common stock are being offered hereby.
Determination
of Offering Price
There
is no current market for our common stock. Our underwriter, National Securities Corporation, is not obligated to make a market
in our securities, and even if it chooses to make a market, can discontinue at any time without notice. Neither we nor the underwriter
can provide any assurance that an active and liquid trading market in our securities will develop or, if developed, that the market
will continue.
The
public offering price of the shares offered by this prospectus has been determined by negotiation between us and the underwriter.
Among the factors considered in determining the public offering price of the shares were:
•
our history and our prospects;
•
the industry in which we operate;
•
our past and present operating results;
•
the previous experience of our executive officers; and
•
the general condition of the securities markets at the time of this offering.
The
offering price stated on the cover page of this prospectus should not be considered an indication of the actual value of the shares.
Upon the commencement of trading, the price of our shares will be subject to change as a result of market conditions and other
factors, and we cannot assure you that the shares can be resold at or above the public offering price.
Underwriter
Warrant
We
have agreed to issue to National Securities Corporation and its designees a warrant to purchase shares of our common stock (up
to 10% of the shares of common stock sold in this offering). This warrant is exercisable at $9.375 per share (125% of the price
of the common stock sold in this offering), commencing on the effective date of this offering and expiring five years from the
effective date of this offering. The warrant and the shares of common stock underlying the warrant have been deemed compensation
by FINRA and are therefore subject to a 180 day lock-up pursuant to Rule 5110(g)(1) of FINRA. National Securities Corporation
(or permitted assignees under the Rule) will not sell, transfer, assign, pledge, or hypothecate this warrant or the securities
underlying this warrant, nor will it engage in any hedging, short sale, derivative, put, or call transaction that would result
in the effective economic disposition of this warrant or the underlying securities for a period of 12 months from the effective
date of the offering.
Pursuant
to our engagement agreement with Liquid Patent Advisors, LLC, on February 9, 2015, we issued to Liquid Patent Advisors, LLC a
warrant to purchase 198,767 shares of our common stock, of which warrants to purchase 188,829 are exercisable at $0.87 per share
and warrants to purchase 9,339 shares are exercisable at $0.15 per share, over a five year term. The warrants were issued in consideration
of Liquid Patent Advisors’ provision of services relating to the design, development and implementation of our intellectual
property. The warrants include customary anti-dilution and net issuance provisions. The warrants also provide its holders with
certain demand and piggyback registration rights. The principals of Liquid Patent Advisors hold investment banking positions with
National Securities Corporation.
Lock-Up
Agreements
In
connection with our issuance of warrants to purchase shares of our common stock to Liquid Patent Advisors, LLC and National Securities
Corporation, including the underwriter warrant to be issued to National Securities upon the completion of this offering, Liquid
Patent Advisors and National Securities have agreed not to sell, transfer or pledge, or offering to do any of the same, directly
or indirectly, the share of common stock issuable upon exercise of such warrants for a period of 12 months days following the
close of this offering. We, all of our directors, officers, employees and the holders of substantially all of our common stock
or securities exercisable for or convertible into our common stock outstanding immediately prior to this offering
41
have
agreed in connection with the present offering, that, without the prior written consent of National Securities Corporation, not
to sell, transfer or pledge, or offering to do any of the same, directly or indirectly, any of our securities for a period 180
days following the close of this offering, subject to extensions under certain circumstances of up to a total of 216 days following
this offering. On the 181
st
day following the close of this offering (subject to
the potential extension described above) and on every subsequent 31
st
day thereafter,
15% of such holder’s securities shall be released from the lock-up until the 366
th
day following the close of this offering, as of which none of such holder’s securities shall be subject to the lock-up.
The
number of shares of common stock outstanding upon the completion of this offering subject to the 180-day lock-up totals 7,903,044
shares, the number of shares underlying options and warrants subject to the 180-day lock-up totals 641,843 shares and the number
of shares underlying warrants subject to the 12-month lock-up totals 395,369 shares plus the number of shares issuable upon exercise
of the warrant issuable to the underwriter we connection with this offering.
Other
than in respect of the warrants issued or to be issued to Liquid Patent Advisors, LLC and National Securities Corporation, the
underwriter may consent to an early release from the lock-up period if, in its opinion, the market for the common stock would
not be adversely impacted by sales and in cases of a financial emergency of an officer, director or other stockholder. We are
unaware of any security holder who intends to ask for consent to dispose of any of our equity securities during the relevant lock-up
periods.
Indemnification
We
will agree to indemnify the underwriter against certain liabilities, including certain liabilities arising under the Securities
Act, and to contribute to payments that the underwriter may be required to make for these liabilities.
Short
Positions and Penalty Bids
The
underwriter may engage in over-allotment, syndicate covering transactions, and penalty bids or purchases for the purpose of pegging,
fixing or maintaining the price of the common stock, in accordance with Regulation M under the Exchange Act.
•
Over-allotment involves sales by the underwriter of shares in excess of the number of shares the underwriter is obligated
to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short
position. In a covered short position, the number of shares over-allotted by an underwriter is not greater than the number of
shares that it may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater
than the number of shares in the over-allotment option. The underwriter may close out any short position by either exercising
its over-allotment option and/or purchasing shares in the open market.
•
Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been
completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the
underwriter will consider, among other things, the price of shares available for purchase in the open market as compared to the
price at which it may purchase shares through the over-allotment option. If an underwriter sells more shares than could be covered
by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market.
A naked short position is more likely to be created if an underwriter is concerned that there could be downward pressure on the
price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.
•
Penalty bids permit an underwriter to reclaim a selling concession from a syndicate member when the shares originally sold
by the syndicate member are purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.
These
syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common
stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of the common stock
may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the NASDAQ Capital
Market, and if commenced, they may be discontinued at any time.
Neither
we nor the underwriter make any representation or prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither we nor the underwriter make any representation
that the underwriter will engage in these transactions or that any transaction, once commenced, will not be discontinued without
notice.
42
Electronic
Distribution
A
prospectus in electronic format may be made available on the Internet sites or through other online services maintained by the
underwriter, or by its affiliates. In those cases, prospective investors may view offering terms online and, depending upon the
underwriter, prospective investors may be allowed to place orders online. The underwriter may agree with us to allocate a specific
number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the
underwriter on the same basis as other allocations.
Other
than the prospectus in electronic format, the information on the underwriter’s website and any information contained in
any other website maintained by the underwriter is not part of the prospectus or the registration statement of which this prospectus
forms a part, has not been approved and/or endorsed by us or the underwriter in its capacity as underwriter and should not be
relied upon by investors.
The
underwriter’s compensation in connection with this offering is limited to the fees and expenses described above under “Underwriting
Discount and Expenses.”
43
LEGAL MATTERS
Greenberg
Traurig, LLP, Irvine, California, will pass upon the validity of the shares of common stock offered by this prospectus and certain
other legal matters. Golenbock Eiseman Assor Bell & Peskoe LLP, New York, New York, is legal counsel to National Securities
Corporation.
EXPERTS
The
financial statements of Atomera Incorporated as of and for the fiscal years ended December 31, 2015 and 2014 included in this
prospectus have been audited by Marcum LLP, independent registered public accounting firm as set forth in their report. We have
included these financial statements in this prospectus in reliance upon the report of Marcum LLP, given on their authority as
experts in accounting and auditing. The report of Marcum LLP, also included in this prospectus, for the fiscal years ended December
31, 2015 and 2014 includes an explanatory paragraph as to the Company’s ability to continue as a going concern.
WHERE YOU CAN FIND MORE INFORMATION
We
have filed with the SEC a registration statement on Form S-1 under the Securities Act that registers the shares of our common
stock to be sold in this offering. Our SEC filings are and will become available to the public over the Internet at the SEC’s
website at
www.sec.gov
. You may also read and copy any document we file with the SEC at its public reference facilities
at 100 F Street N.E., Washington, D.C. 20549. You can also obtain copies of the documents upon the payment of a duplicating fee
to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.
This
prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto.
Some items are omitted in accordance with the rules and regulations of the SEC. You should review the information and exhibits
included in the registration statement for further information about us and the securities we are offering. Statements in this
prospectus concerning any document we filed as an exhibit to the registration statement or that we otherwise filed with the SEC
are not intended to be comprehensive and are qualified by reference to these filings. You should review the complete document
to evaluate these statements.
44
ATOMERA
INCORPORATED
INDEX TO FINANCIAL STATEMENTS
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board
of Directors and Shareholders
of
Atomera Incorporated
We
have audited the accompanying balance sheets of Atomera Incorporated (the “Company”) (formerly known as Mears Technologies,
Inc.) as of December 31, 2015 and 2014, and the related statements of operations, changes in stockholders’ deficit and cash
flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Atomera
Incorporated, as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended
in conformity with accounting principles generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully
described in Note 2, the Company has a significant accumulated deficit, working capital deficit, incurred significant net losses
and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt
about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described
in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/
Marcum LLP
New
York, NY
June 17, 2016
F-2
ATOMERA
INCORPORATED
BALANCE SHEETS
December 31, 2015
and 2014
|
|
|
2015
|
|
|
2014
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3,196,943
|
|
|
$
|
20,980
|
|
|
Restricted investment
|
|
|
15,000
|
|
|
|
15,000
|
|
|
Prepaid expenses and other current assets
|
|
|
48,137
|
|
|
|
24,131
|
|
|
Total current assets
|
|
|
3,260,080
|
|
|
|
60,111
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
15,533
|
|
|
|
21,239
|
|
|
Deferred offering costs
|
|
|
144,669
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,420,282
|
|
|
$
|
81,350
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
301,517
|
|
|
$
|
630,934
|
|
|
Accrued expenses
|
|
|
144,642
|
|
|
|
143,754
|
|
|
Senior secured convertible promissory notes payable,
net
|
|
|
16,094,877
|
|
|
|
-
|
|
|
Total current liabilities
|
|
|
16,541,036
|
|
|
|
774,688
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible promissory notes payable
|
|
|
-
|
|
|
|
6,608,045
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
16,541,036
|
|
|
|
7,382,733
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Notes 6 and 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit:
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, authorized 2,500,000
shares; none issued and outstanding at December 31, 2015 and 2014
|
|
|
-
|
|
|
|
-
|
|
|
Common stock, $0.001 par value, authorized 47,500,000
shares; issued and outstanding 1,617,313 and 1,233,268 shares at
|
|
|
|
|
|
|
|
|
|
December 31, 2015 and 2014, respectively
|
|
|
1,617
|
|
|
|
1,233
|
|
|
Additional paid-in capital
|
|
|
70,451,752
|
|
|
|
66,759,366
|
|
|
Subscription receivable
|
|
|
(187,500
|
)
|
|
|
(187,500
|
)
|
|
Accumulated deficit
|
|
|
(83,386,623
|
)
|
|
|
(73,874,482
|
)
|
|
Total stockholders' deficit
|
|
|
(13,120,754
|
)
|
|
|
(7,301,383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
3,420,282
|
|
|
$
|
81,350
|
|
See accompanying notes to the financial statements.
ATOMERA
INCORPORATED
STATEMENTS OF
OPERATIONS
Years Ended December
31, 2015 and 2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
2,022,133
|
|
|
$
|
1,853,091
|
|
|
General and administrative
|
|
|
3,441,149
|
|
|
|
1,402,879
|
|
|
Selling and marketing
|
|
|
35,661
|
|
|
|
9,392
|
|
|
Total operating expenses
|
|
|
5,498,943
|
|
|
|
3,265,362
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(5,498,943
|
)
|
|
|
(3,265,362
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
7,072
|
|
|
|
7,088
|
|
|
Interest expense
|
|
|
(1,931,728
|
)
|
|
|
(560,310
|
)
|
|
Loss on settlement of options and warrants
|
|
|
(2,088,542
|
)
|
|
|
-
|
|
|
Other income
|
|
|
-
|
|
|
|
850
|
|
|
Total other expense, net
|
|
|
(4,013,198
|
)
|
|
|
(552,372
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(9,512,141
|
)
|
|
$
|
(3,817,734
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share, basic
and diluted
|
|
$
|
(7.55
|
)
|
|
$
|
(3.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares outstanding, basic and diluted
|
|
|
1,259,567
|
|
|
|
1,233,268
|
|
See accompanying notes to the financial statements.
ATOMERA
INCORPORATED
STATEMENTS OF
STOCKHOLDERS' DEFICIT
Years Ended December
31, 2015 and 2014
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Paid-in
|
|
|
Subscription
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2014
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,233,268
|
|
|
$
|
1,233
|
|
|
$
|
66,681,041
|
|
|
$
|
(187,500
|
)
|
|
$
|
(70,056,748
|
)
|
|
$
|
(3,561,974
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
78,325
|
|
|
|
-
|
|
|
|
-
|
|
|
|
78,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,817,734
|
)
|
|
|
(3,817,734
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014
|
|
|
-
|
|
|
|
-
|
|
|
|
1,233,268
|
|
|
|
1,233
|
|
|
|
66,759,366
|
|
|
|
(187,500
|
)
|
|
|
(73,874,482
|
)
|
|
|
(7,301,383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock
warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,172,335
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,172,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock
for the settlement of options and warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
384,045
|
|
|
|
384
|
|
|
|
2,088,158
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,088,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
431,893
|
|
|
|
-
|
|
|
|
-
|
|
|
|
431,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,512,141
|
)
|
|
|
(9,512,141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2015
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,617,313
|
|
|
$
|
1,617
|
|
|
$
|
70,451,752
|
|
|
$
|
(187,500
|
)
|
|
$
|
(83,386,623
|
)
|
|
$
|
(13,120,754
|
)
|
See accompanying notes to the financial statements.
ATOMERA
INCORPORATED
STATEMENTS OF
CASH FLOWS
Years Ended December
31, 2015 and 2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(9,512,141
|
)
|
|
$
|
(3,817,734
|
)
|
|
Adjustments to reconcile net loss to net cash used
in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
9,517
|
|
|
|
5,460
|
|
|
Non-cash warrant fair value for services rendered
|
|
|
1,015,848
|
|
|
|
-
|
|
|
Non-cash interest expense
|
|
|
1,931,728
|
|
|
|
558,766
|
|
|
Non-cash loss on option and warrant settlement
|
|
|
2,088,542
|
|
|
|
-
|
|
|
Stock-based compensation
|
|
|
431,893
|
|
|
|
78,325
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
(24,006
|
)
|
|
|
11,904
|
|
|
Accounts payable
|
|
|
(329,417
|
)
|
|
|
491,185
|
|
|
Accrued expenses
|
|
|
888
|
|
|
|
78,734
|
|
|
Net cash used in operating activities
|
|
|
(4,387,148
|
)
|
|
|
(2,593,360
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(3,811
|
)
|
|
|
(26,512
|
)
|
|
Net cash used in investing activities
|
|
|
(3,811
|
)
|
|
|
(26,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds from convertible promissory notes payable
|
|
|
1,096,560
|
|
|
|
1,576,002
|
|
|
Net proceeds from senior secured convertible promissory
notes payable
|
|
|
6,615,031
|
|
|
|
-
|
|
|
Proceeds from bridge loan notes payable
|
|
|
-
|
|
|
|
738,147
|
|
|
Payments on bridge loan notes payable
|
|
|
-
|
|
|
|
(5,482
|
)
|
|
Payment of offering costs
|
|
|
(144,669
|
)
|
|
|
-
|
|
|
Net cash provided by financing activities
|
|
|
7,566,922
|
|
|
|
2,308,667
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
3,175,963
|
|
|
|
(311,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of year
|
|
|
20,980
|
|
|
|
332,185
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
3,196,943
|
|
|
$
|
20,980
|
|
See Note 15 for supplemental cash flow information.
See accompanying notes to the financial statements.
ATOMERA INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
Years Ended December 31, 2015 and 2014
Atomera Incorporated (the “Company”)
(formerly known as MEARS Technologies, Inc.) was incorporated in the state of Delaware in March 2007 under the name MEARS Technologies,
Inc. and is engaged in the development, commercialization and licensing of proprietary processes and technologies for the semiconductor
industry. On January 12, 2016, the Company changed its name to Atomera Incorporated.
The Company is in the development
stage, having not yet started planned principal operations, and is devoting substantially all of its efforts toward technology
research and development.
|
|
2.
|
LIQUIDITY, GOING CONCERN
AND MANAGEMENT PLANS
|
At December 31, 2015, the Company
had cash of approximately $3.2 million and a working capital deficit of approximately $13.3 million. The Company has incurred
recurring operating losses and at December 31, 2015 had an accumulated deficit of approximately $83.4 million. The Company has
primarily financed operations through the sale of equity and debt securities. In March 2015, the Company raised financing of approximately
$7.4 million through the issuance of senior secured convertible notes. Because of recurring and expected future losses and its
cash on hand, there is a substantial doubt about the Company’s ability to continue as a going concern.
The Company believes that it
requires a minimum of $15 million of capital in order to fund its current business plans and start full-scale industrial production
of a device that incorporates the Company’s technology. The Company also believes that the net proceeds of its presently
proposed initial public offering will be sufficient to fund its presently forecasted working capital requirements over, at least,
the 12 months following the close of the offering. The Company endeavors to acquire additional funds through various financing
sources, including private placement of its equity and debt securities, initial public offering of its equity securities, licensing
fees for its technology and joint ventures with industry partners. In addition, the Company will consider alternatives to its
current business plans that may enable the Company to achieve revenue producing operations and meaningful commercial success with
a smaller amount of capital. However, there can be no assurance that such financing will be available on terms favorable to the
Company, if at all. The Company’s ability to continue as a going concern is dependent upon its ability to (1) obtain additional
financing as may be required, (2) generate sufficient cash flow to meet its obligations on a timely basis and (3) ultimately attain
profitability. The accompanying financial statements do not include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable
to continue as a going concern.
On December 8, 2015, the Company’s
Board of Directors approved a 1-for-15 reverse split of the Company’s common stock. The reverse stock split became effective
on December 11, 2015. Upon the effectiveness of the reverse stock split, (i) every 15 shares of outstanding common stock were
combined into one share of common stock, (ii) the number of shares of common stock into which each outstanding option or warrant
to purchase common stock is exercisable was proportionally decreased and (iii) the exercise price of each outstanding option or
warrant to purchase common stock was proportionately increased. The authorized common and preferred stock shares decreased to
47.5 million and 2.5 million, respectively. The par value remained the same. All share and per share amounts have been retroactively
restated to reflect the reverse stock split in the accompanying financial statements and notes.
|
|
4.
|
Summary
of Significant Accounting Policies
|
The accompanying financial statements
reflect the application of certain significant accounting policies as described below:
Development Stage
The Company has early adopted
as permitted authoritative guidance under ASU No. 2014-10, allowing for the elimination of inception-to-date information and certain
disclosures for development stage companies.
Use of Estimates
The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America requires the Company’s
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.
Significant estimates include the fair value of stock-based compensation and warrants, valuation allowance against deferred tax
assets and related disclosures. Actual results could differ from those estimates.
Restricted Investment
The Company’s restricted
investment consists of a certificate of deposit held as collateral to secure borrowing limits for certain corporate credit cards.
The Company is required to maintain this deposit for as long as it retains possession of the credit cards. The certificate of
deposit matures on April 5, 2017. The carrying value of this certificate of deposit approximates the fair value.
Deferred Offering Costs
The Company complies with the
requirements of the ASC 340,
Other Assets and Deferred Costs
. Deferred offering costs of $144,669 consist principally of
legal, accounting, and filing fees incurred through the balance sheet date that are related to the proposed offering and that
will be charged to capital upon the receipt of the capital raised or charged to expense if the proposed offering is not completed.
Income Taxes
In accordance with authoritative
guidance, deferred tax assets and liabilities are recorded for temporary differences between the financial reporting and tax bases
of assets and liabilities using the current enacted tax rate expected to be in effect when the differences are expected to reverse.
A valuation allowance is recorded on deferred tax assets unless realization is considered more likely than not.
The Company evaluates its tax
positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax
positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed
to meet the “more-likely-than-not” threshold are not recorded as a tax benefit or expense in the current year. The
Company recognizes interest and penalties, if any, related to uncertain tax positions in interest expense. No interest and penalties
related to uncertain tax positions were accrued at December 31, 2015.
The Company follows authoritative
guidance which requires the evaluation of existing tax positions. Management has analyzed all open tax years, as defined by the
statute of limitations, for all major jurisdictions, which includes federal and certain states, the principal state being Massachusetts.
Open tax years are those that are open for examination by taxing authorities.
Fair Value of Financial Instruments
Authoritative guidance requires
disclosure of the fair value of financial instruments. The Company’s financial instruments consist of cash, certificate
of deposits, accounts payable, accrued expenses and bridge loan notes payable, the carrying amounts of which approximate their
estimated fair values primarily due to the short-term nature of the instruments or based on information obtained from market sources
and management estimates. The Company measures the fair value of certain of its financial assets and liabilities on a recurring
basis. A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values. Financial
assets and liabilities carried at fair value which is not equivalent to cost will be classified and disclosed in one of the following
three categories:
Level 1 – Quoted prices
(unadjusted) in active markets for identical assets and liabilities.
Level 2 – Inputs other
than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities,
unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable
inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Debt Discounts
Debt discounts are amortized
to interest expense using the straight-line method, which approximates the interest rate method, over the earlier of the term
of the related debt or their earliest date of redemption.
Concentrations of Credit
Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of cash.
The Company maintains its operating
accounts in a single financial institution. The balances are insured by the U.S. Federal Deposit Insurance Corporation (“FDIC”)
up to specified limits. The Company’s cash is maintained in checking accounts with reputable financial institutions that
may at times exceed amount covered by FDIC limits. The Company has not experienced any realized losses on the Company’s
deposits of cash.
Research and Development
Costs
In accordance with authoritative
guidance, the Company charges research and development costs to operations as incurred. Research and development costs consist
of personnel costs for the design, development, testing and enhancement of the Company’s technology, and certain other allocated
costs, such as depreciation and other facilities related expenditures.
Property and Equipment
Items capitalized as property
and equipment are stated at cost. Maintenance and routine repairs are charged to operations when incurred, while betterments and
renewals are capitalized. Depreciation and amortization are computed using the straight-line method over the estimated useful
lives of the respective assets starting when the asset is placed in service.
Common Stock Warrants
The Company classifies as equity
any warrants that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash
settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or
liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an
event occurs and if that event is outside the Company’s control), (ii) gives the counterparty a choice of net-cash settlement
or settlement in shares (physical settlement or net-share settlement) or (iii) that contain reset provisions that do not qualify
for the scope exception. The Company assesses classification of its common stock warrants and other freestanding derivatives at
each reporting date to determine whether a change in classification between assets and liabilities is required. The Company’s
freestanding derivatives consist of warrants to purchase common stock that were issued in connection with its notes payable. The
Company evaluated these warrants to assess their proper classification and determined that the common stock warrants meet the
criteria for equity classification in the balance sheet. Such warrants are measured at fair value, which the Company determines
using the Black-Scholes-Merton option-pricing model.
Stock-Based Compensation
The Company computes stock-based
compensation in accordance with authoritative guidance. The Company uses the Black-Scholes-Merton option-pricing model to determine
the fair value of its stock options. The Black-Scholes-Merton option-pricing model includes various assumptions, including the
fair market value of the common stock of the Company, expected life of stock options, the expected volatility and the expected
risk-free interest rate, among others. These assumptions reflect the Company’s best estimates, but they involve inherent
uncertainties based on market conditions generally outside the control of the Company.
As a result, if other assumptions
had been used, stock-based compensation cost, as determined in accordance with authoritative guidance, could have been materially
impacted. Furthermore, if the Company uses different assumptions on future grants, stock-based compensation cost could be materially
affected in future periods.
The Company has a stock-based
compensation plan under which stock options are granted to employees, consultants and directors. All grants are approved by the
Company’s Board of Directors. Grants to employees generally vest over a two- to four-year period. Additionally, the Company
from time to time grants options that vest based on performance conditions or that vest immediately upon grant. The Company’s
stock options expire no later than ten years after the grant date.
The Company accounts for the
fair value of equity instruments issued to non-employees using either the fair value of the services received or the fair value
of the equity instrument, whichever is considered more reliable
.
The Company utilizes the Black-Scholes-Merton option-pricing
model to measure the fair value of options issued to non-employees.
The Company recorded $189,365
and $78,325 of compensation expense related to stock options awarded to employees for the years ended December 31, 2015 and 2014,
respectively. In addition, the Company recorded $242,528 of compensation expense related to stock options awarded to non-employees
for the year ended December 31, 2015. There was no compensation expense related to stock options awarded to non-employees for
the year ended December 31, 2014.
Basic and Diluted Net Loss
per Share
Basic net loss per share is
calculated by dividing the net loss by the weighted-average number of shares outstanding for the period. Diluted net loss per
share is computed by dividing the net loss by the weighted-average number of shares and dilutive share equivalents outstanding
for the period, determined using the treasury-stock and if-converted methods. Since the Company has had net losses for all periods
presented, all potentially dilutive securities are anti-dilutive. Accordingly, basic and diluted net loss per share are equal.
The following potential common
stock equivalents were not included in the calculation of diluted net loss per common share because their inclusion would be anti-dilutive
at December 31:
|
|
|
2015
|
|
|
2014
|
|
|
Stock Options
|
|
|
511,245
|
|
|
|
181,492
|
|
|
Warrants
|
|
|
302,751
|
|
|
|
605,702
|
|
|
Conversion of Promissory Notes
|
|
|
2,230,323
|
|
|
|
897,588
|
|
|
|
|
|
3,044,319
|
|
|
|
1,684,782
|
|
Recent Accounting Pronouncements
In June 2014, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-12,
Accounting
for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service
Period
. ASU 2014-12 requires that a performance target that affects vesting and could be achieved after the requisite service
period be treated as a performance condition. ASU 2014-12 is effective for the Company in its first quarter of 2016 with early
adoption permitted. The Company does not expect its pending adoption of ASU 2014-12 to have a material impact on its financial
statements and disclosures.
In August 2014, the FASB issued
ASU No. 2014-15,
Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern
. The new
standard provides guidance around management’s responsibility to evaluate whether there is substantial doubt about an entity’s
ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The adoption
of this standard is not expected to have a material impact on the Company’s financial statements.
In April 2015, the FASB issued
ASU No. 2015-03,
Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance
Costs
, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as
a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts. ASU 2015-03 is effective
for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is
permitted. The Company does not expect that the adoption of ASU 2015-03 will have a material effect on its financial statements.
In November 2015, the FASB issued
ASU No. 2015-17,
Balance Sheet Classification of Deferred Taxes
. The standard amends the current requirement for organizations
to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, companies will
now be required to classify all deferred tax assets and liabilities as noncurrent. The ASU is effective for fiscal years, and
interim periods within those years, beginning after December 15, 2016, with early adoption permitted. The Company does not expect
that the adoption of ASU 2015-17 will have a material effect on its financial statements.
In January 2016, the FASB issued
ASU No. 2016-01,
Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities
,
which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This guidance
will be effective in the first quarter of fiscal year 2019 and early adoption is not permitted. The Company is currently evaluating
the impact that this guidance will have on its financial statements.
The Company has considered all
other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material
impact on its financial statements.
|
|
5.
|
Property
and Equipment
|
Property and equipment consisted of the following:
|
|
|
2015
|
|
|
2014
|
|
|
Computer equipment
|
|
$
|
38,894
|
|
|
$
|
35,083
|
|
|
Software
|
|
|
4,716
|
|
|
|
4,716
|
|
|
Laboratory equipment
|
|
|
184,461
|
|
|
|
184,461
|
|
|
Office equipment
|
|
|
16,699
|
|
|
|
16,699
|
|
|
Furniture and fixtures
|
|
|
824
|
|
|
|
824
|
|
|
|
|
|
245,594
|
|
|
|
241,783
|
|
|
Less: Accumulated depreciation
and amortization
|
|
|
(230,061
|
)
|
|
|
(220,544
|
)
|
|
|
|
$
|
15,533
|
|
|
$
|
21,239
|
|
Depreciation and amortization
expense relating to property and equipment was $9,517 and $5,460 for the years ended December 31, 2015 and 2014, respectively.
During the year ended December
31, 2014, the Company disposed of fully depreciated computer equipment with a cost of $422,645, software with a cost of $20,726,
lab equipment with a cost of $8,874 and furniture and fixtures with a cost of $4,395.
|
|
6.
|
Commitments
AND CoNTINGENCIES
|
Operating Leases
The Company had an operating
lease agreement for the use of 4,400 square feet of office space in Newton, Massachusetts as its corporate headquarters. The lease
commenced on January 31, 2011 and was amended and extended various times through December 31, 2014, the termination date.
On November 5, 2014, the Company
entered a new lease agreement for the use of 1,730 square feet of office space in Wellesley Hills, Massachusetts. The lease with
monthly payments of $4,613 commenced on December 1, 2014 and was amended to expire on November 30, 2016.
On January 19, 2016, the Company
entered into a real estate lease agreement for a 3,396 square foot office facility in Los Gatos, California as its new corporate
headquarters. The lease commenced on February 1, 2016 and expires on January 31, 2018. The lease rate is $12,395 per month, which
will increase to $13,074 per month commencing February 1, 2017.
Rent expense was $55,360 and
$92,613 during the years ended December 31, 2015 and 2014, respectively.
Approximate future minimum lease
payments required under the operating leases are as follows:
|
Years ending December 31,
|
|
Amount
|
|
|
|
|
|
|
|
2016
|
|
$
|
187,000
|
|
|
2017
|
|
|
156,200
|
|
|
2018
|
|
|
13,100
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
356,300
|
|
Incentive Bonus
During September 2015 and amended
in December 2015, the Board of Directors resolved to pay an incentive bonus to certain directors and officers contingent upon
the Company being listed on the NASDAQ stock exchange before May 31, 2016, an initial public offering (IPO) with net proceeds
of at least $15 million and a post-IPO valuation of at least $50 million and that the officers and directors remain in service
with the Company through the close of the IPO. If these circumstances are met, a total bonus of $1,651,369 will be paid to employees
in the form of common stock, convertible at the greater of the IPO price to the public or $3.681 per share.
Officer Compensation
During October 2015, the Company
entered into an employment agreement with an officer. The agreement calls for an annual base salary of $250,000 and a bonus of
up to 50% of his base salary. Upon completion of an IPO, the officer is entitled to an increase in his annual base salary to $300,000
and a $250,000 incentive bonus. In the event of involuntary termination, the officer is entitled to 18 months of severance pay.
As of January 1, 2014, the Company
had outstanding notes payable (the “Bridge Loan Notes”), substantially all of which were issued to existing investors,
totaling $3,740,612 including accrued interest of approximately $486,000. These notes were issued in 2012 and 2013 in the aggregate
principal amount of $1,584,243 and $1,671,876, respectively, and accrued interest at 8% and 18%, respectively. The Company also
issued a warrant to purchase 93,878 shares of common stock in connection with the 2012 notes (Note 10). The initial maturity dates
of these notes had been previously extended to May 31, 2014.
From March 5, 2014 through May
9, 2014, the Company issued Bridge Loan Promissory Notes with certain investors in the aggregate principal amount of $738,147
(the “2014 Bridge Loan Notes”). The 2014 Bridge Loan Notes had a maturity date of April 30, 2014 or May 31, 2014.
The 2014 Bridge Loan Notes were extendable. The notes accrued interest at 18% per annum. The 2014 Bridge Loan Notes were subordinate
to the preceding Bridge Loan Notes. The 2014 Bridge Loan Notes due April 30, 2014 had their initial maturity dates extended to
May 31, 2014.
On May 31, 2014, the outstanding
principal and accrued interest for the Bridge Loan Notes and the 2014 Bridge Loan Notes were exchanged for 2014 Unsecured Convertible
Promissory Notes. The total converted principal and accrued interest was $4,676,664. The 2014 Unsecured Convertible Promissory
Notes were due on May 31, 2016. The notes accrued interest at the rate of 10% per annum. Effective upon the closing of a firm
commitment underwritten public offering of at least $15 million, all of the outstanding principal and accrued interest would automatically
be converted into shares of common stock at a conversion price equal to the lower of the Discounted Price Per Share, the Convertible
Note Price Per Share or the Pre-IPO Price Per Share, as defined in the agreement. Until the 10
th
day prior to the consummation
of an IPO, a holder of a convertible note, at its option, could convert at a conversion price of $7.362 per share. The Company
determined there was no beneficial conversion feature.
From June 6, 2014 through December
15, 2014, the Company issued for cash consideration additional 2014 Unsecured Convertible Promissory Notes under the same terms
as specified in the preceding paragraph, with certain investors in the aggregate principal amount of $1,576,002. Accrued interest
associated with the 2014 Unsecured Convertible Promissory Notes was approximately $355,400 as of December 31, 2014 and was included
in the balance outstanding in the accompanying balance sheets.
From January 9, 2015 through
February 5, 2015, the Company issued additional 2014 Unsecured Convertible Promissory Notes with certain investors in the aggregate
principal amount of $1,096,560, of which $596,560 was from existing investors.
On March 17, 2015, the Company
issued Senior Secured Convertible Notes (“Secured Notes”) to certain investors under which the Company borrowed $7,400,774,
of which $28,217 was from existing investors. The Company paid brokerage commissions to National Securities Corporation (“NSC”)
of approximately $785,700. The brokerage commissions are being amortized as interest expense over the life of the loan. During
the year ended December 31, 2015, the Company recognized interest expense of approximately $514,900 related to the brokerage commissions.
The Company also issued a warrant to NSC in connection with this financing (Note 10). The aggregate unamortized balance of the
brokerage commissions and warrant value at December 31, 2015 is classified as debt discount of $324,760.
In addition on March 17, 2015,
the Company exchanged all of the existing 2014 Unsecured Convertible Promissory Notes for Secured Notes with an aggregate principal
balance of $7,349,226. During 2015, the interest expense on the 2014 Unsecured Convertible Promissory Notes was approximately
$144,000 and total accrued interest on the 2014 Unsecured Convertible Promissory Notes was $499,000 at March 17, 2015. The total
closing represented $14,750,000. The Secured Notes are due on May 31, 2016 and accrue interest at a rate of 10% per annum, except
in any event of default in which case the interest rate shall be 12% per annum. The Secured Notes automatically convert to common
stock in the event of an IPO of the Company and are optionally convertible upon a subsequent placement of equity other than an
IPO or at the discretion of the note holder. Based on the method of conversion, the Secured Notes are converted into common stock
at the Conversion Price, as defined in the agreement. Accrued interest associated with the Secured Notes was approximately $1,670,000
as of December 31, 2015 and was included in the balance outstanding in the accompanying balance sheet.
At December 31, 2015, the senior
secured convertible promissory notes payable consisted of the following:
|
Senior Notes
|
|
$
|
14,750,000
|
|
|
Accrued interest
|
|
|
1,669,637
|
|
|
Debt Discount
|
|
|
(324,760
|
)
|
|
|
|
|
|
|
|
Senior secured convertible promissory
notes payable, net
|
|
$
|
16,094,877
|
|
|
|
8.
|
Related
Party Transactions
|
Through 2014, the Company raised
additional financing through notes payable, substantially all of which were issued to existing investors (Note 7). Certain of
the Company’s officers and directors participated in the placements and purchased convertible notes in the aggregate principal
amount of $3,317,607, representing 22.5% of the convertible notes sold by the Company. During 2014, substantially all interest
expense was related to these notes payable to existing investors. During 2015, the Company issued notes payable to existing investors
in the amount of $624,777. During 2015, the interest expense on the 2014 Unsecured Convertible Promissory Notes and the Secured
Notes with existing investors totaled approximately $655,000.
On January 14, 2005, the Company
executed a Secured Promissory Note (the “Promissory Note”) with an officer of the Company. Under the Promissory Note,
the officer borrowed $187,500 from the Company, which is classified as a subscription receivable in the accompanying balance sheet.
The Promissory Note bears interest at a fixed rate of 3.76% per annum, with interest-only payments due annually through the maturity
date of January 14, 2014. The Promissory Note is collateralized by common stock owned by the officer. The Promissory Note is a
full recourse obligation such that the Company may pursue all remedies available to it in the event of nonpayment. The Promissory
Note matured on January 14, 2014 and was not paid.
During December 2015, the Company
extended the term of the Promissory Note to the earliest of (i) January 14, 2019, (ii) five business days following written notice
by the Company to the officer of the occurrence of a Capital Event, as defined, (iii) five business days following written notice
to the officer that (A) the Company has ceased operations in the ordinary course of business, or (B) the Company has dissolved,
or (iv) the earlier of any date on which (A) the Company has commenced liquidation, or (B) a receiver, conservator or similar
officer has been appointed, the Company has made an assignment for the benefit of creditors, or entered into an arrangement with
its creditors or any proceeding under any bankruptcy or insolvency law, provided however that in the case of any involuntary proceeding,
the Promissory Note shall only become due and payable sixty days after the commencement of the involuntary proceeding and only
if the Company has not obtained a dismissal of such proceeding. The Promissory Note was cancelled effective January 13, 2016 (Note
16).
During both 2015 and 2014, a
director, who is also a shareholder of the Company, was paid $10,000 for his work as a consultant for the Company.
During 2015 and 2014, a law
firm, a partner of which serves on our board and is a shareholder, billed the Company approximately $19,700 and $236,600, respectively.
Included in current liabilities at December 31, 2015 and 2014 is approximately $1,300 and $259,000, respectively, owed to this
law firm.
As of December 31, 2015 the
Company has reserved 916,084 shares of common stock for stock options and warrants.
During October 2015, the Company
offered all option holders as of December 31, 2014 a one-time opportunity to exchange their options for shares of restricted common
stock in a ratio of two options for one share of restricted common stock regardless of exercise price. The offer resulted in 166,230
options converting to 83,115 shares of restricted common stock on December 7, 2015. The Company recorded a loss of $427,695 on
this exchange based on the incremental increase in value of the options after the exchange compared to before the exchange.
During October 2015, the Company
offered all warrant holders as of December 31, 2014 a one-time opportunity to exchange their warrants for shares of common stock
in a ratio of two warrants for one share of common stock regardless of exercise price. The offer resulted in 601,861 warrants
converting to 300,930 shares of common stock on December 7, 2015. The Company recorded a loss of $1,660,847 on this exchange based
on the incremental increase in value of the warrants after the exchange compared to before the exchange.
Prior to 2014, the Company had
outstanding warrants to purchase 605,702 shares of common stock at $33.75 per share and of these warrants, 428,082 were set to
expire June 15, 2016, 83,742 were set to expire November 14, 2016 and 93,878 were set to expire through May 2022. During December
2015, 601,861 of these warrants were exchanged for 300,930 shares of common stock (Note 9). Of the remaining 3,841 warrants, 1,574
expire June 15, 2016, 1,541 expire November 14, 2016 and 726 expire May 21, 2022.
On February 9, 2015, the Company
issued a five year warrant to purchase 198,767 shares of common stock at $0.15 per share to Liquid Patent Advisors, LLC (formerly
known as Liquid Patent Consulting, LLC) (“LPC”). The warrant represented consideration for business, strategic and
intellectual property development to be performed during 2015. The fair value of the warrant on the grant date was estimated using
the Black-Scholes-Merton option pricing model with a common stock value of $5.25 per share, a contractual life of 5 years, a dividend
yield of 0%, a volatility of 43.9% and an assumed risk free interest rate of 1.49%. The fair value of the warrant was determined
to be $1,015,848 and was recorded as consulting expense and is included in general and administrative expenses in the statement
of operations. During July 2015, the exercise price within this warrant to purchase 188,829 shares of common stock was modified
to an exercise price of $0.87 per share. The modification resulted in a decrease in the fair value of the warrant; such decrease
is not recognized under authoritative guidance.
On March 17, 2015, the Company
issued a five year warrant to purchase 100,143 shares of common stock at $7.362 per share to NSC as additional consideration for
serving as placement agent in connection with the sale of the Secured Notes in the principal amount of $7,400,774 (Note 7). Upon
conversion of the Secured Notes, the number of warrant shares is adjusted to 10% of the common stock shares issued in the conversion
and the exercise price is adjusted to the Conversion Price. The fair value of the warrants on the grant date was estimated using
the Black-Scholes-Merton option pricing model with a common stock fair value of $5.25 per share, a contractual life of 5 years,
a dividend yield of 0%, a volatility of 43.9% and an assumed risk free interest rate of 1.56%. The relative fair value of the
warrants was determined to be $156,487 and will be amortized as interest expense over the life of the loan. During the year ended
December 31, 2015, the Company recognized approximately $102,600 of interest expense related to these warrants.
In determining the fair value
for warrants, the expected life of the Company’s options was determined using the contractual life. The methodology in determining
all other inputs to calculate the fair value utilizing the Black-Scholes-Merton option pricing model is the same as the stock
option methodology described in Note 11 for stock options.
A summary of warrant activity
for the years ended December 31, 2015 and 2014 is as follows:
|
|
|
Number of
Shares
|
|
|
Range of
Exercise
Prices
|
|
Weighted-
Average
Exercise
Prices
|
|
|
Weighted-
Average
Remaining
Life
|
|
|
Outstanding at January 1, 2014
|
|
|
605,702
|
|
|
$33.75
|
|
$
|
33.75
|
|
|
|
3.4
|
|
|
Outstanding at December 31, 2014
|
|
|
605,702
|
|
|
$33.75
|
|
$
|
33.75
|
|
|
|
2.4
|
|
|
Issued
|
|
|
298,910
|
|
|
$0.15 - $7.36
|
|
$
|
3.02
|
|
|
|
4.1
|
|
|
Exchanged
|
|
|
(601,861
|
)
|
|
$33.75
|
|
$
|
33.75
|
|
|
|
|
|
|
Outstanding at December 31, 2015
|
|
|
302,751
|
|
|
$0.15 - $33.75
|
|
$
|
3.41
|
|
|
|
4.1
|
|
The warrants outstanding at
December 31, 2015 had an aggregate intrinsic value of approximately $967,200.
The Company granted options
under an Employee Option Plan (the “Old Plan”), which authorized the granting of options to employees, directors and
consultants to purchase common stock. Option grants are no longer authorized under the Old Plan which had 1,370 vested options
remained outstanding at December 31, 2014 and no vested options outstanding at December 31, 2015.
On March 14, 2007, the Company’s
stockholders approved the 2007 Equity Incentive Plan (the “2007 Plan”). Generally, stock options vest and become exercisable
over a two to four-year period from the date of grant; however during 2015 certain options granted provided for immediate vesting
or were milestone based. Stock options expire no later than ten years after the grant date. In addition, non-vested shares that
are released from or reacquired by the Company from outstanding awards under the 2007 Plan become available for grant under the
2007 Plan and may be reissued as new awards. The 2007 Plan is authorized to issue up to 613,333 shares as of December 31, 2015.
A summary of the activity under
the Old and the 2007 Plans for the years ended December 31, 2015 and 2014 is as follows:
|
|
|
Number of
Shares
|
|
|
Range of
Exercise
Prices
|
|
Weighted-
Average
Exercise
Prices
|
|
|
Weighted-
Average
Remaining
Contractual
Term
(In Years)
|
|
|
Outstanding at January 1, 2014
|
|
|
188,257
|
|
|
$2.55 - $187.50
|
|
$
|
36.75
|
|
|
|
7.3
|
|
|
Cancelled
|
|
|
(6,765
|
)
|
|
$59.10 - $187.50
|
|
$
|
65.40
|
|
|
|
|
|
|
Outstanding at December 31, 2014
|
|
|
181,492
|
|
|
$2.55 - $187.50
|
|
$
|
35.70
|
|
|
|
6.5
|
|
|
Exercisable at December 31, 2014
|
|
|
178,159
|
|
|
$2.55 - $187.50
|
|
$
|
35.70
|
|
|
|
6.4
|
|
|
Non-vested at December 31, 2014
|
|
|
3,333
|
|
|
$33.75
|
|
$
|
33.75
|
|
|
|
7.2
|
|
|
Vested and expected to vest
at December 31, 2014
|
|
|
181,333
|
|
|
$2.55 - $187.50
|
|
$
|
35.70
|
|
|
|
6.5
|
|
|
|
|
Number of
Shares
|
|
|
Range of
Exercise
Prices
|
|
Weighted-
Average
Exercise
Prices
|
|
|
Weighted-
Average
Remaining
Contractual
Term
(In Years)
|
|
|
Outstanding at December 31, 2014
|
|
|
181,492
|
|
|
$2.55 - $187.50
|
|
$
|
35.70
|
|
|
|
6.5
|
|
|
Granted
|
|
|
519,498
|
|
|
$5.70 - $6.60
|
|
$
|
6.06
|
|
|
|
9.5
|
|
|
Cancelled
|
|
|
(23,515
|
)
|
|
$6.60 – 187.50
|
|
$
|
15.24
|
|
|
|
|
|
|
Exchanged (Note 9)
|
|
|
(166,230
|
)
|
|
$2.55 - $187.50
|
|
$
|
34.11
|
|
|
|
|
|
|
Outstanding at December 31, 2015
|
|
|
511,245
|
|
|
$5.70 - $59.10
|
|
$
|
7.05
|
|
|
|
9.4
|
|
|
Exercisable at December 31, 2015
|
|
|
199,544
|
|
|
$6.60 - $59.10
|
|
$
|
9.16
|
|
|
|
8.8
|
|
|
Non-vested at December 31, 2015
|
|
|
311,701
|
|
|
$5.70 - $6.60
|
|
$
|
5.70
|
|
|
|
9.8
|
|
|
Vested and expected to vest
at December 31, 2015
|
|
|
496,376
|
|
|
$5.70 – $59.10
|
|
$
|
7.09
|
|
|
|
9.4
|
|
The total number of options
available for future grant was 102,088 and 159,379 as of December 31, 2015 and 2014, respectively.
A summary of the status of the
Company’s non-vested stock options as of December 31, 2015 and 2014 and changes during the years then ended is as follows:
|
Non-vested at December 31, 2013
|
|
|
6,833
|
|
|
Vested
|
|
|
(3,500
|
)
|
|
Non-vested at December 31, 2014
|
|
|
3,333
|
|
|
Granted
|
|
|
519,498
|
|
|
Vested
|
|
|
(187,782
|
)
|
|
Forfeited
|
|
|
(21,682
|
)
|
|
Exchanged
|
|
|
(1,666
|
)
|
|
Non-vested at December 31, 2015
|
|
|
311,701
|
|
The following table summarizes
the stock-based compensation expense recorded in the Company’s results of operations during the years ended December 31:
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
294,797
|
|
|
$
|
-
|
|
|
Research and development
|
|
|
137,096
|
|
|
|
78,325
|
|
|
|
|
$
|
431,893
|
|
|
$
|
78,325
|
|
The Company records compensation
expense for employee awards with graded vesting using the straight-line method. The Company records compensation expense for non-employee
awards with graded vesting using the accelerated expense attribution method. The Company recognizes compensation expense over
the requisite service period applicable to each individual award, which generally equals the vesting term. Estimated prospective
forfeitures are incorporated in the determination of compensation cost to be recognized. The Company applied an expected forfeiture
rate of 4.77% to non-vested stock options for which expense was recognized. The options outstanding at December 31, 2015 had no
intrinsic value in the aggregate.
The Company estimates the fair
value of each option award using the Black-Scholes-Merton option pricing model.
The fair values of options granted
during the year ended December 31, 2015 were calculated using the following assumptions:
|
Weighted average grant date fair value
|
|
$2.14
|
|
Assumptions:
|
|
|
|
Expected volatility
|
|
43.94%
|
|
Weighted average expected term (in years)
|
|
5.4
|
|
Risk-free interest rate
|
|
1.31% – 1.75%
|
|
Expected dividend yield
|
|
0%
|
The risk-free interest rate
was obtained from U.S. Treasury rates for the applicable periods. The Company’s expected volatility was based upon the historical
volatility for industry peers and used an average of those volatilities. The expected life of the Company’s options was
determined using the simplified method as a result of limited historical data regarding the Company’s activity. The dividend
yield considers that the Company has not historically paid dividends, and does not expect to pay dividends in the foreseeable
future.
The fair value of the common
stock was determined by the board of directors based on a variety of factors, including valuations prepared by third parties,
the Company's financial position, the status of development efforts within the Company, the current climate in the marketplace
and the prospects of a liquidity event, among others.
As of December 31, 2015, there
was approximately $673,000 of total unrecognized compensation expense related to non-vested share-based compensation arrangements
that are expected to vest. This cost is expected to be recognized over a weighted-average period of 3.79 years. No options were
granted during the year ended December 31, 2014.
During 2002, the Company established
a plan under Section 401(k) of the Internal Revenue Code (the 401(k) Plan). The 401(k) Plan covers substantially all of its employees
who have attained 18 years of age. Employees may elect to contribute part of their annual compensation to the 401(k) Plan, up
to the maximum deferral allowance for individuals by the Internal Revenue Service under Code Section 401(k), and the Company may
make a matching contribution. During 2015 and 2014, there were no matching contributions made by the Company.
The Company had no income tax
expense due to operating losses incurred for the year ended December 31, 2015. The Company accounts for income taxes in accordance
with authoritative guidance. Under authoritative guidance, a deferred tax asset or liability is recorded for all temporary differences
between book and tax reporting of assets and liabilities. A deferred tax valuation allowance is required if it is more likely
than not that all or a portion of any deferred tax asset will not be realized. The Company provided a full valuation allowance
at December 31, 2015. The valuation allowance increased by approximately $3,158,000 from December 31, 2014.
At December 31, 2015, the Company
had net operating loss carryforwards of approximately $25,018,000 and $8,038,000 to offset future federal and state income taxes,
respectively, if any. These carryforwards expire for federal purposes beginning in 2028 and began to expire for state purposes
in 2017. The future utilization of these net operating loss carryforwards may be subject to limitation in the event of a change
in ownership as described in Internal Revenue Code Section 382. Due to the fact that the Company believes that it is more likely
than not that the Company’s net deferred tax assets will not be realized, the Company has provided a full valuation allowance
against its net deferred tax assets.
A reconciliation of the expected
income tax benefit to actual follows:
|
|
|
2015
|
|
|
2014
|
|
|
Computed “expected” US tax benefit at federal statutory rate
|
|
$
|
(3,234,128
|
)
|
|
$
|
(1,298,030
|
)
|
|
Change resulting from:
|
|
|
|
|
|
|
|
|
|
State and local income tax, net of federal income tax benefit
|
|
|
(452,569
|
)
|
|
|
72,577
|
|
|
Valuation allowance
|
|
|
3,158,286
|
|
|
|
1,274,843
|
|
|
Non-deductible items
|
|
|
566,405
|
|
|
|
1,577
|
|
|
Change in research & development credits
|
|
|
(37,994
|
)
|
|
|
(50,967
|
)
|
|
Income tax expense (benefit)
|
|
$
|
-
|
|
|
$
|
-
|
|
The approximate effect of each
type of temporary difference is as follows:
|
Deferred tax assets:
|
|
2015
|
|
|
2014
|
|
|
Net operating loss carryforwards
|
|
$
|
8,981,824
|
|
|
$
|
8,153,320
|
|
|
Research and development credit
|
|
|
986,971
|
|
|
|
929,688
|
|
|
Stock and warrant based compensation
|
|
|
2,724,699
|
|
|
|
1,942,259
|
|
|
Accrued expense
|
|
|
672,032
|
|
|
|
141,955
|
|
|
Capitalized start-up expenses
|
|
|
11,129,683
|
|
|
|
10,164,901
|
|
|
Property and equipment
|
|
|
1,628
|
|
|
|
6,409
|
|
|
Section 1231 loss carryforwards
|
|
|
27,277
|
|
|
|
27,296
|
|
|
Alternative minimum tax credits
|
|
|
11,771
|
|
|
|
11,771
|
|
|
Total deferred tax assets
|
|
|
24,535,885
|
|
|
|
21,377,599
|
|
|
Valuation allowance
|
|
|
(24,535,885
|
)
|
|
|
(21,377,599
|
)
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
Upon the adoption, and at December
31, 2015, the Company did not have any material uncertain tax positions. No interest and penalties related to uncertain tax positions
were accrued at December 31, 2015.
During May 2013, the Company
brought a lawsuit against another company (the “Defendant”) alleging patent infringement. During December 2014, the
court entered an order granting summary judgment in favor the Defendant on the issue of whether Defendant is infringing the Company’s
patents, and on December 14, 2015, a final judgment was entered and the Company agreed to pay the Defendant approximately $47,000
for costs related to the lawsuit; such amount is included in accrued expenses at December 31, 2015 in the accompanying balance
sheets. In January 2015, Defendant filed a motion with the court to recover from the Company its attorney’s fees and costs.
The court denied Defendant’s motion for reimbursement of fees and costs in December 2015.
Other
The Company is subject to various
legal claims arising in the normal course of business. Based on the information currently available, it is the opinion of management
that the ultimate resolution of pending and threatened legal proceedings will not have a material adverse effect on the Company’s
financial position or the results of future operations.
|
|
15.
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
The accompanying statement of
cash flows for the year ended December 31, 2015 excludes the effect of $156,487 of non-cash financing activities related to the
NSC warrant, which was recorded as a debt discount on the Secured Notes.
The accompanying statement of
cash flows for the year ended December 31, 2015 excludes the effect of $7,349,226 of non-cash financing activities related to
the exchange of unsecured convertible promissory notes for Secured Notes (Note 7).
The accompanying statement of
cash flows for the year ended December 31, 2014 excludes the effect of $4,676,664 of non-cash financing activity related to the
exchange of bridge loans for unsecured convertible promissory notes upon maturity.
Net cash flows from operating
activities as reported in the accompanying statements of cash flows for the year ended December 31, 2014 reflect cash payments
for interest of $1,544. There were no cash payments for interest for the year ended December 31, 2015.
Effective as of January 13,
2016, the Company awarded an officer a bonus in the amount of $187,500, payable in the form of the Company’s cancellation
of the outstanding principal amount of $187,500 under a Promissory Note made by the officer in favor of the Company (see Note
8). As of the date of the award, there was accrued and unpaid interest under the Promissory Note in the amount of $7,050, which
the officer repaid during January 2016. In return for the cancellation of the principal amount under the Promissory Note, the
officer was required to reimburse the Company for withholding taxes payable by the Company, in the amount of $13,998, in connection
with the $187,500 award.
In January 2016 the Company
filed an appeal with the United States Court of Appeals for the Federal Circuit of the trial court’s judgment in favor of
the Defendant in the patent infringement lawsuit described in Note 14 and in the same month the Defendant filed an appeal with
the United States Court of Appeals for the Federal Circuit of the trial court’s denial of their motion to recover attorney’s
fees and costs.
In January 2016, the Company
entered into employment agreements with three officers. The agreements call for an annual base salary of $250,000 and a bonus
of up to 30% of base salary for one officer and annual base salaries of $220,000 and a bonus of up to 15% of base salary for the
other two officers. In the event of involuntary termination, each officer is entitled to six months of severance pay. In June
2016, the Company terminated one of the officers effective as of June 30, 2016.
During January 2016, the Company
issued 2,742 stock options to various directors, officers and employees at an exercise price of $5.70. These options vested immediately.
During January 2016, the Company
entered into a standby letter of credit for $37,186 related to the real estate lease agreement for its new corporate headquarters
in Los Gatos, California (Note 6).
In February 2016, the Company
entered into an employment agreement with an officer. The agreement calls for an annual base salary of $225,000 and a bonus of
up to 30% of base salary. In the event of involuntary termination, the officer is entitled to six months of severance pay.
During February 2016, the Company
issued 27,495 stock options with an exercise price of $5.70. These options vest as follows: one-fourth on the first anniversary
of the grant date, then ratably over the next 36 months.
During February 2016, the Company
extended the period for the Company to complete an IPO and be listed on the NASDAQ stock exchange under the incentive bonus agreements
(Note 6) to May 31, 2017.
During February 2016, the Company
entered into an agreement with another company (“the Evaluator”) whereby the Company’s technology will be tested
by the Evaluator for possible inclusion in future products. There is no revenue associated with this agreement.
During March 2016, the maturity
date of the Secured Notes (Note 7) was extended to May 31, 2017. All other terms of the Secured Notes remained the same.
During April 2016, the Company
issued additional Secured Notes with certain investors in the aggregate principal amount of $5,958,433, of which $2,630,820 is
from existing investors. These notes have the same terms as the previous Secured Notes (Note 7) and mature on May 31, 2017. NSC
acted as placement agent and the Company paid NSC a brokerage commission in the amount of ten percent of the proceeds from the
Secured Notes placed by NSC, or $437,778, and issued to NSC a warrant to purchase ten percent of the common shares issuable upon
conversion of Secured Notes in the principal amount of $4,377,781 at an exercise price equal to the conversion price of the Secured
Notes. In June 2016, and prior to any exercise of the warrant, NSC elected to cancel
the warrant in full and for no consideration.
During April 2016, the Board
of Directors of the Company resolved that upon the completion of an IPO the 2007 Stock Incentive Plan shall be amended to increase
common shares issuable thereunder to 20% of the total issued and outstanding shares of Common Stock on a fully-diluted basis immediately
after the IPO.
Atomera
Incorporated
Condensed Balance
Sheets
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,501,384
|
|
|
$
|
3,196,943
|
|
|
Restricted Investment
|
|
|
15,000
|
|
|
|
15,000
|
|
|
Prepaid expenses and other current assets
|
|
|
44,009
|
|
|
|
48,137
|
|
|
Total current assets
|
|
|
1,560,393
|
|
|
|
3,260,080
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
21,784
|
|
|
|
15,533
|
|
|
Deferred offering costs
|
|
|
180,442
|
|
|
|
144,669
|
|
|
Security Deposit
|
|
|
37,186
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,799,805
|
|
|
$
|
3,420,282
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
408,028
|
|
|
$
|
301,517
|
|
|
Accrued expenses
|
|
|
99,342
|
|
|
|
144,642
|
|
|
Senior secured convertible promissory notes payable,
net
|
|
|
16,657,046
|
|
|
|
16,094,877
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
17,164,416
|
|
|
|
16,541,036
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit:
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, authorized 2,500,000 shares;none issued
and outstanding at March 31, 2016 and December 31, 2015
|
|
|
-
|
|
|
|
-
|
|
|
Common stock, $0.001 par value, authorized 47,500,000 shares; issued and
outstanding 1,617,313 shares at March 31, 2016 and December 31, 2015, respectively
|
|
|
1,617
|
|
|
|
1,617
|
|
|
Additional paid-in capital
|
|
|
70,508,581
|
|
|
|
70,451,752
|
|
|
Subscription receivable
|
|
|
-
|
|
|
|
(187,500
|
)
|
|
Accumulated deficit
|
|
|
(85,874,809
|
)
|
|
|
(83,386,623
|
)
|
|
Total stockholders' deficit
|
|
|
(15,364,611
|
)
|
|
|
(13,120,754
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders'
deficit
|
|
$
|
1,799,805
|
|
|
$
|
3,420,282
|
|
See accompanying notes to the condensed
financial statements
Atomera Incorporated
Condensed Statements of Operations
(Unaudited)
For the Three months ended March 31,
|
|
|
2016
|
|
|
2015
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
945,891
|
|
|
$
|
519,452
|
|
|
General and administrative
|
|
|
861,119
|
|
|
|
1,698,781
|
|
|
Selling and marketing
|
|
|
119,015
|
|
|
|
11,394
|
|
|
Total operating expenses
|
|
|
1,926,025
|
|
|
|
2,229,627
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(1,926,025
|
)
|
|
|
(2,229,627
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(562,161
|
)
|
|
|
(231,122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(2,488,186
|
)
|
|
$
|
(2,460,749
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share, basic and diluted
|
|
$
|
(1.54
|
)
|
|
$
|
(2.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, basic and dilulted
|
|
|
1,617,313
|
|
|
|
1,233,268
|
|
See accompanying notes to the condensed
financial statements
Atomera Incorporated
Condensed Statement of Stockholders'
Deficit
For the Three Months Ended March 31,
2016
(Unaudited)
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-in
|
|
|
Subscription
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,617,313
|
|
|
$
|
1,617
|
|
|
$
|
70,451,752
|
|
|
$
|
(187,500
|
)
|
|
$
|
(83,386,623
|
)
|
|
$
|
(13,120,754
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation in exchange
for settlement of subcription receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
187,500
|
|
|
|
-
|
|
|
|
187,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,829
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,488,186
|
)
|
|
|
(2,488,186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31,
2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,617,313
|
|
|
$
|
1,617
|
|
|
$
|
70,508,581
|
|
|
$
|
-
|
|
|
$
|
(85,874,809
|
)
|
|
$
|
(15,364,611
|
)
|
See accompanying notes to the condensed
financial statements
Atomera
Incorporated
Condensed Statements
of Cash Flows
(Unaudited)
For the Three
Months Ended March 31,
|
|
|
2016
|
|
|
2015
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(2,488,186
|
)
|
|
$
|
(2,460,749
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2,961
|
|
|
|
2,209
|
|
|
Non-cash warrant fair value for services rendered
|
|
|
-
|
|
|
|
1,015,848
|
|
|
Non-cash interest expense
|
|
|
562,168
|
|
|
|
232,869
|
|
|
Stock-based compensation
|
|
|
56,829
|
|
|
|
313,176
|
|
|
Compensation in exchange for settlement of subscription receivable
|
|
|
187,500
|
|
|
|
|
|
|
Changes in operating assets and liabilities
|
|
|
-
|
|
|
|
|
|
|
Prepaid expenses and security deposit
|
|
|
(33,058
|
)
|
|
|
(26,851
|
)
|
|
Accounts payable
|
|
|
106,511
|
|
|
|
6,141
|
|
|
Accrued expenses
|
|
|
(45,300
|
)
|
|
|
(49,051
|
)
|
|
Net cash used in operating activities
|
|
|
(1,650,576
|
)
|
|
|
(966,408
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(9,210
|
)
|
|
|
(2,170
|
)
|
|
Net cash used in investing activities
|
|
|
(9,210
|
)
|
|
|
(2,170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds from unsecurred convertible promissory notes payable
|
|
|
-
|
|
|
|
1,096,560
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from senior secured convertible promissory notes payable
|
|
|
-
|
|
|
|
6,615,031
|
|
|
Payment of offering costs
|
|
|
(35,773
|
)
|
|
|
-
|
|
|
Net cash (used in) / provided by financing activities
|
|
|
(35,773
|
)
|
|
|
7,711,591
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) / increase in cash
|
|
$
|
(1,695,559
|
)
|
|
$
|
6,743,013
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
3,196,943
|
|
|
|
20,980
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
1,501,384
|
|
|
$
|
6,763,993
|
|
See Note 8 for supplemental cash flow information.
See accompanying
notes to the condensed financial statements
ATOMERA INCORPORATED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Periods Ended March 31, 2016 and 2015
(unaudited)
Atomera Incorporated (the Company)
(formerly known as MEARS Technologies, Inc.) was incorporated in the state of Delaware in March 2007 under the name MEARS Technologies,
Inc. and is engaged in the development, commercialization and licensing of proprietary processes and technologies for the semiconductor
industry. On January 12, 2016, the Company changed its name to Atomera Incorporated.
The Company is in the development
stage, having not yet started planned principal operations, and is devoting substantially all of its efforts toward technology
research and development.
|
|
2.
|
LIQUI
DITY,
GOING CONCERN AND MANAGEMENT PLANS
|
At March 31, 2016 the Company
had cash of approximately $1.5 million and a working capital deficit of approximately $15.6 million. The Company has incurred
recurring operating losses and at March 31, 2016 had an accumulated deficit of approximately $85.9 million. The Company has primarily
financed operations through the sale of equity and debt securities. Because of recurring and expected future losses and its cash
balance on hand, there is a substantial doubt about the Company’s ability to continue as a going concern.
The Company believes that it
requires a minimum of $15 million of capital over the next 12 months from the date of filing this report in order to fund its
current business plans and start full-scale industrial production of a device that incorporates the Company’s technology.
The Company endeavors to acquire additional funds through various financing sources, including private placement of its equity
and debt securities, initial public offering of its equity securities, licensing fees for its technology and joint ventures with
industry partners. In addition, the Company will consider alternatives to its current business plans that may enable the Company
to achieve revenue producing operations and meaningful commercial success with a smaller amount of capital. However, there can
be no assurance that such financing will be available on terms favorable to the Company, if at all. The Company’s ability
to continue as a going concern is dependent upon its ability to (1) obtain additional financing as may be required, (2) generate
sufficient cash flow to meet its obligations on a timely basis and (3) ultimately attain profitability. The financial statements
do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification
of liabilities that might be necessary should the Company be unable to continue as a going concern.
ATOMERA INCORPORATED
NOTES TO THE CONDENSED
FINANCIAL STATEMENTS
Periods Ended
March 31, 2016 and 2015
(unaudited)
|
|
3.
|
Summary
of Significant Accounting Policies
|
The accompanying condensed financial
statements reflect the application of certain significant accounting policies as described in this note and elsewhere in this
prospectus.
Basis of Presentation
The accompanying condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP)
for interim financial information and the rules and regulations of the SEC. Accordingly, since they are interim financial statements,
the accompanying condensed financial statements do not include all of the information and notes required by GAAP for annual financial
statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation
of the financial position, results of operations and cash flows for the interim periods presented. In the opinion of the Company’s
management, all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the Company’s
financial position and the results of operations for the periods presented have been included. Interim results are not necessarily
indicative of results for a full year. The condensed financial statements and notes should be read in conjunction with the financial
statements and notes for the year ended December 31, 2015 which are included elsewhere in this prospectus.
Deferred Offering Costs
The Company complies with the
requirements of the ASC 340,
Other Assets and Deferred Costs
. Deferred offering costs of $180,442 consist principally of
legal, accounting, and filing fees incurred through the balance sheet date that are related to the proposed offering and that
will be charged to capital upon the receipt of the capital raised or charged to expense if the proposed offering is not completed.
Common Stock Warrants
The Company classifies as equity
any warrants that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash
settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or
liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an
event occurs and if that event is outside the Company’s control), (ii) gives the counterparty a choice of net-cash settlement
or settlement in shares (physical settlement or net-share settlement) or (iii) that contain reset provisions that do not qualify
for the scope exception. The Company assesses classification of its common stock warrants and other freestanding derivatives at
each reporting date to determine whether a change in classification between assets and liabilities is required. The Company’s
freestanding derivatives consist of warrants to purchase common stock that were issued in connection with its notes payable. The
Company evaluated these warrants to assess their proper classification and determined that the common stock warrants meet the
criteria for equity classification in the balance sheet. Such warrants are measured at fair value, which the Company determines
using the Black-Scholes-Merton option-pricing model.
ATOMERA INCORPORATED
NOTES TO THE CONDENSED
FINANCIAL STATEMENTS
Periods Ended
March 31, 2016 and 2015
(unaudited)
Stock-Based Compensation
The Company computes stock-based
compensation in accordance with authoritative guidance. The Company uses the Black-Scholes-Merton option-pricing model to determine
the fair value of its stock options. The Black-Scholes-Merton option-pricing model includes various assumptions, including the
fair market value of the common stock of the Company, expected life of stock options, the expected volatility and the expected
risk-free interest rate, among others. These assumptions reflect the Company’s best estimates, but they involve inherent
uncertainties based on market conditions generally outside the control of the Company.
As a result, if other assumptions
had been used, stock-based compensation cost, as determined in accordance with authoritative guidance, could have been materially
impacted. Furthermore, if the Company uses different assumptions on future grants, stock-based compensation cost could be materially
affected in future periods.
The Company accounts for the
fair value of equity instruments issued to non-employees using either the fair value of the services received or the fair value
of the equity instrument, whichever is considered more reliable
.
The Company utilizes the Black-Scholes-Merton option-pricing
model to measure the fair value of options issued to non-employees.
The Company recorded $56,829
and $313,176
of compensation expense related to stock options awarded for the three months ended
March 31, 2016 and 2015, respectively.
Use of Estimates
|
|
|
The preparation of condensed financial
statements in conformity with GAAP requires the Company’s management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the
reported amounts of expenses during the reporting period. Significant estimates include
the fair value of stock-based compensation and warrants, valuation allowance against
deferred tax assets and related disclosures. Actual results could differ from those estimates.
|
Basic and Diluted Net Loss
per Share
|
|
|
Basic net loss per share is calculated
by dividing the net loss by the weighted-average number of shares outstanding for the
period
. Diluted net loss per share is computed by
dividing the net loss by the weighted-average number of shares and dilutive share equivalents
outstanding for the period, determined using the treasury-stock and if-converted methods.
Since the Company has had net losses for all periods presented, all potentially dilutive
securities are anti-dilutive. Accordingly, basic and diluted net loss per share are equal.
|
ATOMERA INCORPORATED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Periods Ended March 31, 2016 and 2015
(unaudited)
|
|
|
The following potential common stock equivalents
were not included in the calculation of diluted net loss per common share because the
inclusion thereof would be anti-dilutive:
|
|
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
|
Stock Options
|
|
|
538,014
|
|
|
|
387,955
|
|
|
Warrants
|
|
|
302,751
|
|
|
|
302,751
|
|
|
Conversion of Notes Payable
|
|
|
2,280,274
|
|
|
|
2,079,372
|
|
|
|
|
|
3,121,039
|
|
|
|
2,770,078
|
|
Recent Accounting Pronouncements
Adopted
In April 2015, the FASB issued
ASU No. 2015-03,
Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance
Costs
, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as
a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts. ASU 2015-03 is effective
for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. The application of
ASU 2015-03 did not have a material effect on the condensed financial statements.
Other Recently Issued Accounting
Pronouncements
The Company has considered all
recently issued accounting pronouncements and is in the process of evaluating the potential impact of these recent accounting
pronouncements on its condensed financial statements.
From January 9, 2015 through
February 5, 2015, the Company issued promissory notes to certain investors in the aggregate principal amount of $1,096,560, of
which $596,560 was from existing investors.
ATOMERA INCORPORATED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Periods Ended March 31, 2016 and 2015
(unaudited)
On March 17, 2015, the Company
issued Senior Secured Convertible Notes (“Secured Notes”) to certain investors under which the Company borrowed $7,400,774,
of which $28,217 was from existing investors. The Company paid brokerage commissions to National Securities Corporation (“NSC”)
of $785,700. The brokerage commissions are being amortized as interest expense over the life of the loan. During the three months
ended March 31, 2016, the Company recognized interest expense of $194,428 related to the brokerage commissions which is included
in interest expenses in the condensed statements of operations. The Company also issued a warrant to NSC in connection with this
financing. The aggregate unamortized balance of the brokerage commissions and warrant value at March 31, 2016 is classified as
debt discount of $130,331.
In addition, on March 17, 2015,
the Company exchanged all of its existing Unsecured Convertible Promissory Notes for Secured Notes with an aggregate principal
balance of $7,349,226. During the three months ended March 31, 2015, the interest expense on the Unsecured Convertible Promissory
Notes was approximately $144,000 and total accrued interest on the 2014 Unsecured Convertible Promissory Notes was approximately
$499,000 at March 17, 2015. The total closing represented $14,750,000. The Secured Notes are due on May 31, 2016 and accrue interest
at a rate of 10% per annum, except in any event of default in which case the interest rate shall be 12% per annum. During March
2016, the maturity date of the Secured Notes was extended to May 31, 2017. All other terms of the Secured Notes remained the same.
The Secured Notes automatically convert to common stock in the event of an IPO of the Company and are optionally convertible upon
a subsequent placement of equity other than an IPO or at the discretion of the note holder. Based on the method of conversion,
the Secured Notes are converted into common stock at the Conversion Price, as defined in the agreement. As of March 31, 2016,
accrued interest associated with the Secured Notes was $2,037,377 and was included in the balance outstanding in the accompanying
condensed balance sheet.
As of the date of this prospectus,
the Company is in compliance with all covenants of the Secured Notes.
At March 31, 2016, the Secured
Notes payable consisted of the following:
|
Senior Notes
|
|
$
|
14,750,000
|
|
|
Accrued interest
|
|
|
2,037,377
|
|
|
Debt Discount
|
|
|
(130,331
|
)
|
|
|
|
|
|
|
|
Senior secured convertible
promissory notes payable, net
|
|
$
|
16,657,046
|
|
ATOMERA INCORPORATED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Periods Ended March 31, 2016 and 2015
(unaudited)
|
|
5.
|
Related
Party Transactions
|
On January 14, 2005, the Company
executed a Secured Promissory Note (the Promissory Note) with an officer of the Company. Under the Promissory Note, the officer
borrowed $187,500 from the Company. The Promissory Note bore interest at a fixed rate of 3.76% per annum, with interest-only payments
due annually through the maturity date of January 14, 2014. In December 2015, the Company agreed to extend the term of the note
to January 14, 2019, subject to acceleration in the event of the sale of the sale or liquidation of the Company, bankruptcy or
like event. Effective January 2016 the Company cancelled the outstanding principal of the note in the amount of $187,500. The
cancellation of this note was recognized as a bonus to the officer and included in general and administrative expenses in the
accompanying condensed statement of operations for the three month period ended March 31, 2016. As of the date of the cancellation
of the Promissory Note, there was accrued and unpaid interest under the note in the amount of $7,050, which amount has been repaid
by the officer. In return for the cancellation of the note, the officer was required to reimburse the Company for withholding
taxes payable by the Company, in the amount of $13,998.
During the three month periods
ended March 31, 2016 and 2015, a director, who is also a shareholder of the Company, was paid $3,000 and $4,000, respectively,
for his work as a consultant for the Company.
|
|
|
A director and shareholder of the Company
is a partner of a law firm that serves as legal counsel for the Company. During the three
months ended March 31, 2016 and 2015, this law firm billed the Company $0 and $18,104,
respectively. Included in current liabilities on the accompanying condensed balance sheets
at March 31, 2016 and December 31, 2015, is $1,310 and $1,310, respectively owed to this
law firm.
|
The Company had no warrant activity
in the three months ended March 31, 2016. As of March 31, 2016, warrants to purchase an aggregate of 302,751 shares of common
stock were outstanding with a weighted average exercise price of $23.58 per share and have weighed average remaining life of
2.6
years.
The warrants outstanding at
March 31, 2016 had an aggregate intrinsic value of $967,200.
ATOMERA INCORPORATED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Periods Ended March 31, 2016 and 2015
(unaudited)
A summary of the activity under
the Employee Stock Option Plan and 2007 Equity Inventive Plan for the three months ended March 31, 2016 is as follows:
|
|
|
Number of
Shares
|
|
|
Weighted-
Average
Exercise
Prices
|
|
|
Weighted-
Average
Remaining
Contractual
Term
(In Years)
|
|
|
Outstanding at January 1, 2016
|
|
|
511,245
|
|
|
$
|
7.05
|
|
|
|
9.4
|
|
|
Granted
|
|
|
26,776
|
|
|
$
|
5.70
|
|
|
|
9.9
|
|
|
Cancelled
|
|
|
(7
|
)
|
|
$
|
5.70
|
|
|
|
-
|
|
|
Outstanding at March 31, 2016
|
|
|
538,014
|
|
|
$
|
6.98
|
|
|
|
9.2
|
|
|
Exercisable at March 31, 2016
|
|
|
202,280
|
|
|
$
|
6.15
|
|
|
|
8.6
|
|
|
Vested and expected to vest
at March 31, 2016
|
|
|
527,788
|
|
|
$
|
5.81
|
|
|
|
9.1
|
|
During the three months ended
March 31, 2016, the Company granted options under its Employee Stock Option Plan to purchase 26,776 shares of its common stock
to its employees. The fair value of these options granted was $70,649.
The total number of
options available for grant was 75,312 as of March 31, 2016.
|
|
|
The following table summarizes the stock-based
compensation expense recorded in the Company’s results of operations during the
three months ended March 31, 2016 and 2015:
|
|
|
|
Three Months Ended
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
47,816
|
|
|
$
|
236,429
|
|
|
Research and development
|
|
|
9,013
|
|
|
|
76,747
|
|
|
|
|
$
|
56,829
|
|
|
$
|
313,176
|
|
|
|
|
The Company records
compensation expense for employee awards with graded vesting using the straight-line
method. The Company records compensation expense for nonemployee awards with graded vesting
using the accelerated expense attribution method. The Company recognizes compensation
expense over the requisite service period applicable to each individual award, which
generally equals the vesting term. Estimated prospective forfeitures are incorporated
in the determination of compensation cost to be recognized. The Company applied an expected
forfeiture rate of 4.77% to non-vested stock options for which expense was recognized
during the periods ended March 31, 2016 and 2015.
|
ATOMERA INCORPORATED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Periods Ended March 31, 2016 and 2015
(unaudited)
|
|
|
The Company estimates the fair value of
each option award using the Black-Scholes-Merton option pricing model.
|
The fair values of options granted
during the three months ended March 31, 2016 were calculated using the following assumptions:
|
Assumptions:
|
|
|
|
|
|
Expected volatility
|
|
|
46.54
|
%
|
|
Weighted average expected term (in years)
|
|
|
6.12
|
|
|
Risk-free interest rate
|
|
|
1.62
|
%
|
|
Expected dividend yield
|
|
|
0
|
%
|
The risk-free interest rate
was obtained from U.S. Treasury rates for the applicable periods. The Company’s expected volatility was based upon the historical
volatility for industry peers and used an average of those volatilities. The expected life of the Company’s options was
determined using the simplified method as a result of limited historical data regarding the Company’s activity. The dividend
yield considers that the Company has not historically paid dividends, and does not expect to pay dividends in the foreseeable
future.
The fair value of the common
stock was determined by the board of directors based on a variety of factors, including valuations prepared by third parties,
the Company's financial position, the status of development efforts within the Company, the current climate in the marketplace
and the prospects of a liquidity event, among others.
As of March 31, 2016, there
was approximately $684,000 of total unrecognized compensation expense related to non-vested share-based compensation arrangements
that are expected to vest. This cost is expected to be recognized over a weighted-average period of 3.5 years.
|
|
8.
|
commitmentS
and contingencies
|
Incentive Bonus
|
|
|
During September 2015,
the Board of Directors resolved to pay an incentive bonus to certain directors and officers
contingent upon the Company being listed on the NASDAQ stock exchange before May 31,
2016 (subsequently extended to May 31, 2017 by the Board of Directors during February
2016) in connection with an initial public offering (IPO) with net proceeds of at least
$15 million and a post-IPO valuation of at least $50 million and that the directors and
officers continue to be in service with the Company until the IPO is closed. If these
circumstances are met, a total bonus of $1,651,369 will be paid to employees in the form
of common stock, convertible at the greater of the IPO price to the public or $3.681
per share. These incentive agreements also provide that an officer or director may continue
to be eligible for the incentive bonus if their service with the Company terminates without
cause or the officer or director resigns with good reason.
|
ATOMERA INCORPORATED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Periods Ended March 31, 2016 and 2015
(unaudited)
Litigation
In May 2013, the Company initiated
a civil action in U.S. federal court against another company (the “Defendant”), alleging patent infringement. During
December 2014, the court entered an order granting summary judgment in favor of the Defendant on the issue of whether the Defendant
is infringing on the Company’s patents, and on December 14, 2015 a final judgment was entered and the Company agreed to
pay the Defendant approximately $47,000 for costs related to the lawsuit, which was paid in January 2016. In January 2015, the
Defendant filed a motion with the court to recover from the Company its attorney’s fees and costs. The court denied the
Defendant’s motion for reimbursement of fees and costs in December 2015.
In January 2016 the Company
filed an appeal with the United States Court of Appeals for the Federal Circuit of the trial court’s judgment in favor of
the Defendant and in the same month the Defendant filed an appeal with the United States Court of Appeals for the Federal Circuit
of the trial court’s denial of their motion to recover attorney’s fees and costs. The Defendant has not asserted any
amount of fees or costs it is seeking on appeal.
Operating Leases
On November 5, 2014, the Company
entered a lease agreement for the use of 1,730 square feet of office space in Wellesley Hills, Massachusetts. The lease with monthly
payments of $4,613 commenced on December 1, 2014 and expires on November 30, 2016.
On January 19, 2016, the Company
entered into a real estate lease agreement for a 3,396 square foot office facility in Los Gatos, California as its new corporate
headquarters. The lease commenced on February 1, 2016 and expires on January 31, 2018. The lease rate is $12,395 per month, which
will increase to $13,074 per month commencing February 1, 2017.
Rent expense was $39,606 and
$13,840 during the three months ended March 31, 2016 and 2015, respectively.
ATOMERA INCORPORATED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Periods Ended March 31, 2016 and 2015
(unaudited)
Approximate future minimum lease
payments required under the operating leases are as follows:
|
Years ending December 31,
|
|
Amount
|
|
|
|
|
|
|
|
Remaining period in 2016
|
|
$
|
148,500
|
|
|
2017
|
|
|
156,200
|
|
|
2018
|
|
|
13,100
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
317,800
|
|
Officer Compensation
In January 2016, the Company
entered into employment agreements with three officers. The agreements call for an annual base salary of $250,000 and a bonus
of up to 30% of base salary for one officer and annual base salaries of $220,000 and a bonus of up to 15% of base salary for the
other two officers. In the event of involuntary termination, each officer is entitled to six months of severance pay. In June
2016, the Company terminated one of the officers effective as of June 30, 2016.
In February 2016, the Company
entered into an employment agreement with an officer. The agreement calls for an annual base salary of $225,000 and a bonus of
up to 30% of base salary. In the event of involuntary termination, the officer is entitled to six months of severance pay.
|
|
9.
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
The accompanying condensed statement
of cash flows for the three months ended March 31, 2015 excludes the effect of $7,349,226 of non-cash financing activities related
to the exchange of unsecured convertible promissory notes for Secured Notes (Note 4).
During April 2016, the Company
issued additional Secured Notes with certain investors in the aggregate principal amount of $5,958,433, of which $2,630,820 is
from existing investors. These notes have the same terms as the previous Secured Notes (Note 4) and mature on May 31, 2017. NSC
acted as placement agent and the Company paid NSC a brokerage commission in the amount of ten percent of the proceeds from the
Secured Notes placed by NSC, or $437,778, and issued to NSC a warrant to purchase ten percent of the common shares issuable upon
conversion of Secured Notes in the principal amount of $4,377,781 at an exercise price equal to the conversion price of the Secured
Notes. In June 2016, and prior to any exercise of the warrant, NSC elected to cancel
the warrant in full and for no consideration.
During April 2016, the Board
of Directors of the Company resolved that upon the completion of an IPO the 2007 Stock Incentive Plan shall be amended to increase
common shares issuable thereunder to 20% of the total issued and outstanding shares of Common Stock on a fully-diluted basis immediately
after the IPO.
2,400,000
Shares of Common Stock
Atomera
Incorporated
PROSPECTUS
National
Securities Corporation
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table sets forth the various expenses to be incurred in connection with the sale and distribution of our common stock
being registered hereby, all of which will be borne by us (except any underwriting discounts and commissions and expenses incurred
for brokerage, accounting, tax or legal services or any other expenses incurred in disposing of the shares). All amounts shown
are estimates except the SEC registration fee.
|
SEC
Filing Fee
|
|
$
|
2,345.06
|
|
FINRA
Fee
|
|
$
|
3,993.13
|
|
Underwriter’s
Legal Fees and Expenses.
|
|
$
|
185,000.00
|
|
Nasdaq
Fee
|
|
$
|
50,000.00
|
|
Printing
Expenses
|
|
$
|
15,000.00
|
|
Accounting
Fees and Expenses
|
|
$
|
175,000.00
|
|
Legal
Fees and Expenses
|
|
$
|
225,000.00
|
|
Transfer
Agent and Registrar Expenses
|
|
$
|
15,000.00
|
|
Miscellaneous
|
|
$
|
28,661.81
|
|
Total
|
|
$
|
700,000.00
|
ITEM
14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The
following summary is qualified in its entirety by reference to the complete text of any statutes referred to below and the certificate
of incorporation of Atomera Incorporated, a Delaware corporation.
Section
145 of the General Corporation Law of the State of Delaware (the “DGCL”) permits a Delaware corporation to indemnify
any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason
of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful.
In
the case of an action by or in the right of the corporation, Section 145 of the DGCL permits a Delaware corporation to indemnify
any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by
reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection
with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in
or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses that the Court of Chancery or such other court shall deem proper.
Section
145 of the DGCL also permits a Delaware corporation to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as
such, whether or not the corporation would have the power to indemnify such person against such liability under Section 145 of
the DGCL.
II-1
Article
Sixth of our Amended and Restated Certificate of Incorporation states that to the fullest extent permitted by the DGCL our directors
shall not be personally liable to us or to our stockholders for monetary damages for breach of fiduciary duty as a director. If
the DGCL is amended after the date hereof to authorize corporate action further eliminating or limiting the personal liability
of directors, then the liability of our directors shall be eliminated or limited to the fullest extent permitted by the DGCL,
as so amended.
Article
Seventh of our Amended and Restated Certificate of Incorporation requires us, to the fullest extent permitted by applicable law,
to provide indemnification of (and advancement of expenses to) our directors and officers, and authorizes us, to the fullest extent
permitted by applicable law, to provide indemnification of (and advancement of expenses to) to other employees and agents (and
any other persons to which the DGCL permits us to provide indemnification) through bylaw provisions, agreements with such directors,
officers, employees, agents or other persons, vote of stockholders or disinterested directors or otherwise, subject only to limits
created by the DGCL with respect to actions for breach of duty to our corporation, our stockholders and others.
Article
Seventh of our Amended and Restated Certificate of Incorporation provides that we shall, to the maximum extent and in the manner
permitted by the DGCL, indemnify each of our directors and officers against expenses (including attorneys’ fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of
the fact that such person is or was a director of the Company. Article Seventh of our Amended and Restated Certificate of Incorporation
also provides that we may, to the maximum extent and in the manner permitted by the DGCL, indemnify each of our employees, officers
and agents against expenses (including attorneys’ fees), judgments, fines, settlements and other amounts actually and reasonably
incurred in connection with any proceeding, arising by reason of the fact that such person is or was an employee, officer or agent
of the Company. The right to indemnification conferred by Article Seventh includes the right to be paid by us the expenses incurred
in defending any action or proceeding for which indemnification is required or permitted following authorization thereof by the
board of directors shall be paid in advance of the final disposition of such action or proceeding upon receipt of an undertaking
by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined by final judicial decision
from which there is no further right to appeal that the indemnified party is not entitled to be indemnified as authorized in Article
Seventh of our Amended and Restated Certificate of Incorporation. We may maintain insurance, at our expense, to protect the Company
and any of our directors, officers, employees or agents against any such expense, liability or loss, whether or not we have the
power to indemnify such person.
Prior
to the closing of this offering we plan to enter into an underwriting agreement, which will provide that the underwriters are
obligated, under some circumstances, to indemnify our directors, officers and controlling persons against specified liabilities.
ITEM
15. RECENT SALES OF UNREGISTERED SECURITIES
Since
November 1, 2012, we issued the following securities without registration under the Securities Act of 1933, as amended.
In
December 2012 through February 2013, we sold 411,090 shares of our common stock to 53 accredited investors at a price of $3.75
per share. The issuances were exempt pursuant to Section 4(a)(2) of the Securities Act and Rule 506 thereunder.
On
February 9, 2015, we issued to Liquid Patent Consulting, LLC warrants to purchase 198,767 shares of our common stock at an exercise
price of $0.15 per share over a five-year term. The issuance was exempt pursuant to Section 4(a)(2) of the Securities Act.
From
2012 through 2014, we conducted an offering of convertible promissory notes, which we refer to as our previously issued promissory
notes, to 59 accredited investors for cash consideration of $6,666,828. On March 17, 2015, we consummated an offering of $14.75
million in principal amount of our senior secured convertible promissory notes for cash consideration of $7.4 million and an exchange
of the previously issued promissory notes, which at the time of exchange represented of $7.35 million of indebtedness, including
$689,381 of accrued interest. On April 1, 2016, we completed the private placement of an additional $5.96 million in senior secured
convertible notes on the same terms as the promissory notes placed in March 2015. We refer to these promissory notes as the “convertible
notes.” Interest accrues on the unpaid principal amount under the convertible notes at the rate of ten percent (10%) per
year, except during any event of default under the convertible notes in which case the interest rate shall be twelve percent (12%)
per year. All principal and interest under the convertible notes are due and payable on May 31, 2017. All principal and interest
under the convertible notes are convertible into shares of our common stock upon the close of the offering to which this registration
statement relates at a conversion price equal to 50% of the public offering price. The notes were issued pursuant to Section 4(a)(2)
of the Securities Act and Rule 506 thereunder. All of the investors were accredited investors as such term is defined in Rule
501 under the Securities Act.
II-2
National
Securities Corporation acted as placement agent in connection with the March 2015 and April 2016 placements of
convertible notes. We paid National Securities Corporation a 10% selling commission on all convertible notes sold by National
Securities. We also issued to National Securities warrants to purchase shares of our common stock equal to 10% of our common
stock issuable upon conversion of the convertible notes in the original principal amount of $11,750,338, our representing the
notes sold by National Securities in the March 2015 and April 2016 placements at an exercise price equal to the note
conversion price of $3.75 per share. The warrant issuances were exempt pursuant to Section 4(a)(2) of the Securities Act. In
June 2016, and prior to any exercise of the warrants, National Securities elected to cancel the warrant to purchase 116,741
shares of common stock, in full and for no consideration, issued to National Securities in connection with the April 2016
placement.
We
believe the offers, sales and issuances of the above securities by us were exempt from registration under the Securities Act by
virtue of Section 4(a)(2) of the Securities Act as transactions not involving a public offering. The recipients of the securities
in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates, notes
and warrants issued in these transactions. All recipients had adequate access, through their relationships with us, to information
about our Company. The sales of these securities were made without any general solicitation or advertising.
Between
October 28, 2015 and December 7, 2015, we conducted an offer to exchange with the holders of our outstanding options and warrants
pursuant to which we offered to issue to such holders one share of our common stock for every option or warrant to purchase two
shares of our common stock. In the exchange, the holders of options representing the right to purchase 166,231 shares of our common
stock exchanged those options for 83,115 shares of our common stock (after adjustments for fractional shares) and the holders
of warrants to purchase 602,103 shares of our common stock exchanged those warrants for 301,052 shares of our common stock (after
adjustments for fractional shares). The offer to exchange was conducted by our management and no commissions or other remuneration
was paid to our management or anyone else in the offer to exchange. The holders of options and warrants were not required to provide
any consideration other than the options or warrants delivered in the exchange. The offer to exchange and the issuance of shares
of common stock in the exchange were exempt pursuant to Section 3(a)(9) of the Securities Act.
ITEM
16. EXHIBITS
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1.1*
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Form
of Underwriting Agreement
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3.1
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Amended
and Restated Certificate of Incorporation of the Registrant
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3.2
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Amended
and Restated Bylaws of the Registrant
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3.3
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Certificate
of Amendment to Certificate of Incorporation of the Registrant
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3.4
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Certificate
of Amendment to Certificate of Incorporation of the Registrant
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4.1*
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Specimen
Certificate representing shares of common stock of Registrant
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4.2
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Warrant
dated February 9, 2015 issued to Liquid Patent Advisors, LLC
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4.3
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Form
of Senior Secured Convertible Promissory Note issued by the Registrant to investors in
the offering completed on March 17, 2015
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4.4
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Warrant
dated March 17, 2015 issued to National Securities Corporation
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4.5
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Form
of Senior Secured Convertible Promissory Note issued by the Registrant to investors in
the offering completed on April 1, 2016
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4.6*
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Form
of Underwriter’s Warrant
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5.1*
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Opinion
of Greenberg Traurig, LLP regarding the validity of the common stock being registered
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10.1
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Secured
Promissory Note dated January 14, 2005 made by Dr. Robert Mears
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10.2
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Pledge
and Security Agreement dated January 14, 2005 between Dr. Robert Mears and the Registrant
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10.3
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Assignment
of Patent Rights dated April 3, 2009 between Dr. Robert Mears and the Registrant
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10.4
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License
Agreement dated December 22, 2006 between ASM International, NV and the Registrant
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10.5+
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2007
Stock Incentive Plan
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10.6
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Exclusive
License and Collaboration Agreement dated March 3, 2010 between K2 Energy Limited and
the Registrant
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10.7
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Letter
Agreement dated June 6, 2014 between K2 Energy Limited and the Registrant
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10.8
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Amendment
No. 1 dated March 11, 2015 to Third Amended and Restated Investor Rights Agreement dated
November 11, 2011
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10.9
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Engagement
Agreement dated October 10, 2014 between Liquid Venture Partners, LLC and the Registrant
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10.10
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Engagement
Agreement dated February 9, 2015 between Liquid Patent Advisors, LLC and the Registrant
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10.11
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Securities
Purchase Agreement dated March 17, 2015 between the Purchasers of Senior Secured Convertible
Promissory Notes and the Registrant
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II-3
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10.12
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Registration
Rights Agreement dated March 17, 2015 between the Purchasers of Senior Secured Convertible
Promissory Notes and the Registrant
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10.13
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Security
Agreement dated March 17, 2015 between the Purchasers of Senior Secured Convertible Promissory
Notes and the Registrant
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10.14+
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Executive
Employment Agreement dated October 16, 2015 between Scott Bibaud and the Registrant
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10.15
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Allonge
to Secured Promissory Note dated December 4, 2015 between Dr. Robert Mears and the Registrant
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10.16+
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Employment
Agreement dated January 1, 2016 between Erwin Trautmann and the Registrant
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10.17+
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Employment
Agreement dated January 1, 2016 between Ron Cope and the Registrant
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10.18+
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Employment
Agreement dated January 13, 2016 between Dr. Robert Mears and the Registrant
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10.19+
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Letter
Agreement regarding loan forgiveness dated January 13, 2016 between Dr. Robert Mears
and the Registrant
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10.20
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Lease
Agreement dated January 19, 2016 between 750 University, LLC and the Registrant
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10.21+
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Employment
Agreement dated February 23, 2016 between Francis Laurencio and the Registrant
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10.22+
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Amendment
No. 1 dated February 26, 2016 to Employment Agreement dated October 12, 2015 between
Scott Bibaud and the Registrant
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10.23
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Consent and Amendment Agreement dated April 1, 2016 between the Purchasers of the March
2015 Senior Secured Convertible Promissory Notes and the Registrant
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10.24
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Securities
Purchase Agreement dated April 1, 2016 between the Purchasers of Senior Secured Convertible Promissory Notes and the Registrant
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10.25
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Amended
and Restated Registration Rights Agreement dated April 1, 2016 between the Purchasers
of Senior Secured Convertible Promissory Notes and the Registrant
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10.26
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Amended
and Restated Security Agreement dated April 1, 2016 between the Purchasers of Senior
Secured Convertible Promissory Notes and the Registrant
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21.1
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List
of Subsidiaries
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23.1
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Consent
of Marcum LLP, Independent Registered Public Accounting Firm
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23.2*
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Consent
of Greenberg Traurig, LLP (included in Exhibit 5.1)
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24.1
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Power
of Attorney (included on page II-5)
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ITEM
17. UNDERTAKINGS
The
undersigned registrant hereby undertake to provide to the underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each
purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final adjudication of such issue.
The
undersigned registrant undertakes that:
(1)
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus
as filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2)
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Los Gatos, California, on this 30
th
day of
June 2016.
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Atomera
Incorporated
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/s/
Scott A. Bibaud
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Scott
A. Bibaud
Chief
Executive Officer and Director
(Principal
Executive Officer)
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POWER
OF ATTORNEY
Each
person whose signature appears below constitutes and appoints Scott A. Bibaud, his true and lawful attorney-in-fact and agent,
each with full power of substitution and resubstitution, severally, for him and in his name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this registration statement on Form S-1, any subsequent
registration statements pursuant to Rule 462 of the Securities Act of 1933, as amended, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This power
of attorney may be executed in counterparts.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement on Form S-1 has been signed by the following persons
in the capacities and on the dates indicated.
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/s/
John Gerber
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Chairman
of the Board of Directors
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June
30, 2016
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John
Gerber
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/s/
Scott A. Bibaud
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Chief
Executive Officer and Director
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June
30, 2016
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Scott
A. Bibaud
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(Principal
Executive Officer)
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/s/
Francis Laurencio
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Chief
Financial Officer
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June
30, 2016
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Francis
Laurencio
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(Principal
Financial and Accounting Officer)
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/s/
Erwin Trautmann
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Director
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June
30, 2016
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Erwin
Trautmann
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/s/
C. Rinn Cleavelin
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Director
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June
30, 2016
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C.
Rinn Cleavelin, Ph.D.
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/s/
Rolf Stadheim
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Director
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June
30, 2016
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Rolf
Stadheim
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II-5
Exhibit 3.1
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Delaware
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PAGE
1
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The First State
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I, JEFFREY W. BULLOCK, SECRETARY OF STATE
OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF “MEARS
TECHNOLOGIES, INC.”, FILED IN THIS OFFICE ON THE SIXTEENTH DAY OF MARCH, A.D. 2015, AT 4:36 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN
FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS.
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/s/ Jeffrey W. Bullock
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3385368 8100
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Jeffrey W. Bullock,
Secretary of State
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AUTHENTICATION: 2203262
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150363729
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You
may verify this certificate
online
at
corp.delaware.gov/authver.shtml
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DATE: 03-16-15
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State of Delaware
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Secretary of
State
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Division of Corporations
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Delivered 04:46 PM 03/16/2015
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FILED 04:36 PM 03/16/2015
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SRV 150363729 - 3385368 FILE
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AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MEARS TECHNOLOGIES, INC.
MEARS Technologies, Inc. (hereinafter called
the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State
of Delaware, does hereby certify as follows:
I . The
name of the corporation is MEARS Technologies, Inc. The date of the filing of (i) its original Certificate of Incorporation and
(ii) Certificate of Conversion reflecting the conversion of RJ Mears, LLC, a Delaware limited liability company, to the Corporation,
with the Secretary of State of the State of Delaware was March 14, 2007. The Certificate of Incorporation was amended on January
16, 2008 and March 5, 2008, was amended and restated on February 3, 2009 and June 15, 2011, was further amended on November 14,
2011, was further amended and restated on November 15, 2011.
2. This
Amended and Restated Certificate of Incorporation was duly adopted by the board of directors and the stockholders of the Corporation
in accordance with the applicable provisions of Sections 141, 228, 242 and 245 of the General Corporation Law of the State of Delaware.
3. This
Amended and Restated Certificate of Incorporation amends and restates the current Restated Certificate of Incorporation, and the
text of the Restated Certificate of Incorporation is hereby amended and restated to read as herein set forth in full:
FIRST: The name of the Corporation is: MEARS
Technologies, Inc.
SECOND: The address of the Corporation's registered
office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes
to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
FOURTH: The total number of shares of all classes
of stock which the Corporation shall have authority to issue is (i) 95,000,000 shares of Common Stock, $0.001 par value per share
("Common Stock") and (ii) 5,000,000 shares of Preferred Stock, $0.001 par value per share ("Preferred Stock").
The following is a statement of the designations
and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of
capital stock of the Corporation.
A.
COMMON
STOCK
.
1.
General
.
The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the
holders of the Preferred Stock of any series as may be designated by the Board of Directors upon any issuance of the Preferred
Stock of any series.
2.
Voting
.
The holders of the Common Stock shall have voting rights at all meetings of stockholders, each such holder being entitled to one
vote for each share thereof held by such holder;
provided
,
however
, that, except as otherwise required by law, holders
of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (which, as used herein, shall
mean the certificate of incorporation of the Corporation, as amended from time to time, including the terms of any certificate
of designations of any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred
Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or
more other such series, to vote thereon pursuant to this Certificate of Incorporation. There shall be no cumulative voting.
The number of authorized shares of Common Stock
may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders
of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of the State of Delaware.
3.
Dividends
.
Dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board
of Directors and subject to any preferential dividend or other rights of any then outstanding Preferred Stock.
4.
Liquidation
.
Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled
to receive all assets of the Corporation available for distribution to its stockholders, subject to any preferential or other rights
of any then outstanding Preferred Stock.
B.
PREFERRED
STOCK
.
Preferred Stock may be issued from time to time
in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions
providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided. Any shares
of Preferred Stock which may be redeemed, purchased or acquired by the Corporation may be reissued except as otherwise provided
by law.
Authority is hereby expressly granted to the
Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of
any such series, by adopting a resolution or resolutions providing for the issuance of the shares thereof and by filing a certificate
of designations relating thereto in accordance with the General Corporation Law of the State of Delaware, to determine and fix
the number of shares of such series and such voting powers, full or limited, or no voting powers, and such designations, preferences
and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including
without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be
stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the General Corporation Law of the
State of Delaware. Without limiting the generality of the foregoing, the resolutions providing for issuance of any series of Preferred
Stock may provide that such series shall be superior or rank equally or be junior to any other series of Preferred Stock to the
extent permitted by law.
The number of authorized shares of Preferred
Stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders
of a majority of the voting power of the capital stock of the Corporation entitled to vote thereon, voting as a single class, irrespective
of the provisions of Section 242(b)(2) of the General Corporation Law of the State of Delaware.
FIFTH: In furtherance of and not in limitation
of powers conferred by statute, it is further provided:
1. The
business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
2. Election
of directors need not be by written ballot.
3. The
Board of Directors is expressly authorized to adopt, amend, alter or repeal the By-Laws of the Corporation.
SIXTH: Except to the extent that the General
Corporation Law of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty, no
director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach
of fiduciary duty as a director, notwithstanding any provision of law imposing such liability. No amendment to or repeal of this
provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring prior to such amendment.
SEVENTH: The Corporation shall, to the fullest
extent permitted by Section 145 of the General Corporation Law of Delaware, as amended from time to time, indemnify each person
who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was, or has agreed to become,
a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as
a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture,
trust or other enterprise (including any employee benefit plan) (all such persons being referred to hereafter as an “
Indemnitee
”),
or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by or on behalf of an Indemnitee in connection
with such action, suit or proceeding and any appeal therefrom.
As a condition precedent to an Indemnitee's
right to be indemnified, the lndemnitee must notify the Corporation in writing as soon as practicable of any action, suit, proceeding
or investigation involving such Indemnitee for which indemnity will or could be sought. With respect to any action, suit, proceeding
or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense
and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee.
In the event that the Corporation does not
assume the defense of any action, suit, proceeding or investigation of which the Corporation receives notice under this Article,
the Corporation shall pay in advance of the final disposition of such matter any expenses (including attorneys' fees) incurred
by an Indemnitee in defending a civil or criminal action, suit, proceeding or investigation or any appeal therefrom;
provided
,
however
, that the payment of such expenses incurred by an Indemnitee in advance of the final disposition of such matter
shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event
that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Corporation as authorized
in this Article, which undertaking shall be accepted without reference to the financial ability of the Indemnitee to make such
repayment; and
further
provided
that no such advancement of expenses shall be made under this Article if it
is determined that (i) the Indemnitee did not act in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Corporation, or (ii) with respect to any criminal action or proceeding, the lndemnitee had reasonable
cause to believe his conduct was unlawful.
The Corporation shall not indemnify an Indemnitee
pursuant to this Article in connection with a proceeding (or part thereof) initiated by such Indemnitee unless the initiation thereof
was approved by the Board of Directors of the Corporation. In addition, the Corporation shall not indemnify an Indemnitee to the
extent such Indemnitee is reimbursed from the proceeds of insurance, and in the event the Corporation makes any indemnification
payments to an Indemnitee and such Indemnitee is subsequently reimbursed from the proceeds of insurance, such Indemnitee shall
promptly refund such indemnification payments to the Corporation to the extent of such insurance reimbursement.
All determinations hereunder as to the entitlement
of an Indemnitee to indemnification or advancement of expenses shall be made in each instance (a) by a majority vote of the directors
of the Corporation consisting of persons who are not at that time parties to the action, suit or proceeding in question (“
disinterested
directors
”), whether or not a quorum, (b) by a committee of disinterested directors designated by majority vote of disinterested
directors, whether or not a quorum, (c) if there are no disinterested directors, or if the disinterested directors so direct,
by independent legal counsel (who may, to the extent permitted by law, be regular legal counsel to the Corporation) in a written
opinion, or (d) by the stockholders of the Corporation.
The rights provided in this Article (i) shall
not be deemed exclusive of any other rights to which an Indemnitee may be entitled under any law, agreement or vote of stockholders
or disinterested directors or otherwise, and (ii) shall inure to the benefit of the heirs, executors and administrators of the
Indemnitees. The Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights
to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to,
or greater or less than, those set forth in this Article.
EIGHTH: The Corporation reserves the right to
amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed
by statute and this Certificate of Incorporation, and all rights conferred upon stockholders herein are granted subject to this
reservation.
EXECUTED on
March 16,
2015.
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By:
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/s/ Robert J. Mears
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Name: Robert J. Mears
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Title: President
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Exhibit 3.2
AMENDED AND RESTATED BY-LAWS
(As adopted on December 8, 2015)
OF
MEARS Technologies, Inc.
TABLE OF CONTENTS
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Page
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Article I STOCKHOLDERS
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1
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1.1
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Place of Meetings
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1
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1.2
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Annual Meeting
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1
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1.3
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Special Meetings
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1
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1.4
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Notice of Meetings
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1
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1.5
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Voting List
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1
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1.6
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Quorum
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2
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1.7
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Adjournments
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2
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1.8
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Voting and Proxies
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2
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1.9
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Action at Meeting
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2
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1.10
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Conduct of Meetings.
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3
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1.11
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Action without Meeting
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3
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1.12
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Inspectors of Elections.
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3
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1.13
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Joint Owners of Stock
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5
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Article II DIRECTORS
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5
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2.1
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General Powers
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5
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2.2
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Number: Election and Qualification
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5
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2.3
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Enlargement of the Board
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5
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2.4
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Tenure
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5
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2.5
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Vacancies
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5
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2.6
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Resignation
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6
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2.7
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Regular Meetings
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6
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2.8
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Special Meetings
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6
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2.9
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Notice of Special Meetings
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6
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2.10
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Meetings by Conference Communications Equipment
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6
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2.11
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Quorum
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6
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2.12
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Action at Meeting
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6
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2.13
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Action by Consent
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6
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2.14
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Removal
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6
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2.15
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Committees
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7
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2.16
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Compensation of Directors
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7
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Article III OFFICERS
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7
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3.1
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Titles
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7
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3.2
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Election
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7
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3.3
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Qualification
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7
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3.4
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Tenure
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7
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3.5
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Resignation and Removal
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7
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3.6
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Vacancies
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8
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3.7
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Chairman of the Board
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8
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3.8
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President
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8
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3.9
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Vice Presidents
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8
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3.10
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Secretary and Assistant Secretaries
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9
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3.11
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Treasurer and Assistant Treasurers
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9
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3.12
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Salaries
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9
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Article IV CAPITAL STOCK
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9
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4.1
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Issuance of Stock
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9
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4.2
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Certificates of Stock
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10
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4.3
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Transfers
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10
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4.4
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Lost, Stolen or Destroyed Certificates
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10
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4.5
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Record Date
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11
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Article V GENERAL PROVISIONS
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11
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5.1
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Fiscal Year
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11
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5.2
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Corporate Seal
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11
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5.3
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Waiver of Notice
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11
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5.4
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Voting of Securities
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11
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5.5
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Evidence of Authority
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12
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5.6
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Certificate of Incorporation
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12
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5.7
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Severability
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12
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5.8
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Pronoun
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12
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Article VI AMENDMENTS
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12
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6.1
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By the Board of Directors
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12
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6.2
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By the Stockholders
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12
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Article VII VENUE SELECTION
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12
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7.1
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Exclusive Forum for Certain Litigation
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12
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Article
I
STOCKHOLDERS
1.1
Place
of Meetings
. All meetings of stockholders shall be held at such place as may be designated from time to time by the Board
of Directors. The Board of Directors may, in its sole discretion, determine that a meeting shall not be held at any place, but
may instead be held solely by means of remote communication in a manner consistent with the General Corporation Law of the State
of Delaware.
1.2
Annual
Meeting
. The annual meeting of stockholders for the election of directors and for the transaction of such other business as
may properly be brought before the meeting shall be held on a date and at a time designated by the Board of Directors (which date
shall not be a legal holiday in the place where the meeting is to be held). If no annual meeting is held in accordance with the
foregoing provisions, a special meeting may be held in lieu of the annual meeting, and any action taken at that special meeting
shall have the same effect as if it had been taken at the annual meeting, and in such case all references in these By-laws to
the annual meeting of the stockholders shall be deemed to refer to such special meeting.
1.3
Special
Meetings
. Special meetings of stockholders for any purpose or purposes may be called at any time by the Board of Directors.
Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated
in the notice of meeting.
1.4
Notice
of Meetings
. Except as otherwise provided by law, notice of each meeting of stockholders, whether annual or special, shall
be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting.
Without limiting the manner by which notice otherwise may be given to stockholders, any notice shall be effective if given by
a form of electronic transmission consented to (in a manner consistent with the General Corporation Law of the State of Delaware)
by the stockholder to whom the notice is given. The notices of all meetings shall state the place, if any, date and time of the
meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in
person and vote at such meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the
meeting is called. If notice is given by mail, such notice shall be deemed given when deposited in the United States mail, postage
prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the corporation. If notice
is given by electronic transmission, such notice shall be deemed given at the time specified in Section 232 of the General Corporation
Law of the State of Delaware.
1.5
Voting
List
. The Secretary shall prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network,
provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during
ordinary business hours, at the principal place of business of the corporation. If the meeting is to be held at a physical location
(and not solely by means of remote communication), then the list shall be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by
means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of
the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided
with the notice of the meeting.
1.6
Quorum
.
Except as otherwise provided by law, the Certificate of Incorporation or these By-laws, the holders of a majority in voting power
of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at the meeting, present in person,
present by means of remote communication in a manner, if any, authorized by the Board of Directors in its sole discretion or represented
by proxy, shall constitute a quorum for the transaction of business. A quorum, once established at a meeting, shall not be broken
by the withdrawal of enough votes to leave less than a quorum.
1.7
Adjournments
.
Any meeting of stockholders may be adjourned from time to time to any other time and to any other place at which a meeting of
stockholders may be held under these By-laws by the stockholders present or represented at the meeting and entitled to vote, although
less than a quorum, or, if no stockholder is present, by the chairman of the meeting or any officer entitled to preside at or
to act as secretary of such meeting. It shall not be necessary to notify any stockholder of any adjournment of less than 30 days
if the time and place, if any, of the adjourned meeting, and the means of remote communication, if any, by which stockholders
and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which
adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At the adjourned meeting,
the corporation may transact any business which might have been transacted at the original meeting.
1.8
Voting
and Proxies
. Each stockholder shall have one vote for each share of stock entitled to vote held of record by such stockholder,
unless otherwise provided by law or the Certificate of Incorporation. Each stockholder of record entitled to vote at a meeting
of stockholders, or to express consent or dissent to corporate action without a meeting, may vote or express such consent or dissent
in person (including by means of remote communications, if any, by which stockholders may be deemed to be present in person and
vote at such meeting) or may authorize another person or persons to vote or act for such stockholder by a proxy executed or transmitted
in a manner permitted by the General Corporation Law of the State of Delaware by the stockholder or such stockholder's authorized
agent and delivered (including by electronic transmission) to the Secretary of the corporation. No such proxy shall be voted or
acted upon after three years from the date of its execution, unless the proxy expressly provides for a longer period.
1.9
Action
at Meeting
. When a quorum is present at any meeting, any matter other than the election of directors to be voted upon by the
stockholders at such meeting shall be decided by the affirmative vote of the holders of a majority of the voting power of the
shares of stock entitled to vote on such matter that are present in person, present by means of remote communication in a manner,
if any, authorized by the Board of Directors in its sole discretion or represented by proxy, and are voted for or against the
matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class,
the holders of a majority in voting power of the stock of that class present or represented and voting for or against the matter),
except when a different vote is required by law, the Certificate of Incorporation or these By-laws. When a quorum is present at
any meeting, any election by stockholders of directors shall be determined by a plurality of the votes cast on the election.
1.10
Conduct
of Meetings.
(a)
Chairman
of Meeting
. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the Chairman's absence
by the Vice Chairman of the Board, if any, or in the Vice Chairman's absence by the Chief Executive Officer, or in the Chief Executive
Officer's absence by the President, or in the President's absence by a Vice President, or in the absence of all of the foregoing
persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen by vote
of the stockholders at the meeting. The Secretary shall act as secretary of the meeting, but in the Secretary's absence the chairman
of the meeting may appoint any person to act as secretary of the meeting.
(b)
Rules,
Regulations and Procedures
. The Board of Directors of the corporation may adopt by resolution such rules, regulations and
procedures for the conduct of any meeting of stockholders of the corporation as it shall deem appropriate including, without limitation,
such guidelines and procedures as it may deem appropriate regarding the participation by means of remote communication of stockholders
and proxyholders not physically present at a meeting. Except to the extent inconsistent with such rules, regulations and procedures
as adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe
such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the
chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business
for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations
on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted
proxies or such other persons as shall be determined; (iv) restrictions on entry to the meeting after the time fixed for the commencement
thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined
by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance
with the rules of parliamentary procedure.
1.11
Action
without Meeting.
No action shall be taken by the stockholders except at an annual or special meeting of stockholders called
in accordance with these Bylaws, and no action shall be taken by the stockholders by written consent or by electronic transmission.
1.12
Inspectors
of Elections.
(a)
Applicability
.
Unless otherwise required by the Certificate of Incorporation or by the General Corporation Law of the State of Delaware, the following
provisions of this Section 1.12 shall apply only if and when the Corporation has a class of voting stock that is: (a) listed
on a national securities exchange; (b) authorized for quotation on an interdealer quotation system of a registered national
securities association; or (c) held of record by more than two thousand (2,000) stockholders. In all other cases, observance
of the provisions of this Section 1.12 shall be optional, and at the discretion of the Board.
(b) Appointment.
The Board of Directors shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the
meeting and make a written report thereof. The Board of Directors may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding
at the meeting shall appoint one or more inspectors to act at the meeting.
(c) Inspector’s
Oath. Each inspector of election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality and according to the best of such inspector’s ability.
(d) Duties
of Inspectors. At a meeting of stockholders, the inspectors of election shall (a) ascertain the number of shares outstanding
and the voting power of each share, (b) determine the shares represented at a meeting and the validity of proxies and ballots,
(c) count all votes and ballots, (d) determine and retain for a reasonable period of time a record of the disposition
of any challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares
represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities
to assist the inspectors in the performance of the duties of the inspectors.
(e) Opening
and Closing of Polls. The date and time of the opening and the closing of the polls for each matter upon which the stockholders
will vote at a meeting shall be announced by the chairperson of the meeting at the meeting. No ballot, proxies or votes, nor any
revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Delaware
Court of Chancery upon application by a stockholder shall determine otherwise.
(f) Determinations.
In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies,
any envelopes submitted with those proxies, any information provided in connection with proxies pursuant to Section 211(a)(2)b.(i)
of the General Corporation Law of the State of Delaware, or in accordance with Sections 211(e) or 212(c)(2) of the General Corporation
Law of the State of Delaware, ballots and the regular books and records of the corporation, except that the inspectors may consider
other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers,
their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast
or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose
permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 1.12
shall specify the precise information considered by them, including the person or persons from whom they obtained the information,
when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief
that such information is accurate and reliable.
1.13
Joint
Owners of Stock
. If shares or other securities having voting power stand of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two or more
persons have the same fiduciary relationship respecting the same shares, unless the Secretary of the corporation is given written
notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein
it is so provided, their acts with respect to voting shall have the following effect: (i) if only one votes, his or her act
binds all; (ii) if more than one votes, the act of the majority so voting binds all; (iii) if more than one votes, but
the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply
to the Delaware Court of Chancery for relief as provided in Section 217(b) of the General Corporation Law of the State of
Delaware. If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split
for the purpose of subsection (iii) shall be a majority or even-split in interest.
Article
II
DIRECTORS
2.1
General
Powers
. The business and affairs of the corporation shall be managed by or under the direction of a Board of Directors, who
may exercise all of the powers of the corporation except as otherwise provided by law or the Certificate of Incorporation.
2.2
Number:
Election and Qualification
. The number of directors which shall constitute the whole Board of Directors shall be determined
from time to time by resolution of the stockholders or the Board of Directors, but in no event shall be less than one. The number
of directors may be decreased at any time and from time to time either by the stockholders or by a majority of the directors then
in office, but only to eliminate vacancies existing by reason of the death, resignation, removal or expiration of the term of
one or more directors. The directors shall be elected at the annual meeting or a special meeting of stockholders by such stockholders
as have the right to vote on such election. Directors need not be stockholders of the corporation.
2.3
Enlargement
of the Board
. The number of directors may be increased at any time and from time to time by the stockholders or by a majority
of the directors then in office.
2.4
Tenure
.
Each director shall hold office until the next annual meeting and until a successor is elected and qualified, or until such director's
earlier death, resignation or removal.
2.5
Vacancies
.
Unless and until filled by the stockholders, any vacancy on the Board of Directors, however occurring, including a vacancy resulting
from an enlargement of the Board, may be filled by vote of a majority of the directors then in office, although less than a quorum,
or by a sole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of such director's
predecessor in office, and a director chosen to fill a position resulting from an increase in the number of directors shall hold
office until the next annual meeting of stockholders and until a successor is elected and qualified, or until such director's
earlier death, resignation or removal.
2.6
Resignation
.
Any director may resign by delivering a resignation in writing or by electronic transmission to the corporation at its principal
office or to the Chairman of the Board, the Chief Executive Officer, the President or the Secretary. Such resignation shall be
effective upon receipt unless it is specified to be effective at some later time or upon the happening of some later event.
2.7
Regular
Meetings
. Regular meetings of the Board of Directors may be held without notice at such time and place as shall be determined
from time to time by the Board of Directors; provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of Directors may be held without notice immediately after
and at the same place as the annual meeting of stockholders.
2.8
Special
Meetings
. Special meetings of the Board of Directors may be held at any time and place designated in a call by the Chairman
of the Board, the Chief Executive Officer, the President, or by a majority of the directors then in office.
2.9
Notice
of Special Meetings
. Notice of any special meeting of directors shall be given to each director by the Secretary or by the
officer or one of the directors calling the meeting. Notice shall be duly given to each director (i) in person or by telephone
at least 24 hours in advance of the meeting, (ii) by sending written notice via reputable overnight courier, telecopy or electronic
mail, or delivering written notice by hand, to such director's last known business, home or electronic mail address at least 48
hours in advance of the meeting, or (iii) by sending written notice via first-class mail to such director's last known business
or home address at least 72 hours in advance of the meeting. A notice or waiver of notice of a meeting of the Board of Directors
need not specify the purposes of the meeting.
2.10
Meetings
by Conference Communications Equipment
. Directors may participate in meetings of the Board of Directors or any committee thereof
by means of conference telephone or other communications equipment by means of which all persons participating in the meeting
can hear each other, and participation by such means shall constitute presence in person at such meeting.
2.11
Quorum
.
A majority of the number of directors fixed pursuant to Section 2.2 of these By-laws shall constitute a quorum. In the absence
of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further
notice other than announcement at the meeting, until a quorum shall be present.
2.12
Action
at Meeting
. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of those present
shall be sufficient to take any action, unless a different vote is specified by law or the Certificate of Incorporation.
2.13
Action
by Consent
. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent to the action
in writing or by electronic transmission, and the written consents or electronic transmissions are filed with the minutes of proceedings
of the Board of Directors or committee.
2.14
Removal
.
Except as otherwise provided by the General Corporation Law of the State of Delaware, any one or more or all of the directors
may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors,
except that the directors elected by the holders of a particular class or series of stock may be removed without cause only by
vote of the holders of a majority of the outstanding shares of such class or series.
2.15
Committees
.
The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the
corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution
of the Board of Directors and subject to the provisions of law, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation
to be affixed to all papers which may require it. Each such committee shall keep minutes and make such reports as the Board of
Directors may from time to time request. Except as the Board of Directors may otherwise determine, any committee may make rules
for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted
in the same manner as is provided in these By-laws for the Board of Directors.
2.16
Compensation
of Directors
. Directors may be paid such compensation for their services and such reimbursement for expenses of attendance
at meetings as the Board of Directors may from time to time determine. No such payment shall preclude any director from serving
the corporation or any of its parent or subsidiary entities in any other capacity and receiving compensation for such service.
Article
III
OFFICERS
3.1
Titles
.
The officers of the corporation shall consist of a Chief Executive Officer, a President, a Secretary, a Treasurer and such other
officers with such other titles as the Board of Directors shall determine, including a Chairman of the Board, a Vice Chairman
of the Board, and one or more Vice Presidents, Assistant Treasurers, and Assistant Secretaries. The Board of Directors may appoint
such other officers as it may deem appropriate.
3.2
Election
.
The Chief Executive Officer, President, Treasurer and Secretary shall be elected annually by the Board of Directors at its first
meeting following the annual meeting of stockholders. Other officers may be appointed by the Board of Directors at such meeting
or at any other meeting.
3.3
Qualification
.
No officer need be a stockholder. Any two or more offices may be held by the same person.
3.4
Tenure
.
Except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws, each officer shall hold office until
such officer's successor is elected and qualified, unless a different term is specified in the resolution electing or appointing
such officer, or until such officer's earlier death, resignation or removal.
3.5
Resignation
and Removal
. Any officer may resign by delivering a written resignation to the corporation at its principal office or to the
Chief Executive Officer, the President or the Secretary. Such resignation shall be effective upon receipt unless it is specified
to be effective at some later time or upon the happening of some later event.
Any officer may be removed at any time, with
or without cause, by vote of a majority of the directors then in office.
Except as the Board of Directors may otherwise
determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following
such officer's resignation or removal, or any right to damages on account of such removal, whether such officer's compensation
be by the month or by the year or otherwise, unless such compensation is expressly provided for in a duly authorized written agreement
with the corporation.
3.6
Vacancies
.
The Board of Directors may fill any vacancy occurring in any office for any reason and may, in its discretion, leave unfilled
for such period as it may determine any offices other than those of Chief Executive Officer, President, Treasurer and Secretary.
Each such successor shall hold office for the unexpired term of such officer's predecessor and until a successor is elected and
qualified, or until such officer's earlier death, resignation or removal.
3.7
Chairman
of the Board
. The Board of Directors may appoint from its members a Chairman of the Board, who need not be an employee or
officer of the corporation. If the Board of Directors appoints a Chairman of the Board, such Chairman shall perform such duties
and possess such powers as are assigned by the Board of Directors and, if the Chairman of the Board is also designated as the
corporation's Chief Executive Officer, shall have the powers and duties of the Chief Executive Officer prescribed in Section 3.8
of these By-laws. Unless otherwise provided by the Board of Directors, the Chairman of the Board shall preside at all meetings
of the Board of Directors and stockholders.
3.8
President
:
Chief Executive Officer. Unless the Board of Directors has designated the Chairman of the Board or another person as the corporation's
Chief Executive Officer, the President shall be the Chief Executive Officer of the corporation. The Chief Executive Officer shall
have general charge and supervision of the business of the corporation subject to the direction of the Board of Directors. The
President shall perform such other duties and shall have such other powers as the Board of Directors or the Chief Executive Officer
(if the President is not the Chief Executive Officer) may from time to time prescribe. In the event of the absence, inability
or refusal to act of the Chief Executive Officer or the President (if the President is not the Chief Executive Officer), the Vice
President (or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors) shall perform
the duties of the Chief Executive Officer and when so performing such duties shall have all the powers of and be subject to all
the restrictions upon the Chief Executive Officer.
3.9
Vice
Presidents
. Any Vice President shall perform such duties and possess such powers as the Board of Directors or the Chief Executive
Officer may from time to time prescribe. The Board of Directors may assign to any Vice President the title of Executive Vice President,
Senior Vice President or any other title selected by the Board of Directors.
3.10
Secretary
and Assistant Secretaries
. The Secretary shall perform such duties and shall have such powers as the Board of Directors or
the Chief Executive Officer may from time to time prescribe. In addition, the Secretary shall perform such duties and have such
powers as are incident to the office of the secretary, including without limitation the duty and power to give notices of all
meetings of stockholders and special meetings of the Board of Directors, to attend all meetings of stockholders and the Board
of Directors and keep a record of the proceedings, to maintain a stock ledger and prepare lists of stockholders and their addresses
as required, to be custodian of corporate records and the corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary
shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Secretary may from
time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary, (or
if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the
duties and exercise the powers of the Secretary.
In the absence of the
Secretary or any Assistant Secretary at any meeting of stockholders or directors, the chairman of the meeting shall designate a
temporary secretary to keep a record of the meeting.
3.11
Treasurer
and Assistant Treasurers
. The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned
by the Board of Directors or the Chief Executive Officer. In addition, the Treasurer shall perform such duties and have such powers
as are incident to the office of treasurer, including without limitation the duty and power to keep and be responsible for all
funds and securities of the corporation, to deposit funds of the corporation in depositories selected in accordance with these
By-laws, to disburse such funds as ordered by the Board of Directors, to make proper accounts of such funds, and to render as
required by the Board of Directors statements of all such transactions and of the financial condition of the corporation.
The Assistant Treasurers
shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Treasurer may from
time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer, (or
if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors) shall perform the
duties and exercise the powers of the Treasurer.
3.12
Salaries
.
Officers of the corporation shall be entitled to such salaries, compensation or reimbursement as shall be fixed or allowed from
time to time by the Board of Directors.
Article
IV
CAPITAL STOCK
4.1
Issuance
of Stock
. Subject to the provisions of the Certificate of Incorporation, the whole or any part of any unissued balance of
the authorized capital stock of the corporation or the whole or any part of any shares of the authorized capital stock of the
corporation held in the corporation's treasury may be issued, sold, transferred or otherwise disposed of by vote of the Board
of Directors in such manner, for such lawful consideration and on such terms as the Board of Directors may determine.
4.2
Certificates
of Stock
. Every holder of stock of the corporation shall be entitled to have a certificate, in such form as may be prescribed
by law and by the Board of Directors, certifying the number and class of shares owned by such holder in the corporation. Each
such certificate shall be signed by, or in the name of the corporation by, the Chairman or Vice-Chairman, if any, of the Board
of Directors, or the President or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the corporation. Any or all of the signatures on the certificate may be a facsimile.
Each certificate for
shares of stock which are subject to any restriction on transfer pursuant to the Certificate of Incorporation, these By-laws, applicable
securities laws or any agreement among any number of stockholders or among such holders and the corporation shall have conspicuously
noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction.
If the corporation shall
be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences
and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of each
certificate representing shares of such class or series of stock, provided that in lieu of the foregoing requirements there may
be set forth on the face or back of each certificate representing shares of such class or series of stock a statement that the
corporation will furnish without charge to each stockholder who so requests a copy of the full text of the powers, designations,
preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
4.3
Transfers
.
Except as otherwise established by rules and regulations adopted by the Board of Directors, and subject to applicable law, shares
of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate
representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and
with such proof of authority or the authenticity of signature as the corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation or by these By-laws, the corporation shall be
entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the
payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition
of such stock until the shares have been transferred on the books of the corporation in accordance with the requirements of these
By-laws.
4.4
Lost,
Stolen or Destroyed Certificates
. The corporation may issue a new certificate of stock in place of any previously issued certificate
alleged to have been lost, stolen or destroyed, upon such terms and conditions as the Board of Directors may prescribe, including
the presentation of reasonable evidence of such loss, theft or destruction and the giving of such indemnity and posting of such
bond as the Board of Directors may require for the protection of the corporation or any transfer agent or registrar.
4.5
Record
Date
. The Board of Directors may fix in advance a date as a record date for the determination of the stockholders entitled
to notice of or to vote at any meeting of stockholders or to express consent (or dissent) to corporate action without a meeting,
or entitled to receive payment of any dividend or other distribution or allotment of any rights in respect of any change, conversion
or exchange of stock, or for the purpose of any other lawful action. Such record date shall not be more than 60 nor less than
10 days before the date of such meeting, nor more than 10 days after the date of adoption of a record date for a consent without
a meeting, nor more than 60 days prior to any other action to which such record date relates.
If no record date is fixed,
the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close
of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before
the day on which the meeting is held. If no record date is fixed, the record date for determining stockholders entitled to express
consent to corporate action without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on
which the first consent is properly delivered to the corporation. If no record date is fixed, the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating
to such purpose.
A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned meeting.
Article
V
GENERAL PROVISIONS
5.1
Fiscal
Year
. Except as from time to time otherwise designated by the Board of Directors, the fiscal year of the corporation shall
begin on the first day of January of each year and end on the last day of December in each year.
5.2
Corporate
Seal
. The corporate seal shall be in such form as shall be approved by the Board of Directors.
5.3
Waiver
of Notice
. Whenever notice is required to be given by law, by the Certificate of Incorporation or by these By-laws, a written
waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether
before, at or after the time stated in such notice, shall be deemed equivalent to notice. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting
at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
5.4
Voting
of Securities
. Except as the Board of Directors may otherwise designate, the Chief Executive Officer, the President or the
Treasurer may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this corporation
(with or without power of substitution) at, any meeting of stockholders or securityholders of any other entity, the securities
of which may be held by this corporation.
5.5
Evidence
of Authority
. A certificate by the Secretary, or an Assistant Secretary, or a temporary Secretary, as to any action taken
by the stockholders, directors, a committee or any officer or representative of the corporation shall as to all persons who rely
on the certificate in good faith be conclusive evidence of such action.
5.6
Certificate
of Incorporation
. All references in these By-laws to the Certificate of Incorporation shall be deemed to refer to the Certificate
of Incorporation of the corporation, as amended and in effect from time to time.
5.7
Severability
.
Any determination that any provision of these By-laws is for any reason inapplicable, illegal or ineffective shall not affect
or invalidate any other provision of these By-laws.
5.8
Pronoun
.
All pronouns used in these By-laws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
Article
VI
AMENDMENTS
6.1
By
the Board of Directors
. These By-laws may be altered, amended or repealed or new by-laws may be adopted by the affirmative
vote of a majority of the directors present at any regular or special meeting of the Board of Directors at which a quorum is present.
6.2
By
the Stockholders
. These By-laws may be altered, amended or repealed or new by-laws may be adopted by the affirmative vote
of the holders of a majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote
at any regular meeting of stockholders, or at any special meeting of stockholders, provided notice of such alteration, amendment,
repeal or adoption of new by-laws shall have been stated in the notice of such special meeting.
Article
VII
VENUE SELECTION
7.1
Exclusive
Forum for Certain Litigation
. Unless the corporation consents in writing to the selection of an alternative forum, the
sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the corporation, (ii) any action asserting
a claim of breach of a fiduciary duty owed by any director or officer or other employee of the corporation to the corporation
or the corporation’s stockholders, (iii) any action asserting a claim against the corporation or any director or officer
or other employee of the Corporation arising pursuant to any provision of the General Corporation Law of the State of Delaware
or the Certificate of Incorporation or these By-laws (in each case, as they may be amended from time to time), or (iv) any action
asserting a claim against the corporation or any director or officer or other employee of the corporation governed by the internal
affairs doctrine shall be a state court
located within the State of Delaware (or, if no state court located within the
State of Delaware has jurisdiction, the federal district court for the District of Delaware).
Exhibit 3.3
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Delaware
The First State
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Page 1
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I, JEFFREY W. BULLOCK, SECRETARY
OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF “MEARS
TECHNOLOGIES, INC.”, FILED IN THIS OFFICE ON THE ELEVENTH DAY OF DECEMBER, A.D. 2015, AT 4:39 O’CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE
HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS.
|
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/s/ Jeffrey W. Bullock
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|
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Jeffrey W. Bullock, Secretary of State
|
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3385368 8100
SR# 20151318165
|
|
Authentication: 10601829
Date: 12-11-15
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You may verify this certificate online at corp.delaware.gov/authver.shtml
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CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MEARS TECHNOLOGIES, INC.
|
State
of Delaware
Secretary
of State
Division
of Corporations
Delivered
04:39 PM 12/11/2015
FILED
04:39 PM 12/11/2015
SR
20151318165 - File Number 3385368
|
MEARS Technologies, Inc. (the “Corporation”),
a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”),
does hereby certify:
1. This
Certificate of Amendment of the Amended and Restated Certificate of Incorporation was duly adopted by the board of directors and
the stockholders of the Corporation in accordance with the applicable provisions of Sections 141, 228 and 242 of the General Corporation
Law of the State of Delaware.
2. The
Amended and Restated Certificate of Incorporation is hereby amended by deleting the first paragraph of Article FOURTH thereof in
its entirety and by inserting the following three paragraphs in lieu thereof:
This Corporation is authorized to issue
two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number
of shares that the Corporation is authorized to issue is fifty million (50,000,000) shares, forty-seven million five hundred thousand
(47,500,000) shares of which shall be Common Stock and two million five hundred thousand (2,500,000) shares of which shall be Preferred
Stock. The Common Stock shall have a par value of $0.001 per share and the Preferred Stock shall have a par value of $0.001 per
share.
Upon the filing of this Certificate of Amendment
to the Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware (the “Effective Time”),
each fifteen (15) shares of the Corporation’s Common Stock, par value $0.001 per share, issued and outstanding or held by the Corporation
as treasury stock shall, automatically and without any action on the part of the respective holder thereof, be combined and converted
into one (1) share of Common Stock, par value $0.001 per share, of the Corporation. No fractional shares shall be issued and, in
lieu thereof, upon surrender after the Effective Time of a certificate which formerly represented shares of Common Stock that were
issued and outstanding immediately prior to the Effective Time, any stockholder who would otherwise be entitled to receive a fractional
share of Common Stock as a result of the reclassification following the Effective Time, shall be entitled to receive a cash payment
equal to the fraction to which such holder would otherwise be entitled multiplied by the fair market value of the Common Stock
as determined by the board of directors of the Corporation immediately following the Effective Time.
Each stock certificate that, immediately
prior to the Effective Time, represented shares of Common Stock that were issued and outstanding immediately prior to the Effective
Time shall from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent
that number of whole shares of Common Stock after the Effective Time into which the shares of Common Stock formerly represented
by such certificate shall have been reclassified (as well as the right to receive cash in lieu of fractional shares of Common Stock
after the Effective Time), provided, however, that each person of record holding a certificate that represented shares of Common
Stock that were issued and outstanding immediately prior to the Effective Time shall receive, upon surrender of such certificate,
a new certificate evidencing and representing the number of whole shares of Common Stock after the Effective Time into which the
shares of Common Stock formerly represented by such certificate shall have been reclassified.
[Signature page follows]
IN WITNESS WHEREOF, the undersigned has
duly executed this Certificate of Amendment in the name and on behalf of the Corporation as of this 10
th
day of December,
2015.
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MEARS TECHNOLOGIES, INC.
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By:
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/s/ Scott A. Bibaud
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Scott A. Bibaud,
|
|
|
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President and Chief Executive Officer
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Exhibit 3.4
Delaware
The First State
I,
JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF
THE CERTIFICATE OF AMENDMENT OF "MEARS TECHNOLOGIES, INC. ", CHANGING ITS NAME FROM "MEARS TECHNOLOGIES, INC. ”
TO "ATOMERA INCORPORATED", FILED IN THIS OFFICE ON THE TWELFTH DAY OF JANUARY,
A.D.
2016, AT
1:14
O'CLOCK
P.M.
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|
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/s/ Jeffrey W. Bullock
|
|
|
Jeffrey W. Bullock, Secretary of State
|
|
|
|
|
|
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|
|
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3385368 8100
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Authentication: 201663065
|
|
SR# 20160187197
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Date: 01-13-16
|
|
You may verify this certificate online at corp.delaware.gov/authver.shtml
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|
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State of Delaware
|
|
|
Secretary of State
|
|
|
Division of Corporations
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CERTIFICATE
OF AMENDMENT
|
Delivered 01:14 PM 01/12/2016
|
|
OF
|
FILED 01:14 PM 01/12/2016
|
|
AMENDED AND RESTATED CERTIFICATE OF INC
|
SR
20160173731 -
File
Number 3385368
|
|
OF
|
|
|
MEARS TECHNOLOGIES, INC.
|
|
Mears
Technologies, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware
(the “Corporation”), does hereby certify:
FIRST:
That the Board of Directors of the Corporation adopted a resolution approving an amendment to the Amended and Restated Certificate
of Incorporation of the Corporation, amending Article FIRST thereof in its entirety to read as follows:
“FIRST:
The name of the Corporation is Atomera Incorporated.”
SECOND:
That the aforesaid amendment was not required to be approved by the stockholders of the Corporation in accordance with the applicable
provisions of Section 242 of the General Corporation Law of the State of Delaware.
THIRD:
That the aforesaid amendment was duly adopted by the Board of Directors of the Corporation in accordance with the applicable provisions
of Section 242 of the General Corporation Law of the State of Delaware.
[Signature
page Follows]
IN
WITNESS WHEREOF,
the Corporation has caused this Certificate of Amendment to be signed this 8
th
day of January,
2016.
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MEARS TECHNOLOGIES, INC.
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By:
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/s/ Scott A. Bibaud
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Scott A. Bibaud,
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President and Chief Executive Officer
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Exhibit 4.2
NEITHER THESE SECURITIES NOR THE SECURITIES
ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE 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 APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (II) 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 OR BLUE SKY LAWS. THESE SECURITIES AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
MEARS TECHNOLOGIES, INC.
WARRANT TO PURCHASE COMMON STOCK
|
Warrant No. __
|
Original Issue Date: February 9, 2015
|
Mears Technologies,
Inc., a Delaware corporation (the
“
Company
”
),
hereby certifies that, for value received, Liquid
Patent Consulting, LLC or its permitted registered assigns (the
“
Holder
”
), is entitled to purchase from
the Company up to a total of 2,981,504 shares of common stock, $0,001 par value (the
“
Common Stock
”
),
of the Company (each such share, a
“
Warrant Share
”
and all such shares, the
“
Warrant
Shares
”
) at an exercise price per share equal to $0.01 (as adjusted from time to time as provided in Section 9 herein,
the
“
Exercise Price
”
),
at any time and from time to time from on or after the date hereof (the
“
Trigger
Date
”
)
and through and including 5:00 P.M., prevailing Pacific time, on February 9, 2020 (the
“
Expiration
Date
”
),
and subject to the following terms and conditions:
This Warrant (this
“
Warrant
”
)
is one of a series of similar warrants issued pursuant to that certain Engagement Agreement
for Strategic Consulting Services dated February 9, 2015 between the Company and the Holder (the
“
Consulting Agreement
”
)
.
All such warrants are referred to herein, collectively, as the
“
Warrants.
”
1.
Definitions
.
In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings
given to such terms in the Consulting Agreement.
2 .
Registration
of Warrants
. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the
“
Warrant
Register
”
),
in the name of the record Holder (which shall include the initial Holder or, as the case may
be, any registered assignee to which this Warrant is permissibly assigned hereunder) from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, absent actual notice to the contrary.
3.
Registration
of Transfers
. The Company shall register the transfer of all or any portion of this Warrant in the Warrant Register, upon
(i) surrender of this Warrant, with the Form of Assignment attached as
Schedule 2
hereto duly completed and signed, to
the Company’s transfer agent or to the Company at its address specified herein (ii) delivery, at the request of the Company,
of an opinion of counsel reasonably satisfactory to the Company to the effect that the transfer of such portion of this Warrant
may be made pursuant to an available exemption from the registration requirements of the Securities Act of 1933 (
“
Securities
Act
”
) and all applicable state securities or blue sky laws and (iii) delivery by the transferee of a written statement
to the Company certifying that the transferee is an “accredited investor” as defined in Rule 501(a) under the Securities
Act and making the representations and certifications as the Company may reasonably request to procure an exemption from section
5 of the Securities Act. Upon any such registration or transfer, a new warrant to purchase Common Stock in substantially the form
of this Warrant (any such new warrant, a
“
New Warrant
”
)
evidencing the portion of this Warrant
so transferred shall be issued to the transferee, and a New Warrant evidencing the remaining portion of this Warrant not so transferred,
if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed
the acceptance by such transferee of all of the rights and obligations of a Holder of a Warrant.
4.
Exercise
and Duration of Warrants
.
(a) All
or any part of this Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the Trigger
Date and through and including 5:00 P.M. prevailing Pacific time on the Expiration Date. At 5:00 P.M., prevailing Pacific time,
on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value and this
Warrant shall be terminated and no longer outstanding.
(b) The Holder
may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached as Schedule 1 hereto (the
“
Exercise Notice
”
),
appropriately completed and duly signed, (ii) payment of the Exercise Price
for the number of Warrant Shares as to which this Warrant is being exercised (which may take the form of a “cashless exercise”
if so indicated in the Exercise Notice and if a “cashless exercise” may occur at such time pursuant to Section 10
below), and the date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is
an
“
Exercise Date,
”
The Holder shall not be required to deliver the original Warrant in order
to effect an exercise hereunder. Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the
original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.
5.
Delivery
of Warrant Shares
. Upon exercise of this Warrant, the Company shall promptly issue or cause to be issued and cause to be delivered
to or upon the written order of the Holder and in such name or names as the Holder may designate a certificate for the Warrant
Shares issuable upon such exercise, with an appropriate restrictive legends. The Holder, or any Person permissibly so designated
by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the
Exercise Date.
6.
Charges,
Taxes and Expenses
. Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be
made without charge to the Holder for any issue or transfer tax, transfer agent fee or other incidental tax or expense in respect
of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company;
provided, however,
that
the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of the Holder or an Affiliate thereof. The Holder
shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares upon exercise hereof.
7.
Replacement
of Warrant
. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon
receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction (in such case) and, in each case,
a customary and reasonable indemnity (which shall not include a surety bond), if requested. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party
costs as the Company may prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder
shall deliver such mutilated Warrant to the Company as a condition precedent to the Company’s obligation to issue the New
Warrant.
8.
Reservation
of Warrant Shares
. The Company covenants that it will at all times reserve and keep available out of the aggregate of its
authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon
exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise
of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking
into account the adjustments and restrictions of
Section 9
). The Company covenants that all Warrant Shares so issuable
and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued and fully paid and nonassessable. The Company will take all such action as may be necessary
to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation,
or of any requirements of any securities exchange or automated quotation system upon which the Common Shares may be listed.
9.
Certain
Adjustments
. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment
from time to time as set forth in this
Section 9
.
(a)
Stock
Dividends and Splits
. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common
Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides
its outstanding shares of Common Stock into a larger number of shares, or (iii) combines its outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately before such event and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of
this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive
such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately
after the effective date of such subdivision or combination.
(b)
Fundamental
Transactions
.
If,
at any time while this Warrant is outstanding (i) the Company effects
any merger or consolidation of the Company with or into another Person, in which the Company is not the survivor, (ii) the Company
effects any sale of all or substantially all of its assets or a majority of its Common Stock is acquired by a third party, in
each case, in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which all or substantially all of the holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities,
cash or property (other than as a result of a subdivision or combination of shares of Common Stock covered by Section 9(a) above)
(in any such case, a
“
Fundamental Transaction
”
),
then the Holder shall have the right thereafter
to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant without regard to any limitations
on exercise contained herein (the
“
Alternate Consideration
”
),
The Company shall not effect any
such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to the Company, surviving
entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume
the obligation to deliver to the Holder, such Alternate Consideration as, in accordance with the foregoing provisions, the Holder
may be entitled to purchase and/or receive (as the case may be), and the other obligations under this Warrant. The provisions
of this paragraph (c) shall similarly apply to subsequent transactions analogous to a Fundamental Transaction.
(c)
Number
of Warrant Shares
. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section, the
number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately,
so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant
Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment,
(d)
Calculations
.
All calculations under this
Section 9
shall be made to the nearest cent or the nearest 1/100
th
of a share, as
applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the sale or issuance of any such shares shall he considered an issue or sale of Common Stock.
(e)
Notice
of Adjustments
. Upon the occurrence of each adjustment pursuant to this
Section 9
, the Company at its expense will,
at the written request of the Holder, promptly compute such adjustment, in good faith, in accordance with the terms of this Warrant
and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number
or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions
giving rise to such adjustments and showing in detail the facts upon which such adjustment is based, Upon written request, the
Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s transfer agent.
(f)
Notice
of Corporate Events
. If, while this Warrant is outstanding, the Company (i) declares a dividend or any other distribution
of cash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or
warrants to subscribe for or purchase any capital stock of the Company, (ii) authorizes or approves, enters into any agreement
contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution,
liquidation or winding up of the affairs of the Company, then, except if such notice and the contents thereof shall be deemed
to constitute material non-public information, the Company shall deliver to the Holder a notice describing the material terms
and conditions of such transaction at least ten (10) Trading Days prior to the applicable record or effective date on which a
Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will
take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant
prior to such time so as to participate in or vote with respect to such transaction;
provided, however,
that the failure
to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in
such notice.
10.
Payment
of Exercise Price
. The Holder shall pay the Exercise Price in immediately available funds;
provided, however,
the Holder
may, in its sole discretion, commencing on the date that is 18 months from the date of this Warrant, satisfy its obligation to
pay the Exercise Price through a “cashless exercise”, in which event the Company shall issue to the Holder the number
of Warrant Shares determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the total number of Warrant Shares
with respect to which this Warrant is being exercised.
A = the average of the Closing Sale Prices
of the shares of Common Stock (as reported by Bloomberg Financial Markets) for the five Trading Days ending on the date immediately
preceding the Exercise Date.
B = the Exercise Price then in effect for
the applicable Warrant Shares at the time of such exercise.
For purposes of this Warrant,
“
Closing
Sale Price
”
means, for any security as of any date, the last trade price for such security on the principal
securities exchange or trading market for such security, as reported by Bloomberg Financial Markets, or, if such exchange or trading
market begins to operate on an extended hours basis and does not designate the last trade price, then the last trade price of
such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg Financial Markets, or if the foregoing do not
apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg Financial Markets, or, if no last trade price is reported for such security by Bloomberg Financial Markets,
the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the
“pink
sheets”
by Pink Sheets LLC. If the Closing Sale Price cannot be calculated for a security on a particular date on any
of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined
by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security,
then the Company shall, within two business days submit via facsimile (a) the disputed determination of the Warrant Exercise Price
to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic
calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense
the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company
and the Holder of the results no later than ten business days from the time it receives the disputed determinations or calculations.
Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during the applicable calculation period.
For purposes of Rule 144 promulgated under
the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction
shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced,
on the date this Warrant was originally issued pursuant to the Consulting Agreement (provided that the Commission continues to
take the position that such treatment is proper at the time of such exercise).
11.
Limitation
on Exercises
. In the event that the Company registered the sale of any of its securities pursuant to the Securities Act of
1933, as amended, as an initial public offering, in a transaction that is subject to FINRA review for compensation purposes where
the Holder is, or an affiliate of, a distribution participant for the offering, then this Warrant may not be exercised for 90
days after the effective date of the initial public offering registration statement under that act. Additionally, the Company
shall not effect the exercise of this Warrant, and the Holder shall not have the right to exercise this Warrant, to the extent
that after giving effect to such exercise, the Holder (together with such Holder’s affiliates) would beneficially own in
excess of 4.99%
(
“
Maximum Percentage
”
) of the shares of Common Stock outstanding immediately
after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially
owned by such Holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant
with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (A) exercise of the remaining, unexercised portion of this Warrant beneficially owned by such Holder and its affiliates
and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned
by such Person and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants)
subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding
sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended. To the extent that the limitation contained in this Section 11 applies, the determination of
whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any affiliate) and of which
portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise
shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities
owned by the Holder together with any affiliate) and of which portion of this Warrant is exercisable, in each case subject to
such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of the determination.
For purposes of this Warrant, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number
of outstanding shares of Common Stock as reflected in (1) the Company’s most recent Form 10-K, Form 10-Q, Current Report
on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement
by the Company or (3) any other notice by the Company setting forth the number of shares of Common Stock outstanding. For any
reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) business day confirm orally
and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including
this Warrant, by the Holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was
reported. By written notice to the Company, any Holder may decrease the Maximum Percentage to any other percentage specified in
such notice; provided that such decrease will apply only to the Holder sending such notice and not to any other holder of Warrants,
In addition, by written notice to the Company, any Holder may remove the limitations on exercises provided in this Section 11
entirely; provided that (i) any such removal will not be effective until the 61st day after such notice is delivered to the Company,
and (ii) any such removal will apply only to the Holder sending such notice and not to any other holder of Warrants. The provisions
of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section
11 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended beneficial ownership
limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation.
12.
No
Fractional Shares
. No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of
any fractional shares which would otherwise be issuable, the number of Warrant Shares to be issued shall be rounded up to the
next whole number.
13.
Notices
.
Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall
be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication
is delivered via email at the email address specified in the Consulting Agreement prior to 5:00 p.m. (prevailing Pacific time)
on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via email
at the email address specified in the Consulting Agreement on a day that is not a Trading Day or later than 5:00 p.m. (prevailing
Pacific time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight
courier service specifying next business day delivery, or (iv) upon actual receipt by the party to whom such notice is required
to be given, if by hand delivery. The address and facsimile number of a party for such notices or communications shall be as set
forth in the Consulting Agreement unless changed by such party by two Trading Days’ prior notice to the other party in accordance
with this Section 13.
14.
Warrant
Agent
. The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days’ notice to the Holder, the
Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any
corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation
to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business
shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s
last address as shown on the Warrant Register,
15.
Registration
Rights
. The Company agrees that the Holder and its assigns will have registration rights covering the resale of the Warrant
Shares, including
“piggyback”
registration rights on the registrations of the Company or demand registrations
(voting with the other registrable securities to effect any such demand), no less favorable than those granted to any other person
by the Company prior or subsequent to the date of this Warrant. At such time, and from time to time, as the Company enters into
an agreement subsequent to the date of this Warrant pursuant to which the Company grants any third party rights with respect to
the Company’s registration of Company securities under the Securities Act held by such party, the Company shall offer to
enter• into a formal written registration rights agreement with the Holder and its assigns on substantially the same terms
and such other terms as are customary and usual for agreements of such nature. In addition to, and without restricting or limiting
the scope of this subparagraph (a), the Company further agrees that:
(a)
Right
to Piggyback
. Whenever the Company proposes to register any of its securities under the Securities Act, the Company will give
prompt written notice to the Holder of its intention to effect such registration and will include in such registration all Warrant
Shares with respect to which the Company has received a written request from the Holder for inclusion therein within 15 days after
the receipt of the Company’s notice. The Company will pay, or cause to be paid, the registration expenses of the Holder
in all piggyback registrations.
(b)
Underwritten
Offering
. If a piggyback registration is an underwritten primary or secondary registration on behalf of the Company and/or
other holders of the Common Stock, and the managing underwriters advise the Company in writing that in their opinion the number
of shares requested to be included in such registration (including the Warrant Shares and any other shares of Common Stock held
by holders with registration rights) exceeds the number which can be sold in such offering without materially and adversely affecting
the marketability of the offering, the Company will promptly furnish the Holder with a copy of the underwriter’s opinion
and may, by written notice to the Holder, include in such registration (i) first, the securities the Company proposes to sell,
and (ii) second, the Common Stock requested to be included in such registration pro rata among all holders with registration rights
on the basis of the number of shares owned by each such holder.
(c)
Underwriting
Agreement
. In any registration in which the Warrant Shares is to be included, the Holder shall be a party to the underwriting
agreement entered into by the Company in connection therewith, and the representations and warranties by, and the other agreements
on the part of, the Company and for the benefit of the underwriters shall also be made to and for the benefit of the Holder.
(d)
Documents,
etc
. The Company shall provide to the Holder any and all documents, statements, opinions and forms as the Holder reasonably
deems necessary for the Holder to participate in any piggyback registrations and to facilitate the disposition of the Warrant
Shares covered by such registration pursuant to the terms and conditions of this Agreement and the applicable securities laws.
(e)
Indemnification
.
In the event of any piggyback registration of any Warrant Shares under the Securities Act, and in connection with any
registration statement or any other disclosure document pursuant to which securities of the Company are sold, the Company
will, and hereby does, jointly and severally, indemnify and hold harmless the Holder, its directors and officers and managers
and members, as the case may be, fiduciaries, and agents (each, a
“
Covered Person
”
) against any
losses, claims, damages or liabilities, joint or several, to which such Covered Person may be or become subject under the
Securities Act, any other securities or other laws of any jurisdiction, common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (1) any untrue
statement or alleged untrue statement of any material fact contained or incorporated by reference in any registration
statement under the Securities Act, any preliminary prospectus or final prospectus included therein, or any amendment or
supplement thereto, or any document incorporated by reference therein, or any other such disclosure document, or (2) any
omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the
statement therein not misleading, and will reimburse such Covered Person for any legal or any other expenses incurred by in
connection with investigating or defending any such loss, claim, damage, liability, action or proceeding;
provided
,
however
,
the Company shall not be liable to any Covered Person in any such case to the extent that any such loss, claim, damage,
liability, action or proceeding arises out of or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, amendment or
supplement, any document incorporated by reference or other such disclosure document in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed by such Covered Person specifically stating
this it is for use in the preparation thereof.
(f) All
fees and expenses incurred by the Company in connection with the performance of its obligation to register the Warrant Shares
pursuant to
Section
15
shall be borne by the Company; provided that any fees
and expenses of the holder or holders thereof or of its or their counsel, and transfer taxes applicable to the sale of such Warrant
Shares, shall be borne by such holder or holders.
16.
Miscellaneous
.
(a) The
Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to
confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the
Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, amalgamation, conveyance or otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon
the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities
on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether
such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 16(a), the Company shall
provide the Holder with copies of the same notices and other information given to the shareholders of the Company, contemporaneously
with the giving thereof to the shareholders.
(b) Subject
to the restrictions on transfer set forth on the first page hereof, and compliance with applicable securities laws, this Warrant
may be assigned by the Holder. This Warrant may not be assigned by the Company except to a successor in the event of a Fundamental
Transaction. This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and
assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company
and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in
writing signed by the Company and the Holder, or their successors and assigns.
(c) GOVERNING
LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICTS OF LAW THEREOF, EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION
DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY
WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT
FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND
NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED
BY LAW, THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.
(d) The
headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In
case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability
of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby, and the parties will
attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor,
and upon so agreeing, shall incorporate such substitute provision in this Warrant.
(f) Except
as otherwise set forth herein, prior to exercise of this Warrant, the Holder hereof shall not, by reason of by being a Holder,
be entitled to any rights of a stockholder with respect to the Warrant Shares.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company has caused
this Warrant to be duly executed by its authorized officer as of the date first indicated above.
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MEARS TECHNOLOGIES, INC.
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By:
|
/s/ John D.T. Gerber
|
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Name: John D.T. Gerber
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Title: Chairman
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SCHEDULE 1
FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise
the right to purchase shares
of Common Stock under the foregoing Warrant)
Ladies and Gentlemen:
(1) The
undersigned is the Holder of Warrant No. ___ (the
“Warrant”
) issued by Mears Technologies, Inc. (the
“Company”
).
Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.
(2) The
undersigned hereby exercises its right to purchase Warrant Shares pursuant to the Warrant.
(3) The
Holder intends that payment of the Exercise Price shall be made as (check one):
¨
Cash
Exercise
¨
“Cashless
Exercise” under
Section 12
(4) If
the Holder has elected a Cash Exercise, the Holder shall pay the sum of $________ in immediately available funds to the Company
in accordance with the terms of the Warrant.
(5) Pursuant
to this Exercise Notice, the Company shall deliver to the Holder _______ Warrant Shares in accordance with the terms of the Warrant.
Dated:__________________, ____
[Company]
(Signature must conform in all respects
to name of Holder as specified on the face of the Warrant)
SCHEDULE 2
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer
of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ______________ (the
“Transferee”
) the right represented by the within Warrant to purchase ______________
shares of Common Stock of Mears Technologies, Inc. (the
“Company”
) to which the within Warrant relates and appoints
______________ attorney to transfer said right on the books of the Company with full power of substitution in the premises.
In connection therewith, the undersigned
represents, warrants, covenants and agrees to and with the Company that:
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(a)
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the offer and sale
of the Warrant contemplated hereby is being made in compliance with Section 4(1) of the
United States Securities Act of 1933, as amended (the
“Securities Act”
)
or another valid exemption from the registration requirements of Section 5 of the Securities
Act and in compliance with all applicable securities laws of the states of the United
States;
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(b)
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the undersigned has not offered to sell the Warrant by
any form of general solicitation or general advertising, including, but not limited to, any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or broadcast over television or radio, and any seminar
or meeting whose attendees have been invited by any general solicitation or general advertising;
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(c)
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the undersigned has read the Transferee’s investment
letter included herewith, and to its actual knowledge, the statements made therein are true and correct; and
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(d)
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the undersigned understands that the Company may condition
the transfer of the Warrant contemplated hereby upon the delivery to the Company by the undersigned or the Transferee, as the
case may be, of a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under
applicable securities laws of the states of the United States.
|
Dated:__________________________________
[Company]
(Signature must conform in all respects to name of Holder as
specified on the face of the Warrant)
In the presence of:
Exhibit 4.3
SENIOR SECURED CONVERTIBLE NOTE
NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED HEREBY NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE. PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
MEARS TECHNOLOGIES, INC.
Senior
Secured Convertible Note
|
Issuance Date: March 17, 2015
|
Principal Amount: U.S. $
|
FOR VALUE RECEIVED,
Mears Technologies, Inc., a Delaware corporation (the “
Company
”), hereby promises to pay to the order of
or its registered assigns (“
Holder
”)
the amount set out above as the Principal Amount (the “
Principal
”) when due, whether upon the Maturity Date
(as defined below), acceleration, prepayment or otherwise (in each case in accordance with the terms hereof) and to pay interest
(“
Interest
”) on the outstanding Principal at the applicable Interest Rate (as defined below) from the date
set out above as the Issuance Date (the “
Issuance Date
”) until the same becomes due and payable, whether upon
the Maturity Date or acceleration, conversion, prepayment or otherwise (in each case in accordance with the terms hereof). This
Senior Secured Convertible Note (this “
Note
”) is one of an issue of Senior Secured Convertible Notes issued
either (i) pursuant to the Securities Purchase Agreement (as defined below) on the Closing Date (as defined below); or (ii) in
exchange for those senior convertible notes in the aggregate principal amount of $7,349,226.24 (the “Old MTI Convertible
Note”) issued by the Company to those Persons listed on Exhibit A of the Securities Purchase Agreement under the heading
“Old MTI Convertible Note Conversions” (collectively, the “
Other Notes
” and together with this
Note, the “
Notes
”). Certain capitalized terms used herein are defined in Section 23. All other capitalized
terms not defined herein shall have the meaning given to such terms in the Securities Purchase Agreement.
1.
PREPAYMENT
.
The Company may, at any time prior to the Maturity Date, prepay this Note in full, and in part, including all unpaid and accrued
interest thereon, provided however that the written consent of the Required Holders shall be required if prepaid before the IPO
Outside Date. In the event the Company wishes to prepay this Note on or before the IPO Outside Date, it shall notify the Holder
and the holders of the Other Notes to obtain the requisite consents. A prepayment made pursuant to this Section 1 shall be made
pro rata among all Note holders.
2.
INTEREST
RATE
. So long as no Event of Default shall have occurred and be continuing, Interest on this Note shall accrue at a rate equal
to ten percent (10%) simple interest per annum. Interest shall be payable on the Maturity Date, or such earlier date as is required
pursuant to this Note. If an Event of Default shall have occurred and be continuing, the Interest Rate shall automatically be increased
to twelve percent (12%) simple interest during the period of such Event of Default, until such Event of Default is later cured.
Interest due on this Note shall be computed on the basis of a three hundred sixty-five (365)-day year.
3.
CONVERSION
OF NOTES
. This Note shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock (as defined
below), on the terms and conditions set forth in this Section 3.
(a)
Mandatory
Conversion - IPO
. Upon consummation of the IPO (as defined below), this Note shall automatically convert, through no further
action on the part of the Company or the Holder, into that number of shares of Common Stock equal to the quotient of (A) the Conversion
Amount (as defined below) divided by (B) the Conversion Price. For the purpose of this Section 3(a), the “
Conversion
Price
” shall be equal to fifty percent (50%) of the IPO Price to Public (as defined below) (rounded to two decimal places);
provided; however,
that in no event shall the Conversion Price be greater than $0.4908 or nor less than $0,2454, in each
case as adjusted for stock splits, stock dividends, stock combinations, recapitalizations, or the like that occur after the Issuance
Date in accordance with Section 5.
(b)
Optional
Conversion – Financing
. Upon consummation of a Subsequent Placement other than the IPO pursuant to Section 4(k) of the
Securities Purchase Agreement, the Holder shall be entitled to elect to convert all of the Notes into shares of Common Stock.
In the event that the Holder so elects to convert, this Note shall convert into that number of shares of Common Stock equal to
the quotient of (A) the Conversion Amount divided by (B) the Conversion Price. For the purposes of this Section 3(b), the “
Conversion
Price
” shall be equal to fifty percent (50%) of the purchase price of the securities being sold by the Company in such
Subsequent Placement (rounded to two decimal places);
provided; however,
that in no event shall the Conversion Price be
greater than $0.4908 or nor less than $0,2454, in each case as adjusted for stock splits, stock dividends, stock combinations,
recapitalizations, or the like that occur after the Issuance Date in accordance with Section 5.
(c)
Optional
Conversion
. At any time after the Issuance Date and until ten (10) calendar days prior to the consummation of the IPO, the
Holder shall be entitled to elect to convert all of this Note into shares of Common Stock, In the event that the Holder so elects
to convert, this Note shall convert into that number of shares of Common Stock equal to the quotient of (A) the Conversion Amount
divided by (B) the Conversion Price. For the purposes of this Section 3(c), the “
Conversion Price
” shall be
equal to $0.4908, as adjusted for stock splits, stock dividends, stock combinations, recapitalizations, or the like that occur
after the Issuance Date in accordance with Section 5.
(d)
Mechanics
of Conversion
.
(1)
Conversion;
Issuance of Shares
. To convert the Notes pursuant to Sections 3(b) or 3(c) above into shares of Common Stock on any date (a
“
Conversion Date
”), the Holder shall deliver (whether via facsimile or otherwise) a copy of a properly and fully-completed
and executed notice of conversion in the form attached hereto as
Exhibit I
(the “
Conversion Notice
”)
to the Company and to each other holder of a Note. Promptly following the date of receipt of such Conversion Notice, or, with respect
to a mandatory conversion pursuant to Section 3(a), upon the consummation of the IPO, and following the Holder’s delivery
of this original Note to the Company for cancellation, the Company shall issue and deliver (via reputable overnight courier) to
the Holder a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which
the Holder shall be entitled, with the legends required by the Securities Purchase Agreement or applicable law.
(ii)
Registration
.
The Company shall maintain a register (the “
Register
”
)
for the recordation of the names and addresses
of the holders of each Note and the principal amount of the Notes held by such holders (the “
Registered Notes
”).
The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders
of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes (including,
without limitation, the right to receive payments of Principal and Interest hereunder) notwithstanding notice to the contrary.
A Registered Note may be assigned, transferred or sold in whole or in part only by registration of such assignment or sale on the
Register. Upon its receipt of a written request to assign, transfer or sell all or part of any Registered Note by the holder thereof
and subject to the holder’s compliance with Section 12, the Company shall record the information contained therein in the
Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered
Registered Note to the designated assignee or transferee pursuant to Section 13, provided that if the Company does not so record
an assignment, transfer or sale (as the case may be) of all or part of any Registered Note within two (2) Business Days of its
receipt of such a request, then the Register shall be automatically updated to reflect such assignment, transfer or sale (as the
case may be). The Holder and the Company shall maintain records showing the Principal and Interest converted and/or paid (as the
case may be) and the dates of such conversion and/or payments (as the case may be) or shall use such other method, reasonably satisfactory
to the Holder and the Company, so as not to require physical surrender of this Note upon conversion,
(iii)
No
Fractional Shares; Transfer Taxes
. The Company shall not issue any fraction of a share of Common Stock upon any conversion.
If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of
a share of Common Stock up to the nearest whole share, The Company shall pay any and all transfer, stamp, issuance and similar
taxes that may be payable with respect to the issuance and delivery of Common Stock upon any conversion.
4.
RIGHTS UPON EVENT OF DEFAULT
.
(a)
Event of Default
. Each of the following events shall constitute an “
Event of Default
”:
(i) the Company’s failure
to pay to the Holder any amount of Principal or Interest when and as due if such failure remains uncured for a period of at least
five (5) Business Days;
(ii) liquidation
proceedings shall be instituted by or against the Company and, if instituted against the Company by a third party, shall not be
dismissed within sixty (60) days of their initiation;
(iii) bankruptcy,
insolvency, reorganization or other proceedings for the relief of debtors shall be instituted against the Company and shall not
be dismissed within sixty (60) days of their initiation;
(iv) the
commencement by the Company of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or the consent by it to the entry of a decree, order, judgment or other similar document in
respect of the Company in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign
law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence
of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its
debts generally as they become due, the taking of corporate action by the Company in furtherance of any such action;
(v) the
entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company of a voluntary or
involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization
or other similar law; or (ii) a decree, order, judgment or other similar document adjudging the Company as bankrupt or
insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or
composition of or in respect of the Company under any applicable federal, state or foreign law; or (iii) a decree, order,
judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its property, or ordering the winding up
or
liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such
other decree, order, judgment or other similar document unstayed and in effect for a period of sixty (60) consecutive
days;
(vi) a
final judgment or judgments for the payment of money aggregating in excess of $
250
,000 are
rendered against the Company and which judgments are not, within sixty (60) days after the entry thereof, satisfied, bonded, discharged
or stayed pending appeal, or are not satisfied, bonded or discharged within sixty (60) days after the expiration of such stay;
(vii) the
Company fails to
pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness in
excess of $250,000 due to any third party (other than, with respect to unsecured Indebtedness only, payments contested by the
Company in good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof
in accordance with GAAP) or is otherwise in breach or violation of any agreement for monies owed or owing by the Company in an
amount in excess of $250,000, which breach or violation permits the other party thereto to declare a default or otherwise accelerate
amounts due thereunder;
(viii) other
than as specifically set forth in another clause of this Section 4(a), the Company breaches any material covenant or other term
or condition of any Transaction Document, if such breach remains uncured for a period of thirty (30) days after actual knowledge
of the Company of such breach, or any representation or warranty made by the Company in any Transaction Document is not accurate
in any material respect when made or deemed made;
(ix) the
validity or enforceability of any provision of any Transaction Document
shall
be contested
by the Company, or a proceeding shall be commenced by the Company seeking to establish the invalidity or unenforceability thereof;
(x) the
Security Documents shall for any reason, except (A) to the extent permitted by the terms hereof or thereof, or (B) as a result
of the act or omission of Holder or the holder of any Other Note and not materially related to the failure of the Company to satisfy
or tender to satisfy its obligations under the Security Documents, fail or cease to create a separate valid and perfected first
priority Lien on
the
Collateral (as defined in the Security Agreement) in favor of each of
the Secured Parties (as defined in the Security Agreement) and such breach remains uncured for a period of ten (10) Business Days
after notice from Holder or the holder of any Other Note of such failure or ceasing; or
(xi) any
Event of
Default
(as defined in the Other Notes) occurs with respect to any Other Notes.
(b)
Notice
of an Event of Default
. Upon the occurrence of an Event of Default with respect to this Note or any Other Note, the Company
shall within five (5) Business Days deliver written notice thereof via facsimile and overnight courier (with next day delivery
specified) (an “
Event of Default Notice
”) to the Holder.
At any time after the occurrence of an Event
of Default, the Required Holders may, by notice to the Company, declare all of the Notes to be forthwith due and payable, whereupon
the Principal and all accrued and unpaid Interest thereon, plus all costs of enforcement and collection (including court costs
and reasonable attorney’s fees), shall immediately become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived by the Company.
5.
ADJUSTMENT OF CONVERSION PRICE
.
(a)
Adjustment
of Conversion Price Collar upon Subdivision or Combination of Common Stock
. If the Company subdivides (by any stock split,
stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number
of shares, the Conversion Price (and the minimum and maximum amounts of the Conversion Price) in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time combines (by combination, reverse stock split or otherwise)
one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price (and the minimum
and maximum amounts of the Conversion Price) in effect immediately prior to such combination will be proportionately increased.
Any adjustment pursuant to this Section 5(a) shall become effective immediately after the effective date of such subdivision or
combination.
(b)
Other
Events
. In the event that the Company shall take any action to which the provisions of Section 5(a) are not strictly applicable,
or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the
provisions of this Section 5 but not expressly provided for by such provisions, then the Company’s Board of Directors shall
in good faith determine and implement an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder,
provided that no such adjustment pursuant to this Section 5(b) will increase the Conversion Price as otherwise determined pursuant
to this Section 5, provided further that if the Holder does not accept such adjustments as appropriately protecting its interests
hereunder against such dilution, then the Company’s Board of Directors and the Holder shall agree, in good faith, upon an
independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be
final and binding and whose fees and expenses shall be borne by the Company.
6.
NONCIRCUMVENTION
.
The Company hereby covenants and agrees
that the Company will not, by amendment of its Certificate of Incorporation or Bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all
times in good faith
carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this
Note. Without limiting the generality of the foregoing, so long as any of the Notes remain outstanding, the Company (i) shall
not increase the par value of any shares of Common Stock receivable upon conversion of this Note above the Conversion Price then
in effect and (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally
issue fully paid and non-assessable shares of Common Stock upon the conversion of this Note, including without limitation complying
with Section 7(b) hereof.
7.
RESERVATION OF AUTHORIZED SHARES
.
(a)
Reservation
. The
Company shall at all times during which the Notes are outstanding reserve and keep available out of its authorized but unissued
shares Common Stock, solely for the purpose of effecting the conversion of the Notes, no less than one hundred ten percent (110%)
of the maximum number of shares issuable on conversion of the Notes (the “
Required Reserve Amount
”).
(b)
Insufficient
Authorized Shares
. If, notwithstanding Section 7(a), and not in limitation thereof, at any time while any of the Notes remain
outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation
to reserve a number of shares of Common Stock equal to the Required Reserve Amount (an “
Authorized Share Failure
”),
then the Company shall as soon as reasonably practicable take all action within its power necessary to increase the Company’s
authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the
Notes then outstanding, including without limitation using its best efforts to secure necessary Board of Directors and stockholder
approvals, as further described below, to appropriately amend the Company’s Certificate of Incorporation to provide for
such increase. Without limiting the generality of the foregoing sentence, if not earlier approved by written consent of the stockholders,
as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than seventy (70)
days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval
of an increase in the number of authorized shares of Common Stock; in connection with any such meeting, the Company shall provide
each stockholders with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase
in authorized shares of Common Stock and to cause its Board of Directors to recommend to the stockholders that they approve such
proposal.
8.
COVENANTS
.
Until all of the Notes have been converted or otherwise satisfied in accordance with their terms:
(a)
Rank
.
All payments due under this Note shall rank
pari passu
with all Other Notes.
(b)
New
Subsidiaries
. Simultaneously with the acquisition or formation of each New Subsidiary, other than a Foreign Subsidiary, the
Company shall cause such New Subsidiary to execute, and deliver to each holder of Notes, all joinders to, or as applicable additional,
Security Documents (as defined in the Security Agreement) as requested by the Holder. The Company shall not, directly or indirectly,
acquire or form any New Subsidiary if such New Subsidiary would not be wholly-owned, directly or indirectly, by the Company.
9.
SECURITY
.
This Note and the Other Notes are secured to the extent and in the manner set forth in the Transaction Documents (including, without
limitation, the Security Agreement and the other Security Documents).
10. [Reserved].
11.
AMENDING THE
TERMS OF THIS NOTE
. No provision of this Note may be amended other than by an instrument in writing signed by the Company and
the Required Holders, and any amendment to any provision of this Note made in conformity with the provisions of this Section 11
shall be binding on all Holders, provided that no such amendment shall be effective to the extent that it (1) applies to less than
all of the holders of the Notes then outstanding or (2) imposes any obligation or liability on any Holder without such Holder’s
prior written consent (which may be granted or withheld in such Holder’s sole discretion). No waiver of any provision of
this Note shall be effective unless it is in writing and signed by an authorized representative of the waiving party, provided
that the Required Holders may waive any provision of this Note, and any waiver of any provision of this Note made in conformity
with the provisions of this Section 11 shall be binding on all Holders, provided that no such waiver shall be effective to the
extent that it (1) applies to less than all of the holders of the Notes then outstanding (unless a party gives a waiver as to itself
only) or (2) imposes any obligation or liability on any Holder without such Holder’s prior written consent (which may be
granted or withheld in such Holder’s sole discretion). No amendment to or waiver of any provision this Note shall amend or
waive any provision of any other Transaction Document.
12.
TRANSFER
.
This Note and any shares of Common Stock issued upon conversion of this Note (the “
Conversion Shares
”) may be
offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section
2(g) of the Securities Purchase Agreement and any other restrictions that may be mutually agreed by the Company and the Holder
hereof. Notwithstanding anything in this Note to the contrary, neither this Note nor any Conversion Shares may be sold, assigned
or transferred by the Holder unless the recipient of such agrees in writing to be bound by the terms and conditions of the Securities
Purchase Agreement and the Registration Rights Agreement.
13.
REISSUANCE OF THIS NOTE
.
(a)
Transfer
.
If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section 13(d)), registered as the Holder may request, representing
the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred,
a new Note (in accordance with Section 13(d)) to the Holder representing the outstanding Principal not being transferred.
(b)
Lost,
Stolen or Mutilated Note
. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated below shall suffice
as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company
in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall
execute and deliver to the Holder a new Note (in accordance with Section 13(d)) representing the outstanding Principal.
(c)
Note
Exchangeable for Different Denominations
. This Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section 13(d) and in principal amounts of at least $1,000) representing
in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding
Principal as is designated by the Holder at the time of such surrender,
(d)
Issuance
of New Notes
. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall
be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding
(or in the case of a new Note being issued pursuant to Section 13(a) or Section 13(c), the Principal designated by the Holder which,
when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal
remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated
on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions
as this Note, and (v) shall represent accrued and unpaid Interest on the Principal of this Note, from the Issuance Date.
14.
REMEDIES, CHARACTERIZATIONS,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF
. The remedies provided in this Note shall be cumulative and in addition to
all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree
of specific performance and/or other injunctive relief); provided, the Holder shall not be entitled to any duplication or multiplication
of damages. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as
expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the
computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein or in
the other Transaction Documents, be subject to any other obligation of the Company (or the performance thereof
.
). The
Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy
at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened
breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach
or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required.
The Company shall provide all information and documentation to the Holder that is reasonably requested by the Holder to enable
the Holder to confirm the Company’s compliance with the terms and conditions of this Note (including, without limitation,
compliance with Section 5).
15.
PAYMENT
OF COLLECTION, ENFORCEMENT AND OTHER COSTS
. If (a) this Note is placed in the hands of an attorney for collection or enforcement
of the debt evidenced hereby or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect
amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership
of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company
shall pay the reasonable costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, without limitation, reasonable attorneys’ fees and disbursements.
16.
CONSTRUCTION;
HEADINGS
. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against
any Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect
the interpretation of, this Note.
17.
FAILURE
OR INDULGENCE NOT WAIVER
. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and
signed by an authorized representative of the waiving party.
18.
DISPUTE
RESOLUTION
. If the Holder and the Company are unable to agree as to the arithmetic calculation of the Conversion Price the
Holder and the Company will confer in good faith to resolve such disagreement and the Company shall promptly issue upon conversion
of this Note at the number of shares of Common Stock that are uncontested. Thereafter, the Company and Holder will confer in good
faith to attempt to reach agreement regarding the Conversion Price with the Required Holders; if the Required Holders and the
Company agree in writing upon a Conversion Price, that agreement will be binding on Holder and all holders of the Other Notes.
19.
NOTICES;
PAYMENTS
.
(a)
Notices
.
Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance
with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all
actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefor. Without
limiting the generality of the foregoing, the Company will give written notice to the Holder (i) promptly, but in any event within
ten (10) calendar days, upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation
of such adjustment and (ii) at least ten (10) calendar days prior to the date on which the Company established a record date with
respect to any dividend or Distribution upon the Common Stock.
(b)
Payments
.
Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise expressly set forth
herein, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company
and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address,
in the case of each of the Buyers, which shall initially the address set forth on the Schedule of Buyers attached to the Securities
Purchase Agreement), provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available
funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions.
Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall
instead be due on the next succeeding day which is a Business Day.
20.
CANCELLATION
.
After all Principal, accrued Interest and other amounts at any time owed on this Note have been paid or converted in full, this
Note shall automatically be deemed canceled, shall be surrendered promptly, but in any event within ten (10) calendar days, to
the Company by the Holder for cancellation and shall not be reissued.
21.
WAIVER OF NOTICE
.
To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment, protest and all other demands
and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note.
22.
GOVERNING
LAW
. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication
of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue
of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. In the event that any provision of this Note is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall
be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision of this Note. Nothing contained herein shall be
deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction
to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations,
or to enforce a judgment or other court ruling in favor of the Holder.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ANY RIGHT SUCH PARTY MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
23.
CERTAIN DEFINITIONS
.
For purposes of this Note, the following terms shall have the following meanings:
(a) “
Business
Day
” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.
(b) “
Closing
Date
” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially
issued Notes pursuant to the terms of the Securities Purchase Agreement.
(c) “
Common
Stock
” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into
which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.
(d) “
Conversion
Amount
”
means the sum of the outstanding and unpaid Principal plus all accrued and unpaid Interest thereon plus,
if any, other unpaid amounts due under this Note.
(e) “
GAAP
”
means United States generally accepted accounting principles, consistently applied.
(f) “
IPO
”
means a firm commitment underwritten initial public offering of the Company’s Common Stock pursuant to a registration
statement filed on Form S-1 (or any successor from thereto) that is declared effective by the SEC and consummated prior to the
Maturity Date.
(g) “
IPO
Price to Public
”
means the price to public specified in the IPO registration statement.
(h) “
IPO
Outside Date
”
shall mean February 14, 2016.
(i) “
Interest
Rate
”
means ten percent (10%) simple interest per annum, as may be adjusted from time to time in accordance with
Section 2.
(j) “
Maturity
Date
”
shall mean May 31, 2016.
(k) “
New
Subsidiary
”
means, as of any date of determination, any Person in which the Company after the Closing Date,
directly or indirectly, (i) owns or acquires any of the outstanding capital stock or holds any equity or similar interest of
such Person or (ii) controls or operates all or any part of the business, operations or administration of such Person, and
all of the foregoing, collectively, “
New Subsidiaries.
”
(l) “
Person
”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity or a government or any department or agency thereof.
(m) “
Registration
Rights Agreement
”
means that certain registration rights agreement, dated as of the Closing Date, by and among
the Company and the initial holders of the Notes, as may be amended from time to time.
(n) “
Required
Holders
”
means holders of Notes having outstanding principal amounts in the aggregate that represent a majority
of the then outstanding principal amounts of all Notes.
(o) “
SEC
”
means the United States Securities and Exchange Commission or the successor thereto.
(p) “
Securities
Purchase Agreement
”
means that certain securities purchase agreement, dated as of March 17, 2015, by and among
the Company and the initial holders of certain Other Notes pursuant to which the Company issued such Other Notes, as may be amended
from time to time.
(q) “
Security
Agreement
”
means that certain security agreement, dated as of the Closing Date, by and among the Company and the
initial holders of the Notes, as may be amended from time to time.
24.
MAXIMUM
PAYMENTS
. Nothing contained in this Note shall, or shall be deemed to, establish or require the payment of a rate of interest
or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid
or other charges under this Note exceeds the maximum permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the Company.
25.
SURRENDER
OR ACKNOWLEDGEMENT AND CERTIFICATION
: Upon payment in full or conversion of this Note, Holder shall surrender the original
physical copy of this Note for cancellation; alternatively, if the Holder promptly requests in connection with such payment or
conversion, the Holder may deliver to the Company a signed acknowledgement of payment in full and a certification that the Holder
has cancelled or destroyed the Note in a form reasonably acceptable to the Company.
[Signature page follows]
EXHIBIT I
MEARS TECHNOLOGIES, INC.
CONVERSION NOTICE
Reference is made to
the Senior Secured Convertible Note (the “
Note
”) issued to the undersigned by Mears Technologies, Inc. (the
“
Company
”).
In accordance with and pursuant to the Note, the undersigned hereby elects to convert the
Conversion Amount (as defined in the Note) of the Note indicated below into shares of common stock, $0.001 par value per share
(the “
Common Stock
”), of the Company, as of the date specified below.
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Date of Conversion:
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Aggregate Conversion Amount to be converted:
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Conversion Price:
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Number of shares of Common Stock to be issued:
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Please issue the Common Stock into which the Note is being converted
in the following name and to the following address:
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Issue to:
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Facsimile Number:
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Holder:
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By:
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Title:
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Dated:
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Exhibit 4.4
NEITHER THESE SECURITIES NOR THE SECURITIES
ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE 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 APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (II) 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 OR BLUE SKY LAWS. THESE SECURITIES AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
MEARS TECHNOLOGIES, INC.
WARRANT TO PURCHASE COMMON STOCK
|
Warrant No. __
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Original Issue Date: March 17, 2015
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Mears Technologies,
Inc., a Delaware corporation (the “
Company
”),
hereby certifies that, for value received, National Securities
Corporation, or its permitted registered assigns (the “
Holder
”),
is entitled to purchase from the Company
such number of shares of common stock, $0.001 par value per share (the “
Common Stock
”),
of the Company
.
(each such share, a “
Warrant Share
”
and all such shares, the “
Warrant Shares
”)
as determined in accordance with the terms herewith, at the Exercise Price (as defined below), at any time and from time to time
from on or after the date hereof (the “
Trigger Date
”),
but subject to the delay on exercise set forth
in
Section 13
hereof, and through and including 5:00 P.M., prevailing Pacific time, on March 17, 2020 (the “
Expiration
Date
”),
and subject to the following terms and conditions:
This Warrant (this
“
Warrant
”)
is issued pursuant to that certain Engagement Agreement dated October 10, 2014, as amended,
between the Company and the Holder (the “
Engagement Agreement
”)
.
1.
Definitions.
In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings
given to such terms in the Engagement Agreement. As used in this Warrant, the term “Notes” means those certain convertible
secured promissory notes of the Company offered in a private placement and issued under the terms of that Securities Purchase Agreement
entered into by various investors with the Company, all of like tenor, initially dated on or about March 17, 2015.
2.
Exercise
Price.
For purposes of this Warrant, the “
Exercise Price
”
shall be equal to 100% of the Conversion
Price of the Notes, as determined pursuant to Section 3(a) of the Notes; as adjusted pursuant to Section 5 of the Notes, and provided
that no duplicative adjustment to the Exercise Price shall be made pursuant to
Section 11
herein. Notwithstanding the foregoing,
until immediately prior to the conversion of all of the Notes pursuant to Section 3 of the Notes, the Exercise Price shall be
equal to $0.4908 (as adjusted from time to time as provided in
Section 11
herein.
3.
Number
of Warrant Shares.
The aggregate number of Warrant Shares shall be equal to 10% of the aggregate number of shares of Common
Stock issued by the Company upon conversion of the Notes (other than the shares of Common Stock issued by the Company upon conversion
of certain Old MTI Convertible Notes in the aggregate principal amount of $6,272,667 and shares of Common Stock issued by the Company
upon conversion of Notes issued to J. P.
&
M. B, Kingdon, Stephen M. Cumbie and John Gerber in the aggregate principal
amount of $28,216.76) pursuant to Section 3 of the Notes. Notwithstanding the foregoing, until immediately prior to the conversion
of all of the Notes pursuant to Section 3 of the Notes, the number of Warrant Shares shall be equal to 1,502,151 shares of Common
Stock, as adjusted from time to time as provided in
Section 11
herein.
4.
Registration
of Warrants.
The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “
Warrant
Register
”),
in the name of the record Holder (which shall include the initial Holder or, as the case may be, any
registered assignee to which this Warrant is permissibly assigned hereunder) from time to time, The Company may deem and treat
the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to
the Holder, and for all other purposes, absent actual notice to the contrary.
5.
Registration
of Transfers.
The Company shall register the transfer of all or any portion of this Warrant in the Warrant Register, upon
(i) surrender of this Warrant, with the Form of Assignment attached as
Schedule 2
hereto duly completed and signed, to
the Company's transfer agent or to the Company at its address specified herein (ii) delivery, at the request of the Company, of
an opinion of counsel reasonably satisfactory to the Company to the effect that the transfer of such portion of this Warrant may
be made pursuant to an available exemption from the registration requirements of the Securities Act of 1933
(
“
Securities
Act
”)
and all applicable state
securities or blue sky laws and (iii) delivery by the transferee of a written
statement to the Company certifying that the transferee is an “accredited investor” as defined in Rule 501(a) under
the Securities Act and making the representations and certifications as the Company may reasonably request to procure an exemption
from section 5 of the Securities Act. Upon any such registration or transfer, a new warrant to purchase Common Stock in substantially
the form of this Warrant (any such new warrant, a “
New Warrant
”)
evidencing the portion of this Warrant
so transferred shall be issued to the transferee, and a New Warrant evidencing the remaining portion of this Warrant not so transferred,
if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed
the acceptance by such transferee of all of the rights and obligations of a Holder of a Warrant.
6.
Exercise
and Duration of Warrants.
(a) All
or any part of this Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the Trigger
Date and through and including 5:00 P.M. prevailing Pacific time on the Expiration Date. At 5:00 P.M., prevailing Pacific time,
on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value and this
Warrant shall be terminated and no longer outstanding.
(b) The
Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached as Schedule I hereto
(the “
Exercise Notice
”),
appropriately completed and duly signed, (ii) payment of the Exercise Price
for the number of Warrant Shares as to which this Warrant is being exercised (which may take the form of a “cashless exercise”
if so indicated in the Exercise Notice and if a “cashless exercise” may occur at such time pursuant to
Section
12
below), and the date such items are delivered to the Company (as determined in accordance with the notice provisions
hereof) is an “
Exercise Date
.”
The Holder shall not be required to deliver the original Warrant in order
to effect an exercise hereunder. Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the
original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.
7.
Delivery
of Warrant Shares.
Upon exercise of this Warrant, the Company shall promptly issue or cause to be issued and cause to be delivered
to or upon the written order of the Holder and in such name or names as the Holder may designate a certificate for the Warrant
Shares issuable upon such exercise, with an appropriate restrictive legends, The Holder, or any Person permissibly so designated
by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the
Exercise Date.
8.
Charges,
Taxes and Expenses.
Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be
made without charge to the Holder for any issue or transfer tax, transfer agent fee or other incidental tax or expense in respect
of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrants in a name other than that of the Holder or an Affiliate thereof. The Holder shall be
responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
9.
Replacement
of Warrant.
If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon
receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction (in such case) and, in each case,
a customary and reasonable indemnity (which shall not include a surety bond), if requested. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party
costs as the Company may prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder
shall deliver such mutilated Warrant to the Company as a condition precedent to the Company's obligation to issue the New Warrant.
10.
Reservation
of Warrant Shares,
The Company covenants that it will at all times reserve and keep available out of the aggregate of its
authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon
exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise
of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking
into account the adjustments and restrictions of
Section 11)
. The Company covenants that all Warrant Shares so issuable
and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued and fully paid and non-assessable. The Company will take all such action as may be necessary
to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation,
or of any requirements of any securities exchange or automated quotation system upon which the Common Stock may be listed.
11.
Certain
Adjustments.
The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment
from time to time as set forth in this
Section 11.
(a)
Stock
Dividends and Splits.
If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common
Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides
its outstanding shares of Common Stock into a larger number of shares, or (iii) combines its outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately before such event and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of
this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive
such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately
after the effective date of such subdivision or combination.
(b)
Fundamental
Transactions.
If, at any time while this Warrant is outstanding (i) the Company effects any merger or consolidation of
the Company with or into another Person, in which the Company is not the survivor, (ii) the Company effects any sale of all
or substantially all of its assets or a majority of its Common Stock is acquired by a third party, in each case, in one or a
series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which all or substantially all of the holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities,
cash or property (other than as a result of a subdivision or combination of shares of Common Stock covered by
Section
1
1
(a)
above) (in any such case, a “
Fundamental Transaction
”), then the Holder shall have the right thereafter to
receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been
entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant without regard to
any limitations on exercise contained herein (the “
Alternate Consideration
”)
.
The Company shall not
effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to the
Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation
or entity shall assume the obligation to deliver to the Holder, such Alternate Consideration as, in accordance with the
foregoing provisions, the Holder may be entitled to purchase and/or receive (as the case may be), and the other
obligations under this Warrant, The provisions of this paragraph (b) shall similarly apply to subsequent transactions
analogous to a Fundamental Transaction.
(c)
Number
of Warrant Shares
. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section, the
number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately,
so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant
Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.
(d)
Calculations
.
All calculations under this
Section 11
shall be made to the nearest cent or the nearest 1/100th of a share, as applicable,
The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account
of the Company, and the sale or issuance of any such shares shall be considered an issue or sale of Common Stock.
(e)
Notice
of Adjustments
. Upon the occurrence of each adjustment pursuant to this
Section
11,
the Company at its expense will, at the written request of the Holder, promptly compute such adjustment, in good faith,
in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of
the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant
(as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment
is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company's
transfer agent.
(f)
Notice
of Corporate Events
. If, while this Warrant is outstanding, the Company (i) declares a dividend or any other distribution
of cash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or
warrants to subscribe for or purchase any capital stock of the Company, (ii) authorizes or approves, enters into any agreement
contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution,
liquidation or winding up of the affairs of the Company, then, except if such notice and the contents thereof shall be deemed
to constitute material non-public information, the Company shall deliver to the Holder a notice describing the material terms
and conditions of such transaction at least ten (10) Trading Days prior to the applicable record or effective date on which a
Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will
take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant
prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver
such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.
12.
Payment
of Exercise Price
. The Holder shall pay the Exercise Price in immediately available funds; provided, however, the Holder may,
in its sole discretion, commencing on the date that is 18 months from the date of this Warrant, satisfy its obligation to pay
the Exercise Price through a “cashless exercise”, in which event the Company shall issue to the Holder the number
of Warrant Shares determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to
the Holder.
Y = the total number of Warrant Shares with respect
to which this Warrant is being exercised.
A = the average of the
Closing Sale Prices of the shares of Common Stock (as determined below) for the five Trading Days ending on the date
immediately preceding the Exercise Date.
B = the Exercise Price then in effect for the applicable
Warrant Shares at the time of such exercise.
For purposes of this Warrant, “
Closing Sale
Price
”
means, for any security as of any date, the last trade price for such security on the principal
securities exchange or trading market for such security, as reported by Bloomberg Financial Markets, or, if such exchange or
trading market begins to operate on an extended hours basis and does not designate the last trade price, then the last trade
price of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg Financial Markets, or if the foregoing
do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg Financial Markets, or, if no last trade price is reported for such security by Bloomberg
Financial Markets, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as
reported in the “pink sheets” by Pink Sheets LLC. If the Closing Sale Price cannot be calculated for a security
on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the
fair market value of such security, then the Company shall, within two business days submit via facsimile (a) the disputed
determination of the Warrant Exercise Price to an independent, reputable investment bank selected by the Company and approved
by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the Company's independent, outside
accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the results no later than ten business days from the
time it receives the disputed determinations or calculations, Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent demonstrable error. All such determinations to
be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the
applicable calculation period.
For purposes of Rule 144 promulgated under the Securities Act,
it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to
have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date
this Warrant was originally issued (provided that the Commission continues to take the position that such treatment is proper at
the time of such exercise).
13.
Limitation
on Exercises
. The Company shall not effect the exercise of this Warrant, and the Holder shall not have the right to exercise
this Warrant, to the extent that after giving effect to such exercise, the Holder (together with such Holder's affiliates) would
beneficially own in excess of 4.99% (“
Maximum Percentage
”)
of the shares of Common Stock outstanding
immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common
Stock beneficially owned by such Holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock
which would be issuable upon (A) exercise of the remaining, unexercised portion of this Warrant beneficially owned by such Holder
and its affiliates and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company
beneficially owned by such Person and its affiliates (including, without limitation, any convertible notes or convertible preferred
stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set
forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. To the extent that the limitation contained in this
Section 13
applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder
together with any affiliate) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder,
and the submission of a Notice of Exercise shall be deemed to be the Holder's determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with any affiliate) and of which portion of this Warrant is exercisable,
in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the
accuracy of the determination. For purposes of this Warrant, in determining the number of outstanding shares of Common Stock,
the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1)
the Company's most recent Form
10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may
be, (2) a more recent public announcement by the Company or (3) any other notice by the Company setting forth the number of shares
of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within
one (1)
business day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.
In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise
of securities of the Company, including this Warrant, by the Holder and its affiliates since the date as of which such number
of outstanding shares of Common Stock was reported. By written notice to the Company, any Holder may decrease the Maximum Percentage
to any other percentage specified in such notice; provided that such decrease will apply only to the Holder sending such notice
and not to any other holder of Warrants. In addition, by written notice to the Company, any Holder may remove the limitations
on exercises provided in this
Section 13
entirely; provided that (i) any such removal will not be effective until the 61st
day after such notice is delivered to the Company, and (ii) any such removal will apply only to the Holder sending such notice
and not to any other holder of Warrants. The provisions of this paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this
Section 13
to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
14.
No
Fractional Shares
. No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of
any fractional shares which would otherwise be issuable, the number of Warrant Shares to be issued shall be rounded up to the
next whole number.
15.
Notices
.
Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall
be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication
is delivered via email at the email address specified in the Engagement Agreement prior to 5:00 p.m. (prevailing Pacific time)
on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via email
at the email address specified in the Engagement Agreement on a day that is not a Trading Day or later than 5:00 p.m. (prevailing
Pacific time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight
courier service specifying next business day delivery, or (iv) upon actual receipt by the party to whom such notice is required
to be given, if by hand delivery. The address and facsimile number of a party for such notices or communications shall be as set
forth in the Engagement Agreement unless changed by such party by two Trading Days' prior notice to the other party in accordance
with this
Section 15.
16.
Warrant
Agent
. The Company shall serve as warrant agent under this Warrant, Upon thirty (30) days' notice to the Holder, the Company
may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation
resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the
Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be
a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice
of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address
as shown on the Warrant Register.
17.
Registration
Rights
. The Company agrees that, pursuant to a Registration Rights Agreement, dated of even date herewith, the Holder and
its assigns will have registration rights covering the resale of the Warrant Shares, including “piggyback” registration
rights on the registrations of the Company or demand registrations (voting with the other registrable securities to effect any
such demand), no less favorable than those granted, if any, to any other person by the Company in connection with the Offering
as a result of which this Warrant was issued. In addition, to the extent that the Company issues warrants in connection with a
Public Offering then, at such time, and from time to time, as the Company enters into an agreement subsequent to the date of this
Warrant pursuant to which the Company grants any third party rights with respect to the Company's registration of Company securities
under the Securities Act held by such party, the Company shall offer to enter into a formal written registration rights agreement
with the Holder and its assigns on substantially the same terms and such other terms as are customary and usual for agreements
of such nature.
18.
Miscellaneous
.
(a) The
Holder, solely in such Person's capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to
confer upon the Holder, solely in such Person's capacity as the Holder of this Warrant, any of the rights of a stockholder of the
Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, amalgamation, conveyance or otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon
the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities
on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether
such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this
Section 18(a),
the Company
shall provide the Holder with copies of the same notices and other information given to the shareholders of the Company, contemporaneously
with the giving thereof to the shareholders.
(b) Subject
to the restrictions on transfer set forth on the first page hereof, and compliance with applicable securities laws, this Warrant
may be assigned by the Holder. This Warrant may not be assigned by the Company except to a successor in the event of a Fundamental
Transaction. This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and
assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company
and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in
writing signed by the Company and the Holder, or their successors and assigns.
(c) GOVERNING
LAW; VENUE; WAIVER OF JURY TRIAL ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICTS OF LAW THEREOF. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS
SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION
DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY
WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT
FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS' AND
NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED
BY LAW. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.
(d) The
headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In
case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability
of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby, and the parties will
attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor,
and upon so agreeing, shall incorporate such substitute provision in this Warrant.
(f) Except
as otherwise set forth herein, prior to exercise of this Warrant, the Holder hereof shall not, by reason of by being a Holder,
be entitled to any rights of a stockholder with respect to the Warrant Shares.
SCHEDULE 1
FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise
the right to purchase shares
of Common Stock under the foregoing Warrant)
Ladies and Gentlemen:
(1) The
undersigned is the Holder of Warrant No, ____ (the “
Warrant
”)
issued
by Mears Technologies, Inc. (the “
Company
”)
.
Capitalized terms used herein and not otherwise defined
herein have the respective meanings set forth in the Warrant.
(2) The
undersigned hereby exercises its right to purchase Warrant Shares pursuant to the Warrant.
(3) The
Holder intends that payment of the Exercise Price shall be made as (check one):
¨
Cash
Exercise
¨
“Cashless
Exercise” under
Section 12
(4) If
the Holder has elected a Cash Exercise, the Holder shall pay the sum of $ ______ in immediately available funds to the Company
in accordance with the terms of the Warrant.
(5) Pursuant
to this Exercise Notice, the Company shall deliver to the Holder ________ Warrant Shares in accordance with the terms of the Warrant.
Dated: _________________, _____
[Company]
(Signature must conform in all respects to name of Holder as
specified on the face of the Warrant)
SCHEDULE 2
FORM OF ASSIGNMENT
[To be completed and signed only
upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto __________________ (the “
Transferee
”) the right represented by
the within Warrant to purchase __________________ shares of Common Stock of Mears Technologies, Inc. (the “
Company
”)
to which the within Warrant relates and appoints __________________ attorney to transfer said right on the books of the Company
with full power of substitution in the premises.
In connection therewith, the
undersigned represents, warrants, covenants and agrees to and with the Company that:
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(a)
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the offer and sale of the Warrant contemplated hereby
is being made in compliance with Section 4(1) of the United States Securities Act of 1933, as amended (the “
Securities
Act
”)
or another valid exemption from the registration requirements of Section 5 of the Securities Act and in
compliance with all applicable securities laws of the states of the United States;
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(b)
|
the undersigned has not offered to sell the Warrant by
any form of general solicitation or general advertising, including, but not limited to, any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or broadcast over television or radio, and any seminar
or meeting whose attendees have been invited by any general solicitation or general advertising;
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(c)
|
the undersigned has read the Transferee's investment
letter included herewith, and to its actual knowledge, the statements made therein are true and correct; and
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(d)
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the undersigned understands that the Company may condition
the transfer of the Warrant contemplated hereby upon the delivery to the Company by the undersigned or the Transferee, as the
case may be, of a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under
applicable securities laws of the states of the United States.
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[Company]
(Signature must conform in all respects to name of Holder as
specified on the face of the Warrant)
In the presence of:
Exhibit 4.5
[FORM OF] SENIOR SECURED CONVERTIBLE
NOTE
NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED HEREBY NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
ATOMERA
INCORPORATED
Senior
Secured Convertible Note
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Issuance Date: April 1, 2016
|
Principal Amount: U.S. $_________
|
FOR VALUE RECEIVED,
Atomera Incorporated, a Delaware corporation (the “
Company
”), hereby promises to pay to the order of ____________
or its registered assigns (“
Holder
”) the amount set out above as the Principal Amount (the “
Principal
”)
when due, whether upon the Maturity Date (as defined below), acceleration, prepayment or otherwise (in each case in accordance
with the terms hereof) and to pay interest (“
Interest
”) on the outstanding Principal at the applicable Interest
Rate (as defined below) from the date set out above as the Issuance Date (the “
Issuance
Date
”) until
the same becomes due and payable, whether upon the Maturity Date or acceleration, conversion, prepayment or otherwise (in each
case in accordance with the terms hereof). This Senior Secured Convertible Note (this “
Note
”) is one of an issue
of Senior Secured Convertible Notes issued either (i) pursuant to the Securities Purchase Agreement (as defined below) on the Closing
Date (as defined below); or (ii) pursuant to that certain securities purchase agreement, dated as of March 17, 2015, by and among
Atomera Incorporated (f/k/a Mears Technologies, Inc.) and the investors listed on the Schedule of Buyers attached thereto (collectively,
the “
Other Notes
” and together with this Note, the “
Notes
”). Certain capitalized terms used
herein are defined in Section 22. All other capitalized terms not defined herein shall have the meaning given to such terms in
the Securities Purchase Agreement.
1.
PREPAYMENT
.
The Company may, at any time prior to the Maturity Date, prepay this Note in full, and in part, including all unpaid and accrued
interest thereon, provided however that the written consent of the Required Holders shall be required if prepaid before the IPO
Outside Date. In the event the Company wishes to prepay this Note on or before the IPO Outside Date, it shall notify the Holder
and the holders of the Other Notes to obtain the requisite consents. A prepayment made pursuant to this Section 1 shall be made
pro rata among all Note holders.
2.
INTEREST
RATE
. So long as no Event of Default shall have occurred and be continuing, Interest on this Note shall accrue at a rate equal
to ten percent (10%) simple interest per annum. Interest shall be payable on the Maturity Date, or such earlier date as is required
pursuant to this Note. If an Event of Default shall have occurred and be continuing, the Interest Rate shall automatically be increased
to twelve percent (12%) simple interest during the period of such Event of Default, until such Event of Default is later cured.
Interest due on this Note shall be computed on the basis of a three hundred sixty-five (365)-day year.
3.
CONVERSION
OF NOTES
. This Note shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock (as defined
below), on the terms and conditions set forth in this Section 3.
(a)
Mandatory
Conversion - IPO
. Upon consummation of the IPO (as defined below), this Note shall automatically convert, through no further
action on the part of the Company or the Holder, into that number of shares of Common Stock equal to the quotient of (A) the Conversion
Amount (as defined below) divided by (B) the Conversion Price. For the purpose of this Section 3(a), the “
Conversion Price
”
shall be equal to fifty percent (50%) of the IPO Price to Public (as defined below) (rounded to two decimal places);
provided
;
however
, that in no event shall the Conversion Price be greater than $7.362 or nor less than $3.681, in each case as adjusted
for stock splits, stock dividends, stock combinations, recapitalizations, or the like that occur after the Issuance Date in accordance
with Section 5.
(b)
Optional
Conversion – Financing
. Upon consummation of a Subsequent Placement other than the IPO pursuant to Section 4(k) of the
Securities Purchase Agreement, the Holder shall be entitled to elect to convert all of the Notes into shares of Common Stock. In
the event that the Holder so elects to convert, this Note shall convert into that number of shares of Common Stock equal to the
quotient of (A) the Conversion Amount divided by (B) the Conversion Price. For the purposes of this Section 3(b), the “
Conversion
Price
” shall be equal to fifty percent (50%) of the purchase price of the securities being sold by the Company in such
Subsequent Placement (rounded to two decimal places);
provided
;
however
, that in no event shall the Conversion Price
be greater than $7.362 or nor less than $3.681, in each case as adjusted for stock splits, stock dividends, stock combinations,
recapitalizations, or the like that occur after the Issuance Date in accordance with Section 5.
(c)
Optional
Conversion
. At any time after the Issuance Date and until ten (10) calendar days prior to the consummation of the IPO, the
Holder shall be entitled to elect to convert all of this Note into shares of Common Stock. In the event that the Holder so elects
to convert, this Note shall convert into that number of shares of Common Stock equal to the quotient of (A) the Conversion Amount
divided by (B) the Conversion Price. For the purposes of this Section 3(c), the “
Conversion Price
” shall be
equal to $7.362, as adjusted for stock splits, stock dividends, stock combinations, recapitalizations, or the like that occur after
the Issuance Date in accordance with Section 5.
(d)
Mechanics
of Conversion
.
(i)
Conversion;
Issuance of Shares
. To convert the Notes pursuant to Sections 3(b) or 3(c) above into shares of Common Stock on any date (a
“
Conversion Date
”), the Holder shall deliver (whether via facsimile or otherwise) a copy of a properly and fully-completed
and executed notice of conversion in the form attached hereto as
Exhibit I
(the “
Conversion Notice
”)
to the Company and to each other holder of a Note. Promptly following the date of receipt of such Conversion Notice, or, with respect
to a mandatory conversion pursuant to Section 3(a), upon the consummation of the IPO, and following the Holder’s delivery
of this original Note to the Company for cancellation, the Company shall issue and deliver (via reputable overnight courier) to
the Holder a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which
the Holder shall be entitled, with the legends required by the Securities Purchase Agreement or applicable law.
(ii)
Registration
.
The Company shall maintain a register (the “
Register
”) for the recordation of the names and addresses of the
holders of each Note and the principal amount of the Notes held by such holders (the “
Registered Notes
”). The
entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders of
the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes (including, without
limitation, the right to receive payments of Principal and Interest hereunder) notwithstanding notice to the contrary. A Registered
Note may be assigned, transferred or sold in whole or in part only by registration of such assignment or sale on the Register.
Upon its receipt of a written request to assign, transfer or sell all or part of any Registered Note by the holder thereof and
subject to the holder’s compliance with Section 11, the Company shall record the information contained therein in the Register
and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered Registered
Note to the designated assignee or transferee pursuant to Section 12, provided that if the Company does not so record an assignment,
transfer or sale (as the case may be) of all or part of any Registered Note within two (2) Business Days of its receipt of such
a request, then the Register shall be automatically updated to reflect such assignment, transfer or sale (as the case may be).
The Holder and the Company shall maintain records showing the Principal and Interest converted and/or paid (as the case may be)
and the dates of such conversion and/or payments (as the case may be) or shall use such other method, reasonably satisfactory to
the Holder and the Company, so as not to require physical surrender of this Note upon conversion.
(iii)
No
Fractional Shares; Transfer Taxes
. The Company shall not issue any fraction of a share of Common Stock upon any conversion.
If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of
a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer, stamp, issuance and similar
taxes that may be payable with respect to the issuance and delivery of Common Stock upon any conversion.
4.
RIGHTS
UPON EVENT OF DEFAULT
.
(a)
Event
of Default
. Each of the following events shall constitute an “
Event of Default
”:
(i)
the
Company’s failure to pay to the Holder any amount of Principal or Interest when and as due if such failure remains uncured
for a period of at least five (5) Business Days;
(ii)
liquidation
proceedings shall be instituted by or against the Company and, if instituted against the Company by a third party, shall not be
dismissed within sixty (60) days of their initiation;
(iii)
bankruptcy,
insolvency, reorganization or other proceedings for the relief of debtors shall be instituted against the Company and shall not
be dismissed within sixty (60) days of their initiation;
(iv)
the
commencement by the Company of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or the consent by it to the entry of a decree, order, judgment or other similar document in
respect of the Company in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign
law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence
of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts
generally as they become due, the taking of corporate action by the Company in furtherance of any such action;
(v)
the
entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company of a voluntary or involuntary
case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law;
or (ii) a decree, order, judgment or other similar document adjudging the Company as bankrupt or insolvent, or approving as properly
filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company under
any applicable federal, state or foreign law; or (iii) a decree, order, judgment or other similar document appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or
other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period
of sixty (60) consecutive days;
(vi)
a
final judgment or judgments for the payment of money aggregating in excess of $250,000 are rendered against the Company and which
judgments are not, within sixty (60) days after the entry thereof, satisfied, bonded, discharged or stayed pending appeal, or are
not satisfied, bonded or discharged within sixty (60) days after the expiration of such stay;
(vii)
the
Company fails to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness in excess of
$250,000 due to any third party (other than, with respect to unsecured Indebtedness only, payments contested by the Company in
good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance
with GAAP) or is otherwise in breach or violation of any agreement for monies owed or owing by the Company in an amount in excess
of $250,000, which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due
thereunder;
(viii)
other
than as specifically set forth in another clause of this Section 4(a), the Company breaches any material covenant or other term
or condition of any Transaction Document, if such breach remains uncured for a period of thirty (30) days after actual knowledge
of the Company of such breach, or any representation or warranty made by the Company in any Transaction Document is not accurate
in any material respect when made or deemed made;
(ix)
the
validity or enforceability of any provision of any Transaction Document shall be contested by the Company, or a proceeding shall
be commenced by the Company seeking to establish the invalidity or unenforceability thereof;
(x)
the
Security Documents shall for any reason, except (A) to the extent permitted by the terms hereof or thereof, or (B) as a result
of the act or omission of Holder or the holder of any Other Note and not materially related to the failure of the Company to satisfy
or tender to satisfy its obligations under the Security Documents, fail or cease to create a separate valid and perfected first
priority Lien on the Collateral (as defined in the Security Agreement) in favor of each of the Secured Parties (as defined in the
Security Agreement) and such breach remains uncured for a period of ten (10) Business Days after notice from Holder or the holder
of any Other Note of such failure or ceasing; or
(xi)
any
Event of Default (as defined in the Other Notes) occurs with respect to any of the Other Notes.
(b)
Notice
of an Event of Default
. Upon the occurrence of an Event of Default with respect to this Note or any Other Note, the Company
shall within five (5) Business Days deliver written notice thereof via facsimile and overnight courier (with next day delivery
specified) (an “
Event of Default Notice
”) to the Holder. At any time after the occurrence of an Event of Default,
the Required Holders may, by notice to the Company, declare all of the Notes to be forthwith due and payable, whereupon the Principal
and all accrued and unpaid Interest thereon, plus all costs of enforcement and collection (including court costs and reasonable
attorney’s fees), shall immediately become and be forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Company.
5.
ADJUSTMENT
OF CONVERSION PRICE
.
(a)
Adjustment
of Conversion Price Collar upon Subdivision or Combination of Common Stock
. If the Company subdivides (by any stock split,
stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number
of shares, the Conversion Price (and the minimum and maximum amounts of the Conversion Price) in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time combines (by combination, reverse stock split or otherwise)
one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price (and the minimum
and maximum amounts of the Conversion Price) in effect immediately prior to such combination will be proportionately increased.
Any adjustment pursuant to this Section 5(a) shall become effective immediately after the effective date of such subdivision or
combination.
(b)
Other
Events
. In the event that the Company shall take any action to which the provisions of Section 5(a) are not strictly applicable,
or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the
provisions of this Section 5 but not expressly provided for by such provisions, then the Company’s Board of Directors shall
in good faith determine and implement an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder,
provided that no such adjustment pursuant to this Section 5(b) will increase the Conversion Price as otherwise determined pursuant
to this Section 5, provided further that if the Holder does not accept such adjustments as appropriately protecting its interests
hereunder against such dilution, then the Company’s Board of Directors and the Holder shall agree, in good faith, upon an
independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be
final and binding and whose fees and expenses shall be borne by the Company.
6.
NONCIRCUMVENTION
.
The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation or Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities,
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will
at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights
of the Holder of this Note. Without limiting the generality of the foregoing, so long as any of the Notes remain outstanding, the
Company (i) shall not increase the par value of any shares of Common Stock receivable upon conversion of this Note above the
Conversion Price then in effect and (ii) shall take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the conversion of this Note, including
without limitation complying with Section 7(b) hereof.
7.
RESERVATION
OF AUTHORIZED SHARES
.
(a)
Reservation
.
The Company shall at all times during which the Notes are outstanding reserve and keep available out of its authorized but unissued
shares Common Stock, solely for the purpose of effecting the conversion of the Notes, no less than one hundred ten percent (110%)
of the maximum number of shares issuable on conversion of the Notes (the “
Required Reserve Amount
”).
(b)
Insufficient
Authorized Shares
. If, notwithstanding Section 7(a), and not in limitation thereof, at any time while any of the Notes remain
outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation
to reserve a number of shares of Common Stock equal to the Required Reserve Amount (an “
Authorized Share Failure
”),
then the Company shall as soon as reasonably practicable take all action within its power necessary to increase the Company’s
authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes
then outstanding, including without limitation using its best efforts to secure necessary Board of Directors and stockholder approvals,
as further described below, to appropriately amend the Company’s Certificate of Incorporation to provide for such increase.
Without limiting the generality of the foregoing sentence, if not earlier approved by written consent of the stockholders, as soon
as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than seventy (70) days after
the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase
in the number of authorized shares of Common Stock; in connection with any such meeting, the Company shall provide each stockholders
with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized
shares of Common Stock and to cause its Board of Directors to recommend to the stockholders that they approve such proposal.
8.
COVENANTS
.
Until all of the Notes have been converted or otherwise satisfied in accordance with their terms:
(a)
Rank
.
All payments due under this Note shall rank
pari passu
with all Other Notes.
(b)
New
Subsidiaries
. Simultaneously with the acquisition or formation of each New Subsidiary, other than a Foreign Subsidiary, the
Company shall cause such New Subsidiary to execute, and deliver to each holder of Notes, all joinders to, or as applicable additional,
Security Documents (as defined in the Security Agreement) as requested by the Holder. The Company shall not, directly or indirectly,
acquire or form any New Subsidiary if such New Subsidiary would not be wholly-owned, directly or indirectly, by the Company.
9.
SECURITY
.
This Note and the Other Notes are secured to the extent and in the manner set forth in the Transaction Documents (including, without
limitation, the Security Agreement and the other Security Documents).
10.
AMENDING
THE TERMS OF THIS NOTE
. No provision of this Note may be amended other than by an instrument in writing signed by the Company
and the Required Holders, and any amendment to any provision of this Note made in conformity with the provisions of this Section
10 shall be binding on all Holders, provided that no such amendment shall be effective to the extent that it (1) applies to less
than all of the holders of the Notes then outstanding or (2) imposes any obligation or liability on any Holder without such Holder’s
prior written consent (which may be granted or withheld in such Holder’s sole discretion). No waiver of any provision of
this Note shall be effective unless it is in writing and signed by an authorized representative of the waiving party, provided
that the Required Holders may waive any provision of this Note, and any waiver of any provision of this Note made in conformity
with the provisions of this Section 10 shall be binding on all Holders, provided that no such waiver shall be effective to the
extent that it (1) applies to less than all of the holders of the Notes then outstanding (unless a party gives a waiver as to itself
only) or (2) imposes any obligation or liability on any Holder without such Holder’s prior written consent (which may be
granted or withheld in such Holder’s sole discretion). No amendment to or waiver of any provision this Note shall amend or
waive any provision of any other Transaction Document.
11.
TRANSFER
.
This Note and any shares of Common Stock issued upon conversion of this Note (the “
Conversion Shares
”) may be
offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section
2(g) of the Securities Purchase Agreement and any other restrictions that may be mutually agreed by the Company and the Holder
hereof. Notwithstanding anything in this Note to the contrary, neither this Note nor any Conversion Shares may be sold, assigned
or transferred by the Holder unless the recipient of such agrees in writing to be bound by the terms and conditions of the Securities
Purchase Agreement and the Registration Rights Agreement.
12.
REISSUANCE
OF THIS NOTE
.
(a)
Transfer
.
If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section 12(d)), registered as the Holder may request, representing
the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred,
a new Note (in accordance with Section 12(d)) to the Holder representing the outstanding Principal not being transferred.
(b)
Lost,
Stolen or Mutilated Note
. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated below shall suffice
as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company
in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall
execute and deliver to the Holder a new Note (in accordance with Section 12(d)) representing the outstanding Principal.
(c)
Note
Exchangeable for Different Denominations
. This Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section 12(d) and in principal amounts of at least $1,000) representing
in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding
Principal as is designated by the Holder at the time of such surrender.
(d)
Issuance
of New Notes
. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall
be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding
(or in the case of a new Note being issued pursuant to Section 12(a) or Section 12(c), the Principal designated by the Holder which,
when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal
remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated
on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions
as this Note, and (v) shall represent accrued and unpaid Interest on the Principal of this Note, from the Issuance Date.
13.
REMEDIES,
CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF
. The remedies provided in this Note shall be cumulative
and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief); provided, the Holder shall not be entitled to any
duplication or multiplication of damages. The Company covenants to the Holder that there shall be no characterization concerning
this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion
and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly
provided herein or in the other Transaction Documents, be subject to any other obligation of the Company (or the performance thereof).
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened
breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach
or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required.
The Company shall provide all information and documentation to the Holder that is reasonably requested by the Holder to enable
the Holder to confirm the Company’s compliance with the terms and conditions of this Note (including, without limitation,
compliance with Section 5).
14.
PAYMENT
OF COLLECTION, ENFORCEMENT AND OTHER COSTS
. If (a) this Note is placed in the hands of an attorney for collection or enforcement
of the debt evidenced hereby or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect
amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership
of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company
shall pay the reasonable costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, without limitation, reasonable attorneys’ fees and disbursements.
15.
CONSTRUCTION;
HEADINGS
. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against
any Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect
the interpretation of, this Note.
16.
FAILURE
OR INDULGENCE NOT WAIVER
. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and
signed by an authorized representative of the waiving party.
17.
DISPUTE
RESOLUTION
. If the Holder and the Company are unable to agree as to the arithmetic calculation of the Conversion Price the
Holder and the Company will confer in good faith to resolve such disagreement and the Company shall promptly issue upon conversion
of this Note at the number of shares of Common Stock that are uncontested. Thereafter, the Company and Holder will confer in good
faith to attempt to reach agreement regarding the Conversion Price with the Required Holders; if the Required Holders and the Company
agree in writing upon a Conversion Price, that agreement will be binding on Holder and all holders of the Other Notes.
18.
NOTICES;
PAYMENTS
.
(a)
Notices
.
Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance
with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all
actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefor. Without
limiting the generality of the foregoing, the Company will give written notice to the Holder (i) promptly, but in any event within
ten (10) calendar days, upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation
of such adjustment and (ii) at least ten (10) calendar days prior to the date on which the Company established a record date with
respect to any dividend or Distribution upon the Common Stock.
(b)
Payments
.
Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise expressly set forth
herein, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company
and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address,
in the case of each of the Buyers, which shall initially the address set forth on the Schedule of Buyers attached to the Securities
Purchase Agreement), provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available
funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions.
Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall
instead be due on the next succeeding day which is a Business Day.
19.
CANCELLATION
.
After all Principal, accrued Interest and other amounts at any time owed on this Note have been paid or converted in full, this
Note shall automatically be deemed canceled, shall be surrendered promptly, but in any event within ten (10) calendar days, to
the Company by the Holder for cancellation and shall not be reissued.
20.
WAIVER
OF NOTICE
. To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment, protest and all
other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note.
21.
GOVERNING
LAW
. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication
of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue
of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. In the event that any provision of this Note is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall
be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision of this Note. Nothing contained herein shall be
deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction
to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations,
or to enforce a judgment or other court ruling in favor of the Holder.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ANY RIGHT SUCH PARTY MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
22.
CERTAIN
DEFINITIONS
. For purposes of this Note, the following terms shall have the following meanings:
(a)
“
Business
Day
” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.
(b)
“
Closing
Date
” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially
issued Notes pursuant to the terms of the Securities Purchase Agreement.
(c)
“
Common
Stock
” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock
into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.
(d)
“
Conversion
Amount
” means the sum of the outstanding and unpaid Principal plus all accrued and unpaid Interest thereon plus, if any,
other unpaid amounts due under this Note.
(e)
“
GAAP
”
means United States generally accepted accounting principles, consistently applied.
(f)
“
IPO
”
means a firm commitment underwritten initial public offering of the Company’s Common Stock pursuant to a registration statement
filed on Form S-1 (or any successor from thereto) that is declared effective by the SEC and consummated prior to the Maturity Date.
(g)
“
IPO
Price to Public
” means the price to public specified in the IPO registration statement.
(h)
“
IPO
Outside Date
” shall mean December 31, 2016.
(i)
“
Interest
Rate
” means ten percent (10%) simple interest per annum, as may be adjusted from time to time in accordance with Section
2.
(j)
“
Maturity
Date
” shall mean May 31, 2017.
(k)
“
New
Subsidiary
” means, as of any date of determination, any Person in which the Company after the Closing Date, directly
or indirectly, (i) owns or acquires any of the outstanding capital stock or holds any equity or similar interest of such Person
or (ii) controls or operates all or any part of the business, operations or administration of such Person, and all of the foregoing,
collectively, “
New Subsidiaries
.”
(l)
“
Person
”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization,
any other entity or a government or any department or agency thereof.
(m)
“
Registration
Rights Agreement
” means that certain registration rights agreement, dated as of the Closing Date, by and among the Company
and the other parties signatory thereto, as may be amended from time to time.
(n)
“
Required
Holders
” means holders of Notes having outstanding principal amounts in the aggregate that represent a majority of the
then outstanding principal amounts of all of the Notes (including this Note).
(o)
“
SEC
”
means the United States Securities and Exchange Commission or the successor thereto.
(p)
“
Securities
Purchase Agreement
” means that certain securities purchase agreement, dated as of April 1, 2016, by and among the Company
and the investors listed on the Schedule of Buyers attached thereto, as may be amended from time to time.
(q)
“
Security
Agreement
” means that certain security agreement, dated as of the Closing Date, by and among the Company and the other
parties signatory thereto, as may be amended from time to time.
23.
MAXIMUM
PAYMENTS
. Nothing contained in this Note shall, or shall be deemed to, establish or require the payment of a rate of interest
or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid
or other charges under this Note exceeds the maximum permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the Company.
24.
SURRENDER
OR ACKNOWLEDGEMENT AND CERTIFICATION
: Upon payment in full or conversion of this Note, Holder shall surrender the original
physical copy of this Note for cancellation; alternatively, if the Holder promptly requests in connection with such payment or
conversion, the Holder may deliver to the Company a signed acknowledgement of payment in full and a certification that the Holder
has cancelled or destroyed the Note in a form reasonably acceptable to the Company.
IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed as of the Issuance Date set out above.
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ATOMERA INCORPORATED,
a Delaware corporation
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By:
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/s/ Scott A. Bibaud
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Scott A. Bibaud,
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President and Chief Executive Officer
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[Signature
Page to Senior Secured Convertible Note]
EXHIBIT I
ATOMERA INCORPORATED
CONVERSION NOTICE
Reference is made to
the Senior Secured Convertible Note (the “
Note
”) issued to the undersigned by Atomera Incorporated (the “
Company
”).
In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the
Note) of the Note indicated below into shares of common stock, $0.001 par value per share (the “
Common Stock
”),
of the Company, as of the date specified below.
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Date of Conversion:
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Aggregate Conversion Amount to be converted:
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Conversion Price:
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Number of shares of Common Stock to be issued:
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Please issue the Common Stock into which the Note is being converted in the following name and to the following address:
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Issue to:
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Facsimile Number:
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Holder:
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By:
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Title:
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Dated:
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Exhibit 10.1
Signature Copy
SECURED PROMISSORY NOTE
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Maker
:
Robert J. Mears
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Principal
:
$187,500
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Payee
:
RJ Mears, LLC
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Date
:
January 14, 2005
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FOR VALUE RECEIVED,
the undersigned maker (the “
Maker
”), hereby promises to pay to the order of the above named payee (the “
Payee
”)
the principal sum of One Hundred Eighty-Seven Thousand Five Hundred Dollars ($187,500), together with interest from the date hereof,
at a rate per annum equal to the applicable federal rate in effect for loans of like maturity, which the parties acknowledge and
agree is Three and 76/100 percent (3.76%) per year (the “
Base Rate
”). Interest on this note (as amended or restated,
the “
Note
”) shall be paid in arrears in annual installments beginning on January 14, 2006 and continuing on
each successive anniversary of the date of this Note. The entire principal balance of this Note shall be due and payable in a single
installment on the earlier of (x) the ninth (9
th
) anniversary of the date hereof; (y) five (5) business days following
written notice to the Maker of the occurrence of a Capital Event, as such term is defined in the Second Amended and Restated Limited
Company Agreement of the Payee dated as of November 21, 2003 (as amended or restated from time to time, the “
LLC Agreement
”)
or (z) five (5) business days following written notice to the Maker that (A) the Payee has ceased operations in the ordinary course
of business, (B) the Payee has dissolved (excluding an administrative dissolution resulting solely from the failure of the Payee
to file an annual report), (C) the Payee has commenced liquidation, or (D) a receiver, conservator or similar officer has been
appointed with respect to any material portion of the assets of the Payee, the Payee has made an assignment for the benefit of
creditors, or entered into a composition or other arrangement of similar import with its creditors or any proceeding under any
bankruptcy or insolvency law, now or hereafter enacted, by or with respect to the Payee has been commenced, provided however that
in the case of any involuntary proceeding, this Note shall only become due and payable sixty (60) days after the commencement of
the involuntary proceeding and only if the Payee has not obtained a dismissal of such proceeding.
Notwithstanding the
foregoing, in the event the Payee makes any cash distributions to the Maker with respect to the Series D Preference Membership
Interests (the “
Series D Interests
”) owned by the Maker, other than Tax Distributions (which are expressly excluded
from the prepayment obligations set forth herein), the Maker shall pay to the Payee, as a mandatory prepayment of accrued interest
and principal hereunder, the full amount of such distributions within 5 business days of receipt thereof. For the purposes hereof,
the term “
Tax Distribution
” means any distribution of cash to holders of Series D Interests which constitutes
a tax distribution pursuant to the terms of the LLC Agreement, or is otherwise specifically designated as a tax distribution by
the Payee.
From and after any
Event of Default (as defined below), interest shall accrue on the unpaid balance of this Note at a rate per annum equal to the
Base Rate, plus five percent (5%), until all amounts due hereunder have been fully paid.
If an Event of Default
shall occur, the entire unpaid principal amount of this Note, all of the unpaid interest accrued thereon and all other sums owing
hereunder may become or be declared due and payable by the Payee at its option. Each of the following shall constitute an “
Event
of Default
” hereunder:
1. Failure of the
Maker to pay within fifteen (15) days after it first becomes due any sum owing to the Payee hereunder, whether principal, interest
or otherwise.
2. Breach by the
Maker of any other material obligation wider the Note, the Loan Agreement or the Pledge (as such terms are defined below).
3. The passage
of hundred twenty (120) days following the death of the Maker.
4. The insolvency
of the Maker, or the appointment of a receiver, conservator or similar officer of any of the property of; the making of an assignment
for the benefit of creditors or composition with creditors or other arrangement of similar import by; the commencement of any proceeding
under any bankruptcy or insolvency law, now or hereafter enacted, by or with respect to the Maker. Notwithstanding the foregoing,
in the case of an involuntary proceeding, the Event of Default shall be deemed to occur on the sixtieth (60
th
) day after
commencement of the involuntary proceeding if the Payee has not obtained a dismissal of such proceeding.
5. A termination
of the Maker's employment by the Payee for “
Cause
”, as such term is defined in a certain Employment Agreement
between the parties dated as of June 9, 2004, as it may be amended or restated (the “
Employment Agreement
”),
or in any successor employment or independent contractor agreement between the parties, provided that such determination shall
be subject to the arbitration provisions of the Employment Agreement or any applicable arbitration provisions of any such successor
agreement, as the case may be.
6. A breach of
the material obligations of the Maker under a certain Noncompetition, Nondisclosure and Developments Agreement between the parties
dated as of June 9, 2004, as it may be amended or restated (the “
Nondisclosure Agreement
”), or any successor
agreement dealing with the subject matter thereof, provided that such determination shall be subject to the arbitration provisions
of the Employment Agreement or any applicable arbitration provisions of any successor agreement, as the case may be.
The obligations of
the Maker under this Note may be prepaid, in whole or in part, without premium or penalty. Notwithstanding any other provision
of this Note, in no event shall the rate of interest due and payable hereunder exceed the maximum rate of interest permitted by
applicable law. Any interest actually paid in excess of the maximum permissible interest rate shall be deemed to be a payment of
principal.
The Maker hereby waives
presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance
and enforcement of this Note and assent to the extensions of the time of payment or forbearance or other indulgence without notice.
No delay or omission
by the Payee in exercising or enforcing any of the Payee's powers, rights, privileges, remedies, or discretions hereunder shall
operate as a waiver hereof on that occasion nor on any other occasion. No waiver of any default hereunder shall operate as a waiver
of any other default hereunder nor as a continuing waiver.
The Maker will pay
to the Payee on demand all costs and expenses incurred in collection of the amounts owed hereunder, including reasonable attorneys'
fees.
MAKER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT HE MAY HAVE OR HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE, THE LOAN AGREEMENT OR ANY RELATED DOCUMENT OR INSTRUMENT. AS A MATERIAL
INDUCEMENT FOR THE PAYEE TO MAKE THE LOAN EVIDENCED BY THIS NOTE, THE MAKER HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION AND
VENUE OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS AND TO
SERVICE OF PROCESS UPON THE MAKER BY REGISTERED OR CERTIFIED MAIL OR AS OTHERWISE PERMITTED BY APPLICABLE LAW.
This Note shall be
binding upon the Maker and upon his successors and assigns and shall inure to the benefit of the Payee and its successors, endorsees,
and assigns. This Note is subject to the terms of a Loan Agreement of even date herewith between the Maker and the Payee (the “
Loan
Agreement
”). The obligations of the Maker under this Note and the Loan Agreement are secured by a pledge and security
interest relating to certain Series D Preferred membership interests of the Payee purchased by the Maker With the proceeds of the
loan evidenced hereby, all pursuant to the terms of a Pledge and Security Agreement of even date herewith between the Maker and
the Payee (the “
Pledge
”).
This Note is delivered
to the Payee in Massachusetts and shall be governed by the internal laws of The Commonwealth of Massachusetts, without regard to
its conflicts of law principles.
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By:
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/s/ Robert J. Mears
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Robert J. Mears
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Exhibit 10.2
Signature Copy
PLEDGE AND SECURITY
AGREEMENT
This Pledge and Security
Agreement (the “
Pledge
”) is made as of January 14, 2005, between Robert J. Mears, of Wellesley, Massachusetts
(the “
Borrower
”) and RJ Mears, LLC, a Delaware limited liability company (the “
Lender
”).
RECITALS
A. Borrower
owns equity interests in the Lender, as set forth in that certain Second Amended and Restated Limited Liability Company Agreement
dated as of November 21, 2003 (as it may be amended or restated from time to time, the “
LLC Agreement
”, and
together with the certificate of formation of the Lender filed with the Secretary of State of the State of Delaware as it may be
amended or restated from time to time, the “
Constituent Documents
”);
B. Borrower
and Lender are parties to that certain Loan Agreement of even date herewith (as amended or restated from time to time, the “
Loan
Agreement
”) pursuant to which Lender has agreed to make a loan (the “
Loan
”) to Borrower, the proceeds
of which will be used for the sole purpose of purchasing 15,000 Series D Preference Membership Interests in the Lender (the “
Series
D Interests
”);
C. The
Obligations (as such term is defined below) of the Borrower with respect to the Loan are further evidenced by the secured promissory
Note of the Borrower of even date in the original principal amount of $187,500 (the “
Note
”) and this Pledge
(collectively with the Note and the Loan Agreement, the “
Financing Documents
”); and
D. As
a condition to the Loan, Borrower is hereby granting to Lender a pledge and security interest in the Series D Interests and the
other Collateral described herein, to secure payment and performance of the Obligations.
NOW, THEREFORE, in
consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1.
Defined
Terms
. Capitalized terms used in this Pledge and not otherwise defined herein shall have the respective meanings ascribed
to them in the Loan Agreement. The following terms, as used herein, have the meanings set forth below:
“
Code
”
shall mean the Uniform Commercial Code as the same may from time to time be in effect in the Commonwealth of Massachusetts.
“
Collateral
” shall have
the meaning set forth in
Section 2(a)
.
“
Event of
Default
” shall mean the occurrence of an Event of Default as such term is defined in the Note or any breach of the material
obligations of the Borrower under any other Financing Document which is not cured to the reasonable satisfaction of the Lender
within thirty (30) days following written notice thereof.
“
Financing Documents
”
has the meaning set forth in
Recital C
.
“
Loan
” has the meaning
set forth in
Recital B
.
“
Obligations
”
means the payment and performance obligations of the Borrower to the Lender, as set forth in the Financing Documents.
“
Pledge
”
shall have the meaning set forth in the first paragraph hereof.
“
Series D
Interests
” means the Series D Preference Membership Interests of the Lender purchased by the Borrower with the proceeds
of the Loan.
“
Security
Interests
” means the security interests granted pursuant to
Section 2
hereof.
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2.
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Grant of Pledge and Security Interest Rights to Collateral
.
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(a) Borrower, as security
for the prompt and complete payment and performance when due of the Obligations, hereby pledges and grants to Lender, for its benefit,
a continuing pledge and security interest in all right, title and interest of Borrower in and to (i) the Series D Interests in
the Lender now or hereafter owned by Borrower, (ii) all payments, distributions, cash and other property (including without limitation
other securities of the Lender) from time to time received, receivable or otherwise distributed, in respect of, in exchange for
or upon the conversion of the interests referred to in clause (i) above, (iii) all rights and privileges of Borrower with respect
to the interests and other property referred to in clauses (i) and (ii) above, and (iv) all proceeds of any of the foregoing (collectively,
the “
Collateral
”).
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3.
|
Representations and Warranties
. Borrower
represents and warrants that:
|
(a)
Binding Obligation
.
This Pledge is the legally valid and binding obligation of Borrower, enforceable against him in accordance with its terms, except
as enforcement may be limited by insolvency, death, or similar laws or equitable principles relating to or limiting creditor’s
rights generally.
(b)
Ownership
of Series D Interests
. Except for the Security Interest granted by Borrower hereunder, the Borrower owns and hereafter will
own his Series D Interests, free and clear of any lien, claim, encumbrance or rights of others, subject only to the provisions
of the Constituent Documents and the provisions of applicable securities laws. No effective financing statement or other form of
lien notice covering all or any part of or interest in the Collateral is on file in any recording office, except those in favor
of Lender.
(c)
Perfection
.
Upon the execution and delivery of this Pledge the Borrower shall immediately deliver to the Lender any and all certificates evidencing
the Series D Interests, endorsed in blank or with executed instruments of transfer attached in blank. The Lender shall hold such
certificates subject to the terms of this Agreement. The Borrower further authorizes the Lender to file one or more financing statements
with the Secretary of State of the Commonwealth of Massachusetts and any other filing office the Lender deems to be appropriate,
naming Borrower as “debtor” and Lender as “secured party”. Based upon the foregoing, the Borrower agrees
that the Lender shall have a valid, perfected and first priority security interest in the Collateral, securing the Obligations,
and that all filings, registrations, recordings and other actions necessary or desirable to create, perfect and protect the Security
Interest related to the Collateral have been duly taken, and the Security Interest is entitled to all of the rights, priorities
and benefits afforded by the Code or other relevant law as enacted in any relevant jurisdiction which relates to perfected security
interests.
(d)
Governmental
Authorizations, Consents
. No authorization, approval or other action by, and no notice to or filing with, any domestic or
foreign governmental authority or regulatory body or consent of any other person or entity is required either (i) for the grant
by Borrower of the Security Interest or for the execution, delivery or performance of this Pledge by Borrower or (ii) for the
perfection of or the exercise by Lender of its rights and remedies hereunder.
(e)
Conflicting
Laws and Contracts
. Neither the execution and delivery by Borrower of this Pledge, the creation and perfection of the Security
Interest nor compliance by Borrower with the terms and provisions hereof, will violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on Borrower, the Constituent Documents, or the provisions of any indenture, instrument
or agreement to which Lender, to the knowledge of Borrower or Borrower is a party or subject, or by or which Lender, to the knowledge
of Borrower, Borrower or their properties, is bound, or conflict with or constitute a default thereunder.
(f)
Accurate
Information
. All information heretofore, herein or hereafter supplied to Lender by Borrower to the knowledge of Borrower with
respect to the Collateral is accurate and complete in all respects.
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4.
|
Further Assurances; Covenants
.
|
(a)
Other
Documents and Actions
. Borrower will, from time to time, at his expense, promptly execute and deliver all further instruments
and documents and take all further action that Lender may reasonably request, in order to create, perfect and protect any security
interest granted or purported to be granted hereby or to enable Lender to exercise and enforce their rights and remedies hereunder
with respect to the Collateral. Borrower also authorizes Lender to prepare and file initial financing statements and amendments
to any outstanding financing statements or initial financing statements.
(b)
Protection
of Collateral
. Borrower will not do anything to impair the rights of Lender in the Collateral.
(c)
Taxes
and Claims
. Borrower will pay when due all property and other taxes, assessments and governmental charges imposed upon, and
all claims against, the Collateral.
(d)
Collateral
Information
. Borrower will furnish to Lender, from time to time upon request, statements and schedules further identifying
and describing the Collateral and such other reports in connection with the Collateral as Lender may reasonably request, all in
reasonable detail. Borrower will, promptly upon request, provide to Lender all information and evidence it may reasonably request
Concerning the Collateral to enable Lender to enforce the provisions of this Pledge.
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5.
|
Voting Rights, Distributions, etc.
|
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(a)
|
(i) Borrower shall be entitled to exercise any and all voting
and/or other consensual rights and powers inuring to an owner of the Series D Interests or any part thereof for any purpose consistent
with the terms of this Pledge and the other Financing Documents, provided, however, that Borrower will not be entitled to exercise
any such right if the result thereof could reasonably be expected to materially and adversely affect the rights and remedies of
the Lender under the Financing Documents or the ability of the Lender to exercise the same.
|
(ii) Lender
shall execute and deliver to the Borrower, or cause to be executed and delivered to the Borrowers, any proxies, powers of attorney
and other instruments as Borrower may reasonably request for the purpose of enabling Borrower to exercise the voting and/or consensual
rights and powers he is entitled to exercise pursuant to subparagraph (i) above and to receive the cash distributions he is entitled
to receive pursuant to subparagraph (iii) below.
(iii) Subject
to any other provisions of the Financing Documents with respect to mandatory prepayments of the Loan, Borrower shall be entitled
to receive and retain any and all cash distributions paid in respect of such Series D Interests or any other component of the Collateral
to the extent and only to the extent that such cash distributions are permitted by applicable laws., All noncash distributions
made on or in respect of the Series D Interests or any other component of the Collateral, whether resulting from a subdivision,
combination or reclassification of the outstanding interests of the issuer of any Series D Interests or received in exchange for
the Series D Interests or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition
or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Collateral, and,
if received by Borrower, shall not be commingled by Borrower with any of its other funds or property but shall be held separate
and apart therefrom, shall be held in trust for the benefit of Lender and shall be forthwith delivered to Lender in the same form
as so received (with any necessary endorsement) to be held by the Lender pursuant to the terms hereof.
(b) Upon
the occurrence and during the continuance of an Event of Default and the receipt of notice from Lender with respect to the rights
set forth above, all rights of Borrower to distributions that Borrower is authorized to receive pursuant to
Section 5(a)(iii)
above shall cease, and all such rights shall thereupon become vested in Lender, which shall have the sole and exclusive right and
authority to receive and retain such distributions. All distributions received by Borrower contrary to the provisions of this
Section
5
shall be held in trust for the benefit of Lender, shall be segregated from other property or funds of Borrower and shall
be forthwith delivered to Lender upon demand in the same form as so received (with any necessary endorsement). Any and all money
and other property paid over to or received by Lender pursuant to the provisions of this
Section 5(b)
shall be retained
by Lender in an account to be established by Lender upon receipt of such money or other property and shall be applied to the Obligations.
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6.
|
Lender Appointed Attorney-in-Fact
.
|
Borrower hereby irrevocably
appoints Lender, effective upon the occurrence and during the continuance of an Event of Default, as Borrower’s attorney-in-fact,
with full authority in the place and stead of Borrower and in the name of Borrower, with or without the signature of Borrower where
permitted by law, from time to time in Lender’s discretion, to take any action and to execute any instrument that Lender may deem
necessary or advisable to accomplish the purposes of this Pledge including, without limitation:
(a) To
sign and endorse any documents (including without limitation financing or continuation statements, and amendments thereto) necessary
or advisable to create, perfect, protect and maintain the perfection and priority of the Security Interest;
(b) To
pay or discharge taxes or liens, levied or placed upon or threatened against the Collateral, the legality or validity thereof and
the amounts necessary to discharge the same to be determined by Lender in its reasonable discretion, and such payments made by
Lender due and payable immediately without demand and secured by the Security Interest;
(c) To
ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under
or in respect of such the Collateral;
(d) To
file any claims or take any action or institute any proceedings that Lender may deem necessary or desirable for the collection
of the Collateral or otherwise to enforce the rights of Lender with respect to such Collateral, and
(e) Subject
to the provisions of the Constituent Documents and applicable securities laws, generally to sell, transfer, pledge, exercise any
voting rights of Borrower under the Constituent Documents, make any agreement with respect to or otherwise deal with such the Collateral
as fully and completely as though Lender were the absolute owner thereof for all purposes.
Neither Lender nor
any person designated by Lender shall be liable for any acts or omissions or for any error of judgment or mistake of fact or law,
unless it is determined by a judgment of a court of competent jurisdiction, final and not subject to review on appeal, that such
action, omission, error or mistake constituted gross negligence or willful misconduct. This power, being coupled with an interest,
is irrevocable so long as this Pledge shall remain in force.
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7.
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Transfers and Other Liens
.
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Borrower agrees that he shall not:
(a) Sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to the Collateral or any portion
thereof;
(b) Create,
incur or suffer to exist any lien, encumbrance claim or right of other upon or with respect to the Collateral to secure indebtedness
of any person or entity, except for the Security Interest created by this Pledge; or
(c) Authorize
the filing of any initial financing statement naming Borrower as debtor covering all or any portion of the Pledged Interests, except
initial financing statements and financing statements naming Lender as secured party.
(a) If
any Event of Default shall have occurred and be continuing, Lender may exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default
under the Code and also may without notice except as specified below, sell or otherwise dispose of the Collateral or any part thereof
in one or more units at public or private sale, at any of the Lender's offices or elsewhere, at such time or times, for cash, on
credit or for future delivery, and at such price or prices and upon such other terms as Lender may deem commercially reasonable.
Borrower agrees that, to the extent notice of sale shall be required by law, at least ten (10) days notice to Borrower of the time
and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. At
any sale of any Collateral, if permitted by law, Lender may bid (which bid may be, in whole or in part, in the form of cancellation
of indebtedness) for the purchase of the Collateral or any portion thereof for the account of Lender. Lender shall not be obligated
to make any sale of any Collateral regardless of notice of sale having been given. Lender may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. To the extent permitted by law, Borrower hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now existing or hereafter enacted.
(b) To
the extent not prohibited by, and otherwise subject to the provisions of, the Code, upon the occurrence and continuance of an Event
of Default, Lender shall have the right, but not the obligation, to retain and succeed to ownership of one hundred percent (100%)
of the Collateral, including the Series D Interests.
(c) Borrower
acknowledges and agrees that a breach of any of the covenants contained in
Sections 4(a)
,
4(d)
,
7
and
8
hereof will cause irreparable injury to Lender and that Lender has no adequate remedy at law in respect of such breaches
and therefore agrees, without limiting the right of Lender to seek and obtain specific performance of other obligations of Borrower
contained in this Pledge, that the covenants of the Borrower contained in the Sections referred to in this Section shall be specifically
enforceable against Borrower.
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9.
|
Limitation on Duty of Lender with Respect to Series
D Interests
.
|
Beyond the safe custody
thereof, Lender shall have no duty with respect to the Collateral in its control (or in the control of any agent) or with respect
to any income thereon or the preservation of rights against prior parties or any other rights pertaining thereto. Lender shall
be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its control if the Collateral
are
accorded treatment substantially equal to that which Lender accords
its own property.
Borrower agrees to
pay any and all reasonable expenses of protecting, appraising, handling and maintaining the Collateral of Borrower, all reasonable
costs, fees and expenses of perfecting and maintaining the Security Interest granted by Borrower, and any and all excise, property,
sales and use taxes imposed by any state, federal or local authority on the Collateral of Borrower. If Borrower fails to promptly
pay any portion of the above expenses when due or to perform any other obligation of Borrower under this Pledge, Lender may, at
its option, but shall not be required to, pay or perform the same, and Borrower agrees to reimburse Lender therefor on demand.
All sums so paid or incurred by Lender for any of the foregoing in respect of Borrower, any and all other sums for which Borrower
may become liable hereunder and all costs and expenses (including reasonable attorneys' fees, legal expenses and court costs) incurred
by Lender in enforcing or protecting the Security Interest granted by Borrower or any of Lender's rights or remedies under this
Pledge in respect of Borrower shall be payable on demand, shall bear interest until paid at the default rate under the Loan Agreement,
and shall be secured by the Collateral of Borrower.
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11.
|
Termination of Security Interest, Release of Pledged
Interests
.
|
Upon the indefeasible
payment in full in cash of all Obligations, all rights to the Collateral shall revert to Borrower. Upon such termination of the
Security Interests or release of the Collateral, Lender will, at the expense of Borrower, execute and deliver to Borrower such
documents as Borrower shall reasonably request to evidence the termination of the Security Interests or the release of the Collateral,
as the case may be.
All notices given in
connection herewith shall be sent to Lender or Borrower in the manner provided in the Loan Agreement.
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13.
|
Waivers; APPLICABLE LAW
.
|
None
of the terms or provisions of this Pledge may be waived, altered, modified or amended except by an instrument in writing, duly
executed by Borrower and the Lender. This Pledge and all obligations of the parties hereunder shall be binding upon the successors
and assigns of Borrower and the Lender and shall, together with the rights and remedies of the Lender hereunder, inure to the benefit
of Lender, its successors or assigns. THIS PLEDGE SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE
COMMONWEALTH OF MASSACHUSETTS WITHOUT REGARD TO ITS CONFLICT OF LAW PROVISIONS.
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14.
|
Consent to Jurisdiction and Venue: Service of Process
.
|
AS A MATERIAL INDUCEMENT
FOR THE LENDER TO ENTER INTO THE FINANCING DOCUMENTS, BORROWER HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION AND VENUE OF THE
COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS AND FURTHER CONSENTS
TO SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL OR SUCH OTHER METHOD AS MAY BE PROVIDED BY LAW.
The invalidity, illegality
or unenforceability of any provision in or obligation under this Pledge shall not affect or impair the validity, legality or enforceability
of the remaining provisions or obligations under this Pledge.
Section and subsection
headings in this Pledge are included .herein for convenience of reference only and shall not constitute a part of this Pledge for
any other purpose or be given any substantive effect.
This Pledge may be executed in any number
of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute
this Pledge by signing any such counterpart.
IN WITNESS WHEREOF,
Borrower and Lender have executed this Pledge as of the date first above written.
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BORROWER
|
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LENDER
RJ MEARS, LLC
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/s/ Robert J. Mears
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By:
|
/s/ Frederick R. Jorgenson
|
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Robert J. Mears
|
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Frederick R. Jorgenson
|
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Chief Executive Officer
|
Exhibit 10.3
ASSIGNMENT OF PATENT RIGHTS
This Assignment of Patent Rights (“Patent
Assignment”) is made and entered into this 3
rd
day of April, 2009 (the “Effective Date”) by and between
Robert Joseph Mears of 12 High Meadow Circle, Wellesley, Massachusetts 02482 (“Assignor”) and Mears Technologies, Inc.,
a corporation organized and existing under the laws of the State of Delaware, and having a usual place of business at 1100 Winter
Street, Suite 4700, Waltham, Massachusetts 02451 (“Assignee”).
WHEREAS, Assignor and BTG International Limited,
a company whose registration number in England and Wales is 2664412 and whose registered address is at 10 Fleet Place, Limeburner
Lane, London, EC4M 7SB, England (“BTG”) entered into an Assignment Agreement dated May 14, 2004 (the “Agreement”)
pursuant to which Assignor acquired, upon the terms and conditions set forth in the Agreement, all of BTG’s right, title,
and interest in and to the patents and patent applications (and patents issuing on such applications) listed in Schedule A attached
hereto (collectively, the “Patent Rights”);
WHEREAS, BTG consented, upon the terms and conditions
set forth in the Agreement, to the assignment of the Patent Rights by Assignor to RJ Mears, LLC, a limited liability company organized
under the laws of the state of Delaware, and having a usual place of business at 1100 Winter Street, Suite 4700, Waltham, Massachusetts
02451 (“RJ Mears”);
WHEREAS, RJ Mears was converted to Assignee
pursuant to that certain Certificate of Conversion to Corporation of RJ Mears, LLC to Mears Technologies, Inc. dated March 14,
2007; and
WHEREAS, Assignee now desires to acquire all
right, title, and interest in and to the Patent Rights, and agrees to assume certain obligations set forth in the Agreement;
NOW, THEREFORE, in accordance with the foregoing
recitals, and in consideration of the mutual covenants contained herein, Assignor and Assignee, intending to be legally bound,
hereby agree as follows:
1. Assignor
hereby sells, assigns, transfers, and conveys unto Assignee, its successors, assigns, and legal representatives, Assignor’s
entire right, title, and interest in and throughout the United States of America, its territories and all foreign countries,
in and to the invention(s) described and/or claimed in the Patent Rights (the “Inventions”), together with Assignor’s
entire right, title, and interest in and to the Patent Rights and such other patents as may issue thereon or claim priority thereto
under United States law or international convention, including but not limited to non-provisionals, continuations, divisionals,
reissues, reexaminations, extensions, and substitutions of patents and patent applications within the Patent Rights or such other
patents, and any right, title, and interest Assignor may have in applications to which the Patent Rights claim priority; the Inventions
and the Patent Rights to be held and enjoyed by Assignee for its own use and behalf and for its successors, assigns, and legal
representatives to the full end of the term for which said patents may be granted as fully and entirely as the same would have
been held by Assignor had this assignment and sale not been made; and Assignor hereby conveys all of its rights arising under or
pursuant to any and all United States laws and international agreements, treaties, or laws relating to the protection of industrial
property by filing any such applications for patent, including but not limited to any cause(s) of action and damages accruing prior
to this assignment. Assignor hereby acknowledges that this assignment, being of Assignor’s entire right, title, and interest
in and to the Inventions and the Patent Rights, carries with it the right in Assignee to apply for and obtain from competent authorities
in all countries of the world any and all patents by attorneys and agents of Assignee’s selection and the right to procure
the grant of all patents to Assignee in its own name as assignee of Assignor’s entire right, title, and interest therein.
2. In
consideration for the assignments granted hereunder, Assignee shall, within ninety (90) calendar days after the date of receipt
thereof, pay to each of (i) Assignor, (ii) Adam David Cohen formerly of 43 Princes Court, Cambridge, CB2 1JJ, England, (iii) Stephen
Thomas Warr of 50 Fountains Road, Ipswich, IP2 9ET, England, and (iv) Michael Charles Parker of 2 The Gallop, Sutton, Surrey, SM2
5RU, England (each, individually, an “Inventor”) a royalty, at a rate of ten percent (10%) to each Inventor, on all
revenue, if any, received in respect of the licensing of the Patent Rights (the “Inventor Payments”); provided, however,
that Assignee shall not pay, and shall not be obligated to pay, any Inventor Payments until the payments set forth in paragraph
3 have been satisfied in full. The total amount of all payments properly made by Assignor to Assignee under this Patent Assignment
shall be inclusive of all taxes (including, without limitation, sales and value added taxes), tariff, duty, or assessment levied
or imposed by the government of any jurisdiction in respect of any rights granted hereunder.
3. Prior
to making, or being obligated to make, any of the Inventor Payments set forth in paragraph 2, Assignee shall first pay, within
ninety (90) calendar days after the date of receipt thereof, to BTG a royalty, at a rate of forty percent (40%), on all revenue,
if any, received in respect of the licensing, manufacture, sale, or other commercialization of the Patent Rights, until the aggregate
of all such payments to BTG amounts to the sum of £19,641 (the “BTG Payments”).
4. Assignor
represents and warrants that (i) Assignor is not presently, nor has Assignor ever been, in violation or default of any provision
of the Agreement, (ii) as of the Effective Date of this Patent Assignment, Assignor has not made, and was not obligated to make,
any payments to BTG under clause 4(1) of the Agreement, and (iii) no payments from Assignor to BTG are due within ninety (90) calendar
days from the Effective Date of this Patent Assignment under clause 4(1) of the Agreement.
5. Assignee
agrees to keep proper accounts of its receipts that are the subject of paragraphs 2 and 3 of this Patent Assignment, and that Assignee
will on request produce the same for inspection by Assignor (in the case of the Inventor Payments due under paragraph 2 of this
Patent Assignment) or a duly authorized representative of BTG (in the case of the BTG Payments due under paragraph 3 of this Patent
Assignment) together with any invoices or vouchers relating thereto for the purposes of verification.
6. Assignee
agrees that it will not, without the prior written consent of BTG, assign or otherwise part with possession of its rights in the
Patent Rights (except by way of license thereunder) until the sum of £19,641 has been paid to BTG in satisfaction of the
BTG Payments set forth in paragraph 3.
7. Assignor
hereby further agrees for himself and his executors and administrators to execute upon request any other lawful documents and likewise
to perform any other lawful acts which may be deemed necessary to secure fully the Patent Rights to Assignee, its successors, assigns,
and legal representatives, as well as to third parties at the request of Assignee, including the execution of documents (including,
without limitation, petitions, specifications, oaths, assignments, disclaimers, declarations, and affidavits) relating to non-provisional,
substitution, continuation, divisional, reissue, reexamination, or corresponding foreign or international patent applications within
the Patent Rights, as requested by Assignee, and generally do everything possible to aid Assignee, its successors, assigns, and
legal representatives to obtain, record, maintain, and enforce full protection for the Inventions in all countries.
8. Assignor
hereby further agrees to provide documentary evidence and statements or testimony in any interference, opposition, reexamination,
reissue, or other proceeding in which any of the Patent Rights may be involved.
9. Assignor
hereby warrants that he has not knowingly conveyed to others any rights in the Patent Rights or the Inventions or any license to
use the same or to make, use, or sell anything embodying or utilizing any of the Inventions, and that Assignor has good right and
clear title to assign the Inventions and the Patent Rights without encumbrance.
10. Assignor
does hereby authorize the Director of the United States Patent & Trademark Office, and the empowered officials of all other
governments whose duty it is to record patents, applications, and title thereto, to record the Patent Rights and title thereto
as the property of Assignee, its successors, assigns, or legal representatives, in accordance with the terms of this Patent Assignment.
11. Assignor
does hereby further authorize and request the Director of the United States Patent and Trademark Office and the empowered officials
of all other governments to issue such Patent Rights or patents as shall be granted upon the Patent Rights, or applications based
thereon, to Assignee, its successors, assigns, or legal representatives.
12. Assignee
and Assignor also agree that multiple copies of this Patent Assignment may be executed, each of which shall be deemed an original,
and each of which shall be valid and binding upon Assignee and Assignor.
13. No modifications
of, or additions to, this Patent Assignment shall have effect unless in writing and properly executed by both Assignor and Assignee,
making specific reference to this Patent Assignment by date, parties, and subject matter. This Patent Assignment and the rights
and obligations of the parties hereunder shall be governed by and construed in accordance with the Patent Laws of the United States
and the laws of the Commonwealth of Massachusetts, without regard to the Commonwealth’s conflict of laws principles.
[Remainder of page intentionally left
blank]
IN WITNESS WHEREOF, Assignor and Assignee, through
its duly authorized officer, have caused this Patent Assignment to be executed as of the date first written above.
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/s/ Robert Joseph Mears
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ROBERT JOSEPH MEARS
|
On this 3
rd
day of April, 2009,
before me, the undersigned Notary Public, personally appeared Robert Joseph Mears, proved to me through satisfactory evidence
of identification, which was/were personally known, to be the person whose name is signed on the preceding or attached document,
and who swore or affirmed to me that the contents of the document are truthful and accurate to the best of his knowledge and belief.
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/s/ KEVIN T. McNULTY
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(Seal)
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Signature of Notary
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My Commission Expires:
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MEARS TECHNOLOGIES, INC.
|
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By:
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Steven Levy
|
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Its:
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CEO
|
On this 31
st
day of
March
,
2009, before me, the undersigned Notary Public, personally appeared Steven Levy, proved to me through satisfactory evidence of
identification, which was/were personally known
,
to be the person whose name is signed on the preceding or attached document,
and who swore or affirmed to me that the contents of the document are truthful and accurate to the best of his/her knowledge and
belief. The above-indicated individual is duly authorized to execute this document singly on behalf of Assignee and executed this
document of his/her own free will.
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/s/ KEVIN T. McNULTY
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(Seal)
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Signature of Notary
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My Commission Expires:
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SCHEDULE A
Patent Rights
Country or
Region
|
|
Application No.
|
|
Filing Date
|
|
Patent
No.
|
|
Issue Date
|
|
United Kingdom
|
|
9616598.0
|
|
August 7, 1996
|
|
|
|
|
|
Europe
|
|
97935667.2
|
|
August 7, 1997
|
|
0917776
|
|
July 5, 2006
|
|
Japan
|
|
98/507742
|
|
August 7,1997
|
|
|
|
|
|
United States of America
|
|
09/245,217
|
|
August
7, 1997
(Filing Date of PCT)
February 5, 1999
(§371 Date)
|
|
|
|
|
|
United States of America
|
|
10/375,006
|
|
February 28, 2003
|
|
|
|
|
|
United States of America
|
|
10/134,533
|
|
April 30, 2002
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International (PCT)
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PCT/GB97/02131
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August 7, 1997
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|
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United Kingdom
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9419757.1
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September 30, 1994
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|
Germany
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69525756.0
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September 29, 1995
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0783713
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March 6, 2002
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|
Europe
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95932845.1
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September 29, 1995
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0783713
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March 6, 2002
|
|
France
|
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95932845.1
|
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September 29, 1995
|
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0783713
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March 6, 2002
|
|
United Kingdom
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95932845.1
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|
September 29, 1995
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0783713
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March 6, 2002
|
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Italy
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95932845.1
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|
September 29, 1995
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0783713
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March 6, 2002
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United States of America
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08/817,876
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|
September 29, 1995
(Filing Date of
PCT)
July 24, 1997
(§37l Date)
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6,141,361
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October 31, 2000
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International (PCT)
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PCT/GB95/02326
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September 29, 1995
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Exhibit 10.4
LICENSE AGREEMENT
THIS AGREEMENT (the “Agreement”)
is entered into this 22
nd
day of December, 2006 (the “Effective Date”), by and among RJ Mears LLC, a Delaware
limited liability company with a principal place of business at 1100 Winter Street, Suite 4700, Waltham, Massachusetts, 02451 (“Mears”),
ASM America, Inc. (“ASM America”), a Delaware corporation with a principal place of business at 3440 East University
Drive, Phoenix, Arizona, 85034, and ASM International, N.V. (“ASM International”), a Netherlands corporation with a principal
place of business at Jan van Eycklaan 10, 3723 BC Bilthoven, Netherlands. ASM America, ASM International and their Affiliates (as
defined below) are collectively referred to as “ASM.” Mears and its Affiliates (as defined below) are collectively referred
to as “Mears.” Mears and ASM are collectively referred to as the “Parties.”
WITNESSETH THAT:
WHEREAS, ASM is the owner of certain patent
rights and has the right to grant licenses under said patent rights;
WHEREAS, Mears desires to obtain a license
under the patent rights upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, ASM and Mears hereby agree as follows:
ARTICLE I
Definitions
As used in this Agreement:
“
Affiliate
” shall mean
any legal entity (such as a corporation, partnership, or limited liability company) that is controlled by a Party. For the purposes
of this definition, the term “control” means (i) beneficial ownership of at least fifty percent (50%) of the voting securities
of a corporation or other business organization with voting securities or (ii) a fifty percent (50%) or greater interest in the
net assets or profits of a partnership or other business organization without voting securities.
“
Equipment
” shall mean
equipment used to manufacture semiconductors and components of equipment used to manufacture semiconductors.
“
Licensed Product
” shall
mean products comprising Permitted Structures that absent the license granted hereunder, would infringe one or more Licensed Claims.
“
Licensed Process
” shall
mean any process of making Permitted Structures that, absent the license granted hereunder, would infringe one or more Licensed
Claims.
“
Net Revenues
” shall
mean gross monetary receipts and the cash equivalent of non-monetary consideration receivable by Mears or any of its affiliates,
calculated in accordance with generally-accepted accounting principles consistently applied from the sale or other disposition
of Licensed Products or the performance of Licensed Processes, including revenue from the sub-licensing of Licensed Claims, in
an arm’s-length transaction, net of all separately stated taxes (other than taxes on income), interest and other finance charges
paid by customers, customs duties and other governmental charges, transportation, insurance and storage charges and refunds and
adjustments actually paid or incurred.
“
Licensed Claims
” shall
mean any and all non-Equipment claims entitled to priority to U.S. Serial No. 09/227,679 and/or 60/070,991, including, without
limitation, non-Equipment claims in U.S. Patent Nos. 6,749,687 and 7,105,055.
“
Permitted Structures
”
shall mean (i) structures that include multiple sequences of a non-semiconductor layer adjacent a mono-crystalline semiconductor
layer and (ii) structures that include a monolayer of atomic oxygen at an areal density in the range 10
13
/cm
2
to I 0
15
/cm
2
between two high quality, single crystal silicon layers for the purpose of achieving enhanced
semiconductor device performance.
“
Reporting Period
” shall
begin on the first day of each calendar half-year and end on the last day of such calendar half-year,
“
Term
” shall mean the
term of this Agreement, which shall commence on the Effective Date and shall remain in effect until the expiration or abandonment
of all issued patents and filed patent applications containing the Licensed Claims, unless earlier terminated in accordance with
the provisions of this Agreement.
“
Territory
” shall mean worldwide.
ARTICLE II
License Grant
Subject to the ter
ms of this
Agreement, ASM hereby grants to Mears and its Affiliates for the Term a nonexclusive license, with the right to sublicense, under
the Licensed Claims to develop, make, have made, use, sell, offer to sell, lease, and import Licensed Products in the Territory
and to develop and perform Licensed Processes in the Territory. Nothing in this Agreement is intended to grant a license to anyone
to make, use, sell, offer to sell, lease, or import Equipment that infringes any patent owned by ASM.
ARTICLE III
Royalty
With respect to Licensed Products made
and/or Licensed Processes performed using Equipment manufactured or sold by ASM (“ASM Equipment”), Mears agrees to
pay to ASM America a royalty of 2½% of Net Revenues. With respect to Licensed Products made and/or Licenses Processes performed
using Equipment other than ASM Equipment, Mears agrees to pay to ASM America a royalty of 5% of Net Revenues.
ARTICLE IV
Records, Reports and Payment of Royalty
1. Mears shall keep accurate records
in sufficient detail to enable royalties payable hereunder to be determined and shall permit such records to be inspected and copied
once each calendar year during reasonable business hours by ASM’s certified public accountants, in accordance with the principles
and practices normally employed by certified public accountants and upon the giving of reasonable written notice to Mears by ASK.
ASM’s certified public accountants shall only make such inspection as is necessary to verify the amount of royalties payable hereunder
and shall only report to ASM the amount of royalties due and payable under this Agreement.
2. Mears agrees to report to ASM not
later than the last day of the calendar month following the end of each calendar half-year during the life of this Agreement in
respect to all royalties due hereunder during the preceding calendar half-year. Each such report shall be accompanied by full payment
of the total royalty due to ASM for such calendar half-year pursuant hereto.
ARTICLE V
Assignment and Termination
1. The rights and obligations of Mears
hereunder may be assigned together to an Affiliate of Mears, or to any person or business entity which acquires substantially all
of the assets or capital stock of Mears. Otherwise, the rights of Mears hereunder shall not pass to third parties either by act
or deed of Mears or by operation of law.
2. Except as is otherwise provided
herein, this Agreement and every one of the terms and conditions thereof shall be available to and binding upon the assigns, legal
representatives and/or successors in business of ASM.
3. This Agreement shall
continue in force during its Term.
ARTICLE VI
Miscellaneous
1. Notice, Any notices required or
permitted under this Agreement shall be in writing, shall specifically refer to this Agreement, and shall be sent by hand, recognized
national overnight courier, confirmed facsimile transmission, confirmed electronic mail, or registered or certified mail, postage
prepaid, return receipt requested, to the following addresses of the parties:
|
|
I
f to Mears:
|
RJ Mears, LLC
|
|
|
|
1100 Winter Street
|
|
|
|
Suite 4700
|
|
|
|
Waltham, MA 02451
|
|
|
|
|
|
|
If to ASM:
|
ASM America, Inc.
|
|
|
|
3440 East University Drive
|
|
|
|
Phoenix, AZ 85034
|
All notices under this Agreement shall be
deemed effective upon receipt. A party may change its contact information immediately upon written notice to the other party in
the manner provided in this section.
2. All royalty reports and payments
shall be sent to ASM America at the address appearing above.
3. This Agreement may be executed in
counterparts, each of which will be an original but all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have caused
this Agreement to be signed as an instrument under seal by their duly authorized officers as of the day and year shown below next
to the signatures of the authorized officer of each respective party.
|
RJ MEARS, LLC
|
|
ASM AMERICA, INC.
|
|
|
|
|
|
By:
|
/s/ Robert J. Mears
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|
By:
|
/s/ Charles Dean Del Prado
|
|
|
|
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|
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Its:
|
President
|
|
Its:
|
President
|
|
ASM INTERNATIONAL, N.V.
|
|
|
|
|
|
By:
|
/s/ Charles Dean Del Prado
|
|
|
|
|
|
|
Its:
|
Member of the Management Board
|
|
Exhibit 10.5
MEARS TECHNOLOGIES, INC.
2007 STOCK INCENTIVE PLAN
1.
Purpose
The purpose of this 2007 Stock Incentive
Plan (the “Plan”) of MEARS Technologies, Inc., a Delaware corporation (the “Company”), is to advance the interests
of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who are expected to make
important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based
incentives that are intended to better align the interests of such persons with those of the Company’s stockholders. Except where
the context otherwise requires, the term “Company” shall include any of the Company’s present or future parent or subsidiary
corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder (the “Code”) and any other business venture (including, without limitation, joint venture or limited liability
company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the “Board”).
2.
Eligibility
All of the Company’s employees, officers,
directors, consultants and advisors are eligible to be granted options, restricted stock, restricted stock units and other stock-based
awards (each, an “Award”) under the Plan. Each person who receives an Award under the Plan is deemed a “Participant”.
3.
Administration
and Delegation
(a)
Administration
by Board of Directors
. The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt,
amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board
may construe and interpret the terms of the Plan and any Award agreements entered into under the Plan. The Board may correct any
defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem
expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board
shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the
Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.
(b)
Appointment
of Committees
. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to
one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the “Board”
shall mean the Board or a Committee of the Board or the officers referred to in Section 3(c) to the extent that the Board’s powers
or authority under the Plan have been delegated to such Committee or officers.
(c)
Delegation
to Officers
. To the extent permitted by applicable law, the Board may delegate to one or more officers of the Company the power
to grant Awards (subject to any limitations under the Plan) to employees or officers of the Company or any of its present or future
subsidiary corporations and to exercise such other powers under the Plan as the Board may determine, provided that the Board shall
fix the terms of the Awards to be granted by such officers (including the exercise price of such Awards, which may include a formula
by which the exercise price will be determined) and the maximum number of shares subject to Awards that the officers may grant;
provided further, however, that no officer shall be authorized to grant Awards to any “executive officer” of the Company
(as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or to any “officer”
of the Company (as defined by Rule 16a-1 under the Exchange Act).
4.
Stock
Available for Awards
.
(a)
Number
of Shares
. Subject to adjustment under Section 8, Awards may be made under the Plan for up to 5,092,521 shares of common stock,
$.001 par value per share, of the Company (the “Common Stock”). If any Award expires or is terminated, surrendered or
canceled without having been fully exercised, is forfeited in whole or in part (including as the result of shares of Common Stock
subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right),
or results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan. Further, shares of Common Stock tendered to the Company by a Participant to exercise an Award shall
be added to the number of shares of Common Stock available for the grant of Awards under the Plan. However, in the case of Incentive
Stock Options (as hereinafter defined), the foregoing provisions shall be subject to any limitations under the Code. Shares issued
under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. At no time while there is
any Option (as defined below) outstanding and held by a Participant who was a resident of the State of California on the date of
grant of such Option, shall the total number of shares of Common Stock issuable upon exercise of all outstanding options and the
total number of shares provided for under any stock bonus or similar plan or agreement of the Company exceed the applicable percentage
as calculated in accordance with the conditions and exclusions of Section 260.140.45 of the California Code of Regulations (the
“California Regulations”), based on the shares of the Company which are outstanding at the time the calculation is made.
(b)
Substitute
Awards
. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property
or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted
by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Board deems appropriate in the circumstances,
notwithstanding any limitations on Awards contained in the Plan. Substitute Awards shall not count against the overall share limit
set forth in Section 4(a), except as may be required by reason of Section 422 and related provisions of the Code.
5.
Stock
Options
(a)
General
.
The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common
Stock to be covered by each Option,
the exercise price of each Option and the conditions and limitations applicable to the
exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary
or advisable, An Option that is not intended to be an Incentive Stock Option (as hereinafter defined) shall be designated a “Nonstatutory
Stock Option”.
(b)
Incentive
Stock Options
. An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the
Code (an “Incentive Stock Option”) shall only be granted to employees of MEARS Technologies, Inc., any of MEARS Technologies,
Inc.’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities
the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed
consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other
party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or
for any action taken by the Board, including without limitation the conversion of an Incentive Stock Option to a Nonstatutory Stock
Option.
(c)
Exercise
Price
. The Board shall establish the exercise price of each Option and specify such exercise price in the applicable option
agreement.
(d)
Duration
of Options
. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify
in the applicable option agreement.
(e)
Exercise
of Option
. Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person
or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in
Section 5(f) for the number of shares for which the Option is exercised. Shares of Common Stock subject to the Option will be delivered
by the Company following exercise either as soon as practicable or, subject to such conditions as the Board shall specify, on a
deferred basis (with the Company’s obligation to be evidenced by an instrument providing for future delivery of the deferred shares
at the time or times specified by the Board).
(f)
Payment
Upon Exercise
. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:
(1) in
cash or by check, payable to the order of the Company;
(2) except
as may otherwise be provided in the applicable option agreement, by (i) delivery of an irrevocable and unconditional undertaking
by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding
or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker
to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;
(3) when
the Common Stock is registered under the Exchange Act and to the extent provided for in the applicable option agreement or approved
by the Board, in its sole discretion, by delivery (either by actual delivery or attestation) of shares of Common Stock owned by
the Participant valued at their fair market value as determined by (or in a manner approved by) the Board (“Fair Market Value”),
provided (i) such method of payment is then
permitted under applicable law, (ii) such Common Stock,
if acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established
by the Board in its discretion and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or
other similar requirements;
(4) to
the extent permitted by applicable law and provided for in the applicable option agreement or approved by the Board, in its sole
discretion, by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment
of such other lawful consideration as the Board may determine; or
(5) by
any combination of the above permitted forms of payment.
6.
Restricted Stock; Restricted Stock Units
(a)
General
.
The Board may grant Awards entitling recipients to acquire shares of Common Stock (“Restricted Stock”), subject to the
right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require
forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable
Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award.
Instead of granting Awards for Restricted Stock, the Board may grant Awards entitling the recipient to receive shares of Common
Stock to be delivered at the time such shares of Common Stock vest (“Restricted Stock Units”) (Restricted Stock and Restricted
Stock Units are each referred to herein as a “Restricted Stock Award”).
(b)
Terms
and Conditions
. The Board shall determine the terms and conditions of a Restricted Stock Award, including the conditions for
vesting and repurchase (or forfeiture) and the issue price, if any.
(c)
Additional
Provisions Relating to Restricted Stock
.
(1)
Dividends
.
Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such
shares, unless otherwise provided by the Board. If any such dividends or distributions are paid in shares, or consist of a
dividend or distribution to holders of Common Stock other than an ordinary cash dividend, the shares, cash or other property
will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with
respect to which they were paid. Each dividend payment will be made no later than the end of the calendar year in which the
dividends are paid to shareholders of that class of stock or, if later, the 15th day of the third month following the date
the dividends are paid to shareholders of that class of stock,
(2)
Stock
Certificates
. The Company may require that any stock certificates issued in respect of shares of Restricted Stock shall be
deposited in escrow by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the
expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject
to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by
the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death
(the “Designated Beneficiary”). In the absence of an effective designation by a Participant, “Designated Beneficiary”
shall mean the Participant’s estate.
7.
Other
Stock-Based Awards
Other Awards of shares of Common Stock,
and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other
property, may be granted hereunder to Participants (“Other Stock-Based Awards”), including without limitation stock appreciation
rights and Awards entitling recipients to receive shares of Common Stock to be delivered in the future. Such Other Stock-Based
Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu
of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may be paid in shares of Common Stock or
cash, as the Board shall determine. Subject to the provisions of the Plan, the Board shall determine the terms and conditions of
each Other Stock-Based Award, including any purchase price applicable thereto.
8.
Adjustments
for Changes in Common Stock and Certain Other Events
(a)
Changes
in Capitalization
. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders
of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the
number and class of securities and exercise price per share of each outstanding Option, (iii) the number of shares subject to and
the repurchase price per share subject to each outstanding Restricted Stock Award, and (iv) the terms of each other outstanding
Award shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in the manner determined by
the Board. Without limiting the generality of the foregoing, in the event the Company effects a split of the Common Stock by means
of a stock dividend and the exercise price of and the number of shares subject to an outstanding Option are adjusted as of the
date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises
an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution
date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact
that such shares were not outstanding as of the close of business on the record date for such stock dividend,
(b)
Reorganization
Events
.
(1)
Definition
.
A “Reorganization Event” shall mean: (a) any merger or consolidation of the Company with or into another entity as a
result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities
or other property or is cancelled, (b) any exchange of all of the Common Stock of the Company for cash, securities or other property
pursuant to a share exchange transaction or (c) any liquidation or dissolution of the Company.
(2)
Consequences
of a Reorganization Event on Awards Other than Restricted Stock Awards
. In connection with a Reorganization Event, the Board
may take any one or more of the following actions as to all or any (or any portion of) outstanding Awards other than Restricted
Stock Awards on such terms as the Board determines: (i) provide that Awards shall be assumed, or substantially equivalent Awards
shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), (ii) upon written notice to a Participant,
provide that the Participant’s unexercised Options or other unexercised Awards will terminate immediately prior to the consummation
of such Reorganization Event unless exercised by the Participant within a specified period following the date of such notice, (iii)
provide that outstanding Awards shall become exercisable, realizable, or deliverable, or restrictions applicable to an Award shall
lapse, in whole or in part prior to or upon such Reorganization Event, (iv) in the event of a Reorganization Event under the terms
of which holders of Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the Reorganization
Event (the “Acquisition Price”), make or provide for a cash payment to a Participant equal to the excess, if any, of
(A) the Acquisition Price times the number of shares of Common Stock subject to the Participant’s Options or other Awards (to the
extent the exercise price does not exceed the Acquisition Price) over (B) the aggregate exercise price of all such outstanding
Options or other Awards and any applicable tax withholdings, in exchange for the termination of such Options or other Awards, (v)
provide that, in connection with a liquidation or dissolution of the Company, Awards shall convert into the right to receive liquidation
proceeds (if applicable, net of the exercise price thereof and any applicable tax withholdings) and (vi) any combination of the
foregoing. In taking any of the actions permitted under this Section 8(b), the Board shall not be obligated by the Plan to treat
all Award, or all Awards of the same type, identically.
For purposes of clause (i) above, an Option
shall be considered assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase, for
each share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration
(whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each
share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided,
however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring
or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation,
provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or
succeeding corporation (or an affiliate thereof) equivalent in value (as determined by the Board) to the per share consideration
received by holders of outstanding shares of Common Stock as a result of the Reorganization Event.
(3)
Consequences
of a Reorganization Event on Restricted Stock Awards
. Upon the occurrence of a Reorganization Event other than a liquidation
or dissolution of the Company, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall
inure to the benefit of the Company’s successor and shall, unless the Board determines otherwise, apply to the cash, securities
or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same
manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award. Upon the occurrence of
a Reorganization Event involving the liquidation or dissolution of the Company, except to the extent specifically provided to the
contrary in the instrument evidencing any Restricted Stock Award or any other agreement between a Participant and the Company,
all restrictions and conditions on all Restricted Stock Awards then outstanding shall automatically be deemed terminated or satisfied.
9.
General Provisions Applicable to Awards
(a)
Transferability
of Awards
. Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred,
pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will
or the laws of descent and distribution or, other than in the case of an Incentive Stock Option, pursuant to a qualified domestic
relations order, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant,
to the extent relevant in the context, shall include references to authorized transferees.
(b)
Documentation
.
Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Each Award may contain
terms and conditions in addition to those set forth in the Plan.
(c)
Board
Discretion
. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other
Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.
(d)
Termination
of Status
. The Board shall determine the effect on an Award of the disability, death, termination of employment, authorized
leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during
which, the Participant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise
rights under the Award.
(e)
Withholding
.
The Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations
before the Company will deliver stock certificates or otherwise recognize ownership of Common Stock under an Award. The Company
may decide to satisfy the withholding obligations through additional withholding on salary or wages. If the Company elects not
to or cannot withhold from other compensation, the Participant must pay the Company the full amount, if any, required for withholding
or have a broker tender to the Company cash equal to the withholding obligations. Payment of withholding obligations is due before
the Company will issue any shares on exercise or release from forfeiture of an Award or, if the Company so requires, at the same
time as is payment of the exercise price unless the Company determines otherwise. If provided for in an Award or approved by the
Board in its sole discretion, a Participant may satisfy such tax obligations in whole or in part by delivery of shares of Common
Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however,
except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax obligations
cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal
and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares surrendered to
satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.
(f)
Amendment
of Award
.
(1) The
Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of
the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory
Stock Option, provided that the Participant’s consent to such action shall be required unless (A) the Board determines that the
action, taking into account any related action, would not materially and adversely affect the Participant’s rights under the Plan
or (B) the change is permitted under Section 8 hereof.
(2) The
Board may, without stockholder approval, amend any outstanding Award granted under the Plan to provide an exercise price per share
that is lower than the then-current exercise price per share of such outstanding Award. The Board may also, without stockholder
approval, cancel any outstanding award (whether or not granted under the Plan) and grant in substitution therefor new Awards under
the Plan covering the same or a different number of shares of Common Stock and having an exercise price per share lower than the
then-current exercise price per share of the cancelled award.
(g)
Conditions
on Delivery of Stock
. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to
the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with
the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock
exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations
or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.
(h)
Acceleration
.
The Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the case may be.
10.
Miscellaneous
(a)
No
Right To Employment or Other Status
. No person shall have any claim or right to be granted an Award, and the grant of an Award
shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The
Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from
any liability or claim under the Plan, except as expressly provided in the applicable Award.
(b)
No
Rights As Stockholder
. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have
any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming
the record holder of such shares.
(c)
Effective
Date and Term of Plan
. The Plan shall become effective on the date on which it is adopted by the Board. No Awards shall be
granted under the Plan after the expiration of 10 years from the earlier of (i) the date on which the Plan was adopted by the Board
or (ii) the date the Plan was approved by the Company’s stockholders, but Awards previously granted may extend beyond that date.
(d)
Amendment
of Plan
. The Board may amend, suspend or terminate the Plan or any portion thereof at any time; provided that if at any time
the approval of the Company’s stockholders is required as to any modification or amendment under Section 422 of the Code or any
successor provision with respect to Incentive Stock Options, the Board may not effect such modification or amendment without such
approval. Unless otherwise specified in the amendment, any amendment to the Plan adopted in accordance with this Section 10(d)
shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the time the amendment is adopted, provided
the Board determines that such amendment does not materially and adversely affect the rights of Participants under the Plan.
(e)
Authorization
of Sub-Plans
. The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable
blue sky, securities or tax laws of various jurisdictions. The Board shall establish such sub-plans by adopting supplements to
this Plan containing (i) such limitations on the Board’s discretion under the Plan as the Board deems necessary or desirable or
(ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable.
All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Participants
within the affected jurisdiction and the Company shall not be required to provide copies of any supplement to Participants in any
jurisdiction which is not the subject of such supplement.
(f)
Compliance
with Code Section 409A
. No Award shall provide for deferral of compensation that does not comply with Section 409A of the Code,
unless the Board, at the time of grant, specifically provides that the Award is not intended to comply with Section 409A of the
Code. The Company shall have no liability to a Participant, or any other party, if an Award that is intended to be exempt from,
or compliant with, Section 409A is not so exempt or compliant or for any action taken by the Board.
(g)
Governing
Law
. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws
of the State of Delaware, excluding choice-of-law principles of the law of such state that would require the application of the
laws of a jurisdiction other than such state.
MEARS TECHNOLOGIES, INC.
2007 STOCK INCENTIVE PLAN
CALIFORNIA SUPPLEMENT
Pursuant to Section 10(e) of the Plan, the
Board has adopted this supplement for purposes of satisfying the requirements of Section 25102(o) of the California Law:
Any Awards granted under the Plan to a Participant
who is a resident of the State of California on the date of grant (a “California Participant”) shall be subject to the
following additional limitations, terms and conditions:
1.
Additional
Limitations on Options
.
(a)
Minimum
Vesting Rate
. Except in the case of Options granted to California Participants who are officers, directors, managers, consultants
or advisors of the Company or its affiliates (which Options may become exercisable at whatever rate is determined by the Board),
Options granted to California Participants shall become exercisable at a rate of not less than 20% per year over five years from
the date of grant;
provided
,
that
, such Options may be subject to such reasonable forfeiture conditions as the Board
may choose to impose and which are not inconsistent with Section 260.140.41 of the California Regulations.
(b)
Minimum
Exercise Price
. The exercise price of Options granted to California Participants may not be less than 85% of the Fair Market
Value of the Common Stock on the date of grant in the case of a Nonstatutory Stock Option or less than 100% of the Fair Market
Value of the Common Stock on the date of grant in the case of an Incentive Stock Option;
provided
,
however
, that
if the California Participant is a person who owns stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or its parent or subsidiary corporations, the exercise price shall be not less than 110% of the Fair Market
Value of the Common Stock on the date of grant.
(c)
Maximum
Duration of Options
. No Options granted to California Participants shall have a term in excess of 10 years measured from the
Option grant date.
(d)
Minimum
Exercise Period Following Termination
. Unless a California Participant’s employment is terminated for cause (as defined by
applicable law, the terms of any contract of employment between the Company and such Participant, or in the instrument evidencing
the grant of such Participant’s Option), in the event of termination of employment of such Participant, such Participant shall
have the right to exercise an Option, to the extent that he or she was otherwise entitled to exercise such Option on the date employment
terminated, as follows: (i) at least six months from the date of termination, if termination was caused by such Participant’s death
or “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code) and (ii) at least 30 days from
the date of termination, if termination was caused other than by such Participant’s death or “permanent and total disability”
(within the meaning of Section 22(e)(3) of the Code).
(e)
Limitation
on Repurchase Rights
. If an Option granted to a California Participant gives the Company the right to repurchase shares of
Common Stock issued pursuant to the Plan upon termination of employment of such Participant, the terms of such repurchase right
must comply with Section 260.140.41(k) of the California Regulations.
2.
Additional
Limitations for Restricted Stock Awards
.
(a)
Minimum
Purchase Price
. The purchase price for a Restricted Stock Award granted to a California Participant shall be not less than
85% of the Fair Market Value of the Common Stock at the time such Participant is granted the right to purchase shares under the
Plan or at the time the purchase is consummated;
provided
,
however
, that if such Participant is a person who owns
stock possessing more than 10% of the total combined voting power or value of all classes of stock of the Company or its parent
or subsidiary corporations, the purchase price shall be not less than 100% of the Fair Market Value of the Common Stock at the
time such Participant is granted the right to purchase shares under the Plan or at the time the purchase is consummated.
(b)
Limitation
of Repurchase Rights
. If a Restricted Stock Award granted to a California Participant gives the Company the right to repurchase
shares of Common Stock issued pursuant to the Plan upon termination of employment of such Participant, the terms of such repurchase
right must comply with Section 260.140.42(h) of the California Regulations.
3.
Additional
Limitations for Other Stock-Based Awards
. The terms of all Awards granted to a California Participant under Section 7 of the
Plan shall comply, to the extent applicable, with Section 260.140.41 or Section 260.140.42 of the California Regulations,
4.
Additional
Requirement to Provide Information to California Participants
. The Company shall provide to each California Participant and
to each California Participant who acquires Common Stock pursuant to the Plan, not less frequently than annually, copies of annual
financial statements (which need not be audited). The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent information.
5.
Additional
Limitations on Timing of Awards
. No Award granted to a California Participant shall become exercisable, vested or realizable,
as applicable to such Award, unless the Plan has been approved by the holders of a majority of the Company’s outstanding voting
securities within 12 months before or after the date the Plan was adopted by the Board.
6.
Additional
Limitations Relating to Definition of Fair Market Value
. For purposes of Section 1(b) and 2(a) of this supplement, “Fair
Market Value” shall be determined in a manner not inconsistent with Section 260.140.50 of the California Regulations.
7.
Additional
Restriction Regarding Recapitalizations, Stock Splits, Etc.
For purposes of Section 8 of the Plan, in the event of a stock
split, reverse stock split, stock dividend, recapitalization, combination, reclassification or other distribution of the Company’s
securities, the number of securities allocated to each California Participant must be adjusted proportionately and without the
receipt by the Company of any consideration from any California Participant.
Exhibit 10.6
EXCLUSIVE LICENSE AND COLLABORATION AGREEMENT
This Exclusive License and Collaboration
Agreement (“
Agreement
”) is made and entered into this 3
rd
day of March, 2010 (the “
Effective
Date
”), by and between Mears Technologies, Inc., a Delaware corporation with its principal offices at 1100 Winter Street,
Suite 4700, Waltham, MA 02451 (“
Licensor
”) and K2 Energy Limited, a corporation with its principal offices at
Level 2, 27 Macquarie Place, Sydney NSW 2000, Australia (“
Licensee
”).
WHEREAS, Licensor has developed and/or otherwise
possesses rights to certain technology related to the manufacture of semiconductors and, in particular, photovoltaic platforms
and devices, and
WHEREAS, the parties wish to collaborate
with respect to development of such technology and commercialization thereof, and
WHEREAS, in furtherance of such collaboration,
Licensee desires to license such technology and Licensor is willing to grant to Licensee an exclusive license for such purposes
on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of these
premises and the mutual covenants herein contained, the Parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following
terms, whether used in the singular or plural, shall have the following meanings:
1.1 “
Change of Control
”
means (a) a merger, acquisition, sale of voting control, or other business combination of the Licensee by way of takeover offer,
scheme of arrangement or shareholder approval all in accordance with the Australian Corporations Law, or (b) an issuance of shares
and/or equity securities convertible into shares by the Licensee to a customer(s) or prospective customer(s) of the Licensee or
its related group companies which in number would amount to 50% or more of the total Issued voting shares outstanding, or (c) the
sale, lease, exclusive license or other transfer of all or substantially all of the assets of the Licensee.
1.2 “
Commercialization
Plan
” means the plan set forth in Schedule B of this Agreement.
1.3 “
Field
of Use
” means the manufacture and use of photovoltaic devices, and all solar energy applications.
1.4 “
Know-How
”
means all compositions of matter, techniques and data and other know-how and technical information including inventions (whether
or not patentable), improvements and developments, practices, methods, concepts, trade secrets, documents, computer data, computer
code, apparatus, test data, analytical and quality control data, formulation, manufacturing, patent data or descriptions, development
information, drawings, specifications, designs, plans, proposals and technical data and manuals and all other proprietary information
that is owned or controlled by Licensor as of the Effective Date and reasonably necessary to commercially exploit the Mears’ photovoltaic
and solar energy technologies (including all applications within the Field of Use) or generated pursuant to the R&D Activities
(as defined below), and including all non-patent intellectual property rights in relation to such items.
1.5 “
Licensed
Process
” means any process that would, but for the licenses granted to Licensee hereby, either (i) infringe a Valid Claim
of the Patent Rights or (ii) utilize any Know-How, in either case, in the country in which any such process is practiced.
1.6 “
Licensed Product
”
means (a) any product the making, using, selling, offering for sale, importing or exporting of which by Licensee would, but for
the licenses granted to Licensee hereby, either (i) infringe a Valid Claim of the Patent Rights or (ii) utilize any Know-How, in
either case, in the country in which any such product is so made, used, sold, offered for sale, imported or exported, or (b) any
product that is manufactured using a Licensed Process or that, when used, practices a Licensed Process.
1.7 “
Licensed
Technology
” means Licensed Products and Licensed Processes.
1.8 “
Net Revenues
” means
the gross amount invoiced and received by Licensee on sales of Licensed Products, derived from the sale of products manufactured
or supplied using the practice of Licensed Processes, or derived from the sublicense of the Patent Rights, less: (a) value added,
sales or similar taxes forming part of such invoiced amounts; (b) rebates, discounts and returns; and (c) all accrued and not previously
deducted costs and expenditures (whether internal or external) incurred by Licensee in connection with and properly attributable
to its commercialization or exploitation in whatever form of the Licensed Technology including, but not limited to, all costs and
expenditure attributable to the Commercialization Plan and all other direct and indirect costs and expenditures incurred by the
Licensee in connection with and properly attributable to the research and development, manufacture, promotion, marketing, supply
and protection of the Licensed Technology or the sublicensing of any such rights.
1.9 “
Party
”
means Licensor or Licensee; “
Parties
” means Licensor and Licensee.
1.10 “
Patent
Rights
” means all United States and foreign (non-United States) issued patents and pending patent applications owned or
controlled by Licensor as of the Effective Date or generated pursuant to the R&D Activities (as defined below), including all
United States and foreign patents issuing there from or claiming priority thereto, in whole or in part, and all continuations,
continuations-in-part, re-examinations, divisions, reissues, extensions and renewals of any of the foregoing including, without
limitation, the patents and patent applications listed in Schedule C.
1.11 “
Valid
Claim
” means a claim of either (a) an issued and unexpired patent included within the Patent Rights which has not been
held permanently revoked, unenforceable, or invalid by a decision of a court or other governmental agency of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through
reissue or disclaimer or otherwise, or (b) a pending patent application within the Patent Rights which claim was filed in good
faith and has not been abandoned or finally disallowed without the possibility of appeal or refiling of said application;
2. LICENSE
2.1
Grant
.
Subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee a worldwide, exclusive, revenue-bearing
license under Licensor’s rights in the Patent Rights and the Know-How to (a) make, use, sell, offer for sale, import and export
Licensed Products that are within the Field of Use, and (b) and to practice Licensed Processes in the Field of Use.
2.2
Rights
to Sublicense
. The Licensor also grants to the Licensee, so long as it retains exclusive rights under this License Agreement,
the right to issue sublicenses where the Licensor may lawfully grant such licenses. Sublicense rights shall be granted only to
those third parties (each a “
Sublicensee
”) that can reasonably demonstrate a strong capability and specific plans
for the effective development and marketing of the Licensed Products or Licensed Processes. Any grant of sublicense hereunder shall
require the prior written consent of Licensor such consent not to be withheld unreasonably. All sublicense agreements shall have
a specific clause to prevent further sublicensing by Sublicensees.
3. COOPERATION BETWEEN THE PARTIES
3.1
Commercialization
and Development Program
. The foregoing licenses are granted in furtherance of the Commercialization Plan and cooperation between
the parties as set forth therein.
3.2
Responsibilities
of Licensee
. Licensee will fund research and development, to be performed by or under the direction of Licensor, of the Licensed
Technology in the Field of Use (“
R&D Activities
”) pursuant to the Commercialization Plan. Such funding shall
total no less than $1.0 million in each of calendar years 2010, 2011, 2012, 2013 and 2014. Furthermore, Licensee shall use commercially
reasonable efforts, or shall cause its Sublicensees to use commercially reasonable efforts, to make Licensed Products or Licensed
Processes and to introduce Licensed Products or Licensed Processes into the commercial market pursuant to the Commercialization
Plan. Failure of Licensee to perform its obligations under the Commercialization Plan shall constitute a material breach of this
Agreement.
3.3
Responsibilities
of Licensor
. Licensor shall make reasonable commercial efforts to pursue the R&D Activities using the funding provided
by Licensee, R&D Activities shall include the pursuit of Patent Rights. Licensor shall provide a team dedicated to the R&D
Activities as set forth in the Commercialization Plan.
3.4
Ownership
. All technology
(including Know-How) and Patent Rights resulting from R&D Activities shall belong to Licensor, but shall be subject to the
license grant set forth above.
3.5
Patent Prosecution
. Licensor
shall be solely responsible for prosecuting the patents and applications included in the Patent Rights in the United States and
outside the United States (and any costs associated therewith). Licensor shall keep Licensee reasonably informed of all prosecution
activities, and shall not abandon any patent or application included in the Patent Rights without notifying Licensee in advance
and giving Licensee the right to take over the prosecution and/or maintenance, at its own expense, of any such patent or patent
application and, in such instance, Licensor will provide Licensee with reasonable cooperation and assistance at Licensee’s expense.
4. CONSIDERATION
4.1
Investment
.
Licensee agrees to invest $1.0 million in a convertible promissory note issued by Licensor within one (1) week of the Effective
Date pursuant to the terms and conditions set forth in Schedule A of this Agreement.
4.2
License
Fee
. Licensee agrees to pay to Licensor an earned License Fee equal to fifty percent (50%) of the Net Revenues from Licensed
Products and Licensed Processes.
4.3
Reports
and Payments
. Licensee shall deliver to Licensor within thirty (30) days after the end of each calendar quarter a written
report showing its computation of License Fees due under this Agreement for such calendar quarter. Simultaneously with the delivery
of each such report, Licensee shall tender payment of all amounts shown to be due thereon. The License Fee payments due on sales
in currencies other than U.S. dollars shall be calculated using the appropriate exchange rate for such currency quoted by the
Citibank foreign exchange desk on the close of business on the business day
immediately preceding the date of such report.
All amounts due under this Agreement shall be paid to Licensor in United States dollars (U.S. $) by wire transfer to an account
in a United States bank designated by Licensor, or in such other form and/or manner as Licensor may reasonably request.
4.4
Late
Payments
. Overdue payments due to Licensor hereunder shall be subject to a late payment charge, calculated and compounded monthly,
and calculated at an annual rate of four percent (4.0%) over the lowest prime rate available in New York City, as published in
The Wall Street Journal
on the first Monday (or the next bank business day) following the payment due date, If the amount
of such late payment charge exceeds the maximum permitted by law, such charge shall be reduced to such maximum amount.
4.5
Records
.
Licensee shall keep full, clear and accurate records with respect to all Licensed Products and Licensed Processes manufactured,
performed, sold, offered for sale, imported and/or used and shall finish any information that Licensor may reasonably request from
time to time to enable Licensor to ascertain the proper License Fees due hereunder. Licensee shall retain such records with respect
to each Licensed Product and/or Licensed Process for at least five (5) years from the sale of such Licensed Product or the practice
of such Licensed Process. Licensor shall have the right through its auditors to make examinations, during normal business hours,
of all records and accounts bearing upon the amounts of License Fees payable to it under this Agreement. Prompt adjustment shall
be made by the proper Party to compensate for any errors or omissions disclosed by any such examination, If the examination discloses
an underpayment by Licensee of five (5%) percent or more due Licensor, then Licensee shall pay the costs of such examination, in
addition to such License Fees and applicable late payment charges.
4.6
Taxes
.
If any laws, rules or regulations require the withholding of amounts of income or other taxes or other amounts from payments made
by a Party to the other under this agreement, the Party making the payment will: (a) make such withholding payments as required
and subtract such amounts from the payments due to the other Party; (b) submit proof of payment of the withholding rates to the
other Party at the time of making payment of the balance to Party; and (c) use reasonable endeavours to minimise the extent of
any withholding taxes imposed under the provisions of current or future double taxation treaties or agreements between foreign
countries and the parties will cooperate with each other in that respect, with the appropriate Party under the circumstances providing
the documentation required under such treaty or agreement to claim any available benefits.
5. FURTHER
OBLIGATIONS
5.1
Chief
Executive Officer
. Licensee shall commission a world-wide search for a suitable Chief Executive Officer (CEO), the appointment
of the CEO and any successor CEO subject to the approval of Licensor (not to be withheld unreasonably).
5.2
Board
of Directors
. Subject to the requirements of any applicable legislation or stock exchange rules, Licensor shall have the right
to appoint one (1) member of Licensee’s board of directors and one (1) observer of Licensee’s board of directors. This right subsists
for the Term of this Agreement or until such time as either Party is sold to a third party.
5.3
Revenue
Conversion
. The Parties shall mutually agree to a mechanism for the conversion of some or all of the Net Revenues into equity
securities of Licensee, such conversion to be performed entirely at the discretion of Licensor, subject to the shareholder approval
of Licensee and any other applicable regulatory approvals required at the time of the proposed revenue conversion.
6. TERM AND TERMINATION
6.1
Term
.
This Agreement shall commence on the Effective Date and shall remain in effect until the expiration or abandonment of all issued
patents and filed patent applications within the Patent Rights (the “
Term
”), unless earlier terminated in accordance
with the provisions of this Agreement.
6.2
Termination
.
Either Party may terminate this Agreement (a) if the other Party materially breaches or defaults in the performance of any of the
provisions of this Agreement; (b) if there is a material inaccuracy in any representation or warranty contained herein, and such
breach or inaccuracy is not cured within ninety (90) days after written notice thereof to the Party in default; (c) at any time
if the other Party shall become insolvent, or shall make or seek to make or arrange an assignment for the benefit of creditors,
or if proceedings in voluntary bankruptcy shall be initiated by or on behalf of such Party, or if a receiver or similar officer
is appointed to take charge of all or part of such Party’s assets; or (d) at any time if proceedings in involuntary bankruptcy
shall be initiated against the other Party and such proceedings are not terminated within ninety (90) days after their initiation.
6.3
Return
of Confidential Information
. Upon termination of this Agreement, Licensee shall immediately cease use of the Licensed Technology
and promptly return to Licensor all written materials relating thereto, and all copies thereof.
7.
WARRANTIES
AND COVENANTS
. Licensor hereby represents and warrants to Licensee: (a) Licensor is the sole owner of the Patent Rights existing
as of the Effective Date and has full power to grant the rights, licenses and privileges granted herein and can perform its obligations
as set forth in this Agreement without violating the terms of any agreement that Licensor has with any third party; (b) Licensor
has not assigned any of the Patent Rights to any third party; and (c) Licensor shall not grant any licenses, other than the license
granted hereunder, under the Patent Rights to use Licensed Products and to practice Licensed Processes in the Field of Use anywhere
in the world.
8.
INDEMNIFICATION
.
Licensor shall indemnify, defend and hold harmless Licensee from and against any and all losses, damages, costs and expenses (including
attorneys’ fees) arising out a material breach by Licensor of its representations and warranties (“
Indemnification Claims
”),
provided that (a) Licensor is notified promptly of any Indemnification Claims, (b) Licensor has the sole right to control and defend
or settle any litigation within the scope of this indemnity, and (c) all indemnified parties cooperate to the extent necessary
in the defense of any Indemnification Claims.
9.
LIMITATION
OF LIABILITY
. EXCEPT FOR ANY INDEMNIFICATION REQUIRED HEREUNDER, IN NO OTHER EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER
PARTY OR TO ANY THIRD PARTY FOR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL, INDIRECT, OR EXEMPLARY DAMAGES ARISING OUT OF OR RELATING
TO THIS AGREEMENT, HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE), EVEN IF SUCH PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.
10. CONFIDENTIAL INFORMATION
10.1
Definition
of Confidential Information
. As used herein, the term “Confidential Information” means proprietary technology, product
and marketing information, including but not limited to trade secrets, processes, computer programs (whether in source or object
code form), formulae, data (such as scientific, sales or technical data), testing and evaluation results, information, designs,
processes, procedures, know-how, improvements, inventions, techniques, designs, developments, discoveries, marketing plans, strategies,
forecasts, customer and supplier lists, and compilations of such information disclosed by a Party to the other Party hereunder,
and that should reasonably have been understood by the other Party because of legends or other markings, the circumstances of disclosure
or the nature of the information itself, to be proprietary and confidential to the Party, an Affiliate of the Party or to a third
party. The term “
Affiliate
” means any person or entity directly or indirectly controlling, controlled by, or under
common control with a Party. Confidential Information does not include information that is; (i) known to the Party before receipt
from the other Party without obligations of confidentiality or restrictions on disclosure, as shown by written records in the Party’s
possession at the time of disclosure; (ii) generally available to the public (or becomes so) without the fault or negligence of
the Party; (iii) received by the Party from a source other than the other Party without breach of an obligation of confidentiality
owed to the other Party; or (iv) independently developed by the Party without any use of the other Patty’s Confidential Information,
as demonstrated by the Party’s written records.
10.2
Restrictions
on Disclosure and Use of Confidential Information
. Each Party may use the Confidential Information of the other Party solely
in furtherance of this Agreement and will not disclose such Confidential Information to any third party. A Party may disclose the
Confidential Information within its business only to those having a need to know in connection with this Agreement and who are
bound hereby. Licensee shall not reverse engineer, disassemble or decompile any products, prototypes, software or other tangible
objects that embody Confidential Information. Each Party will use the same degree of care in safeguarding the Confidential Information
as it uses for its own confidential information of like importance, but no less than reasonable care. Upon discovery of any disclosure
or misuse of Confidential Information, a Party must promptly notify the other Party and act to prevent any further disclosure or
misuse. For the purposes of this clause, ‘Confidential Information’ includes the Know-How (whether or not disclosed by a Party
to the other Party) which each Party agrees to treat as Confidential Information of the other Party.
11. MISCELLANEOUS
11.1
Force
Majeure
. In the event that either Party is prevented from performing, or is unable to perform, any of its obligations under
this Agreement due to any cause beyond the reasonable control of the Party invoking this provision, the affected Party’s performance
shall be excused and the time for performance shall be extended for the period of delay or inability to perform due to such occurrence.
11.2
Waiver
.
The waiver by either Party of a breach of or a default under any provision of this Agreement by the other Party shall not be construed
as a waiver of any, subsequent breach of the same or any other provision of this Agreement, nor shall any delay or omission on
the part of either Party to exercise or avail itself of any right, power or privilege that it has or may have hereunder operate
as a waiver of any right, power or privilege by such Party.
11.3
Relationship
of Parties
. Nothing herein shall create or be deemed to create any relationship of agency or partnership between Licensor and
Licensee.
11.4
Notices
.
Any notice or other communication in connection with this Agreement shall be furnished in writing and shall be (a) personally delivered;
(b) sent by registered or certified mail, postage prepaid; (e) facsimile transmission; or (d) sent by commercial overnight courier
service to the addressee at the address listed on the first page of this Agreement or such other address as the addressee shall
have specified in a notice actually received by the addressor. Notices shall be effective upon receipt.
11.5
Assignment
.
Neither this Agreement nor any rights granted hereunder may be sold, assigned, transferred, pledged, mortgaged, leased or otherwise
encumbered or disposed of in whole or in part by Licensee without the express prior written consent of Licensor. A Change of Control
shall be deemed to be an assignment for purpose hereof. Subject to the express limitations set forth herein, this Agreement shall
be binding upon and inure to the benefit of Licensor and Licensee and their respective successors and permitted assigns.
11.6
Entire
Agreement
. This Agreement and the Exhibits hereto contain the full understanding of the Parties with respect to the subject
matter hereof and supersede all prior understandings and writings relating thereto. No waiver, alteration or modification of any
of the provisions hereof shall be binding unless made in writing and signed by the Parties by their respective authorized officers.
11.7
Governing
Law
. This Agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts excluding
its conflicts of laws provisions. The Parties hereby agree on behalf of themselves and any person claiming by or through them that
the sole Jurisdiction and venue for any litigation arising from or relating to this Agreement is an appropriate federal or state
court located in Boston, Massachusetts.
11.8
Heading
.
The headings contained in this Agreement are for convenience and ease of reference only and shall not be considered in construing
this Agreement.
11.9
Counterparts
.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together
shall constitute one and the same Instrument.
11.10
Severability
.
In the event that any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable because it is
invalid or in conflict with any law of any relevant jurisdiction, the validity of the remaining provisions shall not be affected,
and the rights and obligations of the Parties shall be construed and enforced as if the Agreement did not contain the particular
provisions held to be unenforceable.
11.11
Costs,
Expenses and Attorneys’ Fees
. If either Party commences any action or proceeding against the other Party to enforce or interpret
this Agreement, the prevailing Party in such action or proceeding shall be entitled to recover from the other Party the actual
costs, expenses and reasonable attorneys’ fees (including all related costs and expenses), incurred by such prevailing Party in
connection with such action or proceeding and in connection with obtaining and enforcing any judgment or order thereby obtained.
11.12
Compliance
with Export Laws
. Licensee shall comply with all applicable export restrictions in connection with the sale of Licensed Products
or the practice of Licensed Processes.
11.13
Currency
.
All amounts stated in this agreement are United States Dollars.
IN WITNESS WHEREOF, the Parties hereto have
caused this Agreement to be executed under seal in their names by their properly and duly authorized officers or representatives
as of the date set forth above.
|
“Licensor”
|
|
“Licensee”
|
|
|
|
|
|
MEARS TECHNOLOGIES
, INC.
|
|
K2 ENERGY LIMITED
|
|
|
|
|
|
By:
|
Robert J. Mears
|
|
By:
|
Sam Gazal
|
|
|
|
|
|
|
|
Title:
|
CEO & President
|
|
Title:
|
Chairman
|
SCHEDULE A
Term Sheet
MEARS TECHNOLOGIES, INC. (the “
Company
”
)
2009 / 2010 Convertible Bridge Financing
|
Proposed Aggregate Borrowing:
|
|
$5,000,000 in one or more closings, provided that the Board of Directors may choose to increase or decrease the size of the offering in its sole discretion.
|
|
|
|
|
|
Initial Closing:
|
|
On or about _________________________.
|
|
|
|
|
|
Interest Rate:
|
|
8% per year, simple interest.
|
|
|
|
|
|
Due Date of Note(s):
|
|
24 months from the date of the Initial Closing.
|
|
|
|
|
|
Terms:
|
|
Prior to the Due Date each noteholder may elect at any time to convert all principal and interest outstanding into shares of Series D Convertible Preferred Stock of the Company at the Series D price of $12.50 per share (it being noted that each share of the Corporation’s Series D Preferred Stock is currently convertible into approximately 1.204238921 shares of Common Stock and, as such, the Series D Notional Price under the Company’s certificate of incorporation is now $10.38.)
|
|
|
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|
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Upon the closing of a Qualified Financing (as defined below), all principal and interest outstanding will automatically convert into shares of the same class and series of capital stock of the Company issued to other investors in the Qualified Financing (the “Qualified Financing Stock”) at a price per share equal to 80% of the price per share paid by other investors in the Qualified Financing.
|
|
|
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A “Qualified Financing” shall be a sale of convertible preferred stock of the Company of at least $1,000,000, including proceeds from any indebtedness of the Company that converts into equity in such financing (excluding indebtedness under the notes described herein).
|
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Sale of Company:
|
|
In the event that the Company is sold to a third party prior to the completion of the Qualified Financing, upon the closing of such sale, all notes then outstanding shall be cancelled and each noteholder will be paid in cash an amount equal to one and one-half times (1.5X) the principal amount of such noteholder’s note plus the accrued interest on the principal amount.
|
|
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|
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Notification by the Company:
|
|
No later than 10 business days prior to the closing of a Qualified Financing or a Company Sale (“Event”), as the case may be, the Company will provide notice in writing to noteholders of the Event.
|
SCHEDULE B
Commercialization and Development Plan
1. OVERVIEW.
The Parties agree to perform the activities set forth in this Plan in order to bring the Licensed Technology to market. Capitalized
terms used in this schedule shall have the meanings ascribed to them in this Agreement.
2. PROJECT
MANAGER. Licensor shall appoint, subject to the approval of Licensee (which approval shall not be unreasonably withheld or delayed),
a project manager to direct implementation of this Plan and to oversee research and development efforts pursuant to this Agreement.
3. DILIGENCE.
Licensee shall use commercially reasonable efforts, or shall cause its Sublicensees to use commercially reasonable efforts, to
develop Licensed Products or Licensed Processes and to introduce Licensed Products or Licensed Processes into the commercial market
as set forth below, Licensor shall make reasonable commercial efforts to pursue the R&D Activities using the funding provided
by Licensee, including to achieve the agreed research milestones, and shall provide a team dedicated to the R&D
Activities
as provided below.
4. R&D
FUNDING. Licensee funding of Licensor’s R&D Activities shall total no less than $1.0 million in each of calendar years 2010,
2011, 2012, 2013 and 2014.
5. BUDGETING,
INVOICING AND PAYMENT. Within ten (10) business days of the Effective Date and then before each anniversary of that date Licensor
and Licensee shall agree a budget and research milestones for 2010 and subsequently, for each following calendar year. Licensor
shall invoice Licensee on a monthly basis in respect of all expenditures relating to R&D Activities and, to the extent those
expenditures relate to third party service and/or product providers, Licensor will supply Licensee with copies of the relevant
third party’s invoices. All invoices submitted by Licensor to Licensee shall be paid by Licensee within five (5) business days
of the date of invoice.
6. STAFF
AND RESOURCE ALLOCATION. The Project Manager shall have authority to supervise and maintain staff to carry out the R&D
Activities, subject to the availability of funding, Licensor’s oversight, and the Project Manager’s reasonable business and
technical judgment.
7. REPORTING.
The Project Manager shall furnish a report to the parties on no less than a quarterly basis, detailing the R&D Activities undertaken
during the previous quarterly period and plans for the succeeding quarterly period, as well as a funding request setting forth
the proposed use of Licensee’s minimum funding obligation for the applicable year as well as any proposal for additional (but optional)
Licensor funding and the objectives to be pursued therewith.
8. SALES
SCHEDULE. Licensee commits to the following schedule of minimum annual sales
of Licensed Products and/or Licensed Processes:
2010: (No Minimum)
2011: (No Minimum)
2012: (No Minimum)
2013: $5.0 million
2014: $10.0 million
2015 and each year following: $15.0 million
Licensee and Licensor mutually agree that:
|
|
(i)
|
Licensor will, by mutual agreement between the Parties,
make available engineering, technical and business development personnel to assist Licensee achieve the schedule of minimum sales,
the reasonable cost of which shall be reimbursed to Licensor by Licensee; and
|
|
|
(ii)
|
In the event Licensee fails to achieve the minimum annual
sales as scheduled above, Licensee and Licensor will work in good faith to identify and appoint new, mutually acceptable Sublicensees
to assist Licensee achieve these sales objectives.
|
9. BREACH. In the event that Licensor determines that Licensee
(or a Sublicensee) has failed to fulfill any of its obligations under this Schedule, then Licensor may treat such failure as a
material breach of this Agreement.
10. UPDATES. This Commercialization Plan shall be updated
as appropriate by mutual consent of the Parties.
SCHEDULE C
Mears Patent Portfolio
1.
Granted
and Issued US Patents
1. Granted and issued US Patents (continued)
2. Granted and Issued non-US (Rest of World) Patents
Exhibit 10.7
ACN 106 609 143
Mr John Gerber Chairman
Mears Technologies Inc.
189 Wells Avenue, Third Floor
Newton, MA 0249 USA
6
th
June 2014
Dear John,
Mears Technologies Inc. (“Mears”) Exclusive License
and Collaboration Agreement
In March 2010 Mears and K2 Energy Limited
(“K2”) entered into an Exclusive License and Collaboration Agreement whereby Mears granted K2 a license for the exclusive
worldwide rights to the Mears Silicon Technology (“MST
TM
”) for all solar energy applications.
Between April 2010 and January 2013 K2
Energy contributed approximately US$2.7 million to the R&D activities of Mears in relation to this technology. The aim of
the research was to develop more efficient silicon based cells utilising MST
TM
. A new design was developed and fabricated
during the year to seek to overcome recombination issues encountered in the earlier version. Whilst recombination issues of electrons
remain, elipsometry measurements. indicate a significant increase in optical absorption using the MST
TM
film. Additional
metrology work is required to validate this finding. As described in the Information Memorandum and Prospectus of January 2013,
it was determined that the research phase at Mears had concluded. Thus the next phase for this technology commenced with approaches
being made to major international solar groups to collaborate in its future development and commercialisation.
'The above mentioned agreement determined
that the commercialisation and development program would be agreed and the parties would co-operate in the future. To this end
K2 wishes to further advance discussions with major solar groups and prior to committing further expenditure to this cause, requests
your confirmation that K2's obligations pursuant to the research phase described in the March 2010 agreement have been satisfied
as follows:
|
|
1.
|
That the parties acknowledge that K2 has met all funding
obligations of the agreement under Clause 3.2 “Responsibility of Licensee”;
|
|
|
2.
|
That K2 has no future research funding obligations under
the agreement;
|
|
|
3.
|
That K2 will pursue at its cost, a collaboration with
a major international solar group;
|
|
|
4.
|
That Mears has met its entire obligation under the agreement;
|
|
|
5.
|
That all terms and conditions, excluding the funding
requirements in Section 3.2, of the original Exclusive License and Collaboration Agreement, dated 3/3/2010, stay in effect (licensing,
sub-licensing, license fees, patents, etc);
|
|
|
|
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Level 2, Kyle House,
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61 2 9251 3311
|
|
27 Macquarie Place,
|
61 2 9251 6550 fax
|
|
Sydney, 2000
|
k2energy.com.au
|
|
Australia
|
|
|
|
6.
|
That new budgets
and work programs must negotiated and mutually agreed in case the parties seek
joint
collaboration in future MST
TM
Solar commercialization and development work;
|
|
|
7.
|
In the event that
K2 as licensee has been unable to secure annual sales of in excess of $1 million per
year of the licensed MST
TM
Solar products and/or services by the end of calendar
year 2020, then Mears will be able to non-exclusively market these products on K2's behalf
and pay to K2 50% of all net revenue generated.
|
|
|
8.
|
The above is to be agreed by both parties by execution
below.
|
|
Yours faithfully,
|
|
|
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|
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/s/ Sam Gazal
|
|
|
|
|
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Sam Gazal
|
|
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Chairman
|
|
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K2 Energy Limited
|
|
IN WITNESS WHEREOF, the Parties hereto
have caused this Agreement to be executed under seal in their names by their properly and duly authorised officers or representatives
as of the date set forth below.
|
“Licensor”
|
|
“Licensee”
|
|
|
|
|
|
MEARS TECHNOLOGIES, INC,
|
|
KE ENERGY LIMITED
|
|
|
|
|
|
/s/
John D.T.
Gerber
|
|
/s/
Samuel Gazal
|
|
|
|
|
|
By:
|
John D.T.
Gerber
|
|
By:
|
Samuel Gazal
|
|
|
|
|
|
|
|
Title:
|
Chairman
|
|
Title:
|
Director
|
|
|
|
|
|
|
|
Date:
|
June 14, 2014
|
|
Date:
|
6
th
June 2014
|
|
|
|
|
Level 2, Kyle House,
|
61 2 9251 3311
|
|
27 Macquarie Place,
|
61 2 9261 6550 fax
|
|
Sydney, 2000
|
k2energy.com.au
|
|
Australia
|
|
Exhibit 10.8
MEARS TECHNOLOGIES, INC.
AMENDMENT NO. 1 TO
THIRD AMENDED AND RESTATED INVESTOR RIGHTS
AGREEMENT
This Amendment No. 1 to Third Amended and
Restated Investor Rights Agreement (this “Amendment”) is made as of March 11, 2015, by and among Mears Technologies,
Inc. a Delaware corporation (the “Company”), and the other signatories hereto and amends that certain Third Amended and
Restated Investor Rights Agreement, dated November 14, 2011 (the “Agreement”), by and among the Company and the Stockholders
(as defined therein).
WHEREAS, on or about the date hereof, the
Company anticipates selling to certain investors convertible promissory notes in an aggregate principal amount of up to $14,752,667
(the “Financing”);
WHEREAS, it is a condition to the closing
of the Financing that the Stockholders become subject to a market standoff agreement on the terms set forth herein;
WHEREAS, to facilitate the Financing, the
Company and the Stockholders desire to reduce the number of shares of Common Stock that may be subject to award under stock incentive
plans to fifteen percent (15%) of the total number of fully diluted capital stock issued and outstanding at the date of the offer
of the option;
WHEREAS, pursuant to Section 6.6 of
the Agreement, any amendment of the Agreement requires the written consent of the Company and Stockholders holding Shares (as defined
in the Agreement) representing at least 66 2/3% of the voting power of all Shares held by the Stockholders and is binding on all
parties to the Agreement even if they do not execute such consent; and
WHEREAS, the undersigned
Stockholders hold Shares representing at least 66 2/3% of the voting power of all Shares held by the Stockholders;
NOW, THEREFORE, in consideration of the foregoing, and for other
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agree to amend the Agreement
as follows:
1. The
first paragraph of Section 3.11 and Section 3.11(a) of the Agreement shall be amended to read in their entirety as follows:
“The Company may establish a stock incentive
plan pursuant to which the Board may award options to acquire Common Stock, or restricted stock awards, or stock awards pursuant
to performance bonuses to Officers, Directors and employees of, and consultants and advisors to, the Company (the “Plan”).
The Plan shall comply with the following rules:
(a) Subject
to (b), the total number of shares of Common Stock subject to options or other awards granted or offered to be granted under
the Plan shall not, assuming each outstanding option will be exercised, when aggregated with all shares of capital stock
issued as a result of any option granted pursuant to the Plan, exceed fifteen percent (15%) of the total number of fully
diluted capital stock issued and outstanding at the date of the offer of the option or other award,”
Amend. 11/14/14
2. The
following Section 4A shall be inserted immediately following Section 4 of the Agreement:
“4A. “
Market
Stand-off” Agreement
. In connection with the Qualified Public Offering, if any, each Stockholder hereby agrees that,
for a period of 365 days following the effective date of the registration statement for the Qualified Public Offering (such date,
the “
IPO Commencement Date
”, and such period, the “
Restricted Period
”), it will not (i)
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, lend or otherwise transfer or dispose of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, whether now owned or hereafter acquired or with respect to which
such Stockholder has or hereafter acquires the power of disposition, other than any of the securities to be offered to the public
in the Qualified Public Offering through an underwriter or selling group member or any securities acquired in the public market
in, or at any time after, the Qualified Public Offering (collectively, “
Restricted Stock
”); or (ii) enter into
any swap or other agreement, arrangement or transaction that transfers to another, in whole or in part, directly or indirectly,
any of the economic consequence of ownership of any Restricted Stock, whether any transaction described in clause (i) or (ii)
is to be settled by delivery of Common Stock, other securities, in cash or otherwise, without the prior written consent of the
managing or lead underwriter of such offering;
provided, however
that, (A) on the 181
st
day following the IPO
Commencement Date and on every subsequent 31
st
day thereafter, 15% of the securities shall be released from the this
lock-up provision until the 366
th
day following the date of the IPO Commencement Date when all such prohibitions shall
have been removed (for purpose of clarity, the table below contains a summary of the lock-up period); and (B) notwithstanding
the foregoing, if during the last seventeen (17) days of the one hundred eighty (180) day period following the IPO Commencement
Date (the “
FINRA Restricted Period
”) the Company issues an earnings release or material news or , a material
event relating to the Company occurs, or prior to the expiration of the FINRA Restricted Period the Company announces that it
will release earnings results during the sixteen (16) day period beginning on the last day of the restricted period, then, upon
the request of the managing or lead underwriter, to the extent required by any FINRA rules, the restrictions imposed by this Section
4(A) shall continue to apply until the end of the third (3
rd
) trading day following the expiration of the fifteen (15)
day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. In order
to enforce the restrictions agreed to by each Stockholder in this Section 4(A), the Company may impose stop-transfer instructions
with respect to any security acquired under or subject to this Agreement until the end of the Restricted Period, The Company’s
underwriters shall be third-party beneficiaries of the restrictions set forth in this Section 4(A).
|
Days Following the
|
|
% of Securities
|
|
|
Qualified Public Offering
|
|
Subject to Lock-Up
|
|
|
1-180
|
|
|
100%
|
|
|
181-211
|
|
|
85%
|
|
|
212-242
|
|
|
70%
|
|
|
243-273
|
|
|
55%
|
|
|
274-304
|
|
|
40%
|
|
|
305-335
|
|
|
25%
|
|
|
336-365
|
|
|
10%
|
|
|
366 and thereafter
|
|
|
0%
|
|
3. The
Agreement, as amended by this Amendment, contains the entire agreement among the parties with respect to the subject matter thereof
and amends, restates and supersedes all prior and contemporaneous arrangements or understandings with respect thereto.
4. Upon
the effectiveness of this Amendment, on and after the date hereof, each reference in the Agreement to “this Agreement,”
“hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference to the Agreement,
as amended hereby. Except as specifically amended above, the Agreement shall remain in full force and effect and is hereby ratified
and confirmed.
5. This
Amendment shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters
within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of
the Commonwealth of Massachusetts (without reference to the conflict of law provisions thereof), as to all other matters.
6. This
Amendment may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one agreement.
[
Remainder of Page Intentionally Left
Blank
]
IN WITNESS WHEREOF, this Amendment No.
1 to Third Amended and Restated Investor Rights Agreement has been executed by the parties hereto as of the day and year first
above written.
|
|
MEARS TECHNOLOGIES, INC.
|
|
|
|
|
|
By:
|
/s/ R J Mears
|
|
|
Name:
|
R J MEARS
|
|
|
Title:
|
PRESIDENT & CTO
|
Amendment No. 1 to Third Amended and
Restated Investor Rights Agreement Signature Page
MEARS TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTOR RIGHTS
AGREEMENT
November 14, 2011
TABLE OF CONTENTS
|
|
Page
|
|
|
|
|
1. Certain Definitions
|
1
|
|
2. Right of First Refusal
|
4
|
|
2.1 Rights of Stockholders to Acquire Offered Securities
|
4
|
|
2.2 Termination
|
6
|
|
3. Covenants
|
6
|
|
3.1 Conduct of Business
|
6
|
|
3.2 Maintenance of Records
|
6
|
|
3.3 Periodic Reports
|
6
|
|
3.4 Annual Budget
|
7
|
|
3.5 Business Plan
|
7
|
|
3.6 Access to Information
|
7
|
|
3.7 Stockholders’ Permitted Access
|
8
|
|
3.8 Audit
|
8
|
|
3.9 Auditors
|
8
|
|
3.10 Board of Directors
|
8
|
|
3.11 Stock Incentive Plan
|
8
|
|
3.12 Termination of Covenants
|
9
|
|
4. Confidentiality
|
9
|
|
5. Transfers of Rights; Calculation of Share Numbers
|
9
|
|
5.1 Transfer of Rights
|
9
|
|
5.2 Calculation of Share Numbers
|
10
|
|
6. General
|
10
|
|
6.1 Severability
|
10
|
|
6.2 Specific Performance
|
10
|
|
6.3 Governing Law
|
10
|
|
6.4 Notices
|
10
|
|
6.5 Amendment of Prior Agreement; Complete Agreement
|
11
|
|
6.6 Amendments and Waivers
|
11
|
|
6.7 Pronouns
|
11
|
|
6.8 Counterparts; Facsimile Signatures
|
11
|
|
6.9 Section Headings and References
|
11
|
|
6.10 Additional Stockholders
|
12
|
MEARS TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTOR RIGHTS
AGREEMENT
This Agreement dated as of November 14, 2011 is entered into
by and among MEARS Technologies, Inc., a Delaware corporation (the “
Company
”), and the parties that have executed
a counterpart signature page hereto (the “
Stockholders
”).
Recitals
WHEREAS, certain of the Stockholders (the “Existing Stockholders”)
own certain outstanding shares of capital stock of the Company;
WHEREAS, the Company and the Existing Stockholders are party
to that certain Second Amended and Restated Investor Rights Agreement, dated as of June 15, 2011 (the “Prior Agreement”),
pursuant to which the Company and the Existing Stockholders provided for certain arrangements with respect to (i) certain Stockholders’
(as defined in the Prior Agreement) right of first refusal with respect to certain issuances of securities of the Company and (ii)
certain covenants of the Company;
WHEREAS, concurrently herewith, the Company is issuing to certain
of the Stockholders shares of its Series F Convertible Preferred Stock, $0.01 par value per share (the “
Series F Preferred
Stock
”) pursuant to Subscription Agreements;
WHEREAS, on or about the date hereof, the Company is effecting
a recapitalization pursuant to which, among other things, shares of the Company’s Series A Convertible Preferred Stock, $0.01 par
value per share, Series B Convertible Preferred Stock, $0.01 par value per share, Series C Convertible Preferred Stock, $0.01 par
value per share, Series D Convertible Preferred Stock, $0.01 par value per share, Series E Convertible Preferred Stock, $0.01 par
value per share, and Series F Preferred Stock will convert into shares of the Company’s Common Stock, $0.001 par value per share;
and
WHEREAS, the Company and the Existing Stockholders desire to
amend and restate the Prior Agreement in its entirety to provide for certain arrangements with respect to (i) certain Stockholders’
right of first refusal with respect to certain issuances of securities of the Company and (ii) certain covenants of the Company,
both as set forth below.
NOW, THEREFORE, the Company and the Existing Stockholders representing
at least 66 2/3% of the voting power of all Shares (as defined in the Prior Agreement) hereby agree that the Prior Agreement shall
be amended and restated, and the parties to this Agreement further agree as follows:
1.
Certain
Definitions
.
As used in this Agreement, the following terms shall have the
following respective meanings:
“
Affiliated Party
” means, with respect to any
Stockholder, any person or entity which, directly or indirectly, controls, is controlled by or is under common control with such
Stockholder, including, without limitation, any general partner, officer or director of such Stockholder and any venture capital
fund now or hereafter existing which is controlled by one or more general partners of, or shares the same management company as,
such Stockholder.
“
Basic Amount
” means, with respect to a Qualified
Stockholder, its pro rata portion of the Offered Securities determined by multiplying the Offered Securities by a fraction, the
numerator of which is the aggregate number of shares of Common Stock held or issuable upon conversion of all Shares then held by
such Qualified Stockholder and the denominator of which is the total number of shares of Common Stock then outstanding (giving
effect to the conversion into Common Stock of any outstanding shares of convertible preferred stock).
“
Board
” means the Board of Directors of the
Company.
“
Budget
” has the meaning ascribed to it Section
3.4.
“
Business Plan
” has the meaning ascribed to
it in Section 3.5.
“
Commission
” means the Securities and Exchange
Commission, or any other federal agency at the time administering the Securities Act.
“
Common Stock
” means the common stock, $.001
par value per share, of the Company.
“
Company
” has the meaning ascribed to it in
the introductory paragraph hereto.
“
Company Sale
” means: (a) a merger or consolidation
in which (i) the Company is a constituent party, or (ii) a Company Subsidiary is a constituent party and the Company issues shares
of its capital stock pursuant to such merger or consolidation, except in the case of either clause (i) or (ii) any such merger
or consolidation involving the Company or a Company Subsidiary in which the shares of capital stock of the Company outstanding
immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital
stock which represent, immediately following such merger or consolidation, more than 50% by voting power of the capital stock of
(A) the surviving or resulting corporation or (B) if the surviving or resulting corporation is a wholly owned subsidiary of another
corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation;
or (b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions,
by the Company or a Company Subsidiary of all or substantially all the assets of the Company and the Company Subsidiaries taken
as a whole (except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned Company Subsidiary).
“
Company Subsidiary
” means any corporation,
partnership, trust, limited liability company or other non-corporate business enterprise in which the Company (or another Company
Subsidiary) holds stock or other ownership interests representing (a) more than 50% of the voting power of all outstanding stock
or ownership interests of such entity or (b) the right to receive more than 50% of the net assets of such entity available for
distribution to the holders of outstanding stock or ownership interests upon a liquidation or dissolution of such entity.
“
Confidential Information
” means any information
that is labeled as confidential, proprietary or secret, or which a Stockholder obtains from the Company pursuant to financial statements,
reports and other materials provided by the Company to such Stockholder pursuant to this Agreement or pursuant to visitation or
inspection rights granted hereunder.
“
Director
” means an individual who is a member
of the Board.
“
Financial Year
” means each period of 12 months
ending at midnight on December 31 unless otherwise agreed by the Board.
“
GAAP
” means U.S. Generally Accepted Accounting
Principles consistently applied.
“
Notice of Acceptance
” means a written notice
from a Stockholder to the Company containing the information specified in Section 2.1(b).
“
Offer
” means a written notice of any proposed
or intended issuance, sale or exchange of Offered Securities containing the information specified in Section 2.1(a).
“
Offered Securities
” means (a) any shares of
its Common Stock, (b) any other equity securities of the Company, including, without limitation, shares of preferred stock, (c)
any option, warrant or other right to subscribe for, purchase or otherwise acquire any equity securities of the Company, or (d)
any debt securities convertible into capital stock of the Company.
“
Officer
” means any individual appointed as
an officer by the Board according to Company’s by-laws.
“
Plan
” has the meaning ascribed to it in Section
3.12.
“
Qualified Public Offering
” means the Company’s
first underwritten public offering of its Common Stock under the Securities Act.
“
Qualified Stockholder
” means a Stockholder
that either (a) is an “accredited investor” within the meaning of Rule 501(a) under the Securities Act or (b) meets comparable
“sophistication” or other requirements of any applicable jurisdiction such that the offering of such securities by the
Company to such Stockholder would not result in the violation of any law by the Company or impose any undue burden on the Company
as determined in the good faith judgment of the Board.
“
Refused Securities
” means those Offered Securities
as to which a Notice of Acceptance has not been given by the Qualified Stockholders pursuant to Section 2.1.
“
Securities Act
” means the Securities Act of
1933, as amended, or any successor federal statute, and the rules and regulations of the Commission issued under such Act, as they
each may, from time to time, be in effect,
“
Shares
” means all shares of capital stock
of the Company held by the Stockholders, whether now owned or hereafter acquired.
“
Stockholder
” has the meaning ascribed to it
in the introductory paragraph hereto.
2.
Right
of First Refusal
.
2.1
Rights
of Stockholders to Acquire Offered Securities
.
(a) The
Company shall not issue, sell or exchange, agree to issue, sell or exchange, or reserve or set aside for issuance, sale or exchange,
any Offered Securities, unless in each such case the Company shall have first complied with this Section 2.1.
(i) The
Company shall deliver to each Stockholder an Offer, which shall (i) identify and describe the Offered Securities, (ii) describe
the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities
to be issued, sold or exchanged, (iii) identify the persons or entities (if known) to which or with which the Offered Securities
are to be offered, issued, sold or exchanged, and (iv) offer to issue and sell to or exchange with such Stockholder that is a Qualified
Stockholder such Qualified Stockholder’s Basic Amount. Notwithstanding the other provisions of this Section 2.1, after delivery
of the Offer, the Company may issue, sell or exchange, agree to issue, sell or exchange, or reserve or set aside for issuance,
sale or exchange, Offered Securities to the offerees or purchasers described in the Offer and upon the terms and conditions (including,
without limitation, unit prices and interest rates) which are not more favorable, in the aggregate, to the acquiring person or
persons or less favorable to the Company than those set forth in the Offer without complying with the terms of this Section 2.1,
provided that the Company permits each Qualified Stockholder to purchase the number of Offered Securities that such Qualified Stockholder
is entitled to purchase pursuant to this Section 2.1 on substantially the same terms as the Company sold the Offered Securities
in the initial transaction, within 10 days after the Company receives a Notice of Acceptance from such Qualified Stockholder.
(b) To
accept an Offer, in whole or in part, a Qualified Stockholder must deliver to the Company, on or prior to the date 15 days after
the date of delivery of such Offer to such Qualified Stockholder, a Notice of Acceptance providing a representation letter certifying
that such Qualified Stockholder is an accredited investor within the meaning of Rule 501 under the Securities Act and indicating
the portion of the Qualified Stockholder’s Basic Amount that such Qualified Stockholder elects to purchase.
(c) The
Company shall have 90 days from the expiration of the period set forth in Section 2.1(b) to issue, sell or exchange all or any
part of the Refused Securities, but only to the offerees or purchasers described in the Offer (if so described therein) and only
upon terms and conditions (including, without limitation, unit prices and interest rates) which are not more favorable, in the
aggregate, to the acquiring person or persons or less favorable to the Company than those set forth in the Offer.
(d) Upon
(i) the closing of the issuance, sale or exchange of all or less than all of the Refused Securities or (ii) such other date agreed
to by the Company and Qualified Stockholders who have subscribed for a majority of the Offered Securities subscribed for by the
Qualified Stockholders, such Qualified Stockholder or Stockholders shall acquire from the Company and the Company shall issue to
such Qualified Stockholder or Stockholders, the number or amount of Offered Securities specified in the Notices of Acceptance upon
the terms and conditions specified in the Offer.
(e) The
purchase by the Qualified Stockholders of any Offered Securities is subject in all cases to the preparation, execution and delivery
by the Company and the Qualified Stockholders of a purchase agreement relating to such Offered Securities reasonably satisfactory
in form and substance to the Qualified Stockholders and their respective counsel.
(f) Any
Offered Securities not acquired by the Qualified Stockholders or other persons in accordance with Section 2.1(c) may not be issued,
sold or exchanged until they are again offered to the Qualified Stockholders under the procedures specified in this Agreement.
(g) The
rights of the Qualified Stockholders under this Section 2.1 shall not apply to the issuance of:
(i) shares
of Common Stock (and/or options, warrants or other rights to purchase shares of Common Stock) issued by the Company to employees,
consultants and directors (in their capacity as directors) of the Company in accordance with agreements or plans approved by the
Board;
(ii) securities
issued by the Company in connection with any acquisition, merger, joint venture, stock split, distribution reinvestment plan or
recapitalization;
(iii) shares
of Common Stock in a Qualified Public Offering;
(iv) securities
pursuant to strategic or one-off alliances;
(v) shares
of Common Stock issuable upon conversion of shares of preferred stock;
(vi) shares of
capital stock of the Company issued upon the exercise or conversion of any options, warrants or other rights to purchase shares
of capital stock of the Company if such option, warrant or right is not subject to the right of first refusal pursuant to this
Section 2.1; and
(vii) shares of capital
stock to an investor or investors who, in the good faith judgment of the Board, would add material value to the Company in a manner
beyond the capital subscribed.
2.2
Termination
.
This Section 2 shall terminate upon the earlier of the closing of a Company Sale of the closing of a Qualified Public Offering.
3.
Covenants
.
3.1
Conduct
of Business
. The Company shall, except as may be otherwise directed by the Board, use commercially reasonable efforts to ensure
that, in material respects, it:
(a) keeps
its property in good working order and condition (reasonable fair wear and tear excepted) and makes any necessary repairs and replacements;
(b) with
respect to insurance:
(i) insures
and keeps insured at all times the assets of the Company which are of an insurable nature against damage, destruction and other
risks, in each case as is customary and prudent for a similarly situated company in a business similar to the Company’s business;
(ii) takes
out and keeps in force workers’ compensation, public risk, business interruption and any other risk insurance as is customary and
prudent for a similarly situated company in a business similar to the Company’s business;
(iii) takes out
and keeps in force Directors and Officers’ indemnity insurance policies for all Directors and Officers, in an amount to be agreed
by the Board; and
(c) complies
with the requirements of any governmental agency relating to the conduct of the Company’s business and the Company’s assets.
3.2
Maintenance
of Records
. The Company shall use commercially reasonable efforts to ensure that it:
(a) maintains
books and records in accordance with applicable law and regulations including, but not limited to, GAAP; and
(b) makes
provision in its accounts for all applicable taxes payable as they are incurred after deducting any taxation credits arising from
losses and adjustments in previous years.
3.3
Periodic
Reports
. The Company shall make available for inspection by each Stockholder all information concerning the Company’s business
and the operations of the Company, including, but not limited to, the following reports in reasonable detail;
provided
,
however
,
that such Stockholder shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information
so provided:
(a) as
soon as practicable after the end of each quarter, but no later than 20 business days after the end of each quarter, an unaudited
profit and loss statement, cash flow statement and balance sheet as at the end of the quarter;
(b) within
90 days of the end of each Financial Year, an audited profit and loss statement and balance sheet for the Financial Year prepared
in accordance with GAAP; and
(c) subject
to Section 3.6, as soon as reasonably possible, any information reasonably requested by a Stockholder.
3.4
Annual
Budget
. The Company shall before the end of each Financial Year prepare an annual budget, subject to Board approval, for
the following Financial Year in a form and content approved by the Board (the “
Budget”)
.
3.5
Business
Plan
. The Company shall ensure that:
(a) before
the end of each Financial Year, the Officers prepare, subject to Board approval, a one-year business plan and a three-year business
plan for the Company (together, as each plan is amended from time to time in accordance with this Section 3.5, the
‘Business
Plan”);
(b) after
the Business Plan has been approved under Section 3.5(a), the Officers shall update:
(i) the
one-year business plan every twelve months, for adoption by the Board, with a view to ensuring that the Company always has in place
a Business Plan for the next 12 months; and
(ii) the
three-year business plan every 12 months, for adoption by the Board.
(c) if
the Officers believe that any current Business Plan approved by the Board requires amendment and re-approval by the Board, the
amended Business Plan is provided to the Board for approval; and
(d) any
material change to the Business Plan is first approved by the Board.
3.6
Access
to Information
. Subject to Section 3.7, the Company shall on reasonable notice and during normal business hours permit any
Stockholder, or Stockholder’s representative, for purposes relating to a Stockholder’s capacity as such and provided that such
Stockholder shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided,
to:
(a) inspect
any property of the Company;
(b) inspect
and take any copies of any document relating to the Company’s business, including its accounts; and
(c) discuss
the Company’s affairs, finances and accounts with the Company’s Officers and auditors.
3.7
Stockholders’ Permitted Access
.
(a) Inspections
by a Stockholder of property and or documents and the provision of copies of any documents to a Stockholder, may only occur under
the supervision of an Officer;
(b) Inspections
by a Stockholder of any property or document, which in the reasonable opinion of the Board (i) compromises the attorney-client
privilege or (ii) comprises confidential technical or commercially sensitive information, may only occur with the prior written
approval of the Board; and
(c) Copies
of any documents, which in the reasonable opinion of the Board comprise confidential technical or commercially sensitive information,
may only be made available to a Stockholder with the prior written approval of the Board.
3.8
Audit
.
(a) The
accounts of the Company (prepared in accordance with GAAP) shall be audited at the end of each Financial Year. In addition, a set
of consolidated accounts prepared in accordance with GAAP shall be prepared and audited at the end of each Financial Year.
(b) The
Company shall use its best efforts to procure that the audits referred to in Section 3.8(a) are completed by the end of three months
after the end of the relevant Financial Year.
3.9
Auditors
.
The auditors of the Company shall be determined by the Board.
3.10
Board
of Directors
.
(a) The
Company shall promptly reimburse in full each Director of the Company who is not an employee of the Company for all of his or her
reasonable out-of-pocket expenses incurred in attending each meeting of the Board or any committee thereof.
(b) The
Board shall meet on at least a monthly basis, unless otherwise agreed by a majority of the members of the Board who are not employees
of the Company or a Company Subsidiary.
3.11
Stock
Incentive Plan
. The Company may establish a stock incentive plan pursuant to which the Board may award options to acquire
Common Stock or restricted stock awards to Officers, Directors and employees of, and consultants and advisors to, the Company
(the “
Plan
”). The Plan shall comply with the following rules:
(a) Subject
to (b), the total number of shares of Common Stock subject to options or other awards granted or offered to be granted under the
Plan shall not, assuming each outstanding option will be exercised, when aggregated with all shares of capital stock issued as
a result of any option granted pursuant to the Plan, exceed twenty percent (20%) of the total number of fully diluted capital stock
issued and outstanding at the date of the offer of the option.
(b) Options
granted under the Plan shall (i) be granted at such exercise prices, in such amounts, and for such term as the Board may determine
with respect to each option grant, and (ii) become exercisable (“
vest
”) on such schedule(s) and in such amount(s)
as the Board may determine with respect to each such grant (provided that if the Board approves an option grant under the Plan
without approving a vesting schedule for such grant, such option shall vest in equal monthly installments over three years). The
Company shall have the right to repurchase shares of Common Stock acquired through exercise of options granted under the Plan
at fair market value (as determined by the Board) from certain terminating employees in accordance with the terms of their respective
employment.
(c) All
other terms and conditions of the Plan shall be determined by the Board.
3.12
Termination
of Covenants
. All covenants of the Company contained in this Section 3 shall terminate upon the earlier of the closing of a
Company Sale or the closing of a Qualified Public Offering.
4.
Confidentiality
.
Each Stockholder agrees that he, she or it 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, 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 4 by such Stockholder), (b) is or
has been independently developed or conceived by the Stockholder without use of the Company’s Confidential Information or (c) is
or has been made known or disclosed to the Stockholder by a third party without a breach of any obligation of confidentiality such
third party may have to the Company;
provided
,
however
, that a Stockholder 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 Shares from such Stockholder as long as
such prospective purchaser agrees to be bound by the provisions of this Section 4, (iii) to any Affiliated Party of such Stockholder,
provided that such party is obligated not to disclose, divulge or use any Confidential Information to the same extent as the Stockholders,
or (iv) as may otherwise be required by law, provided that the Stockholder takes reasonable steps to minimize the extent of any
such required disclosure. Notwithstanding the foregoing, such information shall not be deemed confidential for the purpose of enforcing
this Agreement. Notwithstanding anything to the contrary, in the event of a pending, threatened or actual breach of a Stockholder’s
obligations under this Section 4, the Company shall have the right to seek injunctive relief in a court of competent jurisdiction
to enjoin such breach.
5.
Transfers
of Rights; Calculation of Share Numbers
.
5.1
Transfer
of Rights
. This Agreement, and the rights and obligations of each Stockholder hereunder, may be assigned by such Stockholder
to (a) any person or entity to which Shares are transferred by such Stockholder, or (b) to any Affiliated Party of such Stockholder,
and, in each case, such transferee shall be deemed a “
Stockholder
” for purposes of this Agreement; provided that
such assignment of rights shall be contingent upon the transferee providing a written instrument to the Company notifying the Company
of such transfer and assignment and agreeing in writing to be bound by the terms of this Agreement.
5.2
Calculation
of Share Numbers
. In determining the number of Shares owned by a Stockholder for purposes of exercising rights under this Agreement,
all Shares held by affiliated entities or persons shall be aggregated together (provided that no shares shall be attributed to
more than one entity or person within any such group of affiliated entities or persons).
6.
General
.
6.1
Severability
.
The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
6.2
Specific
Performance
. In addition to any and all other remedies that may be available at law in the event of any breach of this Agreement,
each Stockholder shall be entitled to specific performance of the agreements and obligations of the Company hereunder and to such
other injunctive or other equitable relief as may be granted by a court of competent jurisdiction.
6.3
Governing Law
. This Agreement shall be governed
by and construed in accordance with the General Corporation Law of the State of Delaware, as to matters within the scope thereof,
and the internal laws of the Commonwealth of Massachusetts (without reference to the conflicts of law provisions thereof), as to
all other matters.
6.4
Notices
. All notices, requests, consents and other
communications under this Agreement shall be in writing and shall be deemed delivered (i) three business days after being sent
by registered or certified mail, return receipt requested, postage prepaid or (ii) one business day after being sent via a reputable
nationwide overnight courier service guaranteeing next business day delivery, in each case to the intended recipient as set forth
below:
If to the Company, at 189 Wells Ave, 3rd Floor, Newton, MA 02459;
Attention: President, or at such other address as may have been furnished in writing by the Company to the other parties hereto,
with a copy to WilmerHale, 850 Winter Street, Waltham, MA 02451, Attention: Michael Bain, Esq.; or
If to a Stockholder, at its address set forth in the records
of the Company, or at such other address as may have been furnished in writing by such Stockholder to the other parties hereto.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation, personal delivery, messenger service, telecopy, first
class mail or electronic mail), but no such notice, request, consent or other communication shall be deemed to have been duly given
unless and until it is actually received by the party for whom it is intended. Any party may change the address to which notices,
requests, consents or other communications hereunder are to be delivered by giving the other parties notice in the manner set forth
in this Section 6.4.
6.5
Amendment
of Prior Agreement; Complete Agreement
. The Company and the Existing Stockholders holding Shares (as defined in the Prior Agreement)
representing at least 66 2/3% of the voting power of all Shares (as defined in the Prior Agreement) held by Stockholders (as defined
in the Prior Agreement) agree that, as of the date of this Agreement, (i) the Prior Agreement is hereby amended and restated in
its entirety by this Agreement, (ii) the provisions of the Prior Agreement shall no longer be of any force or effect and (iii)
this Agreement constitutes the entire agreement and understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings relating to such subject matter.
6.6
Amendments
and Waivers
. This Agreement may be amended or terminated and the observance of any term of this Agreement may be waived with
respect to all parties to this Agreement (either generally or in a particular instance and either retroactively or prospectively),
with the written consent of the Company and Stockholders holding Shares representing at least 66 2/3% of the voting power of all
Shares then held by Stockholders. Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance
of any term hereunder may not be waived with respect to any Stockholder without the written consent of such Stockholder unless
such amendment, termination or waiver applies to all Stockholders in the same fashion (it being agreed that a waiver of the provisions
of Section 2 with respect to a particular transaction shall be deemed to apply to all Qualified Stockholders in the same fashion
if such waiver does so by its terms, notwithstanding the fact that certain Qualified Stockholders may nonetheless, by agreement
with the Company, purchase securities in such transaction). The Company shall give prompt written 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 6.6 shall be binding on all parties hereto, even if they do not
execute such consent. 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.
6.7
Pronouns
.
Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.
6.8
Counterparts;
Facsimile Signatures
. This Agreement may be executed in any number of counterparts (including, in the case of the Stockholders,
a counterpart signature page to the Transaction Documents (as defined in the subscription agreements between the Company and individual
Stockholders)), each of which shall be deemed to be an original, and all of which together shall constitute one and the same document.
This Agreement (including such counterpart signature pages) may be executed by facsimile signatures.
6.9
Section
Headings and References
. The section headings are for the convenience of the parties and in no way alter, modify, amend, limit
or restrict the contractual obligations of the parties. Any reference in this agreement to a particular section or subsection shall
refer to a section or subsection of this Agreement, unless specified otherwise.
6.10
Additional Stockholders
. Persons or entities that,
after the date hereof, purchase Shares may, with the prior written approval of the Company (but without the need for approval by
any other party to this Agreement), become parties to this Agreement by executing and delivering a counterpart signature page,
whereupon they shall be deemed “
Stockholders
” for all purposes of this Agreement.
Executed as of the date first written above.
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COMPANY:
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MEARS TECHNOLOGIES, INC.
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By:
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/s/ Robert J Mears
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Name:
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ROBERT J MEARS
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Title:
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PRESIDENT
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Signature Page to Third Amended and Restated
Investor Rights Agreement
IN WITNESS WHEREOF, the undersigned has
executed this Written Consent of Stockholders and Warrantholders as of the date set forth below.
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If an individual:
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If a corporation, partnership, trust or other
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non-individual signatory:
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Signature
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Print Name of Entity
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By:
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Print Name
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Signature
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Date
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Title of Signatory
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Date
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Please refer to the ‘Stockholder Consent’ section of this book for all the required 66 2/3 + % stockholder signatures.
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Exhibit 10.9
October 10, 2014
Mears Technologies
189 Wells Ave. 3
rd
Floor
Newton, MA, 02459
Attention; Mr. John Gerber
Dear John,
This letter agreement
(the “
Agreement
”)
confirms the terms and conditions that will govern Mears Technologies
(together with its affiliates, subsidiaries, predecessors, and successors, the “
Company
”)
engagement
(the “
Engagement
”)
of National Securities Corporation (“
NSC
”),
a Washington corporation affiliated with Liquid Venture Partners, LLC (“
Liquid
”);
a
Delaware limited liability company whose broker dealer activities are offered through NSC. As set forth below, the Company hereby
engages NSC as the Company's exclusive underwriter, and potentially placement agent, in connection with an offering or series of
offerings of Company securities. Hereafter, unless designated separately, NCS shall refer to both NSC and Liquid collectively.
1.
Exclusive
Appointment; Services
.
a.
Exclusive
Appointment
. The Company hereby appoints NSC to act as its exclusive underwriter in connection with the sale of its common
stock, par value $0.001 per share (“
Common Stock
”)
;
in an initial public offering (“
IPO
”)
of up to approximately $25 million of Common Stock, subject to Section 2(a) and 2(b) below. However, it is understood that the
parties may agree in writing to alter the manner, size, and timing of the contemplated transaction, and the exclusive appointment
of NSC will extend to NSC's appointment as a placement agent or underwriter with respect to offerings or sales of any type or
form, including but not limited to private placements, registered direct offerings, institutional offerings under Rule 144A and
similar arrangements, mergers and acquisitions, and public offerings, on any basis, agency or underwritten as to which the parties
expressly agree will be subject to this Agreement (each, an “
Alternative
Offering
”)
.
Each of the IPO and any Alternative Offering is referred to as an “
Offering
”
.
This
exclusive appointment by the Company of NSC in respect of the Offerings shall not apply to the Company's currently contemplated
financing (expected to be completed by October 31, 2014) for approximately $3.0-$5.5 million in new capital and debt conversion
of approximately $4.6 million (the “IPO Bridge Financing”). As of September 2014, the Company has closed on all of
the conversion of approx. $4.68 million of debt and approx. $1.41 million of new capital. If the Company cannot close on an additional
$2.9 million of new capital by November 30, 2014, this Agreement shall be deemed null and void and have no binding effect on either
Party.
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12100 Wilshire Blvd. Suite 800 • Los Angeles, CA 90025 • www.liquidventure.com
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1
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During the term of this Agreement,
the Company will not, nor will it permit any of its advisors or representatives to, engage any party other than NSC to act as placement
agent or underwriter for any Offering, or to perform any other financial advisory, underwriting, or investment banking services
for the Company, except in connection with the IPO Bridge Financing. If the Company or, to the Company's knowledge, any of its
subsidiaries, stockholders, members, partners, affiliates, advisors or representatives, is contacted by any person concerning an
Offering or expressing a desire to purchase any capital stock of the Company (“
Securities
”),
the
Company shall provide to NSC all relevant details of the inquiry, except in connection with the IPO Bridge Financing.
b.
Services
.
NSC represents and warrants that it is a licensed broker/dealer under applicable federal and state securities law. NSC shall assist
the Company in identifying investors and potential purchasers, carrying out due diligence with respect to any potential Offering,
and analyzing, structuring, and negotiating the contemplated Offering(s) on the terms and conditions set forth herein. In the case
of private Offerings, NSC shall undertake to arrange such transactions on a “
best efforts
”
basis;
NSC shall underwrite public Offerings, if any, on a “
firm commitment
”
basis (any such underwritten
public Offering is a “
Public Offering
”)
.
However, nothing contained herein constitutes
a commitment or guarantee, express or implied, that any Offering will be consummated. NSC will not have the power or authority
to bind the Company to any sale of the Securities, and any Offering will be conducted at a price and on terms satisfactory to
the Company. NSC will have the right, but not the obligation, to determine the allocation of the Securities among prospective
purchasers, if necessary, provided that such allocation is reasonably acceptable to the Company.
2.
Compensation
.
As consideration for the services provided under this Agreement, the Company will pay NSC a fee as follows:
a.
Fee
.
The Company shall pay NSC a cash fee (the “
Cash Fee
”)
equal to six percent (6%) of the
gross proceeds of any Offering, which is due and payable at the time of each closing of an Offering (“
Closing
”)
exclusively from the proceeds of the Offering (directly from escrow; if an escrow account is used); provided, that in the
case of a Public Offering, if NSC is not able to underwrite the full amount of the Public Offering, the Company shall have the
right to include one or more additional underwriters as part of the underwriting syndicate for the Public Offering on customary
terms and conditions and each such additional underwriter shall share a pro rata portion of the Cash Fee based on the number of
shares underwritten by such additional underwriter as a percentage of the aggregate number of shares underwritten in the Public
Offering.
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b.
Warrants
.
In addition to the Cash Fee, immediately upon Closing, the Company shall sell for $1,000 to NSC warrants (“
Warrants
”)
to purchase the same type and character of Securities as are issued in the Offering (e.g., Common Stock), in an amount
equal to twenty percent (20%) of the aggregate Securities issued in the Offering ; provided, that in the case of a Public Offering,
if NSC is not able to underwrite the full amount of the Public Offering, the Company shall have the right to include one or more
additional underwriters as part of the underwriting syndicate for the Public Offering on customary terms and conditions and each
such additional underwriter shall share a pro rata portion of the Warrants based on the number of shares underwritten by such additional
underwriter as a percentage of the aggregate number of shares underwritten in the Public Offering. The Form of Warrant to be used
is attached hereto as
Exhibit B
.
Such Warrants will be for a term of five (5) years at an exercise price equal to
120% (one hundred twenty percent) of the price paid by investors in the Offering. The Warrants will contain provisions for cashless
exercise and adjustments for stock splits and similar transactions and representations and warranties normal and customary for
warrants issued to placement agents or underwriters, and will not be callable or terminable prior to the expiration date. The Warrants
may only be transferred in compliance with applicable securities laws. Common Stock underlying the Warrants will have identical
registration rights as those granted, if any, to investors in the Offering as a result of which the Warrant was issued, including
“
piggyback
”
registration rights on the registrations of the Company, or demand registrations
(voting with the other registrable securities to effect any such demand), as the case may be. The Company shall bear all costs
and expenses of registration, including the filing and clearing of one or more registration statements. The Warrants may be assigned
to any persons or entities designated by NSC.
c.
Other
Fee Provisions: Fee Tail
. The entire Cash Fee will be payable in respect of any other sale or placement of Securities in an
Offering that closes or is in
process during the term of this Agreement, regardless of whether such sale has been arranged
by NSC, by another agent, or directly by the Company, subject to the provisions of Sections 2(a) and 2(b). Upon termination of
this Agreement for any reason other than as a result of a breach by NSC or other termination for cause by the Company, the Company
shall promptly pay NSC its accrued but unpaid fees and unreimbursed expenses incurred up to and as of the date of termination.
Notwithstanding any termination of this Agreement, other than in connection with a Public Offering, NSC shall be entitled to the
entire Cash Fee set forth in
Section 2(a)-(b)
if, within six (6) months of the termination of this Agreement, the Company
consummates or enters into an agreement for the sale of Securities or to obtain financing or
other benefit with
any person or entity contacted by NSC in connection with this engagement or with which the Company or any of its agents on behalf
of the Company first made contact without the involvement of NSC during the term of this Engagement. Any and all such fees
shall
be payable upon the Closing of any such sale. The foregoing shall not apply to any closing in connection with the IPO Bridge Financing.
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d.
Expenses
.
Subject to the following, the Company is responsible for all costs and expenses associated with any Offering of its Securities,
and promptly upon request, the Company shall reimburse NSC for all reasonable out-of-pocket expenses incurred in connection with
this Engagement, including but not limited to reasonable travel, printing, and the fees and expenses of legal counsel and any other
independent advisors selected and retained by NSC (with the Company's consent, which shall not be unreasonably withheld):
i.
NSC
Expenses
. With the exception of legal fees and related legal expenses, .any single expense in excess of $1,000 (one thousand
dollars) will not be incurred without the Company's prior approval, which shall not be unreasonably withheld. Upon execution of
this Agreement, the Company shall pay NSC a retainer of $5,000 (five thousand dollars) which shall be applied to such expenses.
In addition, the Company's obligation to reimburse such ordinary expenses prior to any financing shall be limited to the sum of
$10,000 (ten thousand dollars). Notwithstanding the foregoing limitation, any reasonable reimbursable expenses (thirty thousand
dollars) incurred prior to the, financing due to said limitation up to a maximum of $20,000 shall be reimbursed after the bridge
financing and the cap shall be thereafter lifted to such extent, subject to the Company's continued right to approve expenses over
$1,000 (one thousand dollars).
ii.
Legal
Expenses
. It is understood that the amount of NSC's legal expenses necessarily depends on the manner and size of any Offering
the Company pursues. Prior to NSC's engagement of counsel with respect to any Offering, public or private, the Company shall deposit
with NSC a refundable legal fee retainer of $15,000 (fifteen thousand dollars). With respect to any single private Offering, the
Company shall not reimburse NSC more than $40,000 (forty thousand dollars) in legal fees. It is understood that the fees of NSC's
counsel for any Public Offering
(“
Underwriter's Counsel'
”)
will
significantly exceed $15,000 but in any event shall not exceed $150,000 (one hundred and fifty thousand dollars) unless approved
in writing by the Company; legal fees for Underwriter's Counsel shall be negotiated in good faith and approved by the Company (which
approval shall not be unreasonably withheld) prior to commencement of any work by Underwriter's Counsel with respect to any Public
Offering of Company Securities, it being understood that in no event will NSC advance legal fees on the Company's behalf. Concerning
the legal fees for a Public Offering, unless otherwise agreed in writing by the Company, the Company will provide a retainer for
legal fees as follows: one third up to the filing of the S-1, one third between the filing of the S-1 and the effectiveness of
the IPO, and one third at the effectiveness of the IPO.
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e.
Payments
.
All payments to be made to NSC hereunder will be made in cash by wire transfer of immediately available U.S. funds. Except as expressly
set forth herein, no fee payable to NSC hereunder shall be credited against
any
other fee
due to NSC. The obligation to pay any fee or expense set forth herein shall be absolute and unconditional and shall not be subject
to reduction by way of setoff, recoupment or counterclaim.
3.
Manner
of Offering; Representations and Warranties of the Company
. The Company warrants and agrees that:
a.
Due
Diligence
. The Company will cooperate with NSC in any due diligence investigation reasonably requested by NSC in connection
with the Engagement and will use commercially reasonable efforts (or in the case of a request in connection with a Public Offering,
reasonable best efforts) to furnish NSC with such information with respect to the business, operations, assets, liabilities, financial
condition and prospects of the Company, including but not limited to financial statements, certificates of its senior officers
regarding such information, (and customary opinions of counsel and customary letters or opinions of accountants in the case of
a Public Offering), and such other documents as NSC may from time to time reasonably request (the “
Company Information
”)
to assist in preparing a private placement memorandum, registration statement, or similar document for use in connection
with any Offering and will provide NSC with reasonable access to the officers, directors, employees, accountants, counsel and other
representatives (collectively, the “
Representatives
”)
of the Company. The Company represents
and warrants that all Company Information provided to NSC, including but not limited to the Company's financial statements, will
be complete and correct in all material respects and, taken as a whole together with the Offering Materials (as defined below),
will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company
acknowledges and confirms that other than conducting a customary diligence investigation with a Public Offering, NSC (i) will use
and rely upon the accuracy and completeness of all such Company Information without independently investigating or verifying same;
(ii) has not been retained to independently verify any such Company Information; (iii) assumes no responsibility for the accuracy,
completeness, or adequacy for any purpose of such Company Information or any other information regarding the Company; and (iv)
will not make any appraisal of any assets of the Company.
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b.
Offering
Materials
. The Company will be solely responsible for the contents of the private placement memorandum, registration statement,
or other offering document (as such may be amended or supplemented from time to time, and including any information incorporated
therein by reference, the “
Offering Materials
”)
and any and all other written or oral communications
provided by or on behalf of the Company to any actual or prospective purchaser of the Securities, and the Company represents and
warrants that the Offering Materials and such other communications will not, as of the date of the offer or sale of the Securities,
contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they were made, not misleading in each case except
insofar as the content of any Offering Materials and any other written or oral communications are made in reliance on and in conformity
with any information relating to NSC or any other underwriter or placement agent furnished to the Company by NSC or such other
underwriter or placement agent. The Company authorizes NSC to provide the Offering Materials and related communications to prospective
and final purchasers of the Securities at such times and in such forms as the Company may direct.
If, at any time prior to
the completion of the offer and sale of the Securities, an event occurs that would cause the Offering Materials or other selling
communications to contain an untrue statement of a material fact or to omit to state a material fact necessary in, order to make
the statements therein, in' light of the circumstances under which they were made, not misleading, then the Company will notify
NSC immediately of such event, and NSC will suspend solicitations of the prospective purchasers of the Securities until such time
as the Company shall prepare a supplement or amendment to the Offering Materials, and selling communications that corrects such
statement or omission.
c.
Reliance
Upon Company Representations
The Company agrees that any representations and warranties made by it to any investor in a private
Offering shall be deemed also to be made to NSC for its benefit. In connection with any Public Offering, (i) the Company and NSC
expect to enter into a mutually agreeable underwriting agreement in customary form, which would be expected to supersede this Engagement
Agreement and (ii) such underwriting agreement shall provide that NSC shall be entitled to receive a customary opinion of counsel
and negative assurance statement from counsel to the Company and a letter from the Company's accountants containing statements
and information of the type customarily included in accountants' “comfort letters” to underwriters with respect to
the financial statements and certain financial information contained in the Offering Materials.
d.
Compliance
with State Securities Laws
. The Company will be solely responsible for all applicable state securities law compliance with
respect to the offer and sale of the Securities, including the timely making of any filings or taking other actions required under
the applicable securities or “
blue sky
”
laws or regulations of such domestic states as
NSC reasonably may specify and the continuation of qualifications in effect for so long as may be required, The Company will provide
NSC with copies of any pertinent filings at or around the time they are made, and to the extent any filing contains information
relating to NSC and/or the terms of this Engagement, NSC will be provided a copy of the intended filing sufficiently in advance
to permit time for review and comment.
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e.
Offerings
Exempt from Registration
. To the extent that any Offering Is designated as one to be made pursuant to an applicable exemption
from registration under the Securities Act of 1933, as amended (the “
Act
”),
the Company
agrees that to its knowledge, it will not, directly or indirectly, make any offer or sale of any Securities which would cause
the contemplated Offering to fail to be entitled to the applicable exemption or unreasonably limit the availability of a public
registered Offering or an Offering in which NSC will act, In particular, the Company represents and warrants to NSC that it has
not, directly or indirectly, made any offers or sales of Securities which would cause the Offering of the Securities contemplated
hereunder to fail to be entitled to the exemption from registration afforded by
Section 4(a
)
(2
) of the Act. As used
herein, the terms “
offer
”
and “
sale
”
have the meanings
specified in
Section 2(3
) of the Act.
To the extent that an Offering
is designated as one to be made pursuant to Regulation D under the Act, the offer and sale of the Securities will comply with certain
requirements of Regulation D to at least the extent that any non-compliance would satisfy the provisions of Rule 508 under the
Act, including, without limitation, the requirements that:
(i) Except
as permitted by applicable law, the Company will not offer or sell the Securities by means of any form of general solicitation
or general advertising.
(ii) Except
as permitted by applicable law, the Company will not offer or sell the Securities to any person who is not an “
accredited
investor”
(as defined in Rule 501 under the Act).
(iii) The
Company will exercise reasonable care to assure that the purchasers of the Securities are not underwriters within the meaning of
Section 2(11) of the Act and, without limiting the foregoing, that such purchasers will comply with Rule 502(d) under the Act.
(iv) The
Company will not make any filings with the Securities and Exchange Commission with respect to the offer and sale of the Securities
without prior notification to NSC.
(v) Neither
the Company nor any officer, director, shareholder, promoter, manager or general partner of the Company is or will be subject to
the “
bad actors
”
disqualification provision of Rule 506(d) under the Act.
f.
Audits
.
The Company shall use commercially reasonable efforts to effect all financial audits necessary to meet the listing requirements
of the NASDAQ, NYSE, or NYSE-MKT exchanges, as appropriate. For the avoidance of doubt, no financial audits will be required in
connection with private Offerings.
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g.
Additional
Pre-Offering Requirements
. Prior to any Offering, the Company shall use commercially reasonable efforts to structure its capital
structure, employee stock option plan, and Board of Directors in a manner reasonably acceptable to NSC and, where applicable, the
Company shall use commercially reasonable effort to cause all holders to convert all notes and preferred shares to Common Stock
with the extinguishment of attached rights. As a condition to making any changes at NSC’s request in connection with this subsection,
the Company may require reasonable employment agreements or other protective agreements be entered into with one or more officers
of the Company.
h.
Lock-Up
Period
. In the event of an IPO, all shares held by principals in the Company, shares received pursuant to a merger, if any,
which closes within ninety days of the IPO closing, all Warrants and all shares received pursuant to exercise of such Warrants
received by NSC hereunder may not be sold or redeemed for a period of 12 months following the initial listing on an exchange.
Investors in bridge financing, if any, will be locked up for a period of no less than 180 days following initial listing.
i.
Investor
Relations Firm; Investor Conference Calls
. For a period of two (2) years from the Closing of a Public Offering, the Company
shall retain an investor relations firm reasonably acceptable to NSC in terms of scope of services and fees, which firm should
have the ability to perform investor relations and product and company branding functions. For a period of two (2) years from
the Closing of a Public Offering, the Company, with the aid of the investor relations firm, will announce customary financial results
via press releases and Form 8-K and hold investor and public conference calls at least quarterly, at which the Company will review
its quarterly and annual financial results.
4.
Confidentiality
.
NSC acknowledges that in connection with the Engagement, the Company will provide NSC with information which the Company considers
to be confidential and which will be marked with some methodology that indicates the Company's intention to preserve the information
as confidential (“
Confidential Information
”)
.
NSC agrees to employ all reasonable efforts
to keep the Confidential Information secret and confidential, using no less than the degree of care employed by NSC to preserve
and safeguard its own confidential information, and shall not disclose or reveal the Confidential Information to anyone except
its employees, consultants and contractors who have an obligation of confidentiality with NSC. NSC will not use the Confidential
Information except in connection with its performance of services hereunder, unless disclosure is required by law, court order,
or any government, regulatory or self-regulatory agency or body in the opinion of NSC's counsel, in which event NSC will provide
the Company with reasonable advance notice of such disclosure. These obligations do not apply to any portion of Confidential Information
which: (a) Is or becomes generally available to the public other than through a breach of this Agreement; (b) was rightfully in
NSC’s possession or readily available to NSC from another source not under obligation of secrecy to the Company prior to the disclosure;
(c) is rightfully received by NSC from another source on a non-confidential basis; (d) is disclosed by the Company to an unaffiliated
third party free of any obligation of confidence; (e) is developed by or for NSC without reference to the Company’s Confidential
Information; or (f) is released for disclosure with the Company’s written consent. Notwithstanding any termination of this Agreement,
NSC’s confidentiality obligations shall survive (1) in perpetuity under the Uniform Trade Secrets Act
(“
UTSA
”)
in respect of any Trade Secret as defined by the UTSA, and (2) in respect of any non-Trade Secret,
for a period of two years from the date of disclosure.
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Notwithstanding any of the
foregoing, NSC is authorized to transmit to any prospective investor the following: confidential material furnished by the Company
or prepared by NSC in conjunction with the Company for transmission to prospective investors in a private Offering who have executed
a confidentiality agreement acceptable to the Company; and forms of purchase agreements and any other legal documentation supplied
to NSC for transmission to any prospective investor by or on behalf of the Company. The Company authorizes NSC to execute, on the
Company's behalf, confidentiality agreements in a form acceptable to the Company with such prospective investors.
5.
Indemnification
.
The Company agrees to indemnify NSC and related persons in accordance with the indemnification agreement attached as
Exhibit
A,
which is incorporated herein by this reference. The provisions of Exhibit A shall survive any termination or expiration
of this Agreement.
6.
Term
and Termination
. NSC’s Engagement will commence upon the execution of this Agreement and shall continue in effect for
a period of 180 (one hundred eighty) days (the
“
Initial Term
”)
.
During
the Initial Term, this agreement may not be terminated by the Company absent gross negligence or willful misconduct of NSC. After
the expiration of the Initial Term, the Agreement shall continue in effect; but may be terminated by either party at any time
thereafter with thirty (30) days’ written notice to the other pursuant to
Section 19
. Upon termination of this Agreement
for any reason, the rights and obligations of the parties hereunder shall terminate, except for the obligations set forth in
Sections
2
(including, without limitation, to the extent payment is required under
Section 2(c
)),
3(b)-(g)
,
3(k)-(n)
,
5,
6, 8-19
, and
Exhibit A
, which shall survive termination.
7.
Additional
Services; Right of First Refusal
. Should the Company request NSC to perform any services or act in any capacity not specifically
addressed in this Agreement, such services or activities shall constitute separate engagements, the terms and conditions of which
will be embodied in separate written agreement(s) and will include appropriate indemnification provisions. The indemnity provisions
of
Exhibit A
shall apply to any such additional engagements (whether or not covered by a separate written agreement), unless
and until superseded by a written indemnity provision set forth in a subsequent agreement.
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8.
Other
Transactions; Disclaimers
. The Company acknowledges that NSC is engaged in a wide range of investing, investment banking and
other activities (including investment management, corporate finance, securities issuance, trading and research and brokerage activities)
from which conflicting interests or duties, or the appearance thereof, may arise. Information held elsewhere within NSC but not
accessible (absent a breach of internal procedures) to its investment banking personnel providing services to the Company will
not under any circumstances affect NSC's responsibilities to the Company hereunder. The Company further acknowledges that NSC and
its affiliates have and may continue to have investment banking, broker-dealer and other relationships with parties other than
the Company pursuant to which NSC may acquire information of interest to the Company. NSC shall have no obligation to disclose
to the Company or to use for the Company's benefit any such non-public information or other information acquired in the course
of engaging in any other transaction (on NSC's own account or otherwise) or otherwise carrying on the business of NSC. The Company
further acknowledges that from time to time NSC's independent research department may publish research reports or other materials,
the substance and/or timing of which may conflict with the views or advice of NSC's investment banking department and/or which
may have an adverse effect on the Company's Interests in connection with the transactions contemplated hereby or otherwise. In
addition, the Company acknowledges that, in the ordinary course of business, NSC may trade the securities of the Company for its
own account and for the accounts of its customers, and may at any time hold a long or short position in such securities. NSC shall
nonetheless remain fully responsible for compliance with federal and state securities laws in connection with such activities.
It is expressly understood
and agreed that NSC has not provided nor is undertaking to provide any advice to the Company relating to legal, regulatory, accounting,
or tax matters. The Company acknowledges and agrees that it has relied and will continue to rely on the advice of its own legal,
tax and accounting advisors in all matters relating to any Offering contemplated hereunder.
The Company further acknowledges
and agrees that NSC will act solely as an independent contractor hereunder, and that NSC's responsibility to the Company is solely
contractual in nature and that NSC does not owe the Company or any other person or entity, including but not limited to its shareholders,
any fiduciary or similar duty as a result of the Engagement or otherwise.
The Company agrees that neither
NSC nor any of its controlling persons, affiliates, directors, officers, employees or consultants shall have any liability to the
Company or any person asserting claims on behalf of or in right of the Company for any losses, claims, damages, liabilities or
expenses arising out of or relating to the Engagement, unless it is finally judicially determined that such losses, claims, damages,
liabilities or expenses resulted solely from the gross negligence or willful misconduct of NSC.
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9.
Work
Product and Announcements
. NSC's advice shall be the sole proprietary work product and intellectual property of NSC, and such
advice may not be disclosed, in whole or in part, to third parties other than the Company's professional advisors, as necessary,
without the prior written permission of NSC unless such disclosure is required by law. The Company acknowledges that NSC, at its
option and expense, and no earlier than the first to occur of (i) the signing of definitive agreements regarding the Offering or
(ii) the public announcement of the Offering by the Company, may place announcements and advertisements or otherwise publicize
the Offering (which may include the reproduction of the Company's logo and a hyperlink to the Company's website) on NSC's website
and in such financial and other newspapers and journals as it may choose, stating that NSC has acted as an agent in connection
with or advised the Company about such Offering.
10.
Complete
Agreement; Amendments; Assignment
. This Agreement sets forth the entire understanding of the parties relating to the subject
matter hereof and supersedes and cancels any prior communications, understandings and agreements, whether oral or written, between
NSC and the Company. This Agreement may not be amended or modified except in writing. The rights of NSC hereunder shall be freely
assignable to any affiliate of NSC, and this Agreement shall apply to, inure to the benefit of and be binding upon and enforceable
against each of the parties and their successors and assigns.
11.
Third
Party Beneficiaries
. This Agreement is intended solely for the benefit of the parties hereto and, with the exception of the
rights and benefits conferred upon the Indemnified Parties by
Section 5
and Exhibit A of this Agreement, shall not be deemed
or interpreted to confer any rights upon any third parties.
12.
Governing
Law; Jurisdiction; Venue
. All aspects of the relationship created by this Agreement shall be governed by and construed in
accordance with the laws of the State of New York, applicable to contracts made and to be performed in New York, without regard
to its conflicts of laws provisions. All actions and proceedings which are not submitted to arbitration pursuant to
Section
13
hereof shall be heard and determined exclusively in the state and federal courts located in the Borough of Manhattan
in the City of New York, and the Company and NSC hereby submit to the jurisdiction of such courts and irrevocably waive any defense
or objection to such forum, on forum non conveniens grounds or otherwise. The parties agree to accept service of process by mail,
to their principal business address, addressed to the chief executive officer and secretary thereof. The parties hereby agree
that this
Section 12
shall survive the termination and/or expiration of this Agreement.
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13.
Arbitration
.
Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation
or validity thereof, including the determination of the scope or
applicability of this agreement to arbitrate, shall
be determined by arbitration in New York City (with the exception of claims to enforce the indemnity provision contained herein,
which may, at the option of the party seeking relief, be submitted either to arbitration or to any court of competent jurisdiction
)
.
The arbitration shall be administered either by FINRA Dispute Resolution pursuant to its Code of Arbitration Procedure, or if FINRA
cannot or does not accept the arbitration, by JAMS pursuant to its Streamlined Arbitration Rules and Procedures. Judgment on the
Award may be entered in any court having jurisdiction. This clause shall not preclude parties from seeking provisional remedies
in aid of arbitration from a, court of appropriate
jurisdiction.
The arbitrator may,
in the award, allocate all or part of the costs of the arbitration, including the fees of the arbitrator and the reasonable attorneys'
fees of the prevailing party.
The parties hereby agree
that this
Section 13
shall survive the termination and/or expiration of this Agreement.
The Company's and NSC's
consent to Arbitration are confirmed by initialing below:
14.
Severability
.
Should any one or more covenants, restrictions and provisions contained in this Agreement be held for any reason to be void, invalid
or unenforceable, in whole or in part, such unenforceability will not affect the validity of any other term of this Agreement,
and the invalid provision will be binding to the fullest extent permitted by law and will be deemed amended and construed so as
to meet this intent. To the extent any provision cannot be so amended or construed as a matter of law, the validity of the remaining
provisions shall be deemed unaffected and the illegal or invalid provision will be deemed stricken from this Agreement.
15.
Section
Headings
. The section headings herein are for convenience of reference only, and shall not limit or otherwise affect the meaning
hereof.
16.
Accounting
.
Any calculation, computation or accounting that may be required under this Agreement shall be made in accordance and conformity
with the Generally Accepted Accounting Principles and other standards as determined by the Financial Accounting Standards board
and regulatory agencies with appropriate jurisdiction.
17.
Counterparts
.
This Agreement may be executed via facsimile transmission and may be executed in separate counterparts, each of which shall
be
deemed to be an original and all of which together shall constitute a single instrument.
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18.
Patriot
Act,
NSC hereby notifies the Company that pursuant to the requirements of the USA PATRIOT Act (the “
Patriot Act
”),
it is required to obtain, verify and record information that Identifies the Company in a manner that satisfies the requirements
of the Patriot Act, This notice is given In accordance with the requirements of the Patriot Act.
19.
Notice
.
All notices, demands, and other communications to given pursuant to this Agreement shall be In writing and shall be personally
delivered, sent by overnight delivery using a nationally recognized courier service, sent by facsimile transmission, or emailed.
Notice shall be deemed received: (a) if personally delivered, upon the date of delivery to the address of the receiving party;
(b) if sent by overnight courier, the date actually received by the recipient; (c) if sent by facsimile or email, when sent. The
parties will each promptly notify the other of any changes to the following contact information.
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Notices to the NSC shall be sent to:
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Notices to the Company shall be sent to:
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National Securities Corporation
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Mears Technologies
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410 PARK AVE. 14
TH
PL.
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New York, N.Y. 10022
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Attention:
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JONATHAN RICH
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Attention:
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e-mail:
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jrich@nationalsecuritiesib.com
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e-mail:
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with a copy to:
Liquid Venture Partners
12100 Wilshire Blvd, Suite 800
Los Angeles, CA 90025
Attention: Ankur V. Desal
e-mail:
adesal@liquidventure.com
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12100 Wilshire Blvd. Suite 800 • Los Angeles, CA 90025 • www.liquidventure.com
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If the above accords with your understanding
and agreement, kindly indicate your consent hereto by signing below. We look forward to a long and successful relationship with
you.
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Very truly yours,
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NATION L SECURITIES CORPORAT ON
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By:
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LIQUID VENTURE PARTNERS
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By:
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ACCEPTED AND AGREED TO
AS OF THE DATE FIRST ABOVE WRITTEN:
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Mears Technologies, Inc.
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By:
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/s/ John D.T. Gerber
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Name: John D.T. Gerber
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Title: Chairman
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12100 Wilshire Blvd. Suite 800 • Los Angeles, CA 90025 • www.liquidventure.com
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EXHIBIT A
National Securities Corporation
c/o Liquid Venture Partners
12100 Wilshire Blvd., Suite 800
Los Angeles, CA 90025
Ladies and Gentlemen:
In further consideration
of the engagement by Mears Technologies (the “
Company
”)
of National Securities Corporation,
a Washington corporation doing business as “Liquid Venture Partners” (“
NSC
”),
to
act as the Company's exclusive placement agent in connection with a potential Offering or Offerings of securities, as such engagement
is described in that letter agreement between us of even date (the “
Engagement Agreement
”),
the
Company agrees to indemnify NSC and certain other persons provided for herein. All capitalized terms that are not defined herein
shall have the meaning given to them in the Engagement Agreement.
A.
Indemnification
Generally
. In connection with any Public Offering, the Company and NSC expect to enter into a mutually agreeable underwriting
agreement in customary form, which would be expected to supersede this Engagement Agreement and the indemnification provisions
of such agreement shall be apply. In the case of any other Offering, the Company hereby agrees to indemnify and hold harmless
National Securities Corporation, its subsidiaries, parents and affiliates and each of their directors, officers, managers, agents,
contractors, employees, members, counsel, and each other person or entity who controls NSC or any of its affiliates within the
meaning of Section 15 of the Securities Act (collectively, the “
Indemnified Parties
”)
to
the fullest extent permitted by law from and against any and all losses, claims, damages, expenses, or liabilities (or actions
in respect thereof) (“
Losses
”),
joint or several, to which they or any of them may become
subject under any statute or at common law, and to reimburse such Indemnified Parties for any reasonable legal or other expense
(including but not limited to the cost of any investigation, preparation, response to third party subpoenas) incurred by them
in connection with any litigation or administrative or regulatory action (“
Proceeding
”),
whether
pending or threatened, and whether or not resulting in any liability, insofar as such losses, claims, liabilities, or litigation
arise out of or are based upon (1) the engagement of NSC pursuant to the Engagement Agreement or subsequent agreement of similar
purpose between the Company and NSC (an “
Additional Engagement Agreement
”)
;
(2) the Offering
of Securities to third parties contemplated by the Engagement Agreement or Additional Engagement Agreement, (3) any other matter
relating to any Offering of Securities referred to or contemplated by the Engagement Agreement or Additional Engagement Agreement;
(4) any untrue statement or alleged untrue statement of any material fact contained in the Offering Materials, or in any other
written or oral communication provided by or on behalf of the Company to any actual or prospective purchaser of Securities, unless
such untrue statement or alleged untrue statement arises from information supplied by any members, officers, agents or employees
of NSC, in writing specifically for use therein; or (5) the omission or alleged omission to state in the. Offering Materials a
material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which
they were made, not misleading;
provided
,
however
, that while the indemnity provisions herein shall include
any and all claims regardless of whether NSC's negligence, active or passive, contributed to losses, they shall not apply to (i)
amounts paid in settlement of any such litigation if such settlement is effected without the consent of the Company, which consent
will not be unreasonably withheld, or (ii) Losses arising solely from the willful misconduct or gross negligence of Indemnified
Parties;
and
provided
that the Company will not be responsible for the fees and expenses of more than one counsel
to all Indemnified Parties, in addition to appropriate local counsel, unless in the reasonable judgment of any indemnified Party
there exists a potential conflict of interest which would make It inappropriate for one counsel to represent all such Indemnified
Parties.
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B.
Reimbursement
.
The Company will reimburse all Indemnified Parties for all reasonable expenses (including, but not limited to, reasonable fees
and disbursements of counsel for all Indemnified Parties) Incurred by any such Indemnified Parties in connection with investigating,
preparing, and defending any such action or claim, whether or not in connection with pending or threatened litigation in connection
with the transaction to which an Indemnified Parties is a party, promptly as such expenses are incurred or paid.
C.
Contribution
.
In connection with any Public Offering, the Company and NSC expect to enter into a mutually agreeable underwriting agreement in
customary form, which would be expected to supersede this Engagement Agreement and the contribution provisions of such agreement
shall be apply. In the case of any other Offering, if such indemnification is for any reason not available or insufficient to hold
an Indemnified Party harmless, the Company agrees promptly to contribute to the Losses Involved in such proportion as is appropriate
to reflect the relative benefits received (or anticipated to be received) by the Company, on the one hand, and by NSC, on the other
hand, with respect to the Engagement or similar services under any Additional Engagement Agreement or, if such allocation is determined
by a court or arbitral tribunal to be unavailable, in such proportion as is appropriate to reflect other equitable considerations
such as the relative fault of the Company on the one hand and of NSC on the other hand;
provided
,
however
, that,
to the extent permitted by applicable law, the Indemnified Parties shall not be responsible for amounts which in the aggregate
are in excess of the amount of all cash fees, exclusive of costs, actually received by NSC from the Company at the Closing in connection
with the Engagement or similar services under any Additional Engagement Agreement. Relative benefits to the Company, on the one
hand, and to NSC, on the other hand, with respect to the Engagement shall be deemed to be in the same proportion as (i) the total
value received or proposed to be received by the Company in connection with the Offering, whether or not consummated, bears to
(ii) all fees received or proposed to be received by NSC in connection with the applicable engagement. Relative fault shall be
determined, in the case of Losses arising out of or based on any untrue statement or any alleged untrue statement of a material
fact or omission or alleged omission to state a material fact in conjunction with any Public Offering, by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company to NSC and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act of 1933, as amended) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
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D.
No
Liability Without Gross Negligence or Misconduct
. The Company agrees that no Indemnified Party shall have any liability to
the Company or its respective owners, successors, heirs, parents, affiliates, security holders or creditors for any Losses, except
to the extent such Losses are determined, by a final, non-appealable judgment by a court or arbitral tribunal of competent jurisdiction,
to have resulted from such Indemnified Person's gross negligence or willful misconduct.
E.
Notice
.
NSC agrees, promptly upon receipt, to notify the Company in writing of the receipt of written notice of the commencement of any
action against it or against any other Indemnified Parties, in respect of which indemnity may be sought hereunder; however, the
failure so to notify the Company will not relieve it from liability under Sections A above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the Company of substantial rights or defenses.
F.
Settlement
.
The Company will not, without NSC's prior written consent, settle, compromise, or consent to the entry of any judgment in or otherwise
seek to terminate any pending Proceeding in respect of which indemnification may be sought hereunder (whether or not any Indemnified
Party is a party therein) unless the Company has given NSC reasonable prior written notice thereof and such settlement, compromise,
consent or termination includes an unconditional release of each Indemnified Party from any liabilities arising out of such Proceeding.
The Company will not permit any such settlement, compromise, consent or termination to include a statement as to, or an admission
of, fault, culpability or a failure to act by or on behalf of an Indemnified Party, without such Indemnified Party's prior written
consent. No Indemnified Party seeking indemnification, reimbursement or contribution under this Agreement will, without the Company's
prior written consent (which shall not be unreasonably withheld) settle, compromise, consent to the entry of any judgment in or
otherwise seek to
terminate any Proceeding referred to herein or admit fault, culpability or failure to act by or on behalf
of the Company or any Indemnified Party.
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G.
Survival;
Successors
. The indemnity, contribution and expense reimbursement obligations set forth herein shall be in addition to any
liability the Company may have to any Indemnified Party at common law or otherwise (but not duplicative of or effective to result
in any multiplicative return of Losses or of any such liability of the Company), and shall remain operative and in full force
and effect notwithstanding the termination of this Agreement, the closing of the contemplated Offering, and any successor of NSC
or any other Indemnified Parties shall be entitled to the benefit of the provisions hereof. Prior to entering into any agreement
or arrangement with respect to, or effecting, any merger, statutory exchange or other business combination or proposed sale or
exchange, dividend or other distribution or liquidation of all or a significant portion of its assets in one or a series of transactions
or any significant recapitalization or reclassification of its outstanding securities that does not directly or indirectly provide
for the assumption of the obligations of the Company set forth herein, the Company will promptly notify NSC In writing thereof
and, if requested by NSC, shall arrange in connection therewith alternative means of providing for the obligations of the Company
set forth herein, including the assumption of such obligations by another party, insurance, surety bonds or the creation of an
escrow, In each case in an amount and on terms and conditions reasonably satisfactory to NSC.
H.
Consent
to Jurisdiction; Attorneys' Fees
. Solely for the purpose of enforcing the Company's obligations hereunder, the Company consents
to personal jurisdiction, service and venue in any court proceeding in which any claim subject to this Agreement is brought by
or against any Indemnified Party other than NSC. In any action for enforcement of this Indemnity provision, the prevailing party
shall be entitled to recover all costs, including reasonable attorneys' fees, of bringing such an action.
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February 4, 2015
Mears Technologies, Inc.
20 Walnut Street, Suite 8
Wellesley Hills, MA 02481
Attention: Mr. John Gerber, Chairman
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Re:
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Engagement Agreement – 1
st
Amendment
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Dear John,
This 1
st
Amendment
(“
1
st
Amendment
”) to the Engagement Agreement between the Company and NSC dated October 10, 2014
(“
Agreement
”),
confirms the additional terms and conditions that will govern NSC’s engagement as the
Company’s placement agent in connection with an offering of the Company’s secured notes and makes certain modifications to the
Agreement. All terms Included and not defined herein shall have the same definitions they had in the Agreement.
The Company currently
has placed a principal amount of approximately $6.1 Million in the IPO Bridge Financing that automatically converts into common
stock at the IPO planned under the Agreement. The Company wishes to place up to an additional $6.5 Million in principal amount
in a placing to be called herein the “
2nd
IPO Bridge Financing
”
to fund the Company up through
approximately January 2016 and otherwise provide adequate time to conclude the planned IPO. Additionally, it is contemplated that
the notes sold in the IPO Bridge Financing will be offered the opportunity to convert into the same securities as being sold in
the 2
nd
IPO Bridge Financing, for a potential total principal amount of approximately $12.6 Million.
The 2
nd
IPO
Bridge Financing offered by NSC under this 1
st
Amendment shall be deemed a private placement of Securities under the
Agreement, subject to the modifications herein addressed, and this 1
st
Amendment addresses additional modifications
to the Agreement.
A. Revised Terms of the Bridge Financings
The Company hereby appoints
NSC to act as its exclusive placement agent for the 2
nd
IPO Bridge Financing, which will be subject to the terms of
the Agreement and this 1
st
Amendment.
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1)
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The approximate $6.1 Million of
notes issued in the IPO Bridge Financing will be offered the opportunity to convert into
the secured notes to be offered in the 2
nd
IPO Bridge Financing.
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2)
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The 2
nd
IPO Bridge Financing
will offer notes with the following basic terms: a) accrue interest at a rate of ten
percent (10%) simple interest per annum; b) convert automatically at the IPO into common
shares of the Company at a fifty percent (50%) discount to the IPO price;
provided
however,
that in no event shall such conversion price be greater than $0.50 or less
than $0.25, in each case as adjusted for stock splits, stock dividends, stock combinations,
recapitalizations, or the like that occur after the date of this 1
st
Amendment;
c) have a maturity date of May 31, 2016; and (d) be senior debt of the Company, secured
by all the personal property assets of the Company, including all the intellectual property
assets of the Company;
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3)
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NSC shall have the right to place
any remainder of the additional $6.5 Million of 2
nd
IPO Bridge Financing that
the Company’s existing shareholders and other 3
rd
party investors identified
by the Company have not subscribed to by January 15, 2015, which amount the Company shall
notify NSC in writing no later than January 16, 1015; and
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4)
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The Company shall close on at least
$5.0 Million under the 2
nd
IPO Bridge Financing by February 15, 2015, unless
extended by the Company upon approval of its board of directors (the “
Successful
Closing
”); otherwise, NSC’s right to place the 2
nd
IPO Bridge Financing
may be cancelled any time after February 15, 2015 by the Company in its sole discretion.
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B. NSC
Fees for the 2
nd
IPO Bridge Financing
NSC’s compensation
in connection with the 2
nd
IPO Bridge Financing shall be paid (including issued) at the time of the Successful Closing,
and will include:
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i)
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2
nd
IPO Bridge Financing Cash Fee
. The Company shall pay NSC a cash fee equal to ten
percent (10%) of the gross proceeds of the 2
nd
IPO Bridge Financing, which
is due and payable at the time of the Successful Closing exclusively from the net proceeds
of the 2
nd
IPO Bridge Financing and directly from escrow, if an escrow account
is used (the “
2
nd
IPO Bridge Financing Cash Fee
”). For
clarity, no fee is due on any of the notes that were sold in the IPO Bridge Financing
that convert into the same securities as sold in the 2
nd
IPO Bridge Financing.
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ii)
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2
nd
IPO Bridge Financing Placement Warrants
. In addition to the 2
nd
IPO Bridge Financing Cash Fee, Immediately upon Successful Closing, the Company shall
grant to NSC warrants to purchase common shares of the Company, in an amount equal to
ten percent (10%) of the common shares issuable upon conversion of the notes (or other
common stock or equivalents) sold in the 2
nd
IPO Bridge Financing (“
2
nd
IPO Bridge Financing Placement Warrants
”). For clarity, not warrants will
be issued on any of the notes that were sold in the IPO Bridge Financing that convert
into the same securities as sold in the 2
nd
IPO Bridge Financing. Such 2
nd
IPO Bridge Financing Placement Warrants will be for a term of five (5) years at
an exercise price equal to 100% (one hundred percent) of the conversion price of the
IPO Bridge Financing determined at the IPO. Notwithstanding the foregoing, this warrant
will be issued at the lowest conversion rate, which will be adjusted to reflect the aforementioned
final conversion price of the notes at the time of the IPO. The 2
nd
IPO Bridge
Financing Placement Warrants will contain provisions for cashless exercise and adjustments
for stock splits and similar transactions and representations and warranties normal and
customary for warrants issued to placement agents or underwriters, and will not be callable
or terminable prior to the expiration date. The 2
nd
IPO Bridge Financing Placement
Warrants may only be transferred in compliance with applicable securities laws and FINRA
rules. Common Stock underlying the 2
nd
IPO Bridge Financing Placement Warrants will
have identical registration rights as those granted, if any, to investors in the 2
nd
IPO Bridge Financing, including “
piggyback”
registration rights
on the registrations of the Company or demand registrations (voting with the other registrable
securities to effect any such demand), as the case may be. The Company shall bear all
costs and expenses of registration, including the filing and clearing of one or more
registration statements. The 2
nd
IPO Bridge Financing Placement Warrants may be
initially assigned to any persons or entitles designated by NSC.
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The form of the 2
nd
IPO Bridge Financing
Warrant will be similar to the form of warrant attached to the Agreement.
C. Compensation / Expenses
Section 2(a) of the Agreement
is hereby deleted and in its place is substituted the following section:
“a.
Fee
.
The Company shall pay NSC a cash fee (“Cash Fee”) equal to 10 percent (10%) of the gross proceeds of any private Offering,
which is due and payable at the time of each closing of such private Offering (“Closing”), exclusively from the proceeds
of the Offering (directly from escrow, if an escrow account is used). The Company shall pay NSC a Cash Fee equal to 9 percent (9%)
of the gross proceeds of the IPO, exclusively from the proceeds of the IPO; provided, that in the case of an IPO, if NSC is not
able to underwrite the full amount of the IPO the Company shall have the right with NSC’s reasonable consent to include one or
more additional underwriters as part of the underwriting syndicate for the Public Offering on customary terms and conditions,”
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Section 2(b) of the Agreement
is hereby removed and in its place is substituted the following section:
“b.
Warrants
.
In addition to the Cash Fee, immediately upon Closing of any private Offering, the Company shall sell for $1,000 to NSC
warrants (“Warrants”) to purchase Common Stock, in an amount equal to ten percent (10%) of the aggregate Common
Stock or, if a derivative the number of shares of Common Stock into which the derivative is convertible or exercisable,
issued in the private Offering. In an IPO the Company shall grant NSC Warrants to purchase Common Stock in an amount equal to
12 percent (12%) of the aggregate Common Stock and, if a derivative is included in the Offering, additionally the number of
shares of Common Stock into which the derivative is convertible or exercisable, issued in the IPO; provided, that in the case
of an IPO, if NSC is not able to underwrite the full amount of the IPO, the Company shall have the right with NSC’s
reasonable consent to include one or more additional underwriters as part of the underwriting syndicate for the IPO on
customary terms and conditions. The Form of Warrant to be used is attached hereto as Exhibit B. Such Warrants will be for a
term of five (5) years at an exercise price equal to 120% (one hundred twenty percent) of the price paid by investors in the
Offering. The Warrants will contain provisions for cashless exercise and adjustments for stock splits and similar
transactions and representations and warranties normal and customary for warrants issued to placement agents or underwriters,
and will not be callable or terminable prior to the expiration date. The Warrants may only be transferred in compliance with
applicable securities laws and FINRA rules. Common Stock underlying the Warrants will have registration rights typical of
those granted to underwriters or placement agents for the offering in which the Warrants are issued,
including “piggyback” registration rights on the registrations of the Company or demand registrations (voting
with the other registrable securities to effect any such demand), as the case may be. The Company shall bear all costs and
expenses of registration, including the filing and clearing of one or more registration statements. The Warrants may be
assigned to any persons or entities designated by NSC.
Section 2(d)(II), is hereby
modified to clarify that any legal retainers and fees paid are only refundable to the extent not earned, on an accountable basis.
D. Manner of Offering
Sections 3(e)(I) and (II)
of the Agreement are hereby deleted and in their place are substituted the following:
“(I) Except
as permitted by applicable law and approved by NSC, the Company will not offer or sell the Securities subject to the Agreement
by means of any form of general solicitation or general advertising.
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(ii) Except
as permitted by applicable law and approved by NSC, the Company will not offer or sell the Securities subject to the Agreement
to any person who is not an “accredited investor” (as defined in Rule 501 under the Act).”
Section 3(g) of the Agreement is hereby deleted
and in its place is substituted the following:
g. Additional
Pre-Offering Requirements. Prior to any Offering, the Company shall use commercially reasonable efforts to structure its capital
structure, employee stock option plan, and Board of Directors in a manner reasonably acceptable to NSC and, where applicable, the
Company shall use commercially reasonable effort to cause all holders to convert all notes and preferred shares to Common Stock
with the extinguishment of attached rights. As a condition to making any changes at NSC's request in connection with this subsection,
the Company may require reasonable employment agreements or other protective agreements be entered into with one or more officers
of the Company. In respect of the Board of Directors, the board will be restructured as contemplated by Section 4(q) of the final
Securities Purchase Agreement in respect of a private Offering of notes.
Section 3(h) of the Agreement is hereby deleted
and in its place is substituted the following:
“h. Lock
Up Period. In connection with an IPO, the Company will use its best efforts to obtain lock up agreements from all Its officers,
directors, key employees, stockholders and holders of securities convertible, exercisable or exchangeable for Common Stock as contemplated
by Sections 4(u) and 4(v) of the final Securities Purchase Agreement in respect of a private Offering of notes.
E. Termination of the Agreement
Section 6 of the Agreement is hereby deleted
and in its place is substituted the following:
“6.
Term
and Termination
. NSC's Engagement will commence upon the execution of this Agreement and shall continue in effect until February
15, 2015 (the “Initial Term”). During the Initial Term, this Agreement may not be terminated by the Company absent
gross negligence or willful misconduct of NSC. After the expiration of the Initial Term, the Agreement shall continue in effect,
but may be terminated by either party at any time thereafter with thirty (30) days' written notice to the other pursuant to Section
19. Notwithstanding the immediately preceding sentence, this Agreement may not be terminated by the Company until February 15,
2016 after the Successful Closing of the 2
nd
IPO Bridge Financing absent gross negligence or willful misconduct of NSC.
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Upon termination of
this Agreement for any reason, the rights and obligations of the parties hereunder shall terminate, except for the
obligations set forth in Sections 2 (including, without limitation, to the extent payment is required under Section 2(c),
3(b)-(g), 3(k)-(n), 6, 6, 8-19, and Exhibit A, which shall survive termination.
F. Miscellaneous Amendments to the Agreement
For purposes of conformity, the following amendment(s)
shall be made to the Agreement.
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The last three sentences of the first paragraph of Section 1(a) of
the Agreement shall be deleted and replaced with:
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“This exclusive
appointment by the
Company of
NSC in respect
of the
Offerings shall not apply to the Company's convertible bridge
financing (the
“IPO Bridge Financing
”).
As of September
2014, the Company has closed on a principal amount of approximately $6,100,000 of IPO Bridge Financing. The Company may amend
this Agreement to engage NSC to place an additional amount of IPO Bridge Financing as may be mutually agreed between the Company
and NSC.”
[the remainder of this page Intentionally
blank]
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If the above accords with your understanding
and agreement, kindly indicate your consent hereto by signing below.
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Very truly yours,
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NATIONAL SECURITIES CORPORATION
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By:
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LIQUID VENTURE PARTNERS
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By:
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ACCEPTED AND AGREED TO
AS OF THE DATE FIRST ABOVE WRITTEN:
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Mears Technologies, Inc.
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By:
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/s/ John D.T. Gerber
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Name: John D.T. Gerber
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Title: Chairman
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12100 Wilshire Blvd. Suite 800 • Los Angeles, CA 90025 • www.liquidventure.com
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Exhibit 10.10
February 9, 2015
Mears Technologies
20 Walnut Street, Suite 8
Wellesley Hills, MA 02481
Attention: John Gerber
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Re:
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Engagement Agreement for Strategic Consulting Services
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Dear John,
This letter agreement
(the “
Agreement
”) confirms the terms and conditions pursuant to which Liquid Patent Consulting, LLC (“
Consultant
”)
will provide certain strategic, and intellectual property advisory services to Mears Technologies the “
Company
”)
(the “
Engagement
”).
1.
Services
.
Consultant shall assist the Company with all aspects of its business, strategic and intellectual property development, including:
(a)
Business Strategy Activities
.
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(1)
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Identify optimal legal entity structure, shareholding of
parent and structure for all subsidiaries;
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(2)
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Assess current management and identifying and recruiting
additional key members of the management team and Board of Directors;
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(3)
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Assess the Company’s market landscape;
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(4)
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Assess the Company’s current business strategy and
assisting in the formulation of an optimal business strategy, including a development and commercialization strategy;
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(5)
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Assess the competitive features/functions of the Company’s
current and proposed products and services;
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(6)
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Assess the Company’s current financial and accounting
processes and recommend revisions to such processes;
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(7)
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Assess and make recommendations for performance measurement
metrics for various functions/organizations and total enterprise;
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Los Angeles, CA 90025
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www.liquidventure.com
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(8)
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Assess and make recommendations for the Company’s
sales compensation structure;
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(9)
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Assess and make recommendations for the Company’s
customer service methodologies, processes, performance measurement metrics;
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(10)
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Evaluate and recommend potential strategic partners;
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(11)
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Assist in development of detailed measurable actionable
business and financial plan for the next 18 months; and
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(12)
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General corporate advice, as needed and requested.
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(b)
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IP Related Activities
.
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(1)
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Review and analysis of Inventions held by the Company to
determine their usefulness, potential for monetization and potential patentability, including advice concerning the increase in
the likelihood or strength of any of the foregoing;
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(2)
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Interviewing the Company to understand the subject inventions
and researching prior art for purposes of determining the patentability of such inventions;
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(3)
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Advise and assist
in developing a strategy for the preparation and filing of one or more patents, both
United States and foreign, for purposes of adequately protecting the substantive claims
underlying the inventions, including for each for each such invention a complete invention
package with technical disclosure documentation (each, a “
Disclosure
”)
for use in the Company’s patent applications;
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(4)
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Review and comment on patent applications filed with respect
to such inventions;
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(5)
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Review and comment on office actions concerning patent
applications and issued patents;
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(6)
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Advise and assist
in developing a strategy for the Company’s strategic acquisitions of inventions
and patent rights to enhance the Company’s portfolio of patent rights, including
conducting the due diligence and acquisition efforts on behalf of the Company;
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(7)
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Advise and assist with regard to licensing, litigation
and sales of patent rights held by the Company; and
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(8)
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Provide engineering and/or scientific advisory services
to the Company.
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The IP related services to be provided
by Consultant to the Company set forth in
Section l(b)
shall be subject to a written
work assignment
(“
Work Assignment
”).
The Company shall use a Work
Assignment to request the IP Services in
Section 1(b)(1)
through
(8)
. Each
Work Assignment, when signed and delivered by the Company and accepted by Consultant, shall become part of this Agreement and
incorporated herein by this reference, In the event of any conflict between this Agreement and a Work Assignment, this Agreement
shall govern and control.
(c)
Additional
Services/Exclusions
.
It is expressly understood and agreed that Consultant has not provided nor is undertaking to
provide any advice to the Company relating to legal, regulatory, securities, finance, accounting, or tax matters. The
services provided to the Company hereunder are designed to assist, but not replace, the Company’s own intellectual
property counsel. Should the Company request Consultant to perform any services or act in any capacity not specifically
addressed in this Agreement, such services or activities shall constitute separate engagements, the terms and conditions of
which will be embodied in separate written agreement(s).
2.
Compensation
.
As consideration for the services provided under this Agreement, the Company will pay Consultant certain fees as follows:
(a)
Cash
Fees
.
If the Company elects to file additional patent applications with the help of the Consultant, the Company shall
pay Consultant a cash fee of $7,500 for each patent application Consultant files on behalf of the Company. This amount shall be
inclusive of the legal fees associated with such filings.
(b)
Warrant
.
Upon execution of this Agreement, the Company shall grant to Consultant a warrant, which may be issued in one or more instruments,
in the form of
Exhibit B
attached hereto (the
“
Warrants
”),
to purchase an aggregate of 2,981,504 shares of Company common stock (the
“
Common
Stock
”),
which is in an amount equal to ten percent of the total issued and outstanding Common Stock of the
Company as of the immediately and giving effect. Such Warrants will be for a term of five (5) years at an exercise price of $0.01
per share and shall contain cashless exercise and anti-dilution provisions and representations and warranties normal and customary
for warrants issued to investors, and will not be callable or terminable prior to the expiration date. The exercise price of the
warrant may be adjusted upward at the sole discretion of the Consultant. The Common Stock underlying the Warrants will have registration
rights, including
“
piggyback
”
registration rights on the registrations
of the Company or demand registrations (voting with the other registrable securities to effect any such demand) no less favorable
than those granted to any other person prior to or subsequent to the date of this Agreement. The Company shall bear all costs
and expenses of registration, including the filing and clearing of one or more registration statements. The Warrants may be assigned
to any persons or entities designated by Consultant.
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(c)
Expenses
. The Company shall
fund Consultant’s travel and other reasonable expenses related to the Engagement, including economy class airfare, business
class accommodations, ground transportation, meals and incidentals, in connection with visits by the Consultant team to the Company’s
site, provided that expenses exceeding $10,000 in aggregate shall be subject to the Company’s prior written approval which
shall not be unreasonably withheld.
(d)
Payments
. All payments to
be made to Consultant hereunder will be made in cash by wire transfer of immediately available U.S. funds. Except as expressly
set forth herein, no fee payable to Consultant hereunder shall be credited against any other fee due to Consultant or any of its
affiliates. The obligation to pay any fee or expense set forth herein shall be absolute and unconditional and shall not be subject
to reduction by way of setoff, recoupment or counterclaim.
(e)
Compensation Earned
. All
the compensation provided under this Agreement will be deemed fully earned as of the date of the Agreement, and not subject to
return in whole or in part or subject to reduction or further limitation. The Company waives any and all rights of set off against
the compensation provided for herein, including any securities underlying any Warrants.
(f)
Lock-Up Period
. In the event
of an initial public offering by the Company, all Warrants and shares of Common Stock received pursuant to exercise of such Warrants
received by Consultant and its assigns hereunder may not be sold for a period of 12 months following the initial listing on an
exchange.
3.
Representations and Warranties
of the Company
. The Company warrants and agrees that it is the true and rightful owner of all intellectual property rights
in each of the assets and inventions submitted to Consultant for analysis; that any and all technical invention information provided
to Consultant may, to the actual knowledge of the officers of the Company, be transmitted across country borders subject to compliance
with applicable export control and similar laws; and that no U.S, agency has suspended, revoked, or denied the Company’s
export privileges.
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4.
Term
and Termination
. Consultant’s Engagement will commence upon the execution of this Agreement and shall continue in effect
for a period of one hundred eighty (180) days (the “
Initial Term
”). After the expiration of the initial
Term, the Agreement shall automatically renew and continue in effect until it is terminated by either party with thirty (30) days’
written notice to the other pursuant to
Section 10
, Upon termination of this Agreement for any reason, the rights and obligations
of the parties hereunder shall terminate, except for the obligations set forth in
Sections 2-3
and 5-18, which shall survive
termination.
5.
Confidentiality
,
Consultant acknowledges that in connection with the Engagement, the Company will provide Consultant with information which
the Company considers to be confidential, including its trade secrets (“
Confidential Information
”).
Consultant agrees to employ all reasonable efforts to keep the Confidential Information secret and confidential, using no less
than the degree of care employed by Consultant to preserve and safeguard its own confidential information, and shall not disclose
or reveal the Confidential Information to anyone except its employees, consultants, affiliates and contractors who have an obligation
of confidentiality with Consultant. Consultant will not use the Confidential Information except in connection with its performance
of services hereunder, unless disclosure is required by law, court order, or any government, regulatory or self-regulatory agency
or body in the opinion of Consultant’s counsel, in which event Consultant will provide the Company with reasonable advance
notice of such disclosure. “
Confidential Information
” does not include information which (a) was in
the public domain or readily available to the trade or the public prior to the date of the disclosure; (b) becomes generally available
to the public in any manner or form through no fault of Consultant or its representatives; (c) was in Consultant’s possession
or readily available to Consultant from another source not under obligation of secrecy to the Company prior to the disclosure;
(d) is rightfully received by Consultant from another source on a non-confidential basis; (e) is developed by or for Consultant
without reference to the Company’s Confidential Information; (f) is disclosed by the Company to an unaffiliated third party
free of any obligation of confidence; or (g) is released for disclosure with the Company’s written consent. Notwithstanding
any termination of this Agreement, Consultant’s confidentiality obligations (1) in respect of any material that qualifies
as a “
Trade Secret
” under the Uniform Trade Secrets Act (“
UTSA
”) shall survive
in perpetuity under the UTSA until such information ceases to be a Trade Secret, and (2) in respect of any non-Trade Secret, for
a period of three (3) years from the date of disclosure.
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6.
Indemnification
.
The Company hereby agrees to indemnify and hold harmless Consultant and its affiliates and each of their directors, officers,
managers, agents, employees, members and counsel (collectively, the “
Consultant Indemnified Parties
”)
to the fullest extent permitted by law from and against any and all losses, claims, damages, expenses, or liabilities (or actions
in respect thereof) (“
Losses
”), joint or several, to which they or any of them may become subject under
any statute or at common law, and to reimburse such Consultant indemnified Parties for any reasonable legal or other expense (including
but not limited to the cost of any investigation, preparation, response to
third party subpoenas)
incurred by them in connection with any litigation or administrative or regulatory action (“
Proceeding
”),
whether pending or threatened, and whether or not resulting in any liability, insofar as such
.
losses, claims, liabilities,
or litigation arise out of or are based upon the Engagement, including, but not limited to, the Company’s use or misuse
(including use contrary to federal or state law) of the Disclosure(s), the Company’s breach of the representations and warranties
contained in Section 3 hereof, or any violation of U.S, or other import or export controls; provided, however, that while the
indemnity provisions herein shall include any and all claims regardless of whether Consultant’s sole negligence, active
or passive, contributed to losses, they shall not apply to (l) amounts paid in settlement of any such litigation if such settlement
is effected without the consent of the Company, which consent will not be unreasonably withheld, or (ii) Losses arising solely
from the willful misconduct or gross negligence of Consultant Indemnified Parties.
The provisions of this
Section 6
shall survive any termination or expiration of this Agreement.
7.
Work Product and Announcements
.
Except as provided otherwise in this Section 7, Consultant’s advice shall be the sole proprietary work product and Intellectual
property of Consultant and such advice may not be disclosed, in whole or in part, to third parties other than the Company’s
professional advisors without the prior written permission of Consultant, unless such disclosure is required by law, Any document
or information prepared by Consultant in connection with this Engagement shall not be duplicated by the Company except as explicitly
provided for hereunder or required by law. The Company acknowledges that Consultant, at its option and expense, may place announcements
and advertisements or otherwise publicize the Engagement (which may include the reproduction of the Company’s logo and a
hyperlink to the Company’s website) on Consultant’s website and in such financial and other newspapers and journals
as it may choose.
Concerning services provided to the Company
under Section 1 above, however, a) the Company has a free right to use the Consultant’s advice and work product and any derivative
thereof, except in cases in which such use would reveal to third parties or directly employ a proprietary method of the Consultant
that has been so disclosed as proprietary in advance in writing by the Consultant to the Company and b) the Consultant shall have
no ownership or rights to any intellectual property, advice, or work product that concerns the business or related activities of
the Company, broadly defined as the semiconductor industry, that may result from or be derived thereof, and all such intellectual
property, advice, and work shall be treated as confidential information of the Company.
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8.
Limitation
of Liabiliy
. Consultant shall employ due care and attention in providing the services hereunder. However, the Company
acknowledges that Consultant does not warrant or represent the accuracy or completeness of any public information or any
information provided solely by the Company used in any analysis and that inaccurate or incomplete data may affect the
validity and reliability of Consultant’s work product, including any draft patent Disclosures. Similarly, Consultant
makes no representation or warranty with respect to the non-infringement of any of the assets or inventions described in the
Disclosure(s). Consultant makes no warranty, representation, promise, or undertaking with respect to any legal or financial
consequences of, or any other consequences or benefits obtained from the use of any work product hereunder, including the
Disclosure(s), including any representation that any patent(s) will be granted. The Company assumes all risks related to
documentation or technical information and data which may be subject to U.S. export controls or export or import restrictions
in other countries. Consultant SPECIFICALLY DISCLAIMS ANY OTHER WARRANTY, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. CONSULTANT SHALL NOT BE LIABLE ON ACCOUNT OF ANY ERRORS,
OMISSIONS, DELAYS, OR LOSSES UNLESS CAUSED BY ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. TO THE FULLEST EXTENT PERMITTED BY
LAW, NEITHER CONSULTANT NOR ANY OF ITS CONTROLLING PERSONS, AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES OR CONSULTANTS WILL BE
LIABLE FOR ANY LOSS, DAMAGE OR INJURY (INCLUDING WITHOUT LIMITATION LOST PROFITS, INDIRECT, SPECIAL, OR
CONSEQUENTIAL DAMAGES) ALLEGED TO BE CAUSED BY USE OF THE DISCLOSURE(S) OR OTHER SERVICES PROVIDED HEREUNDER.
CONSULTANT’S LIABILITY ARISING UNDER THIS AGREEMENT SHALL BE LIMITED TO THE AMOUNTS PAID BY THE COMPANY TO CONSULTANT
WITH REGARD TO THE PROVISION OF THE SPECIFIC SERVICES THAT GAVE RISE TO THE CLAIM OF LIABILITY, BUT IN NO EVENT WILL SUCH
LIABILITY EXCEED THE TOTAL AMOUNT ACTUALLY PAID TO CONSULTANT PURSUANT TO
SECTION 2
.
9.
Other Transactions; Disclaimers
. The Company acknowledges
that Consultant and its affiliates are engaged in other activities from which conflicting interests or duties, or the appearance
thereof, may arise. Information held elsewhere within Consultant but not accessible will not under any circumstances affect Consultant’s
responsibilities to the Company hereunder. The Company further acknowledges that Consultant and its affiliates have and may continue
to relationships with parties other than the Company pursuant to which Consultant may acquire information of interest to the Company.
Consultant shall have no obligation to disclose to the Company or to use for the Company’s benefit any such non-public information
or other information acquired in the course of engaging in any other transaction (on Consultant’s own account or otherwise)
or otherwise carrying on the business of Consultant.
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The Company further acknowledges and agrees
that Consultant will act solely as an independent contractor hereunder, and that Consultant’s responsibility to the Company
is solely contractual
.
in nature and that Consultant does not owe the Company or any other person or entity, including
but not limited to its shareholders, any fiduciary or similar duty as a result of the Engagement or otherwise.
10.
Notice
. All notices, demands, and other communications
to given pursuant to this Agreement shall be in writing and shall be personally delivered, sent by overnight delivery using a nationally
recognized courier service, sent by facsimile transmission, or emailed. Notice shall be deemed received: (a) if personally delivered,
upon the date of delivery to the address of the receiving party; (b) if sent by overnight courier, the date actually received by
the recipient; (c) if sent email, when sent, The parties will each promptly notify the other of any changes to the following contact
information.
Notices to Consultant shall be sent to:
Liquid Patent Consulting, LLC:
12100 Wilshire Blvd, Suite 800
Los Angeles, CA 90025
Attention: Ankur V. Desai
e-mail:
adesai@liquidventure.com
Notices to the Company shall be sent to:
Mears Technologies, Inc.
20 Walnut Street, Suite 8
Wellesley Hills, MA 02481
Attention: Kevin McNulty
email:
kevin.mcnulty@mearstechnologies.com
11.
Complete Agreement; Amendments;
Assignment
. This Agreement sets forth the entire understanding of the parties relating to the subject matter hereof
and supersedes and cancels any prior communications, understandings and agreements, whether oral or written, between Consultant
and the Company. This Agreement may not be amended or modified except in writing. The rights of Consultant hereunder shall be freely
assignable to any affiliate of Consultant, and this Agreement shall apply to, inure to the benefit of and be binding upon and enforceable
against the parties and their respective successors and assigns.
12.
Third Party Beneficiaries
.
This Agreement is intended solely for the benefit of the parties hereto and, with the exception of the rights and benefits conferred
upon the Consultant Indemnified Parties by Section 6 of this Agreement, shall not be deemed or interpreted to confer any rights
upon any third parties.
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13.
Governing Law; Jurisdiction;
Venue
. All aspects of the relationship created by this Agreement shall be governed by and construed in accordance with the
laws of the State of California, applicable to contracts made and to be performed in California, without regard to its conflicts
of laws provisions. All actions and proceedings which are not submitted to arbitration pursuant to Section 14 hereof shall be heard
and determined exclusively in the state and federal courts located in the County of Los Angeles, State of California, and the Company
and Consultant hereby submit to the jurisdiction of such courts and irrevocably waive any defense or objection to such forum, on
forum non conveniens
grounds or otherwise.
14.
Arbitration
.
Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement,
interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate,
shall be determined by arbitration before one arbitrator in Los Angeles (with the exception of claims to enforce the
indemnity provision contained herein, administered by JAMS pursuant to its Streamlined Arbitration Rules and Procedures.
Judgment on the Award may be entered in any court having jurisdiction. This clause shall not preclude parties from seeking
provisional remedies in aid of arbitration from a court of appropriate jurisdiction.
The arbitrator may, in the award, allocate
all or part of the costs of the arbitration, including the fees of the arbitrator and the reasonable attorneys’ fees of the
prevailing party.
The parties hereby agree that this
Section
14
shall survive the termination and/or expiration of this Agreement.
The Company’s and Consultant’s
consent to Arbitration are confirmed by initialing below:
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Company
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Consultant
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15.
Severability
. Should any
one or more covenants, restrictions and provisions contained in this Agreement be held for any reason to be void, invalid or unenforceable,
in whole or in part, such unenforceability will not affect the validity of any other term of this Agreement, and the invalid provision
will be binding to the fullest extent permitted by law and will be deemed amended and construed so as to meet this intent. To the
extent any provision cannot be so amended or construed as a matter of law, the validity of the remaining provisions shall be deemed
unaffected and the illegal or invalid provision will be deemed stricken from this Agreement.
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16.
Section Headings
. The section
headings herein are for convenience of reference only, and shall not limit or otherwise affect the meaning hereof.
17.
Accounting
. Any calculation,
computation or accounting that may be required under this Agreement shall be made in accordance and conformity with the Generally
Accepted Accounting Principles and other standards as determined by the Financial Accounting Standards board and regulatory agencies
with appropriate jurisdiction.
18.
Counterparts
. This Agreement
may be executed via facsimile transmission and may be executed in separate counterparts, each of which shall be deemed to be’
an original and all of which together shall constitute a single instrument.
If the above accords with your understanding
and agreement, kindly indicate your consent hereto by signing below. We look forward to a long and successful relationship with
you.
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Very truly yours,
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Liquid Patent Consulting, LLC
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By:
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/s/ Ankur Desai
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Name:
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Ankur Desai
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Title:
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Authorized Signatory
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ACCEPTED AND AGREED TO
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AS OF THE DATE FIRST ABOVE WRITTEN:
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Mears Technologies, Inc.
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By:
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/s/ John D.T. Gerber
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Name: John D.T. Gerber
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Title: Chairman
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Exhibit 10.11
SECURITIES PURCHASE AGREEMENT
This
SECURITIES
PURCHASE AGREEMENT
(this “
Agreement
”), dated as of March 17, 2015 (the “
Effective Date
”),
is by and among Mears Technologies, Inc., a Delaware corporation (the “
Company
”),
and the investors that have executed this Agreement and are listed on the Schedule of Buyers, attached hereto as
Exhibit
A
(individually, a “
Buyer
” and collectively, the “
Buyers
”).
RECITALS
A. The
Company and each Buyer is executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “
1933 Act
”), and Rule 506 of Regulation
D (“
Regulation D
”), as promulgated by the United States Securities and Exchange Commission (the “
SEC
”)
under the 1933 Act.
B. The
Company has authorized the issuance of senior secured convertible notes in the aggregate original principal amount of up to $12,752,667,
and reserves the right to issue additional senior secured convertible notes in the aggregate original principal amount of up to
$2,000,000, in the form attached hereto as
Exhibit B
(the “
Notes
”), which Notes shall be convertible
into shares of Common Stock (as defined in the Notes) (as converted, collectively, the “
Conversion Shares
”),
in accordance with the terms of the Notes.
C. Prior
to the date hereof, the Company issued senior convertible notes having an aggregate principal amount of $7,349,226.24 (the “
Old
MTI Convertible Notes
”) to certain of the Buyers (the “
Earlier Investors
”).
D. Each
Buyer wishes to purchase or acquire through an exchange of its Old MTI Convertible Notes, as applicable, and the Company wishes
to sell or exchange, as applicable, upon the terms and conditions stated in this Agreement, the aggregate original principal amount
of the Notes set forth opposite such Buyer’s name in column (2) on the Schedule of Buyers.
E. At
the Closing, the parties hereto shall execute and deliver a Registration Rights Agreement, in the form attached hereto as
Exhibit
C
(the “
Registration Rights Agreement
”),
pursuant to which the Company has agreed to provide certain registration rights with respect to the Registrable Securities (as
defined in the Registration Rights Agreement), under the 1933 Act and the roles and regulations promulgated thereunder, and applicable
state securities laws.
F. In
connection with the Offering, the Company, together with National Securities Corporation (the “
Placement Agent
”),
have entered into an escrow agreement, in the form attached hereto as
Exhibit D
(the “
Escrow Agreement
”),
with U.S. Bank National Association (the (“Escrow Agent”), to hold the Purchase Price (as hereinafter defined), to
be released at the Closing to the Company, upon the written consent of the Company and the Placement Agent.
G. The
Notes and the Conversion Shares are collectively referred to herein as the “
Securities
.”
H. The
Notes will be secured by a first priority perfected security interest in all or substantially all of the assets of the Company
as evidenced by a security agreement in the form attached hereto as
Exhibit E
(the “
Security Agreement
”
and together with the other security documents and agreements entered into in connection with this Agreement and each of such other
documents and agreements, as each may be amended or modified from time to time, collectively, the “
Security Documents
”).
AGREEMENT
NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and each Buyer hereby agree as follows:
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1.
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PURCHASE AND SALE OF NOTES.
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(a)
Notes
Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue to each Buyer, and
each Buyer severally, but not jointly, shall purchase or acquire through an exchange of one or more Old MTI Convertible Notes from
the Company on the Closing Date (as defined below), a Note in the original principal amount as is set forth opposite such Buyer’s
name in column (2) on the Schedule of Buyers.
(b)
Closing
.
The closing (the “
Closing
”) of the purchase or exchange of the Notes by the Buyers shall occur at the offices
of WilmerHale, LLP, 60 State Street, Boston, MA 02109. The date and time of the Closing (the “
Closing Date
”)
shall be 11:00
a.m., Boston time, on the first Business Day on which the conditions to the Closing set forth in Sections
6 and 7 below are satisfied or waived (or such later date as is mutually agreed to by the Company and each Buyer). As used herein
“
Business Day
” means any day other than a Saturday, Sunday or other day on which commercial banks in Boston,
Massachusetts are authorized or required by law to remain closed.
(c)
Purchase
Price
. The purchase price for each Note to be purchased by each Buyer (the “
Purchase Price
”) shall be equal
to the original principal amount of the Note set forth opposite such Buyer’s name in column (2) on the Schedule of Buyers.
(d)
Payment
of Purchase Price; Delivery of Notes
. On the Closing Date, (i) each Buyer shall pay its respective Purchase Price to the Company
through the Escrow Agent for their respective Note to be issued and sold to such Buyer at the Closing, and (ii) the Company shall
deliver to each Buyer a Note (in such amount as is set forth opposite such Buyer’s name in column (2) on the Schedule of Buyers),
in all cases, duly executed on behalf of the Company and registered in the name of such Buyer or its designee.
(e)
Exchange
of Old MTI Convertible
Notes
. Any Earlier Investor may satisfy all or a portion of the Purchase Price of the Note or
Notes to be issued to such Earlier Investor in the Closing by tendering to the Company for exchange an Old MTI Convertible Note,
with the amount of the outstanding principal balance of such Old MTI Convertible Note credited on a dollar-for-dollar basis to
the Purchase Price of such Note. All accrued and unpaid interest on Old MTI Convertible Note will carry forward and be applied
to the purchase price of the Note. Concurrently with the issuance by the Company of a Note to an Earlier Investor electing to
exchange
an Old MTI Convertible Note, such Earlier Investor shall deliver to the Escrow Agent the original of such Old MTI Convertible Note
duly endorsed over to the Company.
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2.
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BUYER’S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents
and warrants to the Company with respect to only itself that:
(a)
Organization;
Authority
. Such Buyer (i) if an entity, is duly organized, validly existing and in good standing under the laws of the jurisdiction
of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the
Transaction Documents (as defined below) to which it is a party and otherwise to carry out its obligations hereunder and thereunder,
or (ii) if an individual, has the legal capacity to enter into and to consummate the transactions contemplated by the Transaction
Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder.
(b)
No
Public Sale or Distribution
. Such Buyer (i) is acquiring its Note, and (ii) upon conversion of its Note will acquire the Conversion
Shares issuable upon conversion thereof, in each case, for its own account and not with a view towards, or for resale in connection
with, the public
sale
or distribution thereof in violation of applicable
securities laws, except pursuant to sales registered or exempted under the 1933 Act; provided, however, by making the representations
herein, such Buyer does not agree, or make any representation or warranty, to hold any of the Securities for any minimum’ or other
specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act. Such Buyer does not presently have any agreement or understanding, directly or indirectly,
with any Person (as defined below) to distribute any of the Securities in violation of applicable securities laws.
(c)
Accredited
Investor Status
. Such Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.
(d)
Reliance
on
Exemptions
. Such Buyer understands that the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and Such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility
of such Buyer to acquire the Securities.
(e)
Information
.
Such Buyer and its advisors, if any, have been furnished with the Company’s private placement memorandum dated February 18, 2015
(the “
Private Placement Memorandum
”)
and with
all other materials relating to the business, finances and operations of the Company and materials relating to the offer and sale
of the Securities which have been requested by such Buyer. Such Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company. Such Buyer understands that its investment in the Securities involves a high degree of risk.
Such Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision
with respect to its acquisition of the Securities.
(f)
No
Governmental Review
. Such Buyer understands that no United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
(g)
Transfer
or Resale
. Such Buyer understands that except as provided in the Registration Rights Agreement or Section 4(h) hereof: (i)
the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered
for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company (if requested by the Company) an opinion of counsel to such Buyer, in a form reasonably acceptable to the Company, to the
effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) such Buyer provides the Company with reasonable assurance and documentation as may be requested by the
Company or its legal counsel that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated
under the 1933 Act (or a successor rule thereto) (collectively, “
Rule 144
”); (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable,
any resale of the Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC promulgated thereunder; and (iii) neither the Company nor any other Person is under
any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder.
(h)
Validity;
Enforcement
. This Agreement and the other Transaction Documents executed by the Buyer have been duly and validly authorized,
executed and delivered on behalf of such Buyer and constitutes the legal, valid and binding obligations of such Buyer enforceable
against such Buyer in accordance with their respective terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and remedies.
(i)
No
Conflicts
. The execution, delivery and performance by such Buyer of this Agreement and the other Transaction Documents
executed by the Buyer and the consummation by such Buyer of the transactions contemplated hereby and thereby will not (i)
result in a violation of the organizational documents of such Buyer, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Buyer is a party or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws)
applicable to such Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or
violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the
ability of such Buyer to perform its obligations hereunder.
(j)
Buyer’s
Principal Residence/Office
. The address of Buyer’s principal residence, if Buyer is a natural Person, or principal office,
if Buyer is a non-natural Person, such as a corporation, limited liability company or other entity, is set forth on the Buyer’s
signature page hereto.
(k)
No
Engagements
. Such Buyer has not engaged any brokers, finders or agents, and the Company has not, nor will, incur, directly
or indirectly, as a result of any action taken by such Buyer, any liability for brokerage or finders’ fees or agents’ commissions
or any similar charges in connection with the transactions consummated under this Agreement. Neither such Buyer, nor any of Buyer’s
officers, directors, employees, agents, stockholders or partners has either directly or indirectly, including through a broker
or finder: (i) engaged in or received any general solicitation or (ii) published or received any advertisement in connection with
the offer or sale of the Securities.
|
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3.
|
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY.
|
The Company represents
and warrants to each of the Buyers that, except as set forth on the Disclosure Letter (as defined below), which exceptions shall
be deemed to be part of the representations and warranties made hereunder, the following representations are true and complete
as of the Closing Date, except as otherwise indicated. The Disclosure Letter shall be arranged in sections corresponding to the
numbered and lettered sections and subsections contained in this
Section 3
and certain other sections of this agreement,
and the disclosures in any section or subsection of the Disclosure Letter shall qualify other sections and subsections in this
Section 3
only to the extent it is readily apparent from a reading of the disclosure that such disclosure is applicable
to such other sections and subsections.
(a)
Organization
and Qualification
. The Company is an entity duly organized and validly existing and in good standing under the laws of the
jurisdiction in which it is formed, and has the requisite power and authorization to own its properties and to carry on its business
as now being conducted and as presently proposed to be conducted. The Company is duly qualified as a foreign entity to do business
and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not be
reasonably expected to have a Material Adverse Effect. “
Material Adverse Effect
” means any material adverse
effect on (i) the business, properties, assets, liabilities, operations (including results thereof) or condition (financial or
otherwise) of the Company, either individually or taken as a whole, (ii) the transactions contemplated hereby or in any of the
other Transaction Documents, or (iii) the authority or ability of the Company to perform any of its obligations under any of the
Transaction Documents. The Company has no Subsidiaries. “
Subsidiaries
” means any Person in which the Company,
directly or indirectly, owns a majority of the outstanding capital stock or holds any equity or similar interest of such Person,
and each of the foregoing, is individually referred to herein as a “
Subsidiary
.” Additionally, to the extent
that any Subsidiary is hereafter created, and the context of the provision of this Agreement would ordinarily include a Subsidiary,
then the term “Company” will be deemed to include such Subsidiary.
(b)
Authorization;
Enforcement; Validity
. The Company has the requisite power and authority to enter into and perform its obligations under this
Agreement and the other Transaction Documents and to issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of this Agreement and the other Transaction Documents by the Company, and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Notes and the reservation
for issuance and issuance of the Conversion Shares issuable upon conversion of the Notes) have been duly authorized by the Company’s
board of directors or other governing body, as applicable, and (other than the filing with the SEC of one or more Registration
Statements (as defined in the Registration Rights Agreement) in accordance with the requirements of the Registration Rights Agreement,
a Form D with the SEC and any other filings as may be required by any state securities agencies) no further filing, consent or
authorization is required by the Company, its respective boards of directors or the stockholders or other governing body. This
Agreement has been, and the other Transaction Documents will be prior to the Closing, duly executed and delivered by the Company,
and each constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with
its respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities
law. “
Transaction Documents
”
means, collectively, this Agreement, the Notes, the Security Documents,
the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in the Registration Rights Agreement)
and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the
consummation of the transactions contemplated hereby and thereby, as may be amended from time to time.
(c)
Issuance
of Conversion Shares
. The Conversion Shares, when issued in accordance with the terms of the Notes, will be validly issued,
fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with
respect to the issue thereof under the terms thereof, with the holders being entitled to all rights accorded to a holder of Common
Stock. The Company shall have reserved from its duly authorized capital stock not less than one hundred ten percent (110%) of the
maximum number of Conversion Shares issuable upon conversion of the Notes in accordance with their terms. Subject to the accuracy
of the representations and warranties of the Buyers in this Agreement, the offer and issuance by the Company of the Securities
is exempt from registration under the 1933 Act.
(d)
No
Conflicts
. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Notes, the Conversion
Shares upon conversion of the Notes, the reservation for issuance of the Conversion Shares and the creation of the security interests
represented by the Security Documents) will not (i) result in a violation of the Certificate of Incorporation (as defined below)
(including, without limitation, any certificate of designation contained therein) or other organizational documents of the Company,
any capital stock of the Company or Bylaws (as defined below) of the Company, (ii) conflict with, or constitute a default (or
an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party or (iii) result
in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, foreign, federal and state
securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected
except, in the case of clause (ii) or (iii) above, to the extent such violations that could not reasonably be expected to have
a Material Adverse Effect.
(e)
Consents
.
The Company is not required to obtain any consent from, authorization or order of, or make any filing or registration with (other
than the filing with the SEC of one or more Registration Statements in accordance with the requirements of the Registration Rights
Agreement, a Form D with the SEC and any other filings as may be required by any state securities agencies), any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its
respective obligations under, or contemplated by, the Transaction Documents, in each case, in accordance with the terms hereof
or thereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain at or prior
to the Closing have been or will be obtained or made on or prior to the Closing Date, and the Company is not aware of any facts
or circumstances which might prevent the Company from obtaining or effecting any of the registration, application or filings contemplated
by the Transaction Documents.
(f)
Acknowledgment
Regarding Buyer’s Purchase of Securities
. The Company acknowledges that no Buyer is acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given by a Buyer or any of its representatives or agents in connection with the Transaction Documents
and the transactions contemplated hereby and thereby is merely incidental to such Buyer’s purchase of the Securities. The Company
further represents to each Buyer that the Company’s decision to enter into the Transaction Documents to which it is a party has
been based solely on the independent evaluation by the Company and its respective representatives.
(g)
No
General Solicitation; Placement Agent’s Fees
. Neither the Company nor any Person acting on its behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale
of the Securities. The Company shall be responsible for the payment of any Placement Agent’s fees, financial advisory fees, or
brokers’ commissions (other than for Persons engaged by any Buyer or its investment advisor) relating to or arising out of the
transactions contemplated hereby. Other than the Placement Agent, to which a cash fee of 10% of the gross proceeds and a warrant
equal to 10% of the Conversion Shares (except those Conversion Shares related to the Old MTI Convertible Notes), the Company has
not engaged any placement agent or other broker or dealer in connection with the offer or sale of the Securities.
(h)
No
Integrated Offering
. None of the Company or, to its knowledge, any of its affiliates, nor any Person acting on its behalf has,
directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances
that would require registration of the issuance of any of the Securities under the 1933 Act, whether through integration with prior
offerings or otherwise, or cause this offering of the Securities to require approval of stockholders of the Company (other than
any required approval of holders of a majority of the outstanding common stock of the Company received before the Closing) under
any applicable stockholder approval provisions. None of the Company, nor its affiliates nor any Person acting on their behalf will
take any action or steps that would require registration of the issuance of any of the Securities under the 1933 Act or cause the
offering of any of the Securities to be integrated with other offerings of securities of the Company.
(i)
Dilutive
Effect
. The Company understands and acknowledges that the number of Conversion Shares may increase in certain circumstances.
The Company further acknowledges that its obligation to issue the Conversion Shares upon conversion of the Notes in accordance
with this Agreement and the Notes is absolute and unconditional, regardless of the dilutive effect that such issuance may have
on the ownership interests of other stockholders of the Company.
(j)
Application
of Takeover Protections; Rights Agreement
. The Company and its board of directors have taken all necessary action, if any,
in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including,
without limitation, any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of
Incorporation, Bylaws or other organizational documents which is or could become applicable to any Buyer as a result of the consummation
of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Securities and
any Buyer’s ownership of the Securities. The Company and its board of directors have taken all necessary action, if any, in order
to render inapplicable any stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of
shares of Common Stock or a change in control of the Company.
(k)
Placement
Documents: Financial Statements
. The Private Placement Memorandum provided to the Buyers in connection with the sale of the
Notes, at the time of the date thereon, as it may be amended from time to time, did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of
the Company included in the private placement memorandum are unaudited and were not prepared in accordance with generally accepted
accounting principles, but fairly represented the financial position and results of the Company as of at and for the periods ended
on the dates of such financial statements. No other information provided by or on behalf of the Company to any of the Buyers taken
together with such Private Placement Memorandum contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein not misleading, in the light of the circumstance under which they are or
were made.
(l)
Absence
of Certain Changes
. Since the date of the Company’s most recent financial statements contained in the Private Placement Memorandum
provided to the Buyers in connection with the sale of the Notes, there has been no material adverse change and no material adverse
development in the business, assets, liabilities, properties, operations (including results thereof) or condition (financial or
otherwise) of the Company. Since the date of the Company’s most recent financial statements contained in in the Private Placement
Memorandum provided to the Buyer in connection with the sale of the Notes, the Company has not (i) declared or paid any dividends
(whether by cash, property or securities), (ii) sold any assets, individually or in the aggregate, outside of the ordinary course
of business or (iii) made any capital expenditures, individually or in the aggregate, outside of the Ordinary course of business.
The Company has not taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization,
receivership, liquidation or winding up, nor does the Company have any knowledge or reason to believe that any of its creditors
intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor
to do so. The Company is not as of the date hereof, and after giving effect
.
to the transactions contemplated hereby
to occur at the Closing, will not be Insolvent (as defined below). “
Insolvent
” means (i) the present fair saleable
value of the Company’s assets is less than the amount required to pay the Company’s total Indebtedness (as defined below) as it
becomes due, (ii) the Company is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts
and liabilities become absolute and matured or (iii) the Company intends to incur or believe that it will incur debts that would
be beyond its ability to pay as such debts mature.
(m)
No
Material Adverse Effect
. The Company has no knowledge of any event, liability, development or circumstance that has
occurred or exists, or that is reasonably expected to occur or exist with respect to the Company or any of its business,
properties, liabilities, operations (including results thereof) or condition (financial or otherwise), that would have a
Material Adverse Effect.
(n)
Conduct
of Business; Regulatory Permits
. The Company is not in violation of any term of or in default under its Certificate of Incorporation
or Bylaws. The Company is not in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable
to the Company, and the Company will not conduct its business in violation of any of the foregoing, except in all cases for possible
violations which could not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth on
Schedule
3(n)
attached to the Disclosure Letter, the Company possess all certificates, authorizations and permits issued by the appropriate
regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and the Company has not
received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.
(o)
Foreign
Corrupt Practices
. The Company and none of its directors, officers, agents, employees or other Persons acting on behalf of
the Company has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
(p)
Sarbanes-Oxley
Act
. The Company is in compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002 and all applicable rules
and regulations promulgated by the SEC thereunder.
(q)
Transactions
With Affiliates
. Except as set forth on
Schedule 3(q)
attached to the Disclosure Letter and in the Private Placement
Memorandum provided to the Buyers in connection with the sale of the Notes, none of the officers, directors, employees or affiliates
of the Company is presently a party to any transaction with the Company (other than for ordinary course services as employees,
officers or directors and immaterial transactions), including any contract, agreement or other arrangement providing for the furnishing
of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from
any such officer, director, employee or affiliate or, to the knowledge of the Company, any corporation, partnership, trust or other
Person in which any such officer, director, employee or affiliate has a substantial interest or is an employee, officer, director,
trustee or partner.
(r)
Equity
Capitalization
. As of the date hereof, the authorized capital stock of the Company consists solely of 100,000,000 shares, consisting
of (i) 95,000,000 shares of Common Stock, of which 18,499,027 are issued and outstanding as of the Effective Date and (ii) 5,000,000
shares of Preferred Stock, of which no shares are issued or outstanding as of the Effective Date. No approval of the shareholders
is required for the issuance of the Notes or the Conversion Shares or any of the Convertible Securities. No shares of Common Stock
are held in treasury. All of the outstanding shares are duly authorized and have been, or upon issuance will be, validly issued
and are fully paid and non-assessable. All such shares of the Company’s issued and outstanding Common Stock on the date hereof,
except as disclosed on Schedule 3(r) attached to the Disclosure Letter, are not owned by Persons who are “affiliates”
(as defined in Rule 405 of the 1933 Act and calculated based on the assumption that only officers, directors and holders of at
least 10% of the Company’s issued and outstanding Common Stock are “affiliates” without conceding that any such Persons
are “affiliates” for purposes of federal securities laws) of the Company. To the Company’s knowledge, except as disclosed
on Schedule 3(r) attached to the Disclosure Letter, no Person owns 10% or more of the Company’s issued and outstanding shares of
Common Stock (calculated based on the assumption that all Convertible Securities, whether or not presently exercisable or convertible,
have been fully exercised or converted (as the case may be) taking account of any limitations on exercise or conversion (including
“blockers”) contained therein without conceding in the private placement documentation that such identified Person
is a 10% stockholder for purposes of federal securities laws). Except as set forth on
Schedule 3(r)
attached to the Disclosure
Letter, (i) none of the Company’s capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company; (ii) except as disclosed on Schedule 3(r) attached to the Disclosure Letter, there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound to issue additional capital stock of the Company or
options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, or exercisable or exchangeable for, any capital stock of the Company; (iii) except for the Old MTI Convertible
Notes, there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or
instruments evidencing Indebtedness of the Company or by which the Company is or may become bound; (iv) there are no financing
statements securing obligations in any amounts filed in connection with the Company; (v) there are no agreements or arrangements
under which the Company is obligated to register the sale of any of their securities under the 1933 Act (except pursuant to the
Registration Rights Agreement and a warrant issued to the Placement Agent); (vi) there are no outstanding securities or instruments
of the Company by which the Company is or may become bound to redeem a security of the Company; (vii) there are no securities or
instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities; and (viii)
the Company has not issued any stock appreciation rights or “phantom stock” plans or agreements or any similar plan
or agreement. The Company has furnished to the Buyers true, correct and complete copies of the Company’s Certificate of Incorporation,
as amended and as in effect on the date hereof (the “
Certificate of Incorporation
”), and the Company’s bylaws,
as amended and as in effect on the date hereof (the “
Bylaws
”), and the terms of all securities convertible into,
or exercisable or exchangeable for, shares of Common Stock and the material rights of the holders thereof in respect thereto. “
Convertible
Securities
” means preferred stock, options, warrants or other securities directly or indirectly convertible into, exchangeable
for or exercisable for Common Stock of the Company.
(s)
Indebtedness
and Other Contracts
. The Company, except as disclosed on
Schedule 3(s)
attached to the Disclosure Letter, (i) has no
outstanding Indebtedness (as defined below), (ii) is not a party to any contract, agreement or instrument, the violation of which,
or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected to result
in a Material Adverse Effect, (iii) is not in violation of any term of, or in default under; any contract, agreement or instrument
relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in
a Material Adverse Effect, and (iv) is not a party to any contract, agreement or instrument relating to any Indebtedness, the performance
of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. “
Indebtedness
”
of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed
as the deferred purchase price of property or services (including, without limitation, “capital leases” in accordance
with generally accepted accounting principles as in effect on the Closing Date) (other than trade payables entered into in the
ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and
other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations
so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising
under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property
or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the
periods covered thereby, is classified as a capital lease (in accordance with generally accepted accounting principles as in effect
on the Closing Date), (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even
though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and
(H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through
(G) above. “
Contingent Obligation
”
means, as to any Person, any direct or indirect liability, contingent
or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary
purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee
of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with,
or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto. “
Person
”
means
an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency thereof.
(t)
Absence
of Litigation
. Except as set forth on
Schedule 3(t)
attached to the Disclosure Letter, there is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the Company, threatened (i) against the Company or any of the Company’s officers or directors with respect
to their services to the Company or material to the Company; or (ii) that questions the validity of this Agreement or the right
of the Company to enter into this Agreement or to consummate the transactions contemplated hereby, There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any investigation by the SEC or other United States governmental
agency involving the Company or, to the Company’s knowledge, any current or former director or officer of the Company.
(u)
Insurance
.
Except as set forth in
Schedule 3(u)
attached to the Disclosure Letter, the Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent
and customary in the businesses in which the Company is engaged. The Company has not been refused any insurance coverage sought
or applied for, and the Company has no any reason to believe that it will be unable to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business
at a cost that would not have a Material Adverse Effect.
(v)
Employee
Relations
. The Company is not a party to any collective bargaining agreement and does not employ any member of a union. No
executive officer (as defined in Rule 501(f) promulgated under the 1933 Act) or other key employee of the Company has notified
the Company that such officer intends to leave the Company or otherwise terminate such officer’s employment with the Company. To
the Company’s knowledge, no executive officer or other key employee of the Company is, or is now expected to be, in violation of
any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive
officer or other key employee (as the case may be) does not subject the Company to any liability with respect to any of the foregoing
matters. The Company is in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment
and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance
would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(w)
Title
.
The Company has good and marketable title to all personal property owned by it which is material to the business of the Company,
in each case, free and clear of all liens, encumbrances and defects except such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property by the Company.
(x)
Intellectual
Property Rights
. To the Company’s knowledge, the Company owns or possesses adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, original works, inventions,
licenses, approvals, governmental authorizations; trade secrets and other intellectual property rights and all applications and
registrations therefor (“
Intellectual
Property Rights
”
)
necessary to conduct is business as now
conducted and as presently proposed to be conducted. None of the Company’s Intellectual Property Rights have expired, terminated
or been abandoned, or are expected to expire, terminate or be abandoned, within three years from the date of this Agreement, The
Company has no knowledge of any infringement by the Company of Intellectual Property Rights of others. There is no claim, action
or proceeding being made or brought, or to the knowledge of the Company, being threatened, against the Company regarding its Intellectual
Property Rights. The Company is not aware of any facts or circumstances which might give rise to any
of the foregoing infringements
or claims, actions or proceedings. The Company has taken reasonable security measures to protect the secrecy, confidentiality and
value of all of its Intellectual Property Rights.
(y)
Environmental
Laws
. The Company (i) is in compliance with all Environmental Laws (as defined below), (ii) except as set forth on
Schedule
3(y)
attached to the Disclosure Letter, has received all permits, licenses or other approvals required of it under applicable
Environmental Laws to conduct its business, and (iii) is in compliance with all terms and conditions of any such permit, license
or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected
to have, individually or in the aggregate, a Material Adverse Effect. “
Environmental Laws
” means all federal,
state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation,
ambient air, surface Water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “
Hazardous Materials
”) into the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes,
decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder.
(z)
Tax
Status
. The Company (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those
being contested in
.
good faith and (iii) has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of
no basis for any such claim. The Company is not operated in such a manner as to qualify as a passive foreign investment company,
as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.
(aa)
Internal
Accounting and Disclosure Controls
. Except as set forth on
Schedule 3(aa)
attached to the Disclosure Letter, the Company
maintains internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder (the “
1934 Act
”)) that is effective
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes, including that (i) transactions are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements to maintain asset and liability accountability,
(iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization
,
and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. The Company has not received any notice or correspondence
from any accountant or other Person relating to any potential material weakness or significant deficiency in any part of the internal
controls over financial reporting of the Company.
(bb)
Off
Balance Sheet Arrangements
. There is no transaction, arrangement, or other relationship involving the Company in respect of
an off-balance sheet entity that would be required to be disclosed by the Company in a 1934 Act filing or that otherwise could
be reasonably likely to have a Material Adverse Effect.
(cc)
Investment
Company Status
. The Company is not, and upon consummation of the sale of the Securities will not be, an “investment company,”
or, to the knowledge of the Company, an affiliate of an “investment company,” a company controlled by an “investment
company” . or an “affiliated person” of, or “promoter” or “principal underwriter” for,
an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.
(dd)
U.S.
Real Property Holding Corporation
. The Company is not, and has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon any Buyer’s request.
(ee)
Transfer
Taxes
. On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be
paid in connection with the issuance, sale and transfer of the Securities to be sold to each Buyer hereunder will be, or will have
been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.
(ff)
Bank
Holding Company Act
. The Company is not subject to the Bank Holding Company Act of 1956, as amended (the “
BHCA
”)
and to regulation by the Board of Governors of the Federal Reserve System (the “
Federal Reserve
”). Neither
the Company nor, to the Company’s knowledge, any of its affiliates owns or controls, directly or indirectly, five percent (5%)
or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of
a bank or any equity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor, to the Company’s
knowledge, any of its affiliates exercises a controlling influence over the management or policies of a bank or any entity that
is subject to the BHCA and to regulation by the Federal Reserve.
(gg)
Shell
Company Status
. The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i).
(hh)
Public
Utility Holding Act
. The Company is not a “holding company,” or an “affiliate” of a “holding
company,” as such terms are defined in the Public Utility Holding Act of 2005.
(ii)
Federal
Power Act
. The Company is not subject to regulation as a “public utility” under the Federal Power Act, as amended.
(jj)
No
Additional Agreements
. The Company does not have any agreement or understanding with .any Buyer with respect to the transactions
contemplated by the Transaction Documents other than as specified in the Transaction Documents.
(kk)
Real
Property
. The Company holds good title to all real property, leases hi real property, or other interests in real property
stated as owned or held by the Company (the “
Real Property
”). The Real Property is free and clear of all mortgages,
defects, claims, liens, pledges, charges, taxes, rights of first refusal, encumbrances, security interests and other encumbrances
(collectively “
Encumbrances
”) and is not subject to any rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature except for (i) liens for current taxes not yet due, and (ii) zoning laws
and other land use restrictions -that do not impair the present or anticipated use of the property subject thereto, Any Real Property
held under lease by the Company is held under valid, subsisting and enforceable leases with such exceptions as are not material
and do not interfere with the use made and proposed to be made of such property and buildings by the Company.
(ll)
Fixtures
and Equipment
. The Company has good title to, or a valid leasehold. interest in, the tangible personal property, equipment,
improvements, fixtures, and other personal property and appurtenances that are used by the Company in connection with the conduct
of its business (the “
Fixtures and Equipment
”). The Fixtures and Equipment are structurally sound, are in good
operating condition and repair, are adequate for the uses to which they are being put, are not in need of maintenance or repairs
except for ordinary, routine maintenance and repairs and are sufficient for the conduct of the Company’s business in the manner
as conducted prior to the Closing. The Company owns all of its Fixtures and Equipment free and clear of all Encumbrances except
for (i) liens for current taxes not yet due, and (ii) zoning laws and other land use restrictions that do not impair the present
or anticipated use of the property subject thereto.
(mm)
Illegal
or Unauthorized Payments; Political Contributions
. Neither the Company nor, to the Company’s knowledge, any of its officers,
directors, employees, agents or other representatives, when acting in their capacity as officers, directors, employees, agents
or representatives of the Company, has, directly or indirectly, made or authorized any payment, contribution or gift of money,
property, or services, whether or not in contravention of applicable law, (i) as a kickback or bribe to any Person or (ii) to any
political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political
contributions not involving the direct or indirect use of funds of the Company.
(nn)
Money
Laundering
. The Company is in compliance with, and has not previously violated, the USA Patriot Act of 2001 and all other
applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, without limitation, the laws, regulations and
Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, without limitation,
(i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR,
Subtitle B, Chapter V.
(oo)
Ranking
of Notes
. No indebtedness of the Company, at the Closing, will be senior to the Notes in right of payment, whether with respect
to payment or redemptions, interest, damages, upon liquidation or dissolution or otherwise. Except for any Old MTI Convertible
Note holder(s), if any, who do not swap its(s) Old MTI Convertible Note(s) for the Note(s), no indebtedness of the Company, at
the Closing, will
be pari passu
to the Notes in right of payment, whether with respect to payment or redemptions, interest,
damages, upon liquidation or dissolution or otherwise.
(pp)
Disclosure.
The Company understands and confirms that each of the Buyers will rely on the foregoing representations in effecting the transactions
consummated hereunder. The Company acknowledges and agrees that no Buyer makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically set forth in Section 2.
(a)
Best
Efforts
. Each Buyer shall use its best efforts to timely satisfy each of the conditions to be satisfied by it as provided
in Section 6 of this Agreement, The Company shall use its best efforts to timely satisfy each of the conditions to be satisfied
by it as provided in Section 7 of this Agreement.
(b)
Form
D and Blue Sky
. The Company shall file a Form D with respect to the Securities as required under Regulation D and provide a
copy thereof to the Placement Agent promptly after such filing. The Company shall, on or before the Closing Date, take such action,
if any, as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to, qualify the Securities
for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of
the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action
so taken to the Placement Agent on our prior to the Closing Date. Without limiting any other obligation of the Company under this
Agreement, the Company shall timely make all filings and reports relating to the offer and sale of the Securities required in connection
with the consummation of the transactions consummated hereunder under all applicable securities laws (including, without limitation,
all applicable federal securities laws and. all applicable “Blue Sky” laws), and the Company shall comply with all
applicable federal, foreign, state and local laws, statutes, rules, regulations and the like relating to the offering and sale
of the Securities to the Buyers.
(c)
Reporting
Status
. After the date the Company becomes subject to the periodic reporting requirements under Sections 13 or 15(d) of the
1934 Act, as amended from time to time, together with the regulations promulgated thereunder (a “
Reporting Company
”),
and until the date on which the Buyers shall have sold all of the Registrable Securities (such period, to end in any event, whether
or not such securities have been sold, not later than five years after such date, the “
Reporting Period
”),
the Company shall use commercially reasonable efforts to timely file all reports required to be filed with the SEC pursuant to
the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if
the 1934 Act or the rules and regulations thereunder would no longer require or otherwise permit such termination unless such
termination is approved by the holders of a majority stockholders of the voting power of the Company, or unless no Buyer has demand
registration rights under the Registration Rights Agreement or unless no Buyer is a holder of record of Conversion Shares (collectively,
the “
Termination Conditions
”).
(d)
Use
of Proceeds
. The Company shall use the proceeds from the sale of the Securities for general corporate purposes as set forth
in the Private Placement Memorandum;
provided, however,
that the Company shall not use any of the proceeds to make or repay
loans to, or purchase assets from, any officer, director or member of executive management of the Company or any of the Company’s
affiliates.
(e) [
Reserved
.
]
(f)
Listing
.
If the Company becomes a Reporting Company, the Company shall in connection with any proper demand for registration of Registrable
Securities under the Registration Rights Agreement (if the same has not previously occurred) promptly secure the listing or designation
for quotation (as the case may be) of all of the Registrable Securities upon each national securities exchange and automated quotation
system, if any, upon which the Common Stock is then listed or designated for quotation (as the case may be) (subject to official
notice of issuance) and shall thereafter maintain such listing or designation for quotation (as the case may be) of all Registrable
Securities from time to time issuable under the terms of the Transaction Documents on such national securities exchange or automated
quotation system unless one of the Termination Conditions has occurred. During any period that the Common Stock is listed or designated,
the Company shall use commercially reasonable efforts to maintain the Common Stock’s listing or designation for quotation (as
the case may be) on The New York Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market or the
Nasdaq Capital Market (each, an “
Eligible Market
”). During the Reporting Period, the Company shall use commercially
reasonable efforts not to take any action which could be reasonably expected to prevent a listing or result in the delisting or
suspension of the Common Stock from an Eligible Market. The Company shall pay all fees and expenses in connection with satisfying
its obligations under this Section 4(f).
(g)
Fees
.
The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or broker’s commissions
(other than for Persons engaged by any Buyer) relating to or arising out of the transactions contemplated hereby and resulting
from the retention by the Company of any placement agent, financial advisor or broker (including, without limitation, any fees
payable to the Placement Agent, who is the Company’s sole placement agent in connection with the transactions contemplated by
this Agreement). Except where Buyer has breached Section 2(k) hereof, the Company shall pay, and hold each Buyer harmless against,
any liability, loss or expense (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses) arising
in connection with any claim relating to any such payment. Except as otherwise set forth in the Transaction Documents, each party
to this Agreement shall bear its own expenses in connection with the sale of the Securities to the Buyers.
(h)
Pledge
of Securities
. Notwithstanding anything to the contrary contained in this Agreement, the Company acknowledges and agrees that
the Securities may be pledged by a Buyer in connection with a bona fide margin agreement or other bona fide loan or financing arrangement
that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities
hereunder, and no Buyer making a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or any other Transaction Document, The Company hereby agrees to execute
and deliver such documentation as a holder of the Securities may reasonably request in connection with a pledge of the Securities
to such pledgee by a Buyer.
(i)
Reservation
of Shares
. The Company will take all action necessary to at all times have authorized, and reserved for the purpose of issuance,
no less than one hundred ten percent (110%) of the maximum number of Conversion Shares issuable upon conversion of the Notes.
(j)
Conduct
of Business
. So long as any of the Securities are held by the Buyers and their successors in interest and assigns, the business
of the Company shall not be conducted in violation of any law, ordinance or regulation of any governmental entity, except where
such violations would not result, either individually or in the aggregate, in a Material Adverse Effect.
(k)
Subsequent
Placements
. Except as set forth on
Schedule 4(k)
attached to the Disclosure Letter, so long as the Notes are outstanding,
the Company shall, without the prior written consent of the Required Buyers (as defined below), be prohibited from effecting or
entering into an agreement to effect any offering or placement of equity or equity linked securities or debt of the Company (“
Subsequent
Placement
”), other than (i) a firm commitment underwritten initial public offering through a registered broker-dealer
(an “
IPO
”); (ii) prior to the “
IPO Outside Date
” (as defined in the Senior Secured Convertible
Notes), with LVP’s prior written consent, a Subsequent Placement (or series of Subsequent Placements) in which in the aggregate
gross proceeds to the Company do not exceed $2 million; (iii) prior to the IPO Outside Date, without the consent of LVP, a Subsequent
Placement (or series of Subsequent Placements) to one or more of the Company’s industry partners and/or customers (including, without
limitation, an Original Equipment Manufacturer, Integrated Device Manufacturer, and/or foundry) in a transaction, the principal
purpose of which is not to raise equity capital; or (iv) shares of Common Stock or Convertible Securities’ issued to employees
or directors of, or consultants or advisors to, the Company or any of its subsidiaries pursuant to its Stock Incentive Plan (as
defined below).
(I)
Change
of Control
. Prior to the IPO Outside Date, the Company may not effect a Specified Change of Control without the prior written
consent of the Required Buyers. “
Specified Change in Control
” means (x) the acquisition of the Company by another
entity by means of any transaction to which the Company is a party (including, without limitation, any merger or consolidation)
that contemplates an enterprise value of the Company of less than $75 million, or (y) a sale of all or substantially all of the
assets of the Company for an aggregate purchase price of less than $75 million (including, for purposes of this section, the sale
or exclusive license of intellectual property rights which, in the aggregate, constitutes substantially all of the corporation’s
material intellectual property assets).
(m)
Variable
Rate Transaction.
Notwithstanding anything in this Agreement to the contrary, until the later of (i) none of the Notes being
outstanding or (ii) three years after the Company becomes a Reporting Company, the Company shall be prohibited from effecting or
entering into any Subsequent Placement involving a Variable Rate Transaction. “
Variable Rate Transaction
” means
a transaction in which the Company (i) issues or sells any Convertible Securities either (A) at a conversion, exercise or exchange
rate or other price that is based upon and/or varies with the trading prices of, or quotations for, the shares of Common Stock
at any time after the initial issuance of such Convertible Securities, or (B) with a conversion, exercise or exchange price that
is subject to being reset at some future date after the initial issuance of such Convertible Securities or upon the occurrence
of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock,
other than pursuant to a customary “weighted average” anti-dilution provision or in connection with any stock dividend,
stock split, combination or other similar recapitalization or (ii) enters into any agreement (including, without limitation, an
“equity line of credit” or an “at the market offering”) whereby the Company may sell securities at a future
determined price (other than standard and customary “preemptive” or “participation” rights). The Buyers,
by action of the Required Buyers, shall be entitled to obtain injunctive relief against the Company to preclude any such issuance,
which remedy shall be in addition to any right to collect damages.
(n)
Passive
Foreign Investment Company.
For the period ending on the third year anniversary after the Company becomes a Reporting Company,
the Company shall conduct its business in such a manner as will ensure that the Company will not be deemed to constitute a passive
foreign investment company within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.
(o)
Restriction
on Redemption and Cash Dividends.
So long as any Notes are outstanding, the Company shall not, directly or indirectly, redeem
(other than repurchases of stock from former employees, advisors, directors, consultants or other persons who provided services
on behalf of the Company or a Subsidiary at the original purchase price thereof), or declare or pay any cash dividend or distribution
on, any securities of the Company without the prior express written consent of the Required Buyers.
(p)
Corporate
Existence.
So long as any Notes are outstanding, the Company shall maintain its corporate existence.
(q)
Board
of Directors; Size.
So
long as any Notes are outstanding immediately prior to the consummation of the IPO, the Company
will, unless otherwise mutually agreed by Liquid Venture Partners, LLC (“
LVP
”) and the Company, use its commercially
reasonable efforts to ensure that the board of directors of the Company (the “
Board
”) (i) by no later than forty-five
(45) days after the Closing Date, be comprised of no more than seven (7) members who are serving on the Board as of the Closing
Date or who have been elected by a majority of the directors who are serving on the Board as of the Closing Date (the “
Existing
Directors
”);
(ii) by the filing of the registration statement on Form S-1 (the “
S-1
”) for the
IPO, have at least three (3) new members, who will have been mutually selected by the Board and LVP and who will replace a corresponding
number of Existing Directors; (iii) by the filing of the S-1 for the IPO, have a majority of Independent Directors (as defined
by NASDAQ Marketplace Rule 4200(a)(15)); (iv) until the consummation of the IPO, be comprised of a majority of Existing Directors;
and (v) after the consummation of the IPO, be comprised of five (5) members or, as may be subsequently mutually agreed prior to
the filing of the S-1 for the IPO by the Board and LVP, seven (7) members.
(r)
Intellectual
Property Strategy.
Within three months of the Effective Date, the Company will adopt an intellectual property strategy reasonably
acceptable to LVP and the Company, and provide a detailed written statement of the strategy to the Buyers.
(s)
Incentive
Equity
. The Company will take the necessary actions to amend its stock incentive plan (the “
Stock Incentive Plan
”)
to provide that the number of shares of Common Stock reserved for issuance thereunder, together with any stock that may be awarded
for performance bonuses related to a successful IPO, shall equal to no more than fifteen percent (15%) of the number of fully
diluted shares of Common Stock (based on an assumed conversion price of the Notes of $0.44) during the period up to and including
the date of the IPO and giving effect to the IPO and debt conversions triggered by the IPO, unless otherwise mutually agreed between
the Company and LVP in writing. From and after the Effective Date and through and including the consummation of the IPO, the Company
shall not issue any options or other equity awards under the Stock Incentive Plan or otherwise to any employee, officer or director
of the Company as of the Effective Date, except as disclosed in the Private Placement Memorandum, unless otherwise mutually agreed
between the Company and LVP in writing.
(t)
Independent
Accountants
. Within three months after the date of initial issuance of the Notes, the Company will engage independent certified
public accountants, which firm is actively registered with the PCAOB, to perform an audit of the financial statements that would
be necessary and sufficient to meet the filing requirements of a registration statement for the registration of securities of
the Company either for issuance by the Company or resale of the Conversion Shares, which audit will be completed no later than
nine (9) months after the date of the initial issuance of the Notes.
(u)
Lock-Up.
In connection with any IPO, the Company will use its best efforts to obtain lock-up agreements in a form reasonably acceptable
to the Placement Agent from the persons indicted in the below tables, covering themselves and their affiliates, in respect of the
securities issued by the Company held at the commencement of the IPO of the Company, including any common stock into which those
securities may be converted, exercised or exchanged into shares of Common Stock, for the time periods as indicated in the below
tables (for clarity, the lock-up does not apply to any of the securities to be offered to the public in the IPO through an underwriter
or selling group member or any securities acquired in the public market in; or at any time after, the IPO):
(A)
365 Day Lock-Up Table
For the period commencing on the offering date of the IPO of the
Company and extending for 365 days thereafter:
|
|
·
|
Officers and directors serving in such capacities at the commencement
of the IPO (for clarity, if any director and officer who executed a formal lock-up agreement for a 365 day lock-up period is no
longer a director or officer at the time of the IPO, such person will be fully released from the agreement at the time of the IPO,
provided that they execute a substitute lock-up agreement as provided below under the terms of the General Lock Up Table); and
|
|
|
·
|
The Placement Agent, LVP and Liquid Patent Consulting, LLC, provided,
however they or their affiliates may exercise their respective warrants to convert them into shares of Common Stock during the
365 day lock-up period.
|
(B)
General Lock-Up Table
For the period commencing on the offering date of the IPO of the
Company and extending thereafter as indicated below:
|
|
·
|
All Employees (other than officers);
|
|
|
·
|
All existing shareholders, if not otherwise covered by a lock-up with
a greater time period; and
|
|
|
·
|
All holders of the Existing Convertible Notes, if any are outstanding
at the time of the IPO.
|
Under the General Lock-Up, those persons named
above will be prohibited from offering, selling, transferring directly or indirectly, pledging, or offering to do any of the same
directly or indirectly, any of the securities of the Company (including any securities convertible, exercisable or exchangeable
into shares of Common Stock), for a period of 180 days following the effective date of the registration statement for the IPO
(the “
IPO Commencement
Date
”),
and on the 181
st
day following the IPO Commencement
Date and on every subsequent 31
st
day thereafter, 15% of the securities shall be released from the General Lock-Up
until the 366
th
day following the IPO Commencement Date when all such prohibitions shall have been removed. For purpose
of clarity, below is a summary of the lock-up period.
|
Days Following the IPO
|
|
% of Securities
Subject to Lock-Up
|
|
|
1-180
|
|
|
100
|
%
|
|
181-211
|
|
|
85
|
%
|
|
212-242
|
|
|
70
|
%
|
|
243-273
|
|
|
55
|
%
|
|
274-304
|
|
|
40
|
%
|
|
305-335
|
|
|
25
|
%
|
|
336-365
|
|
|
10
|
%
|
|
366 and thereafter
|
|
|
0
|
%
|
(v)
Investor
Market Stand-Off
. In connection with the IPO, if any, each Buyer hereby agrees that, for a period of 365 days following the
IPO Commencement Date (the “
Restricted Period
”), it will not (i) 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, lend
or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, whether now owned or hereafter acquired or with respect to which such Buyer has or hereafter acquires the power
of disposition, other than any of the securities to be offered to the public in the IPO through an underwriter or selling group
member or any securities acquired in the public market in, or at any time after, the IPO (collectively, “
Restricted Stock
”);
or (ii) enter into any swap or other agreement, arrangement or transaction that transfers to another, in whole or in part, directly
or indirectly, any of the economic consequence of ownership of any Restricted Stock, whether any transaction described in clause
(i) or (ii) is to be settled by delivery of Common Stock, other securities, in cash or otherwise, without the prior written consent
of the managing or lead underwriter of such offering;
provided, however
that, (A) on the 181
st
day following,
the IPO Commencement Date and on every subsequent 31
st
day thereafter, 15% of the, securities shall be released from
this lock-up provision until the 366
th
day following the date of the IPO Commencement Date when all such prohibitions
shall have been removed (for purpose of clarity, the table below contains a summary of the lock-up period); and (B) notwithstanding
the foregoing, if during the last seventeen (17) days of the one hundred eighty (180) day period following the IPO Commencement
Date (the “
FINRA Restricted Period
”) the Company issues an earnings release or material news or a material
event relating to the Company occurs, or prior to the expiration of the FINRA Restricted Period the Company announces that it
will release earnings results during the sixteen (16) day period beginning on the last day of the restricted period, then, upon
the request of the managing or lead underwriter, to the extent required by any FINRA rules, the restrictions imposed by this Section
4(v) shall continue to apply until the end of the third (3
rd
) trading day following the expiration of the fifteen (15)
day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. In order
to enforce the restrictions agreed to by Buyer in this Section 4(v), the Company may impose stop-transfer instructions with respect
to any security acquired under or subject to this Agreement until the end of the Restricted Period. The Company’s underwriters shall
be third-party beneficiaries of the restrictions set forth in this Section 4(v).
|
Days Following the IPO
|
|
% of Securities
Subject to Lock-Up
|
|
|
1-180
|
|
|
100
|
%
|
|
181-211
|
|
|
85
|
%
|
|
212-242
|
|
|
70
|
%
|
|
243-273
|
|
|
55
|
%
|
|
274-304
|
|
|
40
|
%
|
|
305-335
|
|
|
25
|
%
|
|
336-365
|
|
|
10
|
%
|
|
366 and thereafter
|
|
|
0
|
%
|
(w)
IPO
Commitment
. The Company shall not within six (6) months of the Closing Date file a registration statement on Form S-1 (or
any successor form thereto) to register and sell Common Stock or other securities in an IPO and shall use its best efforts
to
no later than nine (9) months after the Closing Date, file with the SEC a registration statement on Form S-1
(or any successor form thereto) to register and sell Common Stock in an IPO.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.
(a)
Register
.
The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate
by notice to each holder of Securities), a register for the Notes and, if issued, the Conversion Shares in which the Company shall
record the name and address of the Person in whose name the Notes and/or Conversion Shares have been issued (including the name
and address of each transferee), the principal amount of the Notes or aggregate number of Conversion Shares held by such Person,
and any tax related information required to be maintained. The Company shall keep the register open and available at all times
during business hours for inspection of any Buyer or its legal representatives.
(b)
Transfer
Agent Instructions
. If a Buyer effects a sale, assignment or transfer of the Conversion Shares in compliance with all applicable
securities laws, the Company shall permit the transfer and shall promptly issue, or shall promptly instruct its transfer agent
to issue, as applicable, one or more certificates or, if the Conversion Shares are eligible for legend removal under Section 5(d),
credit shares to the applicable balance accounts at the Depository Trust Company (“
DTC
”) in such name and in
such denominations as specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment
or transfer involves Conversion Shares sold, assigned or transferred pursuant to an effective registration statement or in compliance
with Rule 144, the transfer agent shall issue such shares to such Buyer, assignee or transferee (as the case may be) without any
restrictive legend in accordance with Section 5(d) below. The Company acknowledges that a breach by it of its obligations under
this Section 5(b) will cause irreparable harm to each Buyer. Accordingly, the Company acknowledges that the remedy at law for
a breach of its obligations under this Section 5(b) will be inadequate and agrees, in the event of a breach or threatened breach
by the Company of the provisions of this Section 5(b), that each Buyer shall be entitled, in addition to all other available remedies,
to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required. The Company shall cause its counsel to issue the legal opinion
referred to in the Irrevocable Transfer Agent Instructions to the Company’s transfer agent on each Effective Date (as defined
and provided in the Registration Rights Agreement), provided that the applicable Buyer(s) or its or their representatives and/or
brokers have provided the documentation to counsel reasonably necessary or required for the basis of such legal opinion. Any fees
(with respect to the transfer agent, counsel to the Company or otherwise) associated with the issuance of such opinion or the
removal of any legends on any of the Securities shall be borne by the Company.
(c)
Legends
.
Each Buyer understands that the Securities have been issued (or will be issued in the case of the Conversion Shares) pursuant to
an exemption from registration or qualification under the 1933 Act and applicable state securities laws, and except as set forth
below, the Securities shall bear any legend as required by the “Blue Sky” laws of any state and a restrictive legend
in substantially the following form (and a stop-transfer order may be placed against transfer of such Securities):
[NEITHER THE ISSUANCE AND SALE OF
THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN]/[THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE
COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT, NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
(d)
Removal
of Legends
. Certificates evidencing Securities shall not be required to contain the legend set forth in Section 5(c)
above or any other legend (i) following any sale of such Securities pursuant to an effective registration statement covering
the resale of such Securities is effective under the 1933 Act, (ii) following any sale of such Securities pursuant to Rule
144, (iii) if such Securities are eligible to be sold, assigned or transferred under Rule 144(b)(1) (provided that a Buyer
provides the Company with reasonable assurances that such Securities are eligible and will remain for sale, assignment or
transfer under Rule 144(b)(1) which shall not include an opinion of counsel), (iv) in connection with a sale, assignment or
other transfer (other than under Rule 144), provided that such Buyer provides the Company with an opinion of counsel to such
Buyer, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Securities may be made
without restrictive legends and thereafter made without registration under the applicable requirements of the 1933 Act, or
(v) if such legend is not required under applicable requirements of the 1933 Act (including, without limitation, controlling
judicial interpretations and pronouncements issued by the SEC, provided that Buyer provides the Company with an opinion of
counsel to such effect). If the Company is a Reporting Company and a legend is not required pursuant to the foregoing, the
Company, at its expense, shall no later than three (3) Business Days following the delivery by a Buyer to the Company or the
transfer agent (with notice to the Company) of a legended certificate representing such Securities (endorsed or with stock
powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if
applicable), together with any other deliveries from such Buyer as may be required above in this Section 5(d), as directed by
such Buyer, either: (A) provided that the Company’s transfer agent is participating in the DTC Fast Automated Securities
Transfer Program arid such Securities are Conversion Shares, credit the aggregate number of shares of Common Stock to which
such Buyer shall be entitled to the balance account of such Buyer or the purchaser of such Conversion Shares, as the case may
be (the “
Designated Recipient
”) with the DTC through its Deposit/Withdrawal at Custodian system or (B) if
the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch
for delivery (via reputable overnight courier) to such Designated Recipient, a certificate representing such Securities that
is free from all restrictive and other legends, registered in the name of such Designated Recipient (the date by which
such credit is so required to be made to the balance account of such Designated Recipient with DTC or such certificate is
required to be delivered to such Designated Recipient pursuant to the foregoing is referred to herein as the
“
Required Delivery Date
”).
(e)
Failure
to
Timely Deliver; Buy-In
. If the Company is a Reporting Company and the Company improperly fails to (i) issue and
dispatch for delivery (or cause to be so dispatched) to a Designated Recipient by the Required Delivery Date a certificate representing
the Securities so delivered to the Company by such Buyer that is free from all restrictive and other legends or (ii) credit the
balance account of such Designated Recipient’s or such Designated Recipient’s nominee with DTC for such number of Conversion Shares
so delivered to the Company, and if on or after the business day immediately following the Required Delivery Date such Buyer (or
any other Person in respect, or on behalf, of such Buyer) purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by such Buyer of all or any portion of the number of shares of Common Stock, or a sale
of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, that such Buyer so
anticipated receiving from the Company without any restrictive legend (the “
Buy-In Shares
”), then the Company
shall, within five (5) Business Days after such Buyer’s request and in such Buyer’s sole discretion, either (x) pay cash to such
Buyer in an amount equal to such Buyer’s total purchase price (including brokerage commissions and other out of pocket expenses,
it’ any) for such Buy-In Shares (the “
Buy-In Price
”), at which point the Company’s obligation to so deliver
such certificate or credit such Designated Recipient’s balance account shall terminate and such shares shall be cancelled, or
(y) promptly honor its obligation to so deliver to such Designated Recipient a certificate or certificates or credit such Designated
Recipient’s DTC account representing such number of shares of Common Stock that would have been so delivered if the Company timely
complied with its obligations hereunder and pay cash to such Buyer in an amount equal, to the excess (if any) of the Buy-In Price
over the product of (A) such number of shares of Conversion Shares that the Company was required to deliver to such Designated
Recipient by the Required Delivery Date multiplied by (B) the lowest closing sale price of the Common Stock on the Business Days
during the period commencing on the date of the delivery by such Designated Recipient to the Company of the applicable Conversion
Shares and ending on the date of such delivery and payment under this clause (y).
6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
(a) The
obligation of the Company hereunder to issue and sell the Notes to each Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole discretion by providing each Buyer with prior written notice thereof:
(i) Such
Buyer shall have executed each of the other Transaction Documents to which it is a party and an Investor Questionnaire, and delivered
the same to the Company.
(ii) Such
Buyer and each other Buyer shall have delivered to the Escrow Agent on behalf of the Company the Purchase Price for the Note being
purchased by such Buyer at the Closing by check in collected funds through the Escrow Agent or wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.
(iii) The
representations and warranties of such Buyer shall be true and correct in all material respects as of the date when made and as
of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date), and such Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by
such Buyer at or prior to the Closing Date.
(iv) The
Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities.
(v) No
statute rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated
by the Transaction Documents.
(vi) Since
the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result
in a Material Adverse Effect.
(vii) That
Notes having an aggregate principal amount of at least $5,000,000 are purchased by the Buyers.
7. CONDITIONS
TO EACH BUYER’S OBLIGATION TO PURCHASE.
(a) The
obligation of each Buyer hereunder to purchase its Note at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are for each Buyer’s sole benefit and may be waived by
such Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:
(i) The
Company shall have duly executed and delivered to such Buyer each of the Transaction Documents to which it is a party and the Company
shall have duly executed and delivered to such Buyer a Note (in such original principal amount as is set forth across from such
Buyer’s name in column (2) of the Schedule of Buyers) being purchased by such Buyer at the Closing pursuant to this Agreement.
(ii) Buyer
shall have received an opinion of WilmerHale LLP, the Company’s counsel, dated the date of the issuance of the Note to such Buyer,
stating that the Company is a corporation incorporated under the laws of the State of Delaware, the Transaction Documents have
been duly authorized by all requisite corporate action on the part of the Company, and that the Conversion Shares, if and when
issued in accordance with the terms of the Notes, will be duly authorized, fully paid and non-assessable, which opinion may be
subject to such assumptions and conditions are normally set forth in opinions of legal counsel in respect of such matters.
(iii) The
Company shall have delivered to such Buyer a certificate evidencing the formation and good standing of the Company in its jurisdiction
of formation issued by the Secretary of State (or comparable office) of such jurisdiction of formation as of a date within ten
(10) days of the Closing Date.
(iv) The
Company shall have delivered to such Buyer a certificate or other reasonably acceptable evidence evidencing the Company’s qualification
as a foreign corporation and good standing issued by the Secretary of State (or comparable office) of each jurisdiction in which
the Company conducts business and is required to so qualify, as of a date within ten (10) days of the Closing Date.
(v) The
Company shall have delivered to such Buyer a certified copy of the Certificate of Incorporation as certified by the Secretary of
State of the Company’s jurisdiction of incorporation within ten (10) days of the Closing Date.
(vi) The
Company shall have delivered to such Buyer a certificate, in the form acceptable to such Buyer, executed by the Secretary of the
Company dated as of the Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted by the Company’s board
of directors in a form reasonably acceptable to such Buyer, (ii) the Certificate of Incorporation of the Company and (iii) the
Bylaws of the Company as in effect at the Closing.
(vii) Each
and every representation and warranty of the Company shall be true and correct as of the applicable Closing Date in all material
respects (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such
date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and
conditions required to be performed, satisfied or complied with by the Company at or prior to the Closing Date. Such Buyer shall
have received a certificate, executed by the President of the Company, dated as of the Closing Date, to the foregoing effect and
as to such other matters as may be reasonably requested by such Buyer in the form reasonably acceptable to such Buyer.
(viii) The
Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities.
(ix) No
statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated
by the Transaction Documents.
(x) Since
the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result
in a Material Adverse Effect.
(xi) In
accordance with the terms of the Security Documents, the Company shall have delivered to such Buyer copies of appropriate financing
statements on Form UCC-1 duly filed in such office or offices and in the offices of the United States Patent and Trademark Office
as may be necessary or, in the opinion of the Buyers, desirable to perfect the first priority security interests purported to be
created by each Security Document.
(xii) (i)
Within two (2) Business Days prior to the Closing, the Company shall have delivered or caused to be delivered to each Buyer true
copies of UCC search results in the Company’s jurisdiction of incorporation, listing all effective financing statements which name
as debtor the Company filed in the prior five years to perfect an interest in any assets thereof, together with copies of such
financing statements, none of which, except as otherwise agreed in writing by the Required Buyers, shall cover any of the Collateral
(as defined in the Security Documents) and the results of searches for any tax lien and judgment lien in the jurisdiction of the
Company’s principal place of business filed against such Person or its property, which results, except as otherwise agreed to in
writing by the Required Buyers shall not show any such Liens (as defined in the Security Documents); and (ii) at the Closing, the
Company shall have delivered or caused to be delivered to each Buyer a perfection certificate, duly completed and executed by the
Company, in form and substance reasonably satisfactory to the Required Buyers.
(xiii) Since
the Effective Date, the Company shall not have amended, modified, waived compliance with or terminated, revoked or rescinded in
any manner or respect (and the Company shall not have taken any action, or permitted any action to be taken (whether through the
Company’s inaction or otherwise), that has a similar effect to any of the foregoing) any provision of any of material agreements
and all of such agreements shall be in full force and effect.
(xiv) The
Company shall have delivered to such Buyer a letter dated as of the Closing Date, in a form reasonably acceptable to such Buyer,
executed by the Company (the “
Disclosure
Letter
”).
(xv) The
Company shall have delivered to such Buyer such other documents, instruments or certificates relating to the transactions contemplated
by this Agreement as such Buyer or its counsel may reasonably request.
(xvi) That
Notes having an aggregate principal amount of at least $5,000,000 are purchased by the Buyers.
(xvii) That
all members of the Company’s Board shall have tendered at the Closing resignation letters to the Board agreeing to resign from
the Board effective upon the request of the Board in the form attached hereto as
Exhibit F
such that the Company’s
covenant under Section 4(q) shall be fulfilled.
(xviii) The
Company shall have collected substantially all of the Old MTI Convertible Notes, including all of the Old MTI Convertible Notes
being exchanged for Notes, and shall have certified the same to the Placement Agent. For purposes of the forgoing, “substantially
all” shall mean Old MTI Convertible Notes having an aggregate principal amount of at least 95% of the aggregate principal
amount of all Old MTI Convertible Notes.
8. TERMINATION.
(a) This
Agreement may be terminated prior to Closing:
(i) by
written agreement of the Buyers and the Company; or
(ii) by
either the Company or a Buyer (as to itself but no other Buyer) upon written notice to the other, if the Closing shall not
have taken place by 6:30 p.m. Eastern time on March 5, 2015, unless a later date shall have been approved by the
Company’s Board of Directors, but in no event later than March 31, 2015; provided, that the right to terminate this
Agreement under this Section 8(a)(ii) shall not be available to any party whose failure to comply with its obligations under
this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such time.
(b) No
termination of this Agreement shall affect any obligation of the Company under this Agreement to reimburse such Buyer for the expenses
described in Section 4(g) above. Nothing contained in this Section 8 shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right
of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction
Documents.
9. MISCELLANEOUS.
(a)
Governing
Law; Jurisdiction; Jury Trial
. All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that, it is not personally subject to the jurisdiction of any
such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein
shall be deemed or operate to preclude any Buyer from bringing suit or taking other legal action against the Company in any other
jurisdiction to collect on the Company’s obligations to such Buyer or to enforce a judgment or other court ruling in favor
of such Buyer.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b)
Counterparts
.
This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that
any signature is delivered by facsimile transmission or, by an e-mail which contains a portable document format (.pdf) file of
an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.
(c)
Headings;
Gender
. The headings of this Agreement are for convenience of reference and shall not form part of, or affect, the interpretation
of, this Agreement, Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine,
feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include”
and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,”
“hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision
in which they are found.
(d)
Severability
.
If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of
competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to
apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision
shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified
continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the
prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the
respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would
otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of
the prohibited, invalid or unenforceable provision(s), Notwithstanding anything to the contrary contained in this Agreement
or any other Transaction Document (and without implication that the following is required or applicable), it is the intention
of the parties that in no event shall amounts and value paid by the Company, or payable to or received by any of the Buyers,
under the Transaction Documents (including without ’limitation, any amounts that would be characterized as
“interest” under applicable law) exceed amounts permitted under any applicable law. Accordingly, if any obligation to
pay, payment made to any Buyer, or collection by any Buyer pursuant the Transaction Documents is finally judicially
determined to be contrary to any such applicable law, such obligation to pay, payment or collection shall be deemed to have
been made by mutual mistake of such Buyer, and the Company and such amount shall be deemed to have been adjusted
with ’retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited
by the applicable law. Such adjustment shall be effected, to the extent necessary, by reducing or refunding, at the option of
such Buyer, the amount of interest or any other amounts which would constitute unlawful amounts required to be paid or
actually paid to such Buyer under the Transaction Documents, For greater certainty, to the extent that any interest, charges,
fees, expenses or other amounts required to be paid to or received by such Buyer under any of the Transaction Documents or
related thereto are held to be within the meaning of “interest” or another applicable term to otherwise be
violative of applicable law, such amounts shall be pro-rated over the period of time to which they relate.
(e)
Entire
Agreement: Amendments
. This Agreement, the other Transaction Documents and the schedules and exhibits attached hereto and
thereto and the instruments referenced herein and therein supersede all other prior oral or written agreements between the Buyers,
the Company, their affiliates and Persons acting on their behalf solely with respect to the matters contained herein and therein,
and this Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein contain the entire understanding of the parties solely with respect to the matters covered herein
and therein; provided, however, except as explicitly stated herein, nothing contained in this Agreement or any other Transaction
Document shall (or shall be deemed to) (i) have any effect on any agreements any Buyer has entered into with, or any instruments
any Buyer has received from, the Company prior to the date hereof with respect to any prior investment made by such Buyer in the
Company or (ii) waive, alter, modify or amend in any respect any obligations of the Company, or any rights of or benefits to any
Buyer or any other Person, in any agreement entered into prior to the date hereof between or among the Company and any Buyer,
or any instruments any Buyer received from the Company prior to the date hereof, and all such agreements and instruments shall
continue in full force and effect. Except as specifically set forth herein or therein, neither the Company nor any Buyer makes
any representation, warranty, covenant or undertaking with respect to such matters. For clarification purposes, the Recitals are
part of this Agreement. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company
and the Required Buyers, any amendment to any provision of this Agreement made in conformity with the provisions of this Section
9(e) shall be binding on all Buyers and holders of Securities, as applicable, provided that no such amendment shall be effective
to the extent that it (1) applies to less than all of the holders of the Securities then outstanding or (2) imposes any obligation
or liability on any Buyer without such Buyer’s prior written consent (which may be granted or withheld in such Buyer’s
sole discretion). No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving
party, provided that the Required Buyers may waive any provision of this Agreement, and any waiver of any provision of this Agreement
made in conformity with the provisions of this Section 9(e) shall be binding on all Buyers and holders of Securities, as applicable,
provided that no such waiver shall be effective to the extent that it (1) applies to less than all of the holders of the Securities
then outstanding (unless a party gives a waiver as to itself only) or (2) imposes any obligation or liability on any Buyer without
such Buyer’s prior written consent (which may be granted or withheld in such Buyer’s sole discretion). No consideration
shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration also is offered to all of the parties to the Transaction Documents who are holders of
Notes, The Company has not, directly or indirectly, made any agreements with any Buyers relating to the terms or conditions of
the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without limiting
the foregoing, the Company confirms that, except as set forth in this Agreement, no Buyer has made any commitment or promise or
has any other obligation to provide any financing to the Company or otherwise. As a material inducement for each Buyer to enter
into this Agreement, the Company expressly acknowledges and agrees that no due diligence or other investigation or inquiry conducted
by a Buyer, any of its advisors or any of its representatives shall affect such Buyer’s right to rely on, or shall modify
or qualify in any manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement
or any other Transaction Document. “
Required Buyers
”
means Buyers holding Notes having an aggregate
outstanding principal amount that represents a majority of the aggregate outstanding principal amount of all Notes.
(f)
Notices
.
Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must
be in writing and will be deemed to have been delivered: (i) upon receipt, if delivered personally; (ii) when sent, if sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party);
(iii) when sent, if sent by e-mail (provided that such sent e-mail is kept on file (whether electronically or otherwise) by the
sending party and the sending party does not receive an automatically generated message from the recipient’s e-mail server that
such e-mail could not be delivered to such recipient) and (iv) if sent by overnight courier service, one (1) Business Day after
deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive
the same. The addresses, facsimile numbers and e-mail addresses for such communications shall be:
If to the Company:
Mears Technologies, Inc.
20 Walnut Street, Suite 8
Wellesley Hills, MA 02481
with a copy (for informational purposes only) to:
WilmerHale LLP
60 State Street
Boston, Massachusetts 02109
Attention: Michael D. Bain, Esq.
If to a Buyer, to its address, facsimile number or e-mail address
set forth on such Buyer’s signature page hereto,
with a copy (for informational purposes only) to:
Golenbock Eiseman Assor Bell & Peskoe LLP
437 Madison Avenue, 40th Floor
New York, NY 10022
Facsimile: (212) 754-0330
E-mail : ahudders@golenbock.com
cvandemark@golenbock.com
Attention: Andrew D, Hudders, Esq.
Carl Van Demark, Esq.
or to such other address, facsimile number
or e-mail address and/or to the
.
attention of such other Person as the recipient party has specified by written notice
given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by
the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s
facsimile machine containing the time, date and recipient facsimile number or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with
clause (1), (ii) or (iv) above, respectively. A copy of the e-mail transmission containing the time, date and recipient e-mail
address shall be rebuttable evidence of receipt by e-mail in accordance with clause (iii) above.
(g)
Successors
and Assigns
. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and
assigns, including, as contemplated below, any assignee of any of the Securities. The Company shall not assign this Agreement or
any rights or obligations hereunder without the prior written consent of the Required Buyers; except in the event of a Change in
Control (as defined in the Notes) where the Company repays in full the outstanding Notes of each Buyer or offers each Buyer an
election to be repaid in full under such outstanding notes contingent only upon consummation of such Change in Control. A Buyer
may assign some or all of its rights hereunder in connection with any transfer of any of its Securities without the consent of
the Company, in which event such assignee shall be deemed to be a Buyer hereunder with respect to such assigned rights.
(h)
No
Third Party Beneficiaries
. This Agreement is intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than
the Indemnitees referred to in Section 9(k).
(i)
Survival
.
The representations, warranties, agreements and covenants shall survive the Closing and shall expire on the conversion of the Notes
into Conversion Shares. Each Buyer shall be responsible’ only for its own representations, warranties, agreements and covenants
hereunder.
(j)
Further
Assurances
. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(k)
Indemnification
.
In consideration of each Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each holder of any Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing Persons’ agents or other representatives
(including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively,
the “
Indemnitees
”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements for
one (1) counsel to all the Buyers (the
“Indemnified Liabilities”),
incurred by any Indemnitee as a result of,
or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in
any of the Transaction Documents, (b) any breach of any covenant, agreement or obligation of the Company contained in any, of
the Transaction Documents, or (c) any cause of action, suit, proceeding or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf of the Company) or which otherwise involves such
Indemnitee that arises out of or results from (i) the execution, delivery, performance or successful enforcement of any of the
Transaction Documents, or (ii) the status of such Buyer as a Note holder as a result of the transactions contemplated by the Transaction
Documents or as a party to this Agreement (including, without limitation, as a party in interest or otherwise in any action or
proceeding for injunctive or other equitable relief). To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment, and satisfaction of each of the Indemnified Liabilities
which is permissible under applicable law. Except as otherwise set forth herein, the mechanics and procedures with respect to
the rights. and obligations under this Section 9(k) shall be the same as those set forth in Section 6 of the Registration Rights
Agreement. No Indemnitee shall be entitled to indemnification under this Section 9(k) to the extent an Indemnified Liability arises
out of the gross negligence or willful misconduct of such Indemnitee. The Company shall not be obligated hereunder for any settlement
entered into by an Indemnitee without the Company’s prior written consent; provided, however, that the Company shall not
unreasonably withhold, delay or condition its consent.
(l)
Construction
.
The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and
no rules of strict construction will be applied against any party. No specific representation or warranty shall limit the generality
or applicability of a more general representation or warranty. Each and every reference to share prices, shares of Common Stock
and any other numbers in this Agreement that relate to the Common Stock shall be automatically adjusted for stock dividends, .stock
splits, stock combinations and other similar transactions that occur with respect to the Common Stock after the date of this Agreement.
(m)
Remedies
.
Each Person having any rights under any provision of this Agreement shall have all rights and remedies set forth in the Transaction
Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement shall
be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or all of its obligations under the Transaction Documents,
any remedy at law may prove to be inadequate relief to the Buyers. The Company therefore agrees that the Buyers shall be entitled
to seek specific performance and/or temporary; preliminary and permanent injunctive or other equitable relief from any court of
competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security.
(n)
Withdrawal
Right
. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Buyer exercises a right, election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then such Buyer may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
(o)
Payment
Set Aside; Currency
. To the extent that the Company makes a payment or payments to any Buyer hereunder or pursuant to any of
the other Transaction Documents or any of the Buyers enforce or exercise their rights hereunder or thereunder, and such payment
or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid Or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred. Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement and the other
Transaction Documents are in United States Dollars (“
U.S. Dollars
”), and all amounts owing under this Agreement
and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be
converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “
Exchange
Rate
” means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement, the
U.S. Dollar exchange rate as published in
The Wall Street Journal
on the relevant date of calculation.
(p)
Independent
Nature of Buyers’ Obligations and Rights
. The obligations of each Buyer under the Transaction Documents are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance of the obligations
of any other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action
taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers as, and the Company acknowledges that the
Buyers do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption
that the Buyers are in any way acting in conceit or as a group or entity with respect to such obligations or the transactions
contemplated by the Transaction Documents or any matters, and the Company acknowledges that the Buyers are not acting in concert
or as a group, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated
by the Transaction Documents. The decision of each Buyer to purchase Securities pursuant to the Transaction Documents has been
made by such Buyer independently of any other Buyer. Each Buyer acknowledges that no other Buyer has acted as agent for such Buyer
in connection with such Buyer making its investment hereunder and that no other Buyer will be acting as agent of such Buyer in
connection with monitoring such Buyer’s investment in the Securities or enforcing its rights under the Transaction Documents. The
Company and each Buyer confirms that each Buyer has independently participated. with the Company in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Buyer to be joined as an additional party in any proceeding for such purpose. The use
of a single agreement to effectuate the purchase and sale of the Securities contemplated hereby was solely in the control of the
Company, not the action. or decision of any Buyer, and was done solely for the convenience of the Company and not because it was
required or requested to do so by any Buyer. It is expressly understood and agreed that each provision contained in this Agreement
and in each other Transaction Document is between the Company and
.
a Buyer, solely, and not between the Company and
the Buyers collectively and not between and among the Buyers.
[Signature pages follow]
IN WITNESS WHEREOF
,
Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written
above.
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COMPANY:
|
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MEARS TECHNOLOGIES, INC.,
|
|
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a Delaware corporation
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By:
|
/s/ John D.T. Gerber
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Name:
John D.T. Gerber
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Title:
Chairman
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Exhibit 10.12
REGISTRATION RIGHTS AGREEMENT FOR
INVESTORS
THIS REGISTRATION
RIGHTS AGREEMENT
(this “
Agreement
”) is made as of March 17, 2015 by and among Mears Technologies, Inc.,
a Delaware corporation (“
Company
”), and the persons listed on Schedule A hereto, referred to individually as
the “
Holder
” and collectively as the “
Holders
”.
A. In
connection with the Securities Purchase Agreement by and among the parties hereto, dated as of March 17, 2015 (the “
Securities
Purchase Agreement
”), the Company has agreed, upon the terms and
subject to the conditions of the
Securities
Purchase Agreement, to issue the Notes (as defined in the Securities Purchase Agreement) to the Holders, which will be convertible
into Conversion Shares (as defined in the Notes) in accordance with the terms of the Notes.
B. To
induce the Holders of the Notes to consummate the transactions contemplated by the Securities Purchase Agreement, the Company has
agreed to provide to the Holders, and their assignees or successors in interest, certain rights to provide for the registration
for resale of their Conversion Shares by means of a Registration Statement under the Securities Act, pursuant to the terms of this
Agreement.
C. Unless
otherwise provided in this Agreement, capitalized terms used herein shall have the respective meanings set forth in Section 13
hereof.
NOW, THEREFORE,
in consideration of the above premises and the mutual covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and Holder hereby agree as follows:
1.
Registration
.
(a)
Piggyback
Registrations Rights
. If, at any time after the Company shall become subject to the periodic reporting obligations (a “
Reporting
Company
”) under the Securities Exchange Act through the date that is five years after the date the Company becomes a
Reporting Company, there is not an effective Registration Statement covering the Registrable Securities and the Company shall determine
to prepare and file with the Commission a Registration Statement relating to an offering for its own account or the account of
others under the Securities Act of any of its equity securities (other than on Form S-4 or Form S-8, each as promulgated under
the Securities Act, or their then equivalent relating to equity securities to be issued solely in connection with any acquisition
of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans), then
the Company shall send to the Holders a written notice of such determination at least twenty (20) days prior to the filing of any
such Registration Statement and shall include in such Registration Statement all Registrable Securities requested by any Holder
hereunder to be included in the registration within ten (10) days after the Company sends such notice to the Holders (the “
Piggyback
Shares
”) for resale and offer on a continuous basis pursuant to Rule 415; provided, that (i) if, at any time after giving
written notice of its intention to register any securities and prior to the effective date of the Registration Statement filed
in connection with such registration, the Company determines for any reason not to proceed with or terminate such registration,
the Company will be relieved of its obligation to register any Registrable Securities in connection with such registration, (ii)
in case of a determination by the Company to delay registration of its securities, the Company will be permitted to delay the registration
of Registrable Securities for the same period as the delay in registering such other securities, (iii) each Holder is subject to
confidentiality obligations and shall not use or disclose any information gained in this process or any other material nonpublic
information he, she or it obtains, (iv) each Holder or assignee or successor in interest shall comply with all applicable laws
relating to insider trading or similar restrictions; and (v) if all of the Registrable Securities of the Holders cannot be so included
due to Commission Comments, Commission Guidance or Underwriter Cutbacks, then the Company may reduce, in accordance with the provisions
of Section l(c) hereof; the number of Piggyback Shares included in such Registration Statement required to comply with such Commission
Comments, Commission Guidance or Underwriter Cutbacks.
(b)
Initial
Registration Statement
. At the election of each Holder, the Company shall be required to include up to all Piggyback Shares
held by such Holder for resale and offer on a continuous basis pursuant to Rule 415 in the first Registration Statement filed
after the date that it becomes a Reporting Company (the “
Initial
Registration Statement
”);
provided,
however,
that if all of the Piggyback Shares of the Holders cannot be so included due to Commission Comments, Commission Guidance
or Underwriter Cutbacks, then the Company may reduce, in accordance with the provisions of Section 1(c) hereof, the number of
Piggyback Shares included in such Registration Statement required to comply with such Commission Comments, Commission Guidance
or Underwriter Cutbacks.
(c)
Cutback
Provisions
. In the event all of the Registrable Securities cannot be or are not included in a Registration Statement due to
Commission Comments, Commission Guidance or Underwriter Cutbacks, the Company and the Holders agree that securities shall be removed
from such Registration Statement in the following order until no further removal is required by Commission Comments, Commission
Guidance or Underwriter Cutbacks:
(i) First,
any securities held by any former employee, consultant or affiliate of the Company shall be removed, pro rata based on the number
of securities being registered for such former employees, consultants or affiliates held by all of the former employees of the
Company and any of their affiliates and successors in interest, whether pursuant to agreement or otherwise and any other person
with any registration rights outstanding on the date hereof;
(ii) Second,
the securities held by National Securities Corporation (“
National Securities
”) and its members and affiliates,
if any, obtained solely by reason of providing services to the Company, which are being registered pursuant to any registration
rights agreement or otherwise (for clarity, any securities held by National Securities or its members or affiliates which were
acquired upon payment of a purchase price in cash or property will not be subject to this provision (c)(ii)); and
(iii) Third,
the Registrable Securities held by the Holders that are requested to be included in the Registration Statement shall be removed,
pro rata based on the number of Registrable Shares held by each Holder in comparison to the number of Registrable Securities held
by all Holders who have requested to include any Registrable Securities in the Registration Statement.
(d) [
Reserved
.]
(e)
Filing:
Content
. The Company will use its commercially reasonable efforts to cause each Registration Statement pursuant to which any
Registrable Securities are included, including the Initial Registration Statement, to contain the Plan of Distribution substantially
similar to that attached hereto as
Schedule B
. The Company shall use its commercially reasonable efforts to cause any Registration
Statement filed under this Section 1, including the Initial Registration Statement, to be declared effective under the Securities
Act as promptly as practicable after the filing thereof and shall keep such Registration Statement continuously effective under
the Securities Act until the earlier of (i) one year after its Effective Date (provided, however, the one year period shall be
extended for any Grace Period), (ii) such time as all of the Registrable Securities covered by such Registration Statement have
been publicly sold by the Holders, or (iii) such time as all of the Registrable Securities covered by such Registration Statement
may be sold by the Holders pursuant to Rule 144 without regard to both the volume limitations for sales as provided in Rule 144
and the limitations for such sales provided in Rule 144(i), if applicable, as determined by the counsel to the Company pursuant
to a written opinion letter to such effect, addressed and acceptable to the Company's transfer agent and the affected Holder (“
Effectiveness
Period
”). By 5:00 p.m. (New York City time) on the business day immediately following the Effective Date of a Registration
Statement, the Company shall file with the Commission in accordance with Rule 424 under the Securities Act the final Prospectus
to be used in connection with sales pursuant to such Registration Statement (whether or not such filing is technically required
under such Rule). Notwithstanding the foregoing portion of this Section 1(e), the Company shall have the right in its sole discretion
to withdraw any Registration Statement filed under this Section 1 prior to its effectiveness.
(f)
Termination
of Piggyback Registration Rights
. The registration rights afforded to each Holder under this Section 1 shall terminate on the
earliest date when all Registrable Securities of the Holder either: (i) have been publicly sold by the Holder pursuant to a Registration
Statement, (ii) have been covered by an effective Registration Statement which has been effective for an aggregate period of sixteen
(16) months (whether or not consecutive), provided, however, the time period shall be calculated so as to exclude any Grace Period,
or (iii) may be sold by the Holder pursuant to Rule 144 without regard' to both the volume limitations for sales as provided in
Ride 144 and the limitations for such sales provided in Rule 144(i), if applicable, as determined by the counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable to the Company's transfer agent and the affected
Holder in its reasonable discretion.
2.
Demand
Registration Rights
.
(a)
Demand
Right
. Commencing on the date that is one hundred eighty (180) days after the Company becomes a Reporting Company, the Holders
as a group representing at least 50% of the Registrable Securities (a “
Requesting Group
”) shall have a separate
one-time right, by written notice to the Company, signed by such Holders (the “
Demand Notice
”), to request
the Company to register for resale all Registrable Securities included by the Requesting Group in the Demand Notice (the “
Demand
Shares
”) under and in accordance with the provisions of the. Securities Act by filing with the Commission a Registration
Statement covering the resale of such Demand Shares (the “
Demand Registration Statement
”). A copy of the Demand
Notice also shall be provided by the Company to each of the other Holders who will have fifteen (15) days to notify the Company
in writing to include their Registrable Securities as part of the Demand Shares, the failure of which, however, shall not in any
way affect the rights of the Requesting Group pursuant to this Section 2(a). The Demand Registration Statement required hereunder
shall be on any form of registration statement then available for the registration of the Registrable Securities, as selected
by the Company in accordance with applicable law and regulation. The Company will use its commercially reasonable efforts to file
the DeMand Registration Statement within forty-five (45) days of the receipt of the Demand Notice, provided if the Demand Notice
is given within the forty-five (45) days
after the prior fiscal year end, then the Company will use its reasonably commercial
efforts to file the Demand Registration Statement within ninety (90) days of the fiscal year end of the Company. The Company shall
use its commercially reasonable efforts to cause the Demand Registration Statement to be declared effective under the Sectirities
Act as promptly as practicable after the filing thereof and to keep the Demand Registration Statement continuously effective under
the Securities Act during the Effectiveness Period.
(b)
Inclusion
of Other Registrable Shares and Cutback Provisions
. If as a result of Commission Comments or Commission Guidance, not all
shares are included that are desired to be included in a Registration Statement for the Demand Shares, the provisions of Section
1(c) shall apply, subject to the Demand Priority (as defined below) of the Requesting Group. Pursuant to the piggyback registration
rights granted under this Agreement, the Company may include the Registrable Shares of the other Holders which will be subject
to the provision of Section 1(c) hereof, except that under Section 1(c)(iii), there will be no cutback of the Registrable Securities
of the Requesting Group until the Holders of Piggyback Shares and the shares of any other person exercising piggyback rights under
any other registration rights agreement (except for National Securities and their current and former affiliates, which shall have
the priority established in Section 1(c)) have been removed, and thereafter if any further Registrable Securities have to be removed
then those of the Requesting Group will be removed pro rata (the “
Demand Priority
”), Notwithstanding the foregoing,
if any other securities of any person other than the Holders or the Requesting Group or National Securities and their current
and former affiliates are included on the Demand Registration Statement, such securities will be removed, if required pursuant
to Commission Comments, after removal of the securities indicated in Section 1(c)(i) and before the securities indicated in Section
1(c)(ii), as such persons decide among themselves, and if there is no agreement at to such removal provided to the Company within
a reasonable time, time being of the essence, then all the such securities will be removed.
(c)
Termination
of Demand Registration Rights
. The registration rights afforded to each Holder under this Section 2 shall terminate on the
earliest date when all Registrable Securities of the Holder either: (i) have been publicly sold by the Holder pursuant to a Registration
Statement, (ii) have been covered by an effective Registration Statement which has been effective for an aggregate period of sixteen
(16) months (whether or not consecutive),
provided, however,
the time period shall be calculated so as to exclude any Grace
Period, or (iii) may be sold by the Holder pursuant to Rule 144 without regard to both the volume limitations for sales as provided
in Rule 144 and the limitations for such sales provided in Rule 144(i), if applicable, as determined by the counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable to the Company's transfer agent and the affected
Holder in its reasonable discretion.
3.
Registration
Procedures
. Whenever any Registrable Securities are to be registered pursuant to this Agreement, the Company shall use its
commercially reasonable efforts to
.
effect the registration and sale of such Registrable Securities in accordance with
the intended method of disposition thereof, and pursuant thereto the Company shall have the following obligations:
(a) The
Company shall prepare and file with the Commission a Registration Statement with respect to such Registrable Securities and use
its commercially reasonable efforts to cause such Registration Statement to become effective.
(b) The
Company shall prepare and file with the Commission such amendments (including post-effective amendments) and supplements to a Registration
Statement and the Prospectus used in connection with such Registration Statement, which Prospectus is to be filed pursuant to Rule
424 promulgated under the Securities Act, as may be necessary to keep such Registration Statement effective at all times during
the Effectiveness Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by such Registration Statement. In the case of amendments and supplements
to a Registration Statement which are required to be filed pursuant to this Agreement by reason of the Company filing a report
on Forms 10-K, 10-Q or Current Report on Form 8-K, or any analogous report under the Securities Exchange Act, the Company shall
have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements
with the Commission on the same day on which the Securities Exchange Act report is filed which created the requirement for the
Company to amend or supplement such Registration Statement.
(c) The
Company shall furnish to each Holder of Registrable Securities in any Registration Statement, without charge, (i) promptly after
the same is prepared and filed with the Commission at least one copy of such Registration Statement and any amendment(s) thereto,
including financial statements and schedules; all documents incorporated therein by reference, if requested by such seller, all
exhibits and each preliminary Prospectus, (ii) unless such Holder is exempt from the prospectus
delivery
requirements pursuant to Rule 172 of the Securities Act, upon the effectiveness of any Registration Statement, ten (10) copies
of the Prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies
as such seller may reasonably request), and (iii) such other documents, including copies of any preliminary or final Prospectus,
as such seller may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned
by such seller.
(d) The
Company shall use its commercially reasonable efforts to (i) register and qualify, unless an exemption from registration and
qualification
applies, the resale by any seller of the Registrable Securities covered by a Registration Statement under such other securities
or “blue sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file In those jurisdictions,
such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Effectiveness Period, (iii) take such other actions as may be necessary
to maintain such registrations and qualifications in effect at all times during the Effectiveness Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however,
that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation
in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction.
(e) The
Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of
a Registration Statement, or the suspension of the qualification of any of Registrable Securities for sale in any
jurisdiction
and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest practicable
time and to notify the Holder of any Registrable Securities included in the offering under such Registration Statement of such
order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
(f) The
Company shall notify the Holder in writing of the happening of any event, as promptly as practicable after becoming aware of such
event, as a result of which the Prospectus included in a Registration Statement, as then in effect, includes an untrue statement
of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain
any material, nonpublic information), and, subject to Section 3(r), promptly prepare a supplement or amendment to such Registration
Statement to correct such untrue statement or omission, and, unless such Holder is exempt from the prospectus delivery requirements
pursuant to Rule 172 of the Securities Act, deliver ten (10) copies of such supplement or amendment to the Holder (or such other
number of copies as the Holder may reasonably request).
(g) The
Company shall promptly notify the Holder in writing (i) when a Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness
shall be delivered to the Holder by email or facsimile on the same day of such effectiveness or by overnight delivery), (ii) of
any request by the Commission for amendments or supplements to a Registration Statement or related Prospectus or related information,
and (iii) of the Company's reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.
(h) If
the Holder is required under applicable Commission Guidance to be described in a Registration Statement as an underwriter, at the
reasonable request of such Holder, the Company shall use its best efforts to furnish to such Holder, on the date of the effectiveness
of such Registration
Statement and thereafter from time to time on such dates as the Holder may reasonably request (i)
a letter, dated such date, from the Company's independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the Holder,
and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public offering, addressed to the Holder.
(i) If
the Holder is required under applicable Commission Guidance to be described in a Registration Statement as an underwriter, then
at the request of such Holder in connection with such Holder's due diligence requirements, the Company shall make available for
inspection by (i) the Holder, (ii) the Holder's legal counsel, and (iii) one firm of accountants or other agents retained by the
Holder (collectively, the "
Inspectors
"), all pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the “
Records
”), as shall be reasonably deemed necessary by each
Inspector, and cause the Company's officers, directors and employees to supply all information which any Inspector may reasonably
request;
provided, however,
that each Inspector shall agree to hold in strict confidence
and shall not make any disclosure (except to the Holder) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are so notified, unless (a) the release of such Records
is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or
(b) the information in such Records has been made generally available to the public other than by disclosure in violation of this
or any other agreement of which the Inspector has knowledge. Each Holder agrees that it shall, upon learning that disclosure of
such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice
to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. Nothing herein (or in any other confidentiality agreement between the Company
and the Holder) shall be deemed to limit the Holder's ability to sell Registrable Securities in a manner which is otherwise consistent
with applicable laws and regulations, Notwithstanding the foregoing, each Holder acknowledges that the Records may contain material
non-public information and agrees that it shall strictly comply with the insider trading rules prohibiting the purchasing, selling
or the Company's securities while in the possession of any such material non-public information.
(j) The
Company shall hold in confidence and not make any disclosure of information concerning the Holder provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information
is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information
is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction,
(iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or
any other agreement, or (v) the Holder provides information to the Company intended for inclusion in a Registration Statement.
The Company agrees that it shall, upon learning that disclosure of such information concerning the Holder is sought in or by a
court or governmental body' of competent jurisdiction or through other means, give prompt written notice to the Holder if permitted
by applicable law or regulation and allow the Holder, at the Holder's expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such information.
(k) The
Company shall (i) if applicable, use its best efforts to cause all of the Registrable Securities covered by a Registration Statement
to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed,
if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, or (ii) otherwise, use
its commercially reasonable efforts to secure designation and quotation of all of the Registrable Securities covered by a Registration
Statement on any one of the different levels of The NASDAQ Stock Market, or (iii) if, despite the Company's best efforts or commercially
reasonable efforts, as applicable, to satisfy, the preceding clauses (i) and (ii) the Company is unsuccessful in satisfying the
preceding clauses (i) and (ii), to instead secure the inclusion for quotation on the Over-the-Counter Bulletin Board for such Registrable
Securities and, without limiting the generality of the foregoing, to use its commercially reasonable efforts to encourage at least
two market makers to register with the Financial Industry Regulatory Authority, Inc. (“
FINRA
”) as such with
respect to such Registrable Securities. For the avoidance of doubt, subject to and in accordance with Section 5, the Company shall
pay all fees and expenses of the Company in connection with satisfying its obligation under this Section 3(k).
(l) If
requested by the Holder, and permissible under Commission Guidance, the Company shall (i) as soon as practicable incorporate in
a Prospectus supplement or post-effective amendment such information as the Holder reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the Registrable
Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering; (ii) as soon as practicable make all required filings of such Prospectus supplement or
post-effective amendment after being notified of the matters to be incorporated in such Prospectus supplement or post-effective
amendment; and (iii) as soon as practicable, supplement or make amendments to any Registration Statement if reasonably requested
by the Holder holding any Registrable Securities.
(m) The
Company shall cooperate with each Holder who holds Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities
to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the
case may be, as the Holder may reasonably request and registered in such names as the Holder may request.
(n) The
Company shall use its commercially reasonable efforts to cause the Registrable Securities covered by a Registration Statement to
be registered with or approved by such other U.S. governmental agencies or authorities, but only in matters not contemplated Section
3(d) by or reasonably related to such matters (which matters are to be governed exclusively by Section 3(d)), as may be strictly
necessary to consummate the disposition of such Registrable Securities by the Holder strictly in accordance with the Plan of Distribution
included in the Registration Statement (as such Plan of Distribution may be modified from time to time in any filing with the Commission).
(o) The
Company shall make generally available to its security holders as soon as practicable, but not later than ninety (90) days after
the close of the period covered thereby (or, if different, within the period permitted for the filing of reports on Forms 10-K
or 10-Q), an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the Securities
Act) covering a twelve-month period beginning not later than the first day of the Company's fiscal quarter next following the Effective
Date of a Registration Statement.
(p) The
Company shall otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission
in connection with any registration hereunder.
(q) Within
two (2) business days after a Registration Statement which covers Registrable Securities is ordered effective by the Commission,
the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Holder whose Registrable Securities are included in such Registration Statement) confirmation that
such Registration Statement has been declared effective by the Commission in the form attached hereto as
Exhibit A
and the Irrevocable Transfer Agent Instructions in the form attached hereto as
Exhibit B
.
(r) Notwithstanding
anything to the contrary herein, at any time after the Effective Date of a Registration Statement, the Company may delay the disclosure
of material, non-public information concerning the Company the disclosure of which at the time is not, in the good faith opinion
of the Board of Directors of the Company, in the best interest of the Company and not, after consultation with legal counsel, otherwise
required (a “
Grace Period
”); provided, that the Company shall promptly (i) notify the Holder in writing of the
existence of material, non-public information giving rise to a Grace Period (provided that in each notice the Company will not
disclose the content of such material, non-public information to the Holder) and the date on which the Grace Period will begin,
and (ii) notify the Holder in writing of the date on which the Grace Period ends; and, provided further, that no Grace Period shall
exceed sixty (60) consecutive days and during any three hundred sixty-five
.
(365) day period such Grace Periods shall
not exceed an aggregate of one hundred twenty (120) days (each, an “
Allowable Grace Period
”). For purposes of
determining the length of a Grace Period above, the Grace Period shall begin on and include the date the Holder receives the notice
referred to in clause (i) and shall end on and include the later of the date the Holder receives the notice referred to in clause
(ii) and the date referred to in such notice. The provisions of Section 3(f) hereof shall not be applicable during the period of
any Allowable Grace Period. Upon expiration of the Grace Period, the Company shall again be bound by Section 3(f) with respect
to the information giving rise thereto unless such material, non-public information is no longer applicable. Notwithstanding anything
to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of the
Holder in connection with any sale of Registrable Securities with respect to which the Holder has entered into a contract for sale,
and delivered a copy of the Prospectus included as part of the applicable Registration Statement (unless an exemption from such
Prospectus delivery requirements exists), prior to the Holder's receipt of the notice of a Grace Period or, if earlier, Holders
knowledge of the material, non-public information concerning the Company that gave rise to the Grace Period, and for which the
Holder has not yet settled.
4.
Obligations
of the Holders
.
(a) At
least five (5) business days prior to the first anticipated filing date of a Registration Statement, the Company shall notify the
Holders in writing of the information the Company requires from each Holder if the Holder's Registrable Securities are to be included
in such Registration Statement. It shall be a condition precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to any Registrable Securities of the Holder that the Holder shall furnish to the Company
such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the effectiveness of the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the Company may reasonably request.
(b) The
Holder, by the Holder’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested
by the Company in connection with the preparation and filing of any Registration Statement hereunder, unless the Holder has notified
the Company in writing of the Holder's election to exclude all of the Holder's Registrable Securities from such Registration Statement.
(c) The
Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Sections
3(e) or 3(f) or of a Grace Period under Section 3(r), the Holder will immediately discontinue disposition of Registrable Securities
pursuant to any Registration Statement(s) covering such Registrable Securities until the Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Sections 3(e) or 3(f) or receipt of notice that no supplement or amendment is
required. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of
Common Stock to a transferee of the Holder in connection with any sale of Registrable Securities with respect, to which the Holder
has entered into a
contract for sale prior to the Holder's receipt of a notice from the Company of
the happening of any event of the kind described in Sections 3(e) or 3(f) or of any Grace Period, or, if earlier, Holders knowledge
of the material, non-public information concerning the Company or the facts or circumstances that gave rise to the Grace Period
or of the Section 3(e) or 3(f) event, and for which the Holder has not yet settled.
(d) The
Holder
covenants and agrees that it will comply with the Prospectus delivery requirements
of the Securities Act as applicable to it or an exemption therefrom in connection with sales of Registrable Securities pursuant
to a Registration Statement.
5.
Registration
Expenses
. All expenses incident to the Company's performance of or compliance with this Agreement, including without
limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, fees and disbursements of custodians, and fees and disbursements of counsel for
the Company and all independent certified public accountants, underwriters retained by the Company (excluding discounts,
commissions and placement agent fees) and other Persons retained by the Company (all such expenses being herein called
“
Registration Expenses
”), shall be borne by the Company. Further, the Company shall pay its internal
expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the
expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued
by the Company are then listed.
6.
Indemnification
.
In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To
the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Holder, the
directors, officers, members, partners, employees, agents, representatives of, and each Person, if any, who controls the
Holder within the meaning of the Securities Act or the Securities Exchange Act (each, an “
Indemnified
Person
”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable
attorneys' fees, amounts paid in settlement or expenses, joint or several, (collectively, “
Claims
”)
incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken
from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the Commission,
whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“
Indemnified
Damages
”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other "blue sky" laws of any jurisdiction
in which Registrable Securities are offered, or the omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary Prospectus if used prior to the effective date of such
Registration Statement, or contained in the final Prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the Commission) or the omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in the light of the circumstances under which the statements therein were
made, not misleading, (iii) any violation or alleged violation by the Company of the Securities Act or the Securities
Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement or (iv) any violation of
this Agreement (the matters in the foregoing clauses (1) through (iv) being, collectively, “
Violations
”).
Subject to Section 6(c), the Company shall reimburse the Indemnified Persons, promptly as such expenses are incurred and are
due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or
defending any such Claim, Notwithstanding anything to the contrary contained herein, the indemnification agreement contained
in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which
occurs based on a Holder's material breach of its covenants or agreements in Section 4(c) or (d) or in reliance upon and in
conformity with information furnished in writing to the Company by such Indemnified Person or by a Related
Information Provider expressly for use in connection with the preparation of the Registration Statement or any such amendment
thereof or supplement thereto and (ii) shall not be available to the extent such Claim is based on a failure of the Holder to
deliver or to cause to be delivered the Prospectus made available by the Company, including a corrected Prospectus, if such
Prospectus or corrected Prospectus was timely made available by the Company pursuant to Section 3(c); and (iii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld or delayed. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Holder pursuant to Section 10. “
Related Information Provider
” means, in
respect of any Indemnified Person, the Holder to which such Indemnified Person is related or another Indemnified Person that
is related to the Holder to which such Indemnified Person is related.
(b) To
the fullest extent permitted by law, in connection with any Registration Statement in which a Holder's Registrable Securities
are included or in which a Holder is otherwise participating, such Holder will severally and
not
jointly indemnify and hold harmless the Company, 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, any underwriter, any other
Holder or other Person selling securities in such Registration Statement and any controlling person of any such underwriter
or other Holder or other Person (each an “
Other Indemnified Person
”), against any Claims or Indemnified
Damages to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and only to the
extent, that such Violation occurs based on a Holder's material breach of its covenants or agreements in Section 4(c) or (d)
or in reliance upon and in conformity with written information furnished by such Holder or by a Related Information Provider
expressly for use in connection with such Registration Statement; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any Other Indemnified Person intended to be indemnified pursuant to this Section 6(b),
in connection with investigating or defending any such Claim;
provided, however,
that the indemnity agreement
contained in this Section 6(b) shall not apply to amounts paid in settlement of any such Claim if such settlement is effected
without the prior written consent of the Holder, which consent shall not be unreasonably withheld;
provided, further,
however,
that the Holder shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages
as does not exceed the net proceeds to the Holder as a result of the sale of Registrable Securities pursuant to such
Registration Statement, except in the case of fraud by such Holder. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Other Indemnified Person and shall survive the transfer of the
Registrable Securities by the Holder pursuant to Section 10.
(c) Promptly
after receipt by an Indemnified Person or Other Indemnified Person under this Section 6 of notice of the commencement of any action
or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Other Indemnified
Person shall, if a claim for indemnification in respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right
to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party similarly
noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and reasonably
satisfactory to the Indemnified Person or the Other Indemnified Person, as the case may be;
provided
,
however
,
that an Indemnified Person or Other Indemnified Person shall have the right to retain its own counsel with the fees and expenses
of not more than one counsel for all such Indemnified Persons or all such Other Indemnified Persons to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Other Indemnified Person and the indemnifying party would be inappropriate due to actual or potential differing
interests between such Indemnified Person or Other Indemnified Person and any other party represented by such counsel in such
proceeding. The Other Indemnified Person or Indemnified Person, as applicable, shall cooperate fully with the indemnifying party
in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to such Other Indemnified Person or such Indemnified Person which relates to such action
or Claim. The indemnifying party shall keep the Other Indemnified Person or Indemnified Person, as applicable, reasonably apprised
at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall
be liable for any settlement of any action, claim or proceeding effected without its prior written consent;
provided
,
however
, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying
party shall, without the prior written consent of the Other Indemnified Person or Indemnified Person, as applicable, consent to
entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Other Indemnified Person or such Indemnified Person of a release from all liability
in respect to the Claim at issue, and such settlement shall not include any admission as to fault on the part of such Other Indemnified
Person or such Indemnified Person. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated
to all rights of the Other Indemnified Person or Indemnified Person, as applicable, with respect to all third parties, firms or
corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability
to the Indemnified Person or Other Indemnified Person, as applicable, under this Section 6, except to the extent that the indemnifying
party is materially prejudiced in its ability to defend such action.
(d) The
indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred, subject to an undertaking by the Indemnified Person
or the Other Indemnified Person, as applicable, to return such payments to the extent a court of competent jurisdiction or other
competent authority determines that such payments were unlawful or were not required under this Agreement.
(e) Without
any duplication or multiplication of damages, the indemnity agreements contained herein shall be in addition to (i) any cause of
action or similar right of the Other Indemnified Person or Indemnified Person against the indemnifying party or others, and (ii)
any liabilities the indemnifying party may be subject to pursuant to the law.
(f) Unless
suspended by the underwriting agreement applicable to any registration, the obligations of the Company and Holders under this Section
6 shall survive the completion of any offering of Registrable Securities in a Registration Statement under this Agreement, or otherwise.
7.
Contribution
.
To the extent any indemnification by an indemnifying party is prohibited or limited by law, such indemnifying party agrees
to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law;
provided, however,
that: (i) no Person involved
in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section
10(f) of the Securities Act) in connection with such sale shall be entitled to contribution from any Person involved in such
sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such
Registrable Securities pursuant to such Registration Statement.
8.
No
Delay of Registration
. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any
registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Agreement.
9.
Reports
under Securities Exchange Act
. With a view to making available to the Holder the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the Commission that may at any time permit the Holder to sell securities
of the Company to the public without registration, once the Company becomes a Reporting Company, the Company agrees to use its
commercially reasonable efforts to continue to be a Reporting Company for five years and further during such time it is a Reporting
Company the Company agrees to use its best efforts to:
(a) make
and keep public information available, as those terms are understood and defined in Rule 144;
(b) file
with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the
Securities Exchange Act so long as the Company remains subject to such requirements and the filing of such reports and other documents
is required for the applicable provisions of Rule 144; and
(c) furnish to the Holder so long as the Holder owns Registrable Securities, promptly upon request, (i) a written statement by the
Company, if true, that it has complied with the reporting requirements of Rule 144, the Securities Act and the Securities Exchange
Act, (ii) unless available on the Commission's EDGAR website, 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 to
permit the Holder to sell such securities pursuant to Rule 144 without registration.
10.
Assignment
of Registration Rights
. The rights under this Agreement shall be automatically assignable by the Holder to any transferee of
all or any portion of the Holder's Registrable Securities if: (i) the Holder agrees in writing with the transferee or assignee
to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment;
(ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name
and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred
or assigned; (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee
or assignee is or might be restricted under the Securities Act and applicable state securities laws; and (iv) at or before the
time the Company receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein.
11.
Subsequent
Registration Rights
. The Company agrees that after the date hereof and excluding any registration rights agreement with National
Securities or its members and affiliates, it will not grant to any person any registration right or proceed to register any securities
of any person unless it provides in such agreement or registration that any securities being registered under such agreement or
registration will be subject to the cutback provisions of this Agreement as provided in Section 1(c)
and Section 2(b).
12.
Amendment
of Registration Rights
. Provisions of this Agreement may be amended and the observance thereof may be waived (either generally
or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders
of at least a majority of the then outstanding Registrable Securities. Any amendment so effected will be binding upon all Holders,
whether or not such Holder consents thereto.
13.
Definitions
.
(a) “
Commission
”
means the Securities and Exchange Commission.
(b) “
Commission
Comments
” means written comments pertaining solely to Rule 415 or other comments to the extent they relate to Rule 415
which are received by the Company from the Commission, and a copy of which shall have been provided by the Company to the Holder,
to a filed Registration Statement which limit the amount of shares which may be included therein to a number of shares which is
less than such amount sought to be included thereon as filed with the Commission.
(c) “
Commission
Guidance
” means (i) any guidance, comments, requirements or requests of the Commission staff that is publicly available
in oral or written form and any comments or guidance provided by the Commission staff directly to the Company in written form,
(ii) the Securities Act and the rules and regulations promulgated thereunder or (iii) the Securities Exchange Act and the rules
and regulations promulgated thereunder.
(d) “
Common
Stock
” means the common stock, $0.001 par value per share, of the Company.
(e) “
Effective
Date
” means, as to a Registration Statement, the date on which such Registration Statement is first declared effective
by the Commission.
(f)
“
Person
”
means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
(g) “
Prospectus
”
means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering
of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to
the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus
(h) “
Registrable
Securities
” means (i) the Conversion Shares issued or issuable to the Holder or its assignees or successor in interest
pursuant to conversion of the Notes and (ii) any other shares of Common Stock or any other securities issued or issuable with respect
to the securities referred to in clause (i) by way of a stock dividend or stock split or in connection with an exchange or combination
of shares, recapitalization, merger, consolidation or other reorganization.
(i) “
Registration
Statement
” means any registration statement (including, without limitation, the Initial Registration Statement or the
Follow-up Registration Statement) required to be filed hereunder (which, at the Company's option, may be an existing registration
statement of the Company previously filed with the Commission, but not declared effective), including (in each case) the Prospectus,
amendments and supplements to the Registration Statement or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated by reference in the Registration Statement.
(j) “
Reporting
Company
” means a company that is obligated to file periodic reports under Sections 13 or 15(d) of the Securities Exchange
Act.
(k) “
Rule
144
” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the Commission that may at any time permit the Holder to sell securities
of the Company to the public without registration,
(l) “
Rule
415
” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
(m) “
Rule
424
” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
(n) “
Securities
Act
” means the Securities Act of 1933, as amended from time to time together with the regulations promulgated thereunder.
(o) “
Securities
Exchange Act
” means the Securities Exchange Act of 1934, as amended from time to time, together with the regulations
promulgated thereunder.
(p) “
Underwriter
Cutbacks
” means any reduction in the number of shares suggested by any managing underwriter to be included in a registration
under a Registration Statement based upon the guidance in this Section 13(p). In connection with any offering involving an underwriting
of shares of the Company’s capital stock, the Company shall not be required under Section 1 to include any of the Holders' securities
in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters,
and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering
by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in
such offering exceeds the amount of securities to be sold other than by the Company that the underwriters determine in their sole
discretion 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 determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling shareholders according
to the total amount of securities entitled to be included therein owned by each selling shareholder or in such other proportions
as shall mutually be agreed to by such selling shareholders); provided, that any such cutback will be effected in accordance with
the priorities established by Section 1(c); provided further that in no event shall the amount of securities of the selling Holders
included in an offering pursuant to Section 1 be reduced below 30% of the total amount of securities included in such offering.
14.
Market
Stand-Off
. Each Holder agrees that prior to the Company’s IPO (as that term is defined in the Securities Purchase Agreement)
it will not transfer securities of the Company unless each transferee agrees in writing to be bound by all of the provisions of
Section 4(v) of the Securities Purchase Agreement.
Each Holder agrees that a legend reading
substantially as follows shall be placed on all certificates representing all Registrable Securities of each Holder issued before
the Company's IPO (and the shares or securities of every other person subject to the restriction contained in Section 4(v) of the
Securities Purchase Agreement):
THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD FOLLOWING THE EFFECTIVE DATE OF THE ISSUER’S IPO REGISTRATION STATEMENT FILED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE
SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE ISSUER’S PRINCIPAL OFFICE, SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF
THESE SHARES.
After the Company’s IPO and expiration
of any lock-up period, upon request of any Holder who is a holder of record of the shares represented by any stock certificate(s)
bearing such legend and the surrender of such certificate(s) in connection with such request, the Company shall cause its transfer
agent to promptly issue replacement certificate(s) not bearing such legend representing the shares represented by such surrendered
stock certificate(s).
15.
Miscellaneous
.
(a) A
Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record
owner of such Registrable Securities.
(b) Any
notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must
be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when
sent by facsimile or email (provided confirmation of transmission is mechanically or electronically generated and kept on
file by the sending party); or (iii) one business day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications
shall be:
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If to the Company:
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Mears Technologies, Inc.
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189 Wells Avenue
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Newton, MA 02459
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Attn: CEO
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With a copy (for informational purposes only) to:
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WilmerHale LLP
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60 State Street
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Boston, MA 02109
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Facsimile: (617) 526-5000
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Attention: Michael D. Bain, Esq.
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If to any
Holder, at the address for such Holder on the records of the Company, which may include the information on Schedule A hereto.
or to such other address and/or facsimile
number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other
party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine
or email service containing the time, date, recipient
,
facsimile number and an image of the first page of such transmission
or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
(c) Failure
of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) All
questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal
laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State
of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the
State of New York, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof Nothing contained herein shall be deemed to limit in any way any right to serve process in
any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(e) This
Agreement and the instruments referenced herein and therein constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the instruments referenced herein and therein supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter hereof and thereof.
(f) Subject
to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
(g) The
headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(h) This
Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute
one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission
or other electronic transmission (such as but not limited to an email attachment in PDF format) of a copy of this Agreement bearing
the signature of the party so delivering this Agreement. This Agreement may also be executed by electronic signature of such Person.
(i) Each
party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(j) All
consents and other determinations required to be made by the Holder pursuant to this Agreement shall be made, unless otherwise specified
in this Agreement, by the Holder.
(k) The
language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any party.
(l) This
Agreement is intended for the benefit of, and shall be binding upon, the parties hereto and their respective successors and permitted
assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
(m) The
obligations of each Holder hereunder are several and not joint with the obligations of any other Holder, and no provision of this
Agreement is intended to confer any obligations on a Holder vis-a-vis any other Holder. Nothing contained herein, and no action
taken by any Holder pursuant hereto, shall be deemed to constitute the Holder as a partnership, an association, a joint venture
or any other kind of entity, or create a presumption that the Holder are in any way acting in concert or as a group with respect
to such obligations or the transactions contemplated herein.
(n)
Currency
.
As used herein, “Dollar”, “US Dollar” and “$” each mean the lawful money of the United States.
[Signature pages follow immediately]
IN WITNESS WHEREOF, the parties have executed
this Registration Rights Agreement as of the date first written above.
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COMPANY:
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MEARS TECHNOLOGIES, INC.
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By:
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/s/ John D.T. Gerber
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Name: John D.T. Gerber
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Title: Chairman
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HOLDERS:
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For Entity Investors:
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For Individual Investors:
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Print Name: _______________________________
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Print Name: ____________________________
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Signature: ________________________________
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Signature: _______________________________
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Name of Signatory:
_________________________
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If Joint Investment, 2
nd
Investor should complete:
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Title: ____________________________________
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Print Name: _______________________________
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Signature: _______________________________
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EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Transfer Agent]
[Address]
Attention:
Re: Mears Technologies, Inc,
Ladies and Gentlemen:
[We are][I am]
counsel to Mears Technologies, Inc., a Delaware corporation (the "Company"), and have represented the Company in
connection with that certain Registration Rights Agreement with __________ (the "Holder") (the "Registration
Rights Agreement") pursuant to which the Company agreed, among other things, to register certain of the Registrable
Securities (as defined in the Registration Rights Agreement) held by the Holder, under the Securities Act of 1933, as amended
(the "1933 Act"). In connection with the Company's obligations under the Registration Rights Agreement, on
______________ ___, 20__, the Company filed a registration statement on Form S-[1] (File No. 333- ____________)
(the “Registration Statement”) with the Securities and Exchange Commission (the "SEC") relating to
the Registrable Securities which names the Holder as a selling stockholder thereunder.
In connection with
the foregoing, [we][I] advise you that a member of the SEC's staff has advised [us][me] by telephone that the SEC has entered an
order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS]
and [we][I] have no knowledge, after telephonic inquiry of a member of the SEC's staff, that any stop order suspending its effectiveness
has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities
are available for resale under the 1933 Act pursuant to the Registration Statement.
If applicable, you
may receive notices from the Company pursuant to the Company's rights or obligations under the Registration Rights Agreement in
connection with stop orders or other restrictions on transfer of the shares included in such Registration Statement, but [we][I]
[are][am] not obligated to update this letter or otherwise inform you of any such stop order or restriction.
[Other applicable disclosure to be inserted
here, if appropriate.]
EXHIBIT B
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
_________________, 201[_]
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[Addressed to Transfer Agent]
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Attention: [_________________]
Ladies and Gentlemen:
Reference is made
to that certain Registration Rights Agreement, dated as of _____________, 2015 (the “
Agreement
”), by and among
Mears Technologies, Inc., a Delaware corporation (the “
Company
”), _________________ (the “
Holder
”)
and certain other security holders of the Company, pursuant to which the Company is obligated to register certain shares held
by the Holder (the “
Holder Shares
”) of Common Stock of the Company, par value $0.001 per share (the “
Common
Stock
”).
This letter shall serve
as our irrevocable authorization and direction to you (provided that you are the transfer agent of the Company at such time) to
issue shares of Common Stock upon transfer or resale of the Holder Shares, unless we have otherwise informed you of the termination
of effectiveness of the registration statement in which the Holder Shares are included, a stop order or another transfer restriction.
We may also later inform you that after the termination of effectiveness of such registration statement that a registration statement
in which the Holder's Shares are included, or that such stop order has been lifted or that such transfer restriction is not applicable,
in which case this authorization and direction shall be reinstated and be effective.
You acknowledge and
agree that so long as you have previously received (a) written confirmation from the Company's legal counsel that either (i) a
registration statement covering resales of the Holder Shares has been declared and remains effective by the Securities and Exchange
Commission (the “SEC”) under the Securities Act of 1933, as amended (the “
1933 Act
”), or (ii) sales
of the Holder Shares may be made in conformity with Rule 144 under the 1933 Act (“
Rule 144
”), (b) if applicable,
a copy of such registration statement, and (c) notice from legal counsel to the Company or any Holder that a transfer of Holder
Shares has been effected either pursuant to the registration statement (and a prospectus delivered to the transferee) or pursuant
to Rule 144, then as promptly as practicable, you shall issue the certificates representing the Holder Shares registered in the
names of such transferees, and such certificates shall not bear any legend restricting transfer of the Common Stock evidenced
thereby and should not be subject to any stop-transfer restriction; provided, however, that if such shares of Common Stock and
are not registered for resale under the 1933 Act or able to be sold under Rule 144, then the certificates for such Common Shares
shall bear the following legend:
THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (1) IN THE ABSENCE OF (A) AN
EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
A form of written confirmation
from the Company’s outside legal counsel that a registration statement covering resales of the Holder Shares has been declared
effective by the SEC under the 1933 Act is attached hereto. We will inform you of any stop orders or other transfer restrictions.
Please execute this
letter in the space indicated to acknowledge your agreement to act in accordance with these instructions. Should you have any questions
concerning this matter, please contact me at _________________.
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Very truly yours,
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Mears Technologies, Inc.
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By;
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Name:
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Title:
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THE FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED AND AGREED TO
this__ day of ______,201[_]
[TRANSFER AGENT]
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By:
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Name:
___________________
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Title:
___________________
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Enclosures
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Copy: Holder
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SCHEDULE A
LIST OF HOLDERS
SCHEDULE B
SELLING STOCKHOLDERS
The shares of common
stock being offered by the selling stockholders are those issuable to the selling stockholders upon [conversion of the notes and
exercise of the warrants]. For additional information regarding the issuance of the [notes and the warrants], see “Private
Placement of Notes” above. We are registering the shares of common stock in order to permit the selling stockholders to offer
the shares for resale [from time to time]. Except for the ownership of [the notes issued pursuant to and in connection with the
Securities Purchase Agreement, and the warrants issued pursuant to and the agreements governing our engagement of National Securities
Corporation as a placement agent for the private placement of the notes and the engagement of National Securities Corporation as
an underwriter for a public offering of common stock by the Company] the selling stockholders have not had any material relationship
with us within the past three years.
The table below lists
the selling stockholders and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder) of the shares of common stock held by each of the selling
stockholders. The second column lists the number of shares of common stock beneficially owned by the selling stockholders, based
on their respective ownership of shares of common stock [, notes and warrants,] as of _______, 20__ [assuming conversion of the
notes and exercise of the warrants held by each such selling stockholder on that date but taking account of any limitations on
conversion and exercise set forth therein].
The third column lists
the shares of common stock being offered by this prospectus by the selling stockholders [and does not take. into account any limitations
on (i) conversion of the notes set forth therein or (ii) exercise of the warrants set forth therein].
In accordance with
the terms of a registration rights agreement with the holders of the notes and the warrants, this prospectus generally covers the
resale of [(i) the shares of common stock issued upon conversion of the notes and (ii) the maximum number of shares of common stock
issuable upon exercise of the warrants, in each case, determined as if the outstanding notes and warrants were converted or exercised
(as the case may be) in full (without regard to any limitations on conversion or exercise contained therein) as of the trading
day immediately preceding the date this registration statement was initially filed with the SEC]. Because the conversion price
of the notes and the exercise price of the warrants may be adjusted, the number of shares that will actually be issued may be more
or less than the number of shares being offered by this prospectus. The fourth column assumes the sale of all of the shares offered
by the selling stockholders pursuant to this prospectus.
See “Plan of Distribution.”
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Maximum Number of
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Number of Shares of
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Shares of Common
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Number of Shares of
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Common Stock
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Stock to be Sold
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Common Stock
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Owned Prior to the
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Pursuant to this
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Owned After the
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Name of Selling Stockholder
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Offering
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Prospectus
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Offering
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[Notes (1)…]
PLAN OF DISTRIBUTION
We are registering
the shares of common stock issued upon [conversion of the notes and issuable on exercise of the warrants] to permit the resale
of these shares of common stock by the holders of [the notes and warrants] [from time to time] after the date of this prospectus.
We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all
fees and expenses incident to our obligation to register the shares of common stock.
The selling stockholders
may sell all or a portion of the shares of common stock held by them and offered hereby [from time to time] [directly or] through
one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers,
the selling stockholders will be responsible for underwriting discounts or commissions or agent's commissions. The shares of common
stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve crosses
or block transactions, pursuant to one or more of the following methods:
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·
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on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
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·
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in the over-the-counter market;
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·
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in transactions otherwise than on these exchanges or systems or in the over-the-counter
market;
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·
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through the writing or settlement of options, whether such options are listed on an options exchange or otherwise; ,
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·
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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·
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block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
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·
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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·
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an exchange distribution in accordance with the rules of the applicable exchange;
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privately negotiated transactions;
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·
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short sales made after the date the Registration Statement is declared effective by the SEC;
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·
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broker-dealers may agree with a selling security holder to sell a specified number of such shares at a stipulated price per share;
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·
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a combination of any such methods of sale; and
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·
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any other method permitted pursuant to applicable law.
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The selling stockholders
may also sell shares of common stock under Rule 144 promulgated under the Securities Act of 1933, as amended, if available, rather
than under this prospectus. In addition, the selling stockholders may transfer the shares of common stock by other means not described
in this prospectus. If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters,
broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions
or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers
or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of
common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders
may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions
and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common
stock to broker-dealers that in turn may sell such shares.
The selling
stockholders may pledge or grant a security interest in some or all of the [notes, warrants or] shares of common stock owned
by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and
sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act amending, if necessary, the list of selling stockholders to
include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling
stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees,
donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
To the extent required
by the Securities Act and the rules and regulations thereunder, the selling stockholders and any broker-dealer participating in
the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities
Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus
supplement, if required, will be distributed, which will set forth the aggregate amount of shares of common stock being offered
and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other
terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or re-allowed
or paid to broker-dealers.
Under the
securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed
brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been
registered or qualified for sale in such state or an exemption from registration or qualification is available and is
complied with.
There can be no assurance
that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement,
of which this prospectus forms a part.
The selling stockholders
and any other person participating in such distribution will be subject to applicable provisions of the Securities Act of 1933,
as amended, and the Securities Exchange Act of 1934, as amended, and in each case together with the rules and regulations thereunder,
including, without limitation, to the extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases
and sales of any of the shares of common stock by the selling stockholders and any other participating person. To the extent applicable,
Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in
market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares
of common stock and the ability of any Person to engage in market-making activities with respect to the shares of common stock.
We will pay all expenses
of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be $[ ] in total,
including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities
or “blue sky” laws; provided, however, a selling stockholder will pay all underwriting discounts and selling commissions,
if any. We will indemnify the selling stockholders against liabilities, including some liabilities under the Securities Act in
accordance with the registration rights agreements or the selling stockholders will be entitled to contribution. We may be indemnified
by the selling stockholders against civil liabilities, including liabilities under the Securities Act that may arise from any written
information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the related
registration rights agreements or we may be entitled to contribution.
Once sold under the
registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands
of persons other than our affiliates.
Exhibit 10.13
SECURITY AGREEMENT
This
SECURITY AGREEMENT
(this “
Agreement
”),
dated as of March 17, 2015, is made by and among Mears Technologies, Inc., a Delaware corporation (the “
Grantor
”),
Robert Clifford, as the Collateral Agent, and the secured parties listed on the signature pages hereof (collectively, the “
Secured
Parties
” and each, individually, a “
Secured Party
”).
RECITALS
WHEREAS
, pursuant
to that certain Securities Purchase Agreement, dated even date herewith (as may be amended, restated, supplemented, or otherwise
modified from time to time, including all schedules and • exhibits thereto, collectively, the “
Securities Purchase
Agreement
”), by and among the Grantor and certain of the Secured Parties, Grantor has agreed to sell, and each of the
Secured Parties have agreed to purchase, severally and not jointly, certain senior secured convertible notes in the aggregate original
principal amount of up to $14,752,667 (the “
Offering Notes
”) through either the investment of cash or the exchange
of one or more of those certain senior convertible notes of the Grantor having an aggregate principal amount of up to $7,349,226.24
(such convertible notes that are exchanged in connection with the transactions contemplated by the Securities Purchase Agreement
are referred to as the “
Old MTI Convertible Notes
”); and
WHEREAS
, in
order to induce those Secured Parties to purchase, severally and not jointly, the Offering Notes as provided for in the Securities
Purchase Agreement, Grantor has agreed to grant a continuing security interest in and to the Collateral (as defined below) in order
to secure the prompt and complete payment, observance and performance of the Secured Obligations (as defined below).
AGREEMENTS
NOW, THEREFORE,
for and in consideration of the recitals made above and other good and valuable consideration, the receipt, sufficiency and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
1.
Defined
Terms.
All capitalized terms used herein (including in the preamble and recitals hereof) without definition shall have the
meanings ascribed thereto in the Notes. Any terms used in this Agreement that are defined in the Code shall be construed and defined
as set forth in the Code unless otherwise defined herein or in the Notes;
provided, however,
if the Code is used to define
any term used herein and if such term is defined differently in different Articles of the Code, the definition of such term contained
in Article 9 of the Code shall govern. In addition to those terms defined elsewhere in this Agreement, as used in this Agreement,
the following terms shall have the following meanings:
(a)
“Account”
means an account (as that term is defined in the Code).
(b)
“Account
Debtor”
means an account debtor (as that term is defined in the Code).
(c)
“Bankruptcy
Code”
means title 11 of the United States Code, as in effect from time to time.
(d)
“Books”
means books and records (including, without limitation, the Grantor's Records) indicating, summarizing, or evidencing the Grantor's
assets (including the Collateral) or liabilities, the Grantor's Records relating to its business operations (including, without
limitation, stock ledgers) or financial condition, and the Grantor's goods or General Intangibles related to such information.
(e)
“Chattel
Paper”
means chattel paper (as that term is defined in the Code) and includes tangible chattel paper and electronic chattel
paper.
(f)
“Code”
means the New York Uniform Commercial Code, as in effect from time to time;
provided, however,
in the event that, by
reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to any Secured
Party's Lien on any Collateral is governed by the Uniform Commercial Code as enacted
.
and in effect in a jurisdiction
other than the State of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in
such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.
(g)
“Collateral”
has the meaning specified therefor in Section 2.
(h)
“Commercial
Tort Claims”
means commercial tort claims (as that term is defined in the Code), and includes those commercial tort claims
listed on
Schedule 1
attached hereto.
(i)
“Control
Agreement”
means a control agreement, in form and substance reasonably satisfactory to the Collateral Agent, executed
and delivered by Grantor, the Collateral Agent (on behalf of all Secured Parties), and the applicable securities intermediary (with
respect to a Securities Account) or bank (with respect to a Deposit Account), as may be amended, restated, supplemented, or otherwise
modified from time to time.
(j)
“Copyrights”
means all
copyrights and copyright registrations, and also includes (i) all reissues, continuations, extensions or renewals
thereof, (ii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including
payments under all licenses entered into in connection therewith and damages and payments for past or future infringements or dilutions
thereof, (iii) the right to sue for past, present and future infringements and dilutions thereof, (iv) the goodwill of Grantor's
business symbolized by the foregoing or connected therewith, and (v) all of Grantor's rights corresponding thereto throughout the
world.
(k)
“Deposit
Account”
means a deposit account (as that term is defined in the Code).
(1)
“Equipment”
means all equipment (as that term is defined in the Code) in all of its forms of the Grantor, wherever located, and including,
without limitation, all machinery, apparatus, installation facilities and other tangible personal property, and all parts thereof
and all accessions, additions, attachments, improvements, substitutions, replacements and proceeds thereto and therefor.
(m)
“Event
of Default”
has the meaning specified therefor in the Notes,
(n)
“Foreign
Subsidiary”
means any Person in which the Company, directly or indirectly, owns the majority of the outstanding Stock
and that is a “controlled foreign corporation” under Section 957 of the Internal Revenue Code of 1986.
(o)
“GAAP”
means United States generally accepted accounting principles, consistently applied.
(p)
“General
Intangibles”
means general intangibles (as that term is defined in the Code) and, in any event, includes payment intangibles,
contract rights, rights to payment, rights arising under common law, statutes, or regulations, choses or things in action,
goodwill, programming materials, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights
to payment under any royalty or licensing agreements (including Intellectual Property Licenses), infringement claims, commercial
computer programs, information contained on computer disks or tapes, software, literature, reports, catalogs, pension plan refunds,
pension plan refund claims, insurance premium rebates, tax refunds, and tax refund claims, interests in a partnership or limited
liability company which do not constitute a security under Article 8 of the Code, and any other personal property other than Commercial
Tort Claims, money, Accounts, Chattel Paper, Deposit Accounts, goods, Investment Related Property, Negotiable Collateral, and
oil, gas, or other minerals before extraction.
(q)
“Governmental
Authority”
means any domestic or foreign federal, state, local, or other governmental or administrative body, instrumentality,
board, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar
dispute-resolving panel or body.
(r)
“Insolvency
Proceeding”
means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under
any other state or federal bankruptcy or insolvency law or any equivalent laws in any other jurisdiction, assignments for the benefit
of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
(s)
“Intellectual
Property”
means Patents, Copyrights, Trademarks, the goodwill associated with such Trademarks, trade secrets and customer
lists, and Intellectual Property Licenses.
(t)
“Intellectual
Property Licenses”
means rights under or interests in any patent, trademark, copyright or other intellectual property,
including software license agreements with any other party, whether the Grantor is a licensee or licensor under any such license
agreement, as may be amended, restated, supplemented, or otherwise modified from time to time.
(u)
“Inventory”
means all inventory (as that term is defined in the Code) in all of its forms of the Grantor, wherever located, including, without
limitation, (i) all goods in which the Grantor has an interest in mass or a joint or other interest or right of any kind (including
goods in which the Grantor has an interest or right as consignee), and (ii) all goods which are returned to or repossessed by the
Grantor, and all accessions thereto, products thereof and documents therefor.
(v)
“Investment
Related Property”
means (i) investment
property (as that term is defined in the Code), and (ii) all of the following
(regardless of whether classified as investment property under the Code): all Pledged Interests, Pledged Operating Agreements,
and Pledged Partnership Agreements.
(w)
“Lien”
means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or
charge on property of any kind.
(x)
“Negotiable
Collateral”
means letters of credit, letter-of-credit rights, instruments, promissory notes, drafts, and documents.
(y)
“New
Subsidiary”
has the meaning specified therefor in the Notes.
(z)
“Notes”
mean collectively the Offering Notes and the
Old MTI Convertible Notes.
(aa)
“Patents”
means all patents and patent applications, and also includes (i) all renewals thereof; (ii) all income, royalties, damages
and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into
in connection therewith and damages and payments for past or future infringements or dilutions thereof, (iii) the right to sue
for past, present and future infringements and dilutions thereof, and (iv) all of Grantor's rights corresponding thereto throughout
the world.
(bb)
“Permitted
Liens”
means (i)
any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary
course of business by operation of law with respect to a liability that is not yet due or delinquent or that is being contested
in good faith for which adequate reserves have been established in accordance with GAAP, (iii) any Lien created by operation of
law, such as materialmen's liens, mechanics' liens and other similar liens, arising in the ordinary course of business with respect
to a liability that is not yet due or delinquent or that is being contested in good faith by appropriate proceedings, (iv) Liens
on Equipment having a fair market value of not more than $250,000 in the aggregate, but only if the lien constitutes a purchase
money security interest incurred in connection with the purchase of such Equipment, (v) Liens securing the Company's obligations
under the Transaction Documents, and (vi) Liens granted to the Secured Parties pursuant to the terms of this Agreement.
(cc)
“Permitted
Transfers”
means (i) sales of Inventory in the ordinary course of business, (ii) non-exclusive licenses in the
ordinary course of business for the use of Intellectual Property (A) to manufacturers, distributors, OEMs, strategic partners
and value added re-sellers in connection with the manufacture and distribution of Grantor's products, (B) in connection with
the embedding of Intellectual Property in the products of others, and (C) to end users; provided no such license could result
in a legal transfer of title of the licensed Intellectual Property, or (iii) dispositions of worn-out, obsolete or surplus
Equipment at fair market value in the ordinary course of business.
(dd)
“Person”
has the meaning specified therefor in the Securities Purchase
Agreement.
(ee)
“Pledged
Companies”
means each Person all or a portion of whose Stock is acquired or otherwise owned by the Grantor after the
date hereof.
(ff)
“Pledged
Interests”
means all of Grantor's right, title and interest in and to all of the Stock now or hereafter owned by Grantor,
regardless of class or designation, including all substitutions therefor and replacements thereof, all proceeds thereof and all
rights relating thereto, also including any certificates representing the Stock, the right to receive any certificates representing
any of the Stock, all warrants, options, share appreciation rights and other rights, contractual or otherwise, in respect thereof,
and the right to receive dividends, distributions of income, profits, surplus, or other compensation by way of income or liquidating
distributions, in cash or in kind, and cash, instruments, and other property from time to time received, receivable, or otherwise
distributed in respect of or in addition to, in substitution of, on account of, or in exchange for any or all of the foregoing.
Pledged Interests categorically excludes any authorized but unissued Stock of the Company which is not being pledged under this
Agreement.
(gg)
“Pledged
Operating Agreements”
means all of Grantor's rights, powers, and remedies under the limited liability company operating
agreements of each of the Pledged Companies that are limited liability companies, as may be amended, restated, supplemented, or
otherwise modified from time to time.
(hh)
“Pledged
Partnership Agreements”
means all of Grantor's rights, powers, and remedies under the partnership agreements of each
of the Pledged Companies that are partnerships, as may be amended, restated, supplemented, or otherwise modified from time to time.
(ii)
“Proceeds”
has the meaning specified therefor in Section 2.
(jj)
“Real
Property”
means any estates or interests in real property now owned or hereafter acquired by Grantor and the improvements
thereto.
(kk)
“Records”
means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable
in perceivable form.
(ll)
“Registration
Rights Agreement”
means that certain registration rights agreement, dated as of the date hereof, by and among the Company
and the initial holders of the Notes, as may be amended from time to time.
(mm)
“Secured
Obligations”
mean all of the present and future payment and performance obligations of Grantor arising under this Agreement,
the Notes and the other Transaction Documents, including, without duplication, reasonable attorneys' fees and expenses and any
interest, fees, or expenses that accrue after the filing of an Insolvency Proceeding, regardless of whether allowed or allowable
in whole or in part as a claim in any Insolvency Proceeding.
(nn)
“Securities
Account”
means a securities account (as that term is defined in the Code).
(oo)
“Security
Documents”
means, collectively, this Agreement, each Control Agreement and each other security agreement, pledge agreement,
assignment, mortgage, security deed, deed of trust, and other agreement or document executed and delivered by the Grantor as security
for any of the Secured Obligations, as may be amended, restated, supplemented, or otherwise modified from time to time.
(pp)
“Security
Interest”
and
“Security Interests”
have the meanings specified therefor in Section 2.
(qq)
“Stock”
means all shares, options, warrants, interests (including, without limitation, membership and partnership interests), participations,
or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred
stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations
promulgated by the United States Securities and Exchange Commission and any successor thereto under the Securities Exchange Act
of 1934, as in effect from time to time).
(rr)
“Supporting
Obligations”
means supporting obligations (as such term is defined in the Code).
(ss)
“Trademarks”
means all trademarks, trade names, trademark applications, service marks, service mark applications, and also includes (i) all
renewals thereof, (ii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto,
including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements
or dilutions thereof, (iii) the right to sue for past, present and future infringements and dilutions thereof, (iv) the goodwill
of Grantor's business symbolized by the foregoing or connected therewith, and (v) all of Grantor's rights corresponding thereto
throughout the world.
(tt)
“Transaction
Documents”
mean, collectively, the Securities Purchase Agreement, the Notes, the Security Documents, the Registration
Rights Agreement and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection
with the consummation of the transactions contemplated hereby and thereby, as may be amended from time to time.
(uu)
“URL”
means “uniform resource locator,” an internet web address.
2.
Grant
of Security
. The Grantor hereby unconditionally grants, assigns, and pledges to the Collateral Agent a continuing security
interest (each, a “
Security Interest
” and, collectively, the “
Security Interests
”) in all
personal property assets of the Grantor whether now owned or hereafter acquired or arising and wherever located (collectively,
the “
Collateral
”), including, without limitation, the Grantor’s right, title, and interest in and to the following,
whether now owned or hereafter acquired or arising and wherever located:
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(a)
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all of the Grantor's Accounts;
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(b)
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all of the Grantor's Books;
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(c)
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all of the Grantor's Chattel Paper;
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(d)
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all of the Grantor's Deposit Accounts;
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(e)
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all of the Grantor's Equipment and fixtures;
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(f)
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all of the Grantor's General Intangibles;
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(g)
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all of the Grantor's Intellectual Property;
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(h)
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all of the Grantor's Inventory;
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(i)
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all of the Grantor's Investment Related Property;
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(j)
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all of the Grantor's Negotiable Collateral;
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(k)
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all of the Grantor's rights in respect of Supporting Obligations;
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(l)
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all of the Grantor's Commercial Tort Claims;
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(m) all
of the Grantor's money, cash, cash equivalents, or other assets of the Grantor that now or hereafter come into the possession,
custody, or control of any Secured Party; and
all of the proceeds and products,
whether tangible or intangible, of any of the foregoing, including proceeds of insurance or Commercial Tort Claims covering or
relating to any or all of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit Accounts, Equipment, General
Intangibles, Intellectual Property, Inventory, Investment Related Property, Negotiable Collateral, Supporting Obligations, money,
or other tangible or intangible property resulting from the sale, lease, license, exchange, collection, or other disposition of
any of the foregoing, the proceeds of any award in condemnation with respect to any of the foregoing, any rebates or refunds,
whether for taxes or otherwise, and all proceeds of any such proceeds, or any portion thereof or interest therein, and the proceeds
thereof, and all proceeds of any loss of, damage to, or destruction of the above, whether insured or not insured, and, to the
extent not otherwise included, any indemnity, warranty, or guaranty payable by reason of loss or damage to, or otherwise with
respect to any of the foregoing (the
“Proceeds”
). Without limiting the generality of the foregoing, the term
“Proceeds” includes whatever is receivable or received when Investment Related Property or proceeds are sold, exchanged,
collected, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes proceeds of any indemnity
or guaranty payable to the Grantor or any Secured Party from time to time with respect to any of the Investment Related Property.
Notwithstanding the foregoing, the Collateral shall not include (i) the Stock of any first-tier Foreign Subsidiary in excess of
65% of the aggregate outstanding voting Stock of such first-tier Foreign Subsidiary or (ii) any Stock of any Foreign Subsidiary
that is not a first-tier Foreign Subsidiary.
3.
Security
for Obligations
. This Agreement and the Security Interests created hereby secure the payment and performance of the Secured
Obligations, whether now existing or arising hereafter.
4.
Grantor
Remains Liable
. Anything herein to the contrary notwithstanding, (a) the Grantor shall remain liable under the contracts
and agreements included in the Collateral, including the Pledged Operating Agreements and the Pledged Partnership Agreements,
to perform all of the duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by Secured Parties, or any of them, of any of the rights hereunder shall not release the Grantor from any of its
duties or obligations under such contracts and agreements included in the Collateral, and (c) no Secured Party shall have any
obligation or liability under such contracts and agreements included in the Collateral by reason of this Agreement, nor shall
any Secured Party be obligated to perform any of the obligations or duties of the Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder. Until an Event of Default shall occur and be continuing, except
as otherwise provided in this Agreement or any other Transaction Document, the Grantor shall have the right to possession and
enjoyment of the Collateral for the purpose of conducting the ordinary course of its businesses, subject to and upon the
terms hereof and the other Transaction Documents. Without limiting the generality of the foregoing, it is the intention of
the parties hereto that record and beneficial ownership of the Pledged Interests, including all voting, consensual, and
dividend rights, shall remain in the Grantor until the occurrence of an Event of Default and until the Collateral Agent (on
behalf of all Secured Parties) shall notify the Grantor of its exercise of voting, consensual, or dividend rights with
respect to the Pledged Interests pursuant to Section 15 hereof.
5.
Representations
and Warranties
. The Grantor hereby represents and warrants as follows:
(a) The
exact legal name of the Grantor is set forth in the preamble this Agreement.
(b)
Schedule
2
attached hereto sets forth (i) all Real Property owned or leased by the Grantor, together with all other locations of
Collateral, as of the date hereof, and (ii) the chief executive office of the Grantor as of the date hereof.
(c) This
Agreement creates a valid security interest in all of the Collateral of the Grantor, to the extent a security interest therein
can be created under the Code, securing the payment of the Secured Obligations. Except to the extent a security interest in the
Collateral cannot be perfected by the filing of a financing statement under the Code, all filings and other actions necessary or
reasonably desirable to perfect and protect such security interest have been duly taken or will have been taken upon the filing
of financing statements listing the Grantor, as a debtor, and Secured Parties, as secured parties, in the jurisdictions listed
on
Schedule 3
attached hereto. Upon the making of such filings, the Secured Parties shall each have a first priority
perfected security interest in all of the Collateral of the Grantor to the extent such security interest can be perfected by the
filing of a financing statement (subject to Permitted Liens). Subject to Section 6(c), all action by the Grantor necessary to perfect
and reasonably necessary to protect such security interest on each item of Collateral has been duly taken.
(d) Except
for the Security Interests created hereby, no Collateral is subject to any Lien as of the date hereof, except for Permitted Liens.
(e) No
consent, approval, authorization, or other order or other action by, and no notice to or filing with, any Governmental Authority
or any other Person is required (i) for the grant of a Security Interest by the Grantor in and to the Collateral pursuant to this
Agreement or for the execution, delivery, or performance of this Agreement by the Grantor, or (ii) for the exercise by any Secured
Party of the voting or other rights provided in this Agreement with respect to Investment Related Property pledged hereunder or
the remedies in respect of the Collateral pursuant to this Agreement, except as may be required in connection with such disposition
of Investment Related Property by laws affecting the offering and sale of securities generally.
(f)
Schedule
4
contains a complete and accurate list of all of the Grantor's Deposit Accounts and Securities Accounts, including, without
limitation, with respect to each bank or securities intermediary (a) the name and address of such Person and (b) the account numbers
of such accounts maintained with such Person.
6.
Covenants
.
The Grantor covenants and agrees with each Secured Party that from and after the date of this Agreement and until the date of termination
of this Agreement in accordance with Section 24 hereof:
(a)
Possession
of Collateral
. In the event that any Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral,
Investment Related Property, or Chattel Paper with a value in excess of $100,000 in the aggregate, and if and to the extent that
perfection or priority of Secured Parties' respective Security Interests is dependent on or enhanced by possession, the Grantor,
immediately upon the request of the Collateral Agent (on behalf of all Secured Parties), shall execute such other documents and
instruments as shall be reasonably requested by the Collateral Agent or, if applicable, endorse and deliver physical possession
of such Negotiable Collateral, Investment Related Property, or Chattel Paper to the Collateral Agent (on behalf of all Secured
Parties), together with such undated powers endorsed in blank as shall be requested by the Collateral Agent.
(b)
Chattel
Paper
.
(i) The
Grantor shall take all steps reasonably necessary to grant the Collateral Agent (on behalf of all Secured Parties) control of all
Chattel Paper in accordance with the Code and all “transferable records” as that term is defined in Section 16 of the
Uniform Electronic Purchase Act and Section 201 of the federal Electronic Signatures in Global and National Commerce Act as in
effect in any relevant jurisdiction; and
(ii) If
the Grantor retains possession of any Chattel Paper or instruments (which retention of possession shall be subject to the extent
permitted hereby), promptly upon the request of the Collateral Agent (on behalf of all Secured Parties), such Chattel Paper and
instruments shall be marked with the following legend: “This writing and the obligations evidenced or secured hereby are
subject to the Security Interests of [names of Secured Parties].”
(c)
Control
Agreements
. The Grantor shall not establish or maintain any Deposit Account or Securities Account (or any other similar account)
other than a payroll account unless (1) the Grantor shall have provided each Secured Party with ten (10) days’ advance written
notice of each such account and (ii) if an Event of Default has occurred and is then continuing, the Collateral Agent on behalf
of the Secured Parties shall have received a Control Agreement in respect of such account concurrently with the opening thereof,
From and after the occurrence and during the continuance of any Event of Default, the Grantor shall ensure that all of its Account
Debtors forward payment of the amounts owed by them directly to a Deposit Account that is subject to a Control Agreement and deposit
or cause to be deposited promptly, and in any event no later than the first (1
st
) Business Day after the date of receipt
thereof, all of their collections (including those sent directly by their Account Debtors to the Grantor) into a Deposit Account
subject to a Control Agreement. Upon the request of the Collateral Agent (on behalf of all Secured Parties) from and after the
occurrence and during the continuance of any Event of Default, the Grantor shall promptly (but in no event later than ten (10)
Business Days after such request therefor) cause each of its Deposit Accounts and Securities Accounts to be subject to a Control
Agreement in favor of the Collateral Agent on behalf of the Secured Parties.
(d)
Letter-of-Credit
Rights
. In the event that the Grantor is or becomes the beneficiary of one or more letters of credit with a face amount of
greater than $25,000 individually or $100,000 in the aggregate, the Grantor shall promptly (and in any event within five (5) Business
Days after becoming a beneficiary) notify the Secured Parties thereof and, upon the request by the Collateral Agent (on behalf
of all Secured Parties), use commercially reasonable efforts to enter into an agreement with the Collateral Agent (on behalf of
all Secured Parties) and the issuing or confirming bank with respect to letter-of-credit rights assigning such letter-of-credit
rights to the Collateral Agent (on behalf of all Secured Parties) and directing all payments thereunder to the Collateral Agent
(on behalf of all Secured Parties) during the continuance of an Event of Default following notice from the Collateral Agent, all
in form and substance satisfactory to the Collateral Agent (on behalf of all Secured Parties).
(e)
Commercial
Tort Claims
. The Grantor shall promptly (and in any event within five (5) Business Days of receipt thereof) notify the
Secured Parties in writing upon incurring or otherwise obtaining a Commercial Tort Claim after the date hereof and, upon
request of the Collateral Agent (on behalf of all Secured Parties), promptly amend
Schedule 1
to this Agreement
to describe such after-acquired Commercial Tort Claim in a manner that reasonably identifies such Commercial Tort Claim, and
hereby authorizes the filing of additional financing statements or amendments to existing financing statements describing
such Commercial Tort Claims, and agrees to do such other acts or things deemed reasonably necessary or desirable by the
Collateral Agent (on behalf of all Secured Parties) to give the Collateral Agent on behalf of the Secured Parties a first
priority, perfected security interest (subject to Permitted Liens) in any such Commercial Tort Claim.
(f)
Government
Contracts
. If any Account or Chattel Paper arises out of a contract or contracts with the United States of America or any department,
agency, or instrumentality thereof, the Grantor shall
.
promptly (and in any event within five (5) Business Days of
the creation thereof) notify the Secured Parties thereof in writing and use commercially reasonable efforts to execute any instruments
or take any steps reasonably required by the Collateral Agent (on behalf of all Secured Parties) in order that all moneys due or
to become due under such contract or contracts shall be assigned to the Collateral Agent (on behalf of all Secured Parties) during
the continuance of an Event of Default following notice from the Collateral Agent, and shall provide written notice thereof and
use commercially reasonable efforts to take all other appropriate actions under the Assignment of Claims Act or other applicable
law to provide the Collateral Agent on behalf of all Secured Parties a first-priority perfected security interest (subject to Permitted
Liens) in such contract.
(g)
Investment
Related Property
.
(i) If
the Grantor shall receive or become entitled to receive any Pledged Interests after the date hereof, it shall promptly (and in
any event within five (5) Business Days of receipt thereof) identify such Pledged Interests in a written notice to the Secured
Parties;
(ii) Upon
the request of the Collateral Agent during the continuance of an Event of Default, all sums of money and property paid or distributed
in respect of the Investment Related Property pledged hereunder which are received by the Grantor shall be held by the Grantor
in trust for the benefit of the Secured Parties segregated from the Grantor's other property, and the Grantor shall deliver it
promptly to the Collateral Agent (on behalf of all Secured Parties) in the exact form received;
(iii) The
Grantor shall promptly deliver to the Secured Parties a copy of each material notice or other written communication received by
it in respect of any Pledged Interests;
(iv) The
Grantor shall not make or consent to any material amendment or other modification or waiver with respect to any Pledged Interests,
Pledged Operating Agreement, or Pledged Partnership Agreement or enter into any agreement or permit to exist any restriction with
respect to any Pledged Interests, in each case, that could reasonably be expected to materially adversely affect the Collateral
Agent or the Secured Parties;
(v) The
Grantor agrees that it will cooperate with the Secured Parties in obtaining all necessary approvals and making all necessary filings
under federal and state law, and, upon the request of the Collateral Agent during the continuance of an Event of Default, under
foreign law, in connection with the Security Interests on the Investment Related Property pledged hereunder or any sale or transfer
thereof; and
(vi) As
to all limited liability company or partnership interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement,
the Grantor hereby represents, warrants and covenants that the Pledged Interests issued pursuant to such agreement (A) shall not
be dealt in or traded on securities exchanges or in securities markets, (B) will not constitute investment company securities,
and (C) will not be held by the Grantor in a securities account. In addition, none of the Pledged Operating Agreements, the Pledged
Partnership Agreements, or any other agreements governing any of the Pledged Interests issued under any Pledged Operating Agreement
or Pledged Partnership Agreement, shall provide that such Pledged Interests are securities governed by Article 8 of the Uniform
Commercial Code as in effect in any relevant jurisdiction.
(h)
Transfers
and Other Liens
. The Grantor shall not (i) sell, lease, license, assign (by operation of law or otherwise), transfer or
otherwise dispose of, or grant any option with respect to, any of the Collateral, except for Permitted Transfers or as
expressly permitted by this Agreement and the other Transaction Documents, or (ii) except for Permitted Liens, create or
permit to exist any Lien upon or with respect to any of the Collateral without the consent of the Collateral Agent. The
inclusion of Proceeds in the Collateral shall not be deemed to constitute consent by any Secured Party to any sale or other
disposition of any of the Collateral except as expressly permitted in this Agreement or the other Transaction Documents.
Notwithstanding anything contained in this Agreement to the contrary, Permitted Liens shall not be permitted with respect to
any Pledged Interests.
(i)
Preservation
of Existence
. The Grantor shall maintain and preserve its existence, rights and privileges, and become or remain duly qualified
and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction
of its business makes such qualification necessary, except where failure to be so qualified could not reasonably be expected to
have a Material Adverse Effect (as defined in the Securities Purchase Agreement).
(j)
Maintenance
of Properties
. The Grantor shall maintain and preserve all of its properties which are reasonably necessary in the proper conduct
of its business in good working order and condition, ordinary wear and tear excepted.
(k)
Maintenance
of Insurance
. The Grantor shall maintain insurance with responsible and reputable insurance companies or associations (including,
without limitation, comprehensive general liability, property, hazard, rent and business interruption insurance) with respect to
all of its assets and properties (including, without limitation, all real properties leased or owned by it and any and all Inventory
and Equipment) and business, in such amounts and covering such risks as is required by any governmental authority having jurisdiction
with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly
situated, in each case, reasonably acceptable to the Collateral Agent (on behalf of all Secured Parties).
(l)
Other
Actions as to Any and All Collateral
. The Grantor shall promptly (and in any event within five (5) Business Days of acquiring
or obtaining such Collateral) notify the Secured Parties in writing upon (i) acquiring or otherwise obtaining any Collateral after
the date hereof consisting of Investment Related Property, Chattel Paper (electronic, tangible or otherwise), documents (as defined
in Article 9 of the Code), promissory notes (as defined in the Code) or instruments (as defined in the Code) collectively having
an aggregate value in excess of $100,000 or (ii) any amount payable under or in connection with any of the Collateral being or
becoming evidenced after the date hereof by any Chattel Paper, documents, promissory notes, or instruments and, in each such case
upon the request of the Collateral Agent (on behalf of all Secured Parties), promptly execute such other documents, or if applicable,
deliver such Chattel Paper, other documents or certificates evidencing any Investment Related Property and do such other acts or
things deemed reasonably necessary or desirable by the Collateral Agent (on behalf of all Secured Parties) to protect the Secured
Parties' respective Security Interests therein.
7.
Relation
to Other Transaction Documents
. In the event of any conflict between any provision in this Agreement and any provision in the
Securities Purchase Agreement or Notes, such provision of the Securities Purchase Agreement or Notes shall control, except to the
extent the applicable provision in this Agreement is more restrictive with respect to the rights of the Grantor or imposes more
burdensome or additional obligations on the Grantor, in which event the applicable provision in this Agreement shall control.
8.
Further
Assurances
.
(a) The
Grantor agrees that from time to time, at its own expense, it will promptly execute and deliver all further instruments and documents,
and take all further action, that may be reasonably necessary or that the Collateral Agent (on behalf of all Secured Parties)
may reasonably request, in order to perfect and protect the Security Interests granted or purported to be granted hereby or to
enable the Secured Parties to exercise and enforce their rights and remedies hereunder with respect to any of the Collateral.
(b) The
Grantor authorizes the filing by the Collateral Agent (on behalf of all Secured Parties) of financing or continuation statements,
or amendments thereto, including, but not limited to, the recordation of the security interests granted hereunder in Patents, Trademarks
and Copyrights in the United States Patent and Trademark Office and the United States Copyright Office, and Grantor will execute
and deliver to the Collateral Agent such other instruments or notices, as may be reasonably necessary or as the Collateral Agent
may reasonably request, in order to perfect and preserve the Security Interests granted or purported to be granted hereby. Upon
the Satisfaction in Full of the Secured Obligations, the Collateral Agent shall (at Grantor' expense) file a termination statement
and/or other necessary documents terminating and releasing any and all financing statements or Liens on the Collateral pursuant
to Section 24 within five (5) Business Days following a written request therefor from Grantor.
(c) The
Grantor authorizes the Collateral Agent (on behalf of all Secured Parties) at any time and from time to time to file, transmit,
or communicate, as applicable, financing statements and amendments (i) describing the Collateral as “all assets of debtor”
or words of similar effect, (ii) describing the Collateral as being of equal or lesser scope or with greater detail, or (iii) that
contain any information required by part 5 of Article 9 of the Code for the sufficiency or filing office acceptance. The Grantor
also hereby ratifies any and all financing statements or amendments previously filed by the Collateral Agent in any jurisdiction.
(d) Subject
to Section 8(b), the Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination
statement with respect to any financing statement filed in connection with this Agreement without the prior written consent of
the Collateral Agent (on behalf of all Secured Parties), subject to the Grantor's rights under Section 9-509(d)(2) of the Code.
(e) Upon
five (5) Business Day's advance notice, the Grantor shall permit each Secured Party (at such Secured Party's expense) or its employees,
accountants, attorneys or agents, access to examine and inspect any Collateral or any other property of the Grantor at any time
during ordinary business hours, but no more than once per calendar year unless an Event of Default has occurred and is continuing.
9.
Collateral
Agent's Right to Perform Contracts, Exercise Rights, etc
. Upon the occurrence and during the continuance of an Event of Default,
the Collateral Agent (on behalf of all Secured Parties) (a) may proceed to perform any and all of the obligations of the Grantor
contained in any contract, lease, or other agreement and exercise any and all rights of the Grantor therein contained as fully
as the Grantor itself could, (b) shall have the right to use the Grantor's rights under Intellectual Property Licenses in connection
with the enforcement of the Secured Parties' rights hereunder, including the right to prepare for sale and sell any and all Inventory
and Equipment now or hereafter owned by the Grantor and now or hereafter covered by such licenses, and (c) shall have the right
to request that any Stock that is pledged hereunder be registered in the name of the Secured Parties or any of their nominees.
10.
Collateral
Agent Appointed Attorney-in-Fact
. The Grantor, on behalf of itself and each New Subsidiary of the Grantor, hereby irrevocably
appoints the Collateral Agent (on behalf of all Secured Parties) as the attorney-in-fact of the Grantor and each such New Subsidiary
upon the occurrence and during the continuance of an Event of Default. In the event the Grantor or any New Subsidiary fails to
execute or deliver in a timely manner any Transaction Document or other agreement, document, certificate or instrument which the
Grantor or New Subsidiary now or at any time hereafter is required to execute or deliver pursuant to the terms of the Securities
Purchase Agreement or any other Transaction Document, upon the occurrence and during the continuance of an Event of Default, the
Collateral Agent (on behalf of all Secured Parties) shall have full authority in the place and stead of the Grantor or New Subsidiary,
and in the name of the Grantor, such New Subsidiary or otherwise, to execute and deliver each of the foregoing. Without limitation
of the foregoing, upon the occurrence and during the continuance of an Event of Default, the Collateral Agent (on behalf of all
Secured Parties) shall have full authority in the place and stead of the Grantor and each New Subsidiary, and in the name of any
the Grantor, any such New Subsidiary or otherwise, to take any action and to execute any instrument which the Collateral Agent
(on behalf of all Secured Parties) may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation:
(a) to
ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due
under or in connection with any Collateral of the Grantor or New Subsidiary;
(b) to
receive and open all mail addressed to the Grantor or New Subsidiary and to notify postal authorities to change the address for
the delivery of mail to the Grantor or New Subsidiary to that of an address approved by the Collateral Agent (on behalf of all
Secured Parties);
(c) to
receive, indorse, and collect any drafts or other instruments, documents, Negotiable Collateral or Chattel Paper;
(d) to
file any claims or take any action or institute any proceedings which the Collateral Agent (on behalf of all Secured Parties) may
deem reasonably necessary or desirable for the collection of any of the Collateral of the Grantor or New Subsidiary or otherwise
to enforce the rights of the Secured Parties with respect to any of the Collateral; and
(e) to
use any labels, Patents, Trademarks, trade names, URLs, domain names, industrial designs, Copyrights, customer lists, advertising
matter or other industrial or intellectual property rights, in advertising for the exclusive purpose of sale and selling Inventory
and other Collateral and to collect any amounts due under Accounts, contracts or Negotiable Collateral of the Grantor or New Subsidiary.
To the extent permitted by law, the Grantor hereby ratifies,
for itself and each New Subsidiary, all that such attorney-in-fact shall lawfully do or cause to be done by virtue hereof, Such
power-of-attorney granted pursuant to this Section 10 is coupled with an interest and shall be irrevocable until this Agreement
is terminated.
11.
Collateral
Agent May Perform
. If the Grantor fails to perform any agreement contained herein, upon the occurrence and during the
continuance of an Event of Default, the Collateral Agent (on behalf of all Secured Parties) may perform, or cause performance
of, such agreement, and the reasonable expenses of the Collateral Agent incurred in connection therewith shall be payable by
the Grantor.
12.
Collateral
Agent's Duties; Bailee for Perfection
. The powers conferred on the Collateral Agent hereunder are solely to protect the Secured
Parties' respective interests in the Collateral and shall not impose any duty upon the Collateral Agent in favor of the Grantor
or any other Secured Party to exercise any such powers. Except for the safe custody of any Collateral in its actual possession
and the accounting for moneys actually received by it hereunder, the Collateral Agent shall not have any duty to the Grantor or
any other Secured Party as to any Collateral or as to the taking of any necessary steps
.
to preserve rights against
prior parties or any other rights pertaining to any Collateral. The Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of any Collateral in its actual possession if such Collateral is accorded treatment substantially
equal to that which is accorded to its own property. The Collateral Agent agrees that, with respect to any Collateral at any time
or times in its possession and in which any other Secured Party has a Lien, the Collateral Agent shall be the bailee of each other
Secured Party solely for purposes of perfecting (to the extent not otherwise perfected) each other Secured Party's Lien in such
Collateral, provided that the Collateral Agent shall not be obligated to obtain or retain possession of any such Collateral.
13.
Collection
of Accounts, General Intangibles and Negotiable Collateral
. At any time upon the occurrence and during the continuation
of an Event of Default, the Collateral Agent (on behalf of all Secured Parties) may (a) notify Account Debtors of the Grantor
that the Accounts, General Intangibles, Chattel Paper or Negotiable Collateral have been assigned to the Collateral Agent (on
behalf of all Secured Parties) or that the Collateral Agent (on behalf of all Secured Parties) has a security interest
therein, and (b) collect the Accounts, General Intangibles and Negotiable Collateral directly, and any
collection
costs and expenses shall constitute part of the Secured Obligations.
14.
Disposition
of Pledged Interests by Secured Parties
. None of the Pledged Interests hereafter acquired on the date of acquisition thereof
will be registered or qualified under the various federal, state or other securities laws of the United States or any other jurisdiction,
and disposition thereof after an Event of Default may be restricted to one or more private (instead of public) sales in view of
the lack of such registration. The Grantor understands that in connection with such disposition, the Collateral Agent (on behalf
of all Secured Parties) may approach only a restricted number of potential purchasers and further understands that a sale under
such circumstances may yield a lower price for the Pledged Interests than if the Pledged Interests were registered and qualified
pursuant to federal, state and other securities laws and sold on the open market. The Grantor, therefore, agrees that: (a) if the
Collateral Agent (on behalf of all Secured Parties) shall, pursuant to the terms of this Agreement, sell or cause the Pledged Interests
or any portion thereof to be sold at a private sale, the Collateral Agent (on behalf of all Secured Parties) shall have the right
to rely upon the advice and opinion of any nationally recognized brokerage or investment firm (but shall not be obligated to seek
such advice and the failure to do so shall not be considered in determining the commercial reasonableness of such action) as to
the best manner in which to offer the Pledged Interest or any portion thereof for sale and as to the best price reasonably obtainable
at the private sale thereof; and (b) such reliance shall be conclusive evidence that the Collateral Agent has handled the disposition
in a commercially reasonable manner.
15.
Voting
Rights
.
(a) Upon
the occurrence and during the continuation of an Event of Default, (i) the Collateral Agent (on behalf of all Secured Parties)
may, at its option, and with two (2) Business Days prior notice to the Grantor, and in addition to all rights and remedies available
to the Secured Parties under any other agreement, at law, in equity, or otherwise, exercise all voting rights, and all other ownership
or consensual rights in respect of the Pledged Interests, but under no circumstances is the Collateral Agent obligated by the terms
of this Agreement to exercise such rights, and (ii) if the Collateral Agent (on behalf of all Secured Parties) duly exercises its
right to vote any of such Pledged Interests, the Grantor hereby appoints the Collateral Agent (on behalf of all Secured Parties)
as the Grantor's true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote such Pledged Interests in any manner that the Collateral
Agent (on behalf of all Secured Parties) deem advisable for or against all matters submitted or which may be submitted to a vote
of shareholders, partners or members, as the
,
case may be. Such power-of-attorney granted pursuant to this Section 15
is coupled with an interest and shall be irrevocable until this Agreement is terminated.
(b) For
so long as the Grantor shall have the right to vote the Pledged Interests, it covenants and agrees that it will not, without the
prior written consent of the Collateral Agent (on behalf of all Secured Parties), vote or take any consensual action with respect
to such Pledged Interests which would materially or adversely affect the rights of the Secured Parties exercising the voting rights
owned by the Grantor or the value of the Pledged Interests.
16.
Remedies
.
Upon the occurrence and during the continuance of an Event of Default:
(a) The
Collateral Agent (on behalf of all Secured Parties) may exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein, in the other Transaction Documents, or otherwise available to it, all the rights and remedies of
a secured party on default under the Code or any other applicable law. Without limiting the generality of the foregoing, the Grantor
expressly agrees that, in any such event, the Collateral Agent (on behalf of all Secured Parties) without any demand, advertisement,
or notice of any kind (except a notice specified below of time and place of public or private sale) to or upon the Grantor or any
other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum extent permitted
by the Code or by any other applicable law), may take immediate possession of all or any portion of the Collateral and (i) require
the Grantor to, and the Grantor hereby agrees that it will at its own expense and upon request of the Collateral Agent (on behalf
of all Secured Parties) promptly, assemble all or part of the Collateral as directed by the Collateral Agent (on behalf of all
Secured Parties) and make it available to the Collateral Agent (on behalf of all Secured Parties) at one or more locations where
the Grantor regularly maintains Inventory, and (ii) without notice except as specified below, sell the Collateral or any part thereof
in one or more parcels at public or private sale, at the Collateral Agent's offices or elsewhere, for cash, on credit, and upon
such other terms as the Collateral Agent (on behalf of all Secured Parties) may deem commercially reasonable. The Grantor agrees
that, to the extent notice of sale shall be required by law, at least 10 Business Days' notice of the time and place of any public
sale or the time after which any private sale is to be made shall constitute reasonable notification and specifically such notice
shall constitute a reasonable “authenticated notification of disposition” within the meaning of Section 9-611 of the
Code. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given.
The Collateral Agent (on behalf of all Secured Parties) may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was
so adjourned.
(b) The
Collateral Agent (on behalf of all Secured Parties) is hereby granted a non-exclusive license or other right to use, without liability
for royalties or any other charge, the Grantor's labels, Patents, Copyrights, rights of use of any name, trade secrets, trade names,
Trademarks, service marks and advertising matter, URLs, domain names, industrial designs, other industrial or intellectual property
or any property of a similar nature, whether owned by the Grantor or with respect to which the Grantor has rights under license,
sublicense, or other agreements (but only to the extent (i) such license, sublicense or agreement does not prohibit such use by
the Collateral Agent (on behalf of all Secured Parties), and (ii) the Grantor will not be in default under such license, sublicense,
or other agreement as a result of such use by the Collateral Agent (on behalf of all Secured Parties)), as it pertains to the Collateral,
for the exclusive purpose of preparing for sale, advertising for sale and effectuating the sale of any Collateral, and the Grantor's
rights under all licenses and all franchise agreements shall inure to the benefit of the Collateral Agent (on behalf of all Secured
Parties).
(c) Any
cash held by the Collateral Agent as Collateral and all proceeds received by the Collateral Agent in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral shall be applied against the Secured Obligations in the order
set forth in Section 17 hereof. In the event the proceeds of Collateral are insufficient for the Satisfaction in Full of the Secured
Obligations (as defined below), the Grantor shall remain liable for any such deficiency.
(d) The
Grantor hereby acknowledges that the Secured Obligations arose out of a commercial transaction, and agrees that if an Event of
Default shall occur and be continuing the Collateral Agent (on behalf of all Secured Parties) shall have the right to an immediate
writ of possession without notice of a hearing. The Collateral Agent (on behalf of all Secured Parties) shall have the right to
the appointment of a receiver for the properties and assets of the Grantor, and the Grantor hereby consents to such rights and
such appointment and hereby waives any objection it may have thereto or the right to have a bond or other security posted by the
Collateral Agent (on behalf of all Secured Parties).
(e) The
Collateral Agent (on behalf of all Secured Parties) may, in addition to other rights and remedies provided for herein, in the other
Transaction Documents, or otherwise available to it under applicable law and without the requirement of notice to or upon the Grantor
or any other Person (which notice is hereby expressly waived to the maximum extent permitted by the Code or any other applicable
law), (i) with respect to the Grantor's Deposit Accounts in which any Secured Party's Liens are perfected by control under Section
9-104 of the Code, instruct the bank maintaining such Deposit Account for the Grantor to pay the balance of such Deposit Account
to or for the benefit of the Collateral Agent (on behalf of all Secured Parties), and (ii) with respect to the Grantor's Securities
Accounts in which any Secured Party's Liens are perfected by control under Section 9-106 of the Code, instruct the securities intermediary
maintaining such Securities Account for the Grantor to (A) transfer any cash in such Securities Account to or for the benefit of
the Collateral Agent (on behalf of all Secured Parties), or (B) liquidate any financial assets in such Securities Account that
are customarily sold on a recognized market and transfer the cash proceeds thereof to or for the benefit of the Collateral Agent
(on behalf of all Secured Parties).
17.
Priority
of Liens; Application of Proceeds of Collateral
. Each Secured Party hereby acknowledges and agrees that, notwithstanding the
time or order of the filing of any financing statement or other registration or document with respect to the Collateral and the
Security Interests, or any provision of this Agreement, any other Security Document, the Code or other applicable law, solely
as amongst the Secured Parties, the separate Security Interests of the Secured Parties shall have the same rank and priority;
provided, that, the foregoing shall not apply to any Security Interest of a Secured Party that is void or voidable as a matter
of law. In furtherance thereof, all
proceeds of Collateral received by the Collateral Agent shall be applied as follows:
(a)
first
,
ratably to pay any expenses due to the Collateral Agent (including, without limitation, the reasonable costs and expenses paid
or incurred to correct any default under or enforce any provision of the Transaction Documents, or after the occurrence and during
the continuance of any Event of Default in gaining possession of, maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated);
(b)
second
,
to pay any indemnities then due to any of the Secured Parties under the Transaction Documents, until paid in full;
(c)
third
,
ratably to pay any fees or premiums then due to any of the Secured Parties under the Transaction Documents, until paid in full;
(d)
fourth
,
ratably to pay interest due in respect of the Secured Obligations then due to any of the Secured Parties, until paid in full;
(e)
fifth
,
ratably to pay the principal amount of all Secured Obligations then due to any of the Secured Parties, until paid in full;
(f)
sixth
,
ratably to pay any other Secured Obligations then due to any of the Secured Parties; and
(g)
seventh
,
to Grantor or such other Person entitled thereto under applicable law.
18.
Remedies
Cumulative
. Each right, power, and remedy of any Secured Party as provided for in this Agreement or in any other Transaction
Document or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall
be in addition to every other right, power, or remedy provided for in this Agreement or in the other Transaction Documents or
now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by any
Secured Party, of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by
such Secured Party of any or all such other rights, powers, or remedies.
19.
Marshaling
.
No Secured Party shall be required to marshal any present or future collateral security (including but not limited to the
Collateral) for, or other assurances of payment of, the Secured Obligations or any of them or to resort to such collateral
security or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect
of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and
remedies, however existing or arising. To the extent that it lawfully may, the Grantor hereby agrees that it will not invoke
any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of any Secured Party's
rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Secured Obligations
or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or payment
thereof is otherwise assured, and, to the extent that it lawfully may, the Grantor hereby irrevocably waives the benefits of
all such laws.
20.
Appointment
of Collateral Agent; Acknowledgment
.
(a) The
Secured Parties hereby appoint Robert Clifford to act as the initial collateral agent on behalf of all Secured Parties (the
“Collateral
Agent”
).
Notwithstanding anything in this Agreement to the contrary, one or more Secured Parties (other
than the then Collateral Agent) holding a majority of the then aggregate outstanding principal balance of the Notes
(excluding any Notes held by the then acting Collateral Agent) may remove the then acting Collateral Agent and appoint any
other Secured Party to act as the Collateral Agent under this Agreement. Upon such appointment such Secured Party shall act
as Collateral Agent pursuant to the terms of this Agreement.
(b) No
Secured Party (which term, as used in this sentence, shall include reference to each Secured Party's officers, directors, employees,
attorneys, agents and affiliates and to the officers, directors, employees, attorneys and agents of such Secured Party's affiliates)
shall: (i) have any duties or responsibilities except those expressly set forth in this Agreement and the other Security Documents
or (ii) be required to take, initiate or conduct any enforcement action (including any litigation, foreclosure or collection proceedings
hereunder or under any of the other Security Documents). Without limiting the foregoing, no Secured Party shall have any right
of action whatsoever against any other Secured Party as a result of such Secured Party acting or refraining from acting hereunder
or under any of the Security Documents except as a result and to the extent of losses caused by such Secured Party's actual gross
negligence or willful misconduct. No Secured Party assumes any responsibility for any failure or delay in performance or breach
by the Grantor or any other Secured Party of its obligations under this Agreement or any other Transaction Document. No Secured
Party makes to any other Secured Party any express or implied warranty, representation or guarantee with respect to any Secured
Obligations, Collateral, Transaction Document or the Grantor. No Secured Party nor any of its officers, directors, employees,
attorneys or agents shall be responsible to any other Secured Party or any of its officers, directors, employees, attorneys or
agents for: (i) any recitals, statements, information, representations or warranties contained in any of the Transaction Documents
or in any certificate or other document furnished pursuant to the terms hereof; (ii) the execution, validity, genuineness, effectiveness
or enforceability of any of the Transaction Documents; (iii) the validity, genuineness, enforceability, collectability, value,
sufficiency or existence of any Collateral, or the attachment, perfection or priority of any Lien therein; or (iv) the assets,
liabilities, financial condition, results of operations, business, creditworthiness or legal status of the Grantor or any Account
Debtor. No Secured Party nor any of its officers, directors, employees, attorneys or agents shall have any obligation to any other
Secured Party to ascertain or inquire into the existence of any default or Event of Default, the observance or performance by
the Grantor of any of its duties or agreements under any of the Transaction Documents or the satisfaction of any conditions precedent
contained in any of the Transaction Documents.
(d) Each
Secured Party hereby acknowledges and represents that it has, independently and without reliance upon any other Secured Party,
and based upon such documents, information and analyses as it has deemed appropriate, made its own credit analysis of the Grantor
and its own decision to enter into the Transaction Documents and to purchase the Notes, and each Secured Party has made such inquiries
concerning the Transaction Documents, the Collateral and the Grantor as such Secured Party feels necessary and appropriate, and
has taken such care on its own behalf as would have been the case had it entered into the Transaction Documents without any other
Secured Party. Each Secured Party hereby further acknowledges and represents that the other Secured Parties have not made any
representations or warranties to it concerning the Grantor, any of the Collateral or the legality, validity, sufficiency or enforceability
of any of the Transaction Documents. Each Secured Party also hereby acknowledges that it will, independently and without reliance
upon the other Secured Parties, and based upon such financial statements, documents and information as it deems appropriate at
the time, continue to make and rely upon its own credit decisions in taking or refraining to take any other action under this
Agreement or the Transaction Documents. No Secured Party shall have any duty or responsibility to provide any other Secured Party
with any notices, reports or certificates furnished to such Secured Party by the Grantor or any credit or other information concerning
the affairs, financial condition, business or assets of the Grantor (or any of its affiliates) which may come into possession
of such Secured Party.
21.
Indemnity
and Expenses
.
(a) Without
limiting any obligations of the Grantor under the Securities Purchase Agreement, the Grantor agrees to indemnify all Secured Parties
from and against all claims, lawsuits and liabilities (including reasonable attorneys' fees) arising out of or resulting from
this Agreement (including enforcement of this Agreement), except claims, losses or liabilities resulting from the gross negligence
or willful misconduct of the Secured Party seeking indemnification as determined by a final non-appealable order of a court of
competent jurisdiction. This provision shall survive the termination of this Agreement and the Transaction Documents and the Satisfaction
in Full of the Secured Obligations.
(b) The
Grantor shall, upon demand, pay to the Collateral Agent all of the reasonable costs and expenses which the Collateral Agent may
incur in connection with the custody, preservation, use or operation of, or, upon an Event of Default, the sale of, collection
from, or other realization upon, any of the Collateral in accordance with this Agreement and the other Transaction Documents.
The Grantor shall, upon demand, pay to each Secured Party all of the reasonable costs and expenses which such Secured Party may
incur in connection with (i) the exercise or enforcement of any of the rights of such Secured Party hereunder or (ii) the failure
by the Grantor to perform or observe any of the provisions hereof.
22.
Merger,
Amendments; Etc
. THIS AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES SOLELY WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES, THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES. No provision of this Agreement
may be amended other than by an instrument in writing signed by the Grantor and the Collateral Agent, and any amendment to any
provision of this Agreement made in conformity with the provisions of this Section 22 shall be binding on all Secured Parties,
provided that no such amendment shall be effective to the extent that it (a) applies to less than all of the Secured Parties or
(b) imposes any obligation or liability on any Secured Party without such Secured Party's prior written consent (which may be granted
or withheld in such Secured Party's sole discretion). No waiver shall be effective unless it is in writing and signed by an authorized
representative of the waiving party, provided that the Collateral Agent may waive any provision of this Agreement, and any waiver
of any provision of this Agreement made in conformity with the provisions of this Section 22 shall be binding on all Secured Parties,
provided that no such waiver shall be effective to the extent that it (i) applies to less than all the Secured Parties (unless
a party gives a waiver as to itself only) or (ii) imposes any obligation or liability on any Secured Party without such Secured
Party's prior written consent (which may be granted or withheld in such Secured Party's sole discretion).
23.
Addresses
for Notices
. All notices and other communications provided for hereunder (a) shall be given in the form and manner set forth
in the Securities Purchase Agreement and (b) shall be delivered, (i) in the case of notice to the Grantor, by delivery of such
notice to the Grantor's address specified in the Securities Purchase Agreement or at such other address as shall be designated
by the Grantor in a written notice to each of the Secured Parties in accordance with the provisions thereof, and (ii) in the case
of notice to any Secured Party, by delivery of such notice to such Secured Party at its address specified in the Securities
Purchase Agreement or at such other address as shall be designated by such Secured Party in a written notice to the Grantor and
each other Secured Party in accordance with the provisions thereof.
24.
Separate,
Continuing Security Interests; Assignments under Transaction Documents
. This Agreement shall create a continuing security interest
in the Collateral in favor of the Collateral Agent on behalf of each Secured Party and shall (a) remain in full force and effect
until Satisfaction in Full of the Secured Obligations, (b) be binding upon the Grantor, and its permitted successors and permitted
assigns, and (c) inure to the benefit of, and be enforceable by, the Secured Parties and their respective successors, transferees
and assigns. Without limiting the generality of the foregoing clause (c), any Secured Party may, in accordance with the
provisions of the Transaction Documents, assign or otherwise transfer all or any portion of its rights and obligations under the
Transaction Documents to any other Person, and such other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Secured Party herein or otherwise. Upon Satisfaction in Full of the Secured Obligations, the Security Interests
granted hereby shall terminate and all rights to the Collateral shall revert to the Grantor or any other Person entitled thereto.
At such time, the Collateral Agent and each Secured Party will authorize the filing of appropriate termination statements to terminate
such Security Interests. No transfer or renewal, extension, assignment, or termination of this Agreement or any other Transaction
Document, or any other instrument or document executed and delivered by the Grantor to any Secured Party nor any additional loans
made by any Secured Party to the Grantor, nor the taking of further security, nor the retaking or re-delivery of the Collateral
to the Grantor, or any of them, by any Secured Party, nor any other act of the Secured Parties, or any of them, shall release the
Grantor from any obligation, except a release or discharge executed in writing by all Secured Parties. No Secured Party shall by
any act, delay, omission or otherwise, be deemed to have waived any of its rights or remedies hereunder, unless such waiver is
in writing and signed by such Secured Party and then only to the extent therein set forth. A waiver by any Secured Party of any
right or remedy on any occasion shall not be construed as a bar to the exercise of any such right or remedy which such Secured
Party would otherwise have had on any other occasion.
25.
Governing
Law; Jurisdiction; Service of Process; Jury Trial
. All questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York, Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is
improper;
provided, however,
any suit seeking enforcement against any Collateral or other property may be brought, at any
Secured Party's option, in the courts of any jurisdiction where such Secured Party elects to bring such action or where such Collateral
or other property may be found: Each party hereby irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any mariner permitted by law.
EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
26.
Miscellaneous
.
(a) This
Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is
delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature
page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such signature page were an original thereof. Any party delivering an executed
counterpart of this Agreement by facsimile or other electronic method of transmission also shall deliver an original executed counterpart
of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement. The foregoing shall apply to each other Security Document
mutatis mutandis.
(b) Any
provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision
in any other jurisdiction.
(c) Headings
used in this Agreement are for convenience only and shall not be used in connection with the interpretation of any provision hereof.
(d) The
pronouns used herein shall include, when appropriate, either gender and both singular and plural, and the grammatical construction
of sentences shall conform thereto.
(e) The
language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. For clarification purposes, the Recitals are part of this Agreement.
(f) Unless
the context of this Agreement or any other Transaction Document clearly requires otherwise, references to the plural include the
singular; references to the singular include the plural, the terms “includes” and “including” are not
limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase
“and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and
similar terms in this Agreement or any other Transaction Document refer to this Agreement or such other Transaction Document,
as the case may be, as a whole and not to any particular provision of this Agreement or such other Transaction Document, as the
case may be. Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified.
Any reference in this Agreement or in any other Transaction Document to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements,
thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, joinders, and supplements set forth herein).
“Satisfaction in Full of the Secured
Obligations”
shall mean the indefeasible payment in full in cash and discharge, or other satisfaction in accordance
with the terms of the Transaction Documents (including, without limitation, conversion of the Notes into equity of the Company)
and discharge, of all Secured Obligations in full. Any reference herein to any Person shall be construed to include such Person's
permitted successors and permitted assigns. Any requirement of a writing contained herein or in any other Transaction Document
shall be satisfied by the transmission of a Record and any Record so transmitted shall constitute a representation and warranty
as to the accuracy and completeness of the information contained therein.
(g) All
dollar amounts referred to in this Agreement and the other Transaction Documents are in United States Dollars (
“U.S. Dollars”
),
and all amounts owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated
in other currencies shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date
of calculation.
“Exchange Rate”
means, in relation to any amount of currency to be converted into U.S. Dollars
pursuant to this Agreement, the U.S. Dollar exchange rate as published in The Wall Street Journal on the relevant date of calculation.
[signature pages follow]
IN WITNESS WHEREOF,
the undersigned parties hereto have executed this Agreement by and through their duly authorized officers, as of the day and year
first above written.
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GRANTOR:
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MEARS TECHNOLOGIES, INC.,
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a Delaware corporation
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By:
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/s/ John D.T. Gerber
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Name: John D.T. Gerber
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Title: Chairman
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COLLATERAL AGENT:
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/s/ Robert Clifford
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Robert Clifford
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Exhibit 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT
AGREEMENT
(
“
Agreement
”
)
is entered into on October 16, 2015 (
“
Effective Date
”
)
by and between Mears Technologies, Inc., a Delaware corporation (
“
Company
”
),
and Scott A.
Bibaud (
“
Executive
”
).
RECITAL
Company wishes to
employ Executive in an executive capacity on the terms and conditions and for the consideration, hereinafter set forth and Executive
wishes to be employed by Company on such terms and conditions and for such consideration.
AGREEMENT
It is agreed as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
1.1 Definitions.
(a)
“Annual
Base Salary”
shall mean Executive’s annual base salary as of the date of his Involuntary Termination, determined
pursuant to Section 4.1.
(b)
“Board”
shall mean the board of directors of Company.
(c)
“Cause”
shall mean Executive (i) has engaged in gross negligence or willful misconduct in the performance of his duties at the Company,
(ii) has materially breached this Agreement or that certain Employee Confidentiality and Assignment Agreement dated October 16,
2015 between the Company and Executive, (iii) has willfully and materially breached a significant corporate policy or code of conduct
established by Company, (iv) has engaged in willful misconduct that is materially injurious to Company and its subsidiaries taken
as a whole (monetarily or otherwise), (v) has committed an act of fraud or embezzlement, (vi) has been convicted of (or pleaded
no contest to) a criminal act involving fraud, dishonesty, or moral turpitude, or (vii) has been convicted for any violation of
U.S. or foreign securities laws or has entered into a cease and desist order with the Securities and Exchange Commission alleging
violation of U.S. or foreign securities laws.
(d)
“Change
of Control”
shall mean
(i) the Company
is merged, consolidated, or reorganized into or with another corporation or other legal person (an
“Acquirer”)
and
as a result of such merger, consolidation, or reorganization, less than fifty-one percent (51%) of the outstanding voting securities
or other capital interests of the surviving, resulting, or acquiring corporation or other legal person are owned in the aggregate
by the stockholders of the Company, directly or indirectly, immediately prior to such merger, consolidation or reorganization,
other than by the Acquirer or any corporation or other legal person controlling, controlled by or under common control with the
Acquirer; or
(ii) the Company
sells all or substantially all of its business and/or assets to an Acquirer, of which less than fifty-one percent (51%) of the
outstanding voting securities or other capital interests are owned in the aggregate by the stockholders of the Company, directly
or indirectly, immediately prior to such sale, other than by any corporation or other legal person controlling, controlled by or
under common control with the Acquirer.
(e)
“Code”
shall mean the Internal Revenue
Code of 1986, as amended.
(f)
“Compensation
Committee”
shall mean the Compensation Committee of the Board.
(g)
“Disability”
shall mean that, as a result of Executive’s incapacity due to physical or mental illness, Executive shall have been absent
from the full-time performance of his duties for six consecutive months and shall not have returned to full-time performance of
his duties within 30 days after written notice of termination is given to Executive by Company (provided, however, that such notice
may not be given prior to 30 days before the expiration of such six-month period).
(h)
“Good
Reason”
shall mean the occurrence of any one or more of the following:
(i) a diminution
in Executive’s Annual Base Salary not in accordance with Section 4.1;
(ii) a material
diminution in Executive’s title, authority, duties, or responsibilities from those applicable to him as of the Effective
Date, including any change in title or a material change in the reporting structure so that Executive reports to someone other
than the Board;
(iii) a material
change in the geographic location at which Executive must perform services, which for purposes of this Agreement includes only
Company requiring Executive to involuntarily relocate to a geographic location other than the Place of Employment in Section 2.5;
or
(iv) a material
breach by Company of any provision of this Agreement (including, without limitation, the requirements of Sections 2.2, 4.1, 4.2,
4.3 or 4.4 of this Agreement); or
(v) a Change of
Control.
Notwithstanding
the foregoing provisions of this Section 1.1(h) or any other provision in this Agreement to the contrary, any assertion by Executive
of a termination of employment for “Good Reason” shall not be effective unless all of the following conditions are
satisfied: (1) any condition described in clauses (i) through (iv) of this Section 1.1(h) giving rise to Executive’s termination
of employment must have arisen without Executive’s consent; (2) Executive must provide written notice to Company of such
condition in accordance with Section 7.1 within 30 days of the initial existence of the condition; (3) the condition specified
in such notice must remain uncorrected for a period of 30 days following receipt of such notice by Company; and (4) the date of
Executive’s
termination of employment must occur within one year following the initial existence of the condition
specified in such notice.
(i)
“Incentive
Plan”
shall mean the Mears Technologies, Inc. 2007 Stock Incentive Plan as it may be amended from time-to-time.
(j)
“Involuntary
Termination”
shall mean any termination of Executive’s employment with Company which results from either:
(i) A termination by the Company without Cause; or
(ii) A resignation by Executive for Good Reason;
provided, however, the term “Involuntary
Termination” shall not include a termination for Cause or any termination as a result of death or Disability.
(k)
“Payment
Date”
shall mean the later of (i) the date that is 30 days after Executive’s termination of employment with Company
or (ii) the date upon which the Release described in Section 5.5 becomes irrevocable by Executive.
1.2 Interpretations
.
In this Agreement, unless a clear contrary intention appears, (a) the words “herein,” “hereof,” “hereunder,”
and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, or other subdivision,
(b) reference to any Article or Section means such Article or Section hereof, (c) the word “including” (and with correlative
meaning, “include”) means including, without limiting the generality of any description preceding such term, and (d)
where any provision of this Agreement refers to action to be taken by either party, or which such party is prohibited from taking,
such provision shall be applicable whether such action is taken directly or indirectly by such party.
ARTICLE II
EMPLOYMENT AND DUTIES
2.1 Employment
.
Effective as of the Effective Date and continuing for the period of time set forth in Section 3.1 of this Agreement, Executive’s
employment by Company shall be subject to the terms and conditions of this Agreement.
2.2 Positions.
From and after the Effective Date, Company shall employ Executive in the position of Chief Executive Officer of the Company
(“CEO”)
or in such other position or positions as the parties mutually may agree. Also, while serving in the
position of CEO, Executive shall also be entitled to serve as a member of the Board.
2.3 Duties and
Services
. Executive agrees to serve in the position referred to in Section 2.2 and to perform diligently and to the best of
his abilities the duties and services appertaining to such office, as well as such additional duties and services appropriate
to such offices which the parties mutually may agree upon from time to time. Executive in his capacity as CEO shall have all of
the authorities, duties and obligations of the CEO as provided under Section 3.8 of the Bylaws of the Company, as amended. Executive
also agrees to serve, if elected, as an officer or director of any wholly-owned subsidiary or affiliate of Company so long as
such
service is commensurate with Executive’s duties and responsibilities to Company. Executive’s
employment shall also be subject to the policies maintained and established by Company that are of general applicability to Company’s
executive employees, as such policies may be amended from time to time.
2.4 Other
Interests.
Executive agrees, during the period of his employment by Company, to devote substantially all
of his business
time, energy, and best efforts to the business and affairs of Company and its affiliates and not to engage, directly or indirectly,
in any other business or businesses, whether or not similar to that of Company, except as herein permitted or with the consent
of the Board. The foregoing notwithstanding, the parties recognize and agree that Executive may engage in passive personal investment
and charitable activities and serve on corporate boards of directors that, in any case, do not conflict with the business and
affairs of Company or interfere with Executive’s performance of his duties hereunder, which shall be at the sole determination
of the Board.
2.5 Place of Employment
. Executive’s place
of employment hereunder shall be at Company’s executive offices in the greater San Jose, California metropolitan area or
such other place in the San Francisco Bay Area as the Company may determine from time-to-time.
ARTICLE III
TERM AND TERMINATION OF EMPLOYMENT
3.1 Term
. Unless
sooner terminated pursuant to other provisions hereof, Company agrees to employ Executive for the period beginning on the Effective
Date and ending on the fourth anniversary of the Effective Date.
3.2 Company’s
Right to Terminate
. Notwithstanding the provisions of Section 3.1, Company shall have the right to terminate Executive’s
employment under this Agreement at any time for any of the following reasons:
(a) upon Executive’s death;
(b) upon Executive’s Disability;
(c) for Cause; or
(d) at any time,
for any other reason whatsoever, in the sole discretion of the Board.
Prior to terminating Executive for Cause,
(i) Executive shall have been provided with fifteen (15) days prior written notice of the circumstances giving rise to Cause, (ii)
Executive shall have fifteen (15) days to remedy the circumstances constituting Cause, if curable, (iii) Executive shall have had
the opportunity to appear before the Board (without counsel) to discuss the circumstances constituting Cause, and (iv) at least
two thirds (2/3) of the members of the Board (excluding Executive) shall have affirmatively voted to terminate Executive for Cause.
3.3 Executive’s Right to Terminate
. Notwithstanding
the provisions of Section 3.1, Executive shall have the right to terminate his employment under this Agreement for any of the
following reasons:
(a) for Good Reason; or
(b) at any time for
any other reason whatsoever, in the sole discretion of Executive.
3.4 Notice of Termination
. If Company desires to
terminate Executive’s employment hereunder at any time prior to expiration of the term of employment as provided in Section
3.1, it shall do so by giving a 30-day written notice to Executive that it has elected to terminate Executive’s employment
hereunder and stating the effective date and reason for such termination, provided that no such action shall alter or amend any
other provisions hereof or rights arising hereunder. If Executive desires to terminate his employment hereunder at any time prior
to expiration of the term of employment as provided in Section 3.1, he shall do so by giving a 30-day written notice to Company
that he has elected to terminate his employment hereunder and stating the effective date and reason for such termination, provided
that no such action shall alter or amend any other provisions hereof or rights arising hereunder.
3.5 Deemed
Resignations
. Unless otherwise agreed to in writing by Company and Executive prior
to the termination of Executive’s
employment, any termination of Executive’s employment shall constitute an automatic resignation of Executive as an officer
of Company and each affiliate of Company and an automatic resignation of Executive from the Board (if applicable) and from the
board of directors or similar governing body of any affiliate of Company and from the board of directors or similar governing
body of any corporation, limited liability entity, or other entity in which Company or any affiliate holds an equity interest
and with respect to which board or similar governing body Executive serves as Company’s or such affiliate’s designee
or other representative.
3.6 Meaning of Termination of Employment
.
For all purposes of this Agreement, Executive shall be considered to have terminated employment with Company when Executive
incurs a “separation from service” with Company within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable
administrative guidance issued thereunder.
ARTICLE IV
COMPENSATION AND BENEFITS
4.1 Base
Salary
. During the period of this Agreement, Executive shall receive a minimum base salary of $300,000 per annum during each
full year of employment, except that until there is an initial public offering (the “
IPO
”),
the
base salary shall be $250,000 per annum. Executive’s base salary shall be reviewed by the Compensation Committee on an annual
basis, and, in the sole discretion of the Compensation Committee, such base salary may be increased, but not decreased (except
with the prior written consent of Executive), effective as of any date determined by the Compensation Committee. Executive’s
base salary shall be paid in equal installments in accordance with Company’s standard policy regarding payment of compensation
to executives but no less frequently than monthly.
4.2 Onetime Incentive Bonus
. Executive
shall receive a onetime Incentive Bonus of $250,000. This onetime Incentive Bonus shall be awarded to Executive if the IPO occurs
(a) prior to May 31, 2016 or, (b) if the maturity date of the Senior Secured Convertible Notes (
“
Notes
”
)
under the Company’s February 18, 2015 offering is extended, prior to June 30, 2016.
4.3 Option Compensation
. Upon
the date of this Agreement, Executive shall receive a grant of options (
“
Options
”
) to purchase 4,545,042
shares of the $0.001 par value common stock (
“
Common Stock
”
)
of the Company. The strike price
of the Options shall be $0.38 per share, representing the fair market value of one share of Common Stock as of the date of this
Agreement. The Options shall be granted pursuant to the terms and subject to the conditions of a Stock Option Agreement of even
date herewith between Executive and Company. Upon, and subject to, the completion of the IPO, Executive shall be granted additional
stock options (
“
Gross Up Options
”
), which together with the Options, will represent six and three tenths
percent (6.3%) of the outstanding shares of Common Stock on a fully-diluted basis after giving effect to the IPO. The strike price
of the Gross Up Options shall be the public offering price in the IPO and the Gross Up Options shall be granted pursuant to the
terms and subject to the conditions of a similar Stock Option Agreement.
(a)
Vesting of
Options
. In addition to the time-based vesting provisions set forth hereafter in this subpart (a), Options to purchase 2,077,727
shares of Common Stock shall vest and become exercisable subject to the conversion of all principal and accrued interest under
the Notes into shares of Common Stock on or before May 31, 2016, unless such date is extended by the holders of the Notes to no
later than June 30, 2016. In addition to the afore-mentioned performance-based vesting condition with respect to Options to purchase
2,077,727 shares of Common Stock, all of the Options will vest over a four-year period from the date of grant as follows: one-fourth
of the Options shall vest and first become exercisable on the one year anniversary of the date of grant (such amount to be equal
to one-fourth of the Options outstanding as of the one year anniversary date after giving effect to the potential cancellation
of Options to purchase 2,077,727 shares of Common Stock in the event of the failure to satisfy the above-mentioned performance-based
vesting condition) and the balance of the Options shall vest in 36 equal monthly installments commencing on the 13 month following
the date of grant.
(b)
Vesting
of Gross Up Options
. The Gross Up Options will vest as follows: a Ratable Portion (as defined below) of the Gross Up Options
shall vest and first become exercisable on the later of the one year anniversary of the date of grant of the Options or the completion
date of the IPO (the latter of the two dates referred to as the “
Initial Vesting Date
”),
and
the balance of the Gross Up Options shall vest in equal monthly installments, commencing on the one month anniversary of the Initial
Vesting Date, over a number of months equal to 48 less the Variable Number (as defined below). The term “
Ratable Portion
”
shall mean a portion of the Gross Up Options equal to the total number of Gross Up Options multiplied by the product of .25 times
a fraction, the denominator of which is 12 and the numerator of which is the lesser of 12 and the Variable Number. The term “
Variable
Number
”
means number of 30-day periods, or portions therof, between the grant date of the Options and the
Initial Vesting Date.
4.4 Bonuses and Long-Term Incentive
.
(a)
Annual Bonus
.
Executive shall be eligible for an annual bonus of up to fifty percent (50%) of Executive’s Base Salary based on performance
criteria set by the Compensation Committee and to otherwise participate in Company’s annual bonus plan or plans applicable
to Executive, all as approved from time to time by the Compensation Committee in amounts to be determined by the Compensation Committee
based upon criteria established by the Compensation Committee.
(b)
Long-Term
Incentive Plan
. Subject to the sole discretion of the Compensation Committee, Executive shall also be eligible for participation
in the Incentive Plan or such other long-term incentive arrangement of Company as may from time to time be made available to other
executive officers of Company. Any awards made under the Incentive Plan or such other arrangements shall be governed by Section
5.7 herein.
4.5 Other Perquisites
. During his employment hereunder,
Executive shall be afforded the following benefits as incidences of his employment:
(a)
Business
and Entertainment Expenses -
Subject to Company’s standard policies and procedures with respect to expense reimbursement
as applied to its executive employees generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable
and appropriate expenses incurred by Executive for business-related purposes, including dues and fees to industry and professional
organizations and costs of entertainment and business development.
(b)
Company
Benefits -
Executive and, to the extent applicable, Executive’s spouse, dependents, and beneficiaries, shall be allowed
to participate in all benefits, plans, and programs, including improvements or modifications of the same, which are now, or may
hereafter be, available to other executive employees of Company. Such benefits, plans, and programs shall include, without limitation,
any profit sharing plan, thrift plan, health insurance or health care plan, life insurance, disability insurance, pension plan,
supplemental retirement plan, vacation and sick leave plan, and the like which may be maintained by Company. Company shall not,
however, by reason of this paragraph be obligated to institute, maintain, or refrain from changing, amending, or discontinuing,
any such benefit plan or program, so long as such changes are similarly applicable to executive employees generally. See
Exhibit
A
for the current Company Benefits Program.
ARTICLE V
EFFECT OF TERMINATION ON COMPENSATION;
ADDITIONAL PAYMENTS
5.1 Termination Other Than an Involuntary
Termination
. If Executive’s employment hereunder shall terminate for any other reason except other than expiration of
the term provided in Section 3.1 hereof or those described in Section 5.2, then Company shall continue to provide all compensation
and benefits to Executive hereunder until the date of such termination of employment, and such compensation and benefits shall
terminate contemporaneously with such termination of employment.
5.2 Involuntary Termination
. Subject to the provisions
of Sections 5.5 and 5.6 hereof, if Executive’s employment by Company or any successor thereto shall be subject to an
Involuntary
Termination, then Company shall, as additional compensation for services rendered to Company (including its subsidiaries), pay
to Executive the following amounts and take the following actions:
(a) Pay Executive
a lump sum cash payment in an amount equal to eighteen (l 8) months of Executive’s Base Salary on or before the Payment Date;
(b) Accelerate eighteen
(18) months vesting of options or other types of equity granted to Executive; and
(c) During the portion,
if any, of the twelve (12) month period commencing on the date of such Involuntary Termination that Executive is eligible to elect
and elects to continue coverage for himself and his eligible dependents under Company’s or a subsidiary’s group health
plans, as applicable, under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and/or Sections 601 through
608 of the Employee Retirement Income Security Act of 1974, as amended, Company shall promptly reimburse Executive on a monthly
basis for the difference between the amount Executive pays to effect and continue such coverage and the employee contribution amount
that active senior executive employees of Company pay for the same or similar coverage under such group health plans; provided,
however, that such reimbursement shall cease to be effective if and to the extent Executive becomes eligible to receive medical
and/or dental coverage from a subsequent employer (and any such eligibility shall be promptly reported to Company by Executive).
5.3 Change of Control
. In the event of a Change of
Control, vesting of all options or other types of equity granted to Executive shall fully vest immediately prior to such Change
of Control.
5.4 Expiration of Term
. If Executive’s employment
hereunder shall terminate upon expiration of the term provided in Section 3.1 hereof, then Company shall, as additional compensation
for services rendered to Company (including its subsidiaries), pay to Executive the amounts set forth in Section 5.2(a).
5.5 Release
and Full Settlement
. As a condition to the receipt of any severance compensation and benefits under this Agreement, Executive
must first execute a release and agreement, substantially in the form attached hereto as
Exhibit B
, which (a) shall release
and discharge Company and its affiliates, and their officers, directors, employees, and agents, from any and all claims or causes
of action of any kind or character, including all claims or causes of action arising out of Executive’s employment with
Company or its affiliates or the termination of such employment, and (b) must be effective and irrevocable within 55 days after
the termination of Executive’s employment. If Executive is entitled to and receives the benefits provided hereunder, performance
of the obligations of Company hereunder will constitute full settlement of all claims that Executive might otherwise assert against
Company on account of Executive’s termination of employment.
5.6 Payments Subject to
Section 409A of the Code
. Notwithstanding the foregoing provisions of this Article 5, if the payment of any severance compensation
or severance benefits under this Agreement would be subject to additional taxes and interest under Section 409A of the
Code
because the timing of such payment is not delayed as provided in Section 409A(a)(2)(B) of the Code, then any such payments that
Executive (or Executive’s estate) would otherwise be entitled to during the first twelve (12) months following the date
of Executive’s termination of employment shall be accumulated and paid on the date that is twelve (12) months after the
date of Executive’s termination of employment (or if such payment date does not fall on a business day of Company, the next
following business day of Company), or such earlier date upon which such amount can be paid under Section 409A of the Code without
being subject to such additional taxes and interest. Executive hereby agrees to be bound by Company’s determination of its
“specified employees” (as such term is defined in Section 409A of the Code) in accordance with any of the methods
permitted under the regulations issued under Section 409A of the Code.
5.7 Other Benefits
. This Agreement governs the rights
and obligations of Executive and Company with respect to Executive’s base salary and certain perquisites of employment.
Except as expressly provided herein, Executive’s rights and obligations both during the term of his employment and thereafter
with respect to stock options, restricted stock, incentive and deferred compensation, life insurance policies insuring the life
of Executive, and other benefits under the plans and programs maintained by Company shall be governed by the separate agreements,
plans and other documents and instruments governing such matters.
ARTICLE VI
DISPUTE RESOLUTION
6.1 General
. Executive and the Company explicitly
recognize that no provision of this Article VI shall prevent either party from seeking to resolve any dispute arising under the
Confidentiality and Assignment of Invention Agreement.
6.2 Negotiation
.
The parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly by
negotiations between Executive and an executive officer of Company who has authority to settle the controversy. Any party may
give the other party written notice of any dispute not resolved in the normal course of business. Within ten days after the
effective date of such notice, Executive and an executive officer of Company shall meet at a mutually acceptable time and
place within the San Jose, California metropolitan area, and thereafter as often as they reasonably deem necessary, to
exchange relevant information and to attempt to resolve the dispute. If the matter has not been resolved within 30 days of
the disputing party’s notice, or if the parties fail to meet within ten days, either party may initiate arbitration of
the controversy or claim as provided in Section 6.3 below. If a negotiator intends to be accompanied at a meeting by an
attorney, the other negotiator shall be given at least three business days’ notice of such intention and may also be
accompanied by an attorney. All negotiations pursuant to this Section 6.2 shall be treated as compromise and
settlement negotiations for the purposes of the federal and state rules of evidence and procedure.
6.3 Arbitration
. Company and Executive agree that
after efforts to negotiate any dispute in accordance with Section 6.2 have failed, then either party may by written notice (the
“Notice”
)
demand arbitration of the dispute as set out below, and each party hereto expressly agrees
to submit to, and be bound by, such arbitration.
(a) Each party
will, within ten business days of the Notice, nominate an arbitrator, who shall be a non-neutral arbitrator. Each nominated arbitrator
must be someone experienced in dispute resolution and of good character without moral turpitude and not within the employ or direct
or indirect influence of the nominating party. The two nominated arbitrators will, within ten business days of nomination, agree
upon a third arbitrator, who shall be neutral. If the two appointed arbitrators cannot agree on a third arbitrator within such
period, the parties may seek such an appointment through any permitted court proceeding or by the American Arbitration Association
(“
AAA
”)
. The three arbitrators will set the rules and timing of the arbitration, but will generally follow
the rules of the AAA and this Agreement where same are applicable and shall provide for a reasoned opinion.
(b) The arbitration
hearing will in no event take place more than 180 days after the appointment of the third arbitrator.
(c) The arbitration
will take place in the San Jose, California metroplex unless otherwise unanimously agreed to by the parties.
(d) The results
of the arbitration and the decision of the arbitrators will be final and binding on the parties, and each party agrees and acknowledges
that these results shall be enforceable in a court of law.
(e) All administrative
costs and expenses of the mediation and arbitration shall be borne equally by the Company and Executive during the pendency of
the proceedings. Such costs and expenses do not include attorney’s fees, expert witness fees or other party generated expenses.
Upon the conclusion of the proceedings, the prevailing party shall be entitled to recover reasonable and necessary attorneys’
fees, expert witness fees, and costs and expenses of arbitration.
ARTICLE VII
MISCELLANEOUS
7.1 Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 3:30 p.m. (Pacific time) on any
day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States
(“Business Day”),
(b) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that is not a Business Day or later than 3:30 p.m. (Pacific
time) on any Business Day, (c) the 2nd Business Day following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices
and communications shall be as set forth on the signature pages attached hereto. All notices and demands to Executive or the Company
may be given to them at the following addresses:
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If to Executive to:
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Scott A. Bibaud
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101 Kennedy Court
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Los Gatos, CA 95032
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If to Company:
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Mears Technologies, Inc.
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Chairman of the Board
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20 Walnut Street, Suite 8
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Wellesley Hills, MA 02481
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Such parties may designate in writing from time to time such
other place or places that such notices and demands may be given.
7.2 Applicable Law; Submission to
Jurisdiction.
(a) This Agreement
is entered into under, and shall be governed for all purposes by, the laws of the State of California, without regard to conflict
of law principals thereof.
(b) With respect
to any claim or dispute related to or arising under this Agreement, the parties hereto hereby consent to the exclusive jurisdiction,
forum, and venue of the state or federal (to the extent federal jurisdiction exists) courts located in Santa Clara County in the
State of California.
7.3 No Waiver
. No failure by either party hereto
at any time to give notice of any breach by the other party of or to require compliance with, any condition or provision of this
Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent
time.
7.4 Severability
. Any provision in this Agreement
which is prohibited or unenforceable in any jurisdiction by reason of applicable law shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating or affecting the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
7.5 Counterparts
.
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
7.6 Withholding of Taxes and Other Employee Deductions
. Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city, and other taxes
as may be required pursuant to any law or governmental regulation or ruling and all other customary employee deductions made with
respect to Company’s employees generally.
7.7 Headings
. The Section headings have been inserted
for purposes of convenience and shall not be used for interpretive purposes.
7.8 Gender and
Plurals
. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes
the plural and conversely.
7.9 Assignment
. This Agreement shall be binding upon and inure to the benefit of Company and any successor of Company, by merger or otherwise.
This Agreement shall also be binding upon and inure to the benefit of Executive and his heirs, representatives and assigns. If
Executive shall die prior to full payment of amounts due pursuant to this Agreement, such amounts shall continue to be payable
pursuant to the terms of this Agreement. Executive shall not have any right to pledge, hypothecate, anticipate, or assign any portion
of this Agreement or any of the rights hereunder, except by will or the laws of descent and distribution.
7.10 Term
. This
Agreement has a term co-extensive with the term of employment provided in Section 3.1. Termination of this Agreement shall not
affect any right or obligation of any party which is accrued or vested prior to such termination. The provisions of Section 3.5
shall survive the termination of this Agreement and shall be binding upon Executive and his or her legal representatives, successors,
and assigns following such termination.
7.11 Entire Agreement.
This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof and contains all the
covenants, promises, representations, warranties, and agreements between the parties with respect to such subject matter. Without
limiting the scope of the preceding sentence, all understandings and agreements preceding the date of execution of this Agreement
and relating to the subject matter hereof are hereby null and void and of no further force and effect, including, without limitation,
all prior employment and severance agreements, if any, by and between Company and Executive. Any modification of this Agreement
will be effective only if it is in writing and signed by the party to be charged.
7.12 Expenses.
Company shall reimburse Executive for his reasonable fees and expenses incurred by him incident to the negotiation, preparation
and execution of this Agreement.
IN WITNESS WHEREOF,
the parties hereto have entered into this Agreement as of the date first written above.
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“Company”
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Mears Technologies, Inc.
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a Delaware corporation
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By:
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/s/
John D.T. Gerber
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John D.T. Gerber
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Chairman of the Board
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“Executive”
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Scott A. Bibaud
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By:
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/s/ Scott A. Bibaud
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EXHIBIT A
2015 Employee Benefits Overview
Health & Dental Care
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v
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Company
provides health care coverage under the “PPO Value” plan from
Harvard Pilgrim Health Plan.
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v
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Company
provides dental care coverage under the “Dental Guard Preferred PPO” plan from Guardian Dental at no cost to the employee.
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401k Plan
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v
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Company
employees are entitled to contribute to the
Nationwide
401k retirement plan after 60 days of employment with the Company.
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Life/AD&D and Disability Insurance
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v
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Company
provides Life/Accidental Death & Dismemberment insurance through the
Principal Financial Group
at 300% of annual salary
at no cost to the employee.
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v
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Company
provides Limited Disability insurance at 60% of pre-disability earnings for up to 2 years at no cost to the employee.
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Paid Time Off (Flex-Time)
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v
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Company
employees accrue paid leave based on years of service:
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o
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First Year of Service 16 days
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o
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Third
Year of Service 21 days
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o
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Fifth
Year of Service 26 days
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2015 Company Holidays - Holiday schedule
(12 days) published prior to the start of each calendar year:
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1.
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JAN 1 – New Year’s Day
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2.
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JAN 19 – Martin Luther King Day
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3.
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FEB 16 – Presidents Day
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6.
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JUL 3 – Independence Day
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10.
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NOV 27 – Day after Thanksgiving
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11.
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DEC 24 – Christmas Eve
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12.
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DEC 25 – Christmas Day
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EXHIBIT B
RELEASE
For and in consideration
of certain benefits to be provided to Scott A. Bibaud (
“
Executive
”
) pursuant Sections 5._ of that certain
Employment Agreement (
“
Agreement
”
)
dated October __, 2015 by and between Mears Technologies, Inc.,
a Delaware corporation (
“
Company
”
),
and Executive, Executive represents, warrants and agrees as
follows:
1. Executive
hereby releases and forever discharges the Company, and all of its affiliates, subsidiaries, predecessors and successors in interest,
as well as its current and former agents, Executives, owners, partners, officers, directors, members and shareholders (collectively,
the “
Released Parties
”)
from any and all suits, claims, costs, demands, attorney’s fees,
damages, back pay, front pay, interest, bonuses, fringe benefits, special damages, general damages, punitive damages, liabilities,
actions, expenses, accidents, injuries and any other cause of action in law or equity of any kind or nature, that he has or may
have or might in any manner acquire which arises out of, relates to, or is in connection with his employment with the Company,
the expiration or termination of that employment or any other act, occurrence or omission, known or unknown, which occurred or
failed to occur on or before the date this release (
“
Release
”
)
is executed, including, but not
limited to, all claims under the agreement and any disputes regarding Executive benefits and/or any acts of retaliation or other
act of unlawful discrimination under state or federal law. This waiver specifically includes, by way of example and not limitation,
any claims for age related discrimination. The sole exceptions are that this Release shall not apply to (i) any claims for workers’
compensation benefits, eligibility for continuation health coverage, vested pension benefit or any other claim which cannot be
waived as a matter of law and (ii) Executive’s rights to payments and other benefits under Sections 5._ of the Agreement.
2. Executive acknowledges
that he expressly waives protection of section 1542 of the California Civil Code, which provides:
A general release does not extend to
claims which a creditor does not know or suspect to exist in his or her favor at the time of executing a release, which if known
by him or her must have materially affected the settlement with the debtor.
3. By signing this
Release, Executive knowingly and voluntarily waives claims under state and federal discrimination laws and in particular federal
age discrimination claims arising under 29 U.S.C. §621
et. seq.
The parties therefore acknowledge that:
a) Executive is
waiving all rights to claims based on conduct (including but not limited to failure to take actions) preceding the effective date
of this Agreement including but not limited to claims asserting age discrimination under federal law;
b) They have drafted
this Agreement in a manner calculated to be understood by Executive, and, in fact, he understands the terms of this Agreement;
and
c) Executive agrees
that his waiver of rights or claims of state or federal discrimination is made in exchange for consideration in addition to anything
of value to which he is already entitled.
4. Executive affirms
and acknowledges that he has read this Release and fully understands and appreciates its terms and effect. Executive has been advised
to consult with an attorney prior to executing this Agreement, and he has, in fact, either consulted with an attorney of his choosing
whom he believes to be competent to provide advice regarding the desirability and consequences of waiving his rights or claims
relating to his employment or independently determine that doing so is not in his personal self-interest. Executive has been given
a reasonable period of time not less than twenty-two (22) days to consider this Release, before signing below and the amount of
time has been sufficient for him to consult any attorneys he chooses to consult on the settlement issue as well as to make any
decisions which he desires to make regarding the advisability of this Release and the costs and benefits of entering into this
Release. Executive declares that he knowingly and voluntarily enters into this Release. Executive has also been informed that he
may revoke this Release within eight days after signing it by notifying the Company of his desire to do so by either hand delivered
notice of revocation, fax or email.
5. Executive agrees
that he will now and in the future execute any and all documents, releases, dismissal notices, and any other form of written documentation
necessary to fulfill the terms and obligations of this Release.
Exhibit 10.15
ALLONGE TO
SECURED PROMISSORY
NOTE
This Allonge dated as of December 4, 2015
(the “
Allonge
”) to that certain Secured Promissory Note dated January 14, 2005 (the “
Note
”)
is made and entered into by and between MEARS Technologies, Inc. (the “
Payee
”) and Robert J. Mears (the “
Maker
”).
Capitalized terms used but not defined herein shall have the meaning set forth in the Note.
Recitals
WHEREAS, the Note evidences a loan in the
principal amount of $187,500.00 made on or about January 14, 2005 by the Payee to Maker to fund Maker's purchase of 15,000 shares
of Series D Preference Membership Interests (the “
Series D Interests
”) of RJ Mears, LLC (the “
LLC
”),
a predecessor in interest to the Payee;
WHEREAS, the Payee was initially formed
as Nanovis LLC, a Delaware limited liability company on or about April 26, 2001, and changed its name to RJ Mears, LLC on or about
July 18, 2003;
WHEREAS, on or about March 15, 2007, the
LLC was converted into a Delaware corporation, named MEARS Technologies, Inc., and at such time, the MEARS Technologies, Inc. succeeded
to all assets of the LLC and the Series D Interests were converted into 25,033 shares of Common Stock of the Payee, represented
by Certificate No. 216, standing in the name of the Maker on the books of the Company (the “
Pledged Common Stock
”);
WHEREAS, the Maker's obligations under the
Note and the other Financing Documents (as defined in the Pledge Agreement, defined below) are and continue to be secured pursuant
to a Pledge and Security Agreement dated as of January 14, 2005 (the “
Pledge Agreement
”); and
WHEREAS, the Payee and the Maker desire
to extend the maturity date of the Note, reaffirm the security interests and make certain other changes as set forth herein.
NOW THEREFORE, in consideration of the mutual
covenants and agreements contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree
as follows:
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1.
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The second sentence of the first paragraph of the Note
is hereby deleted in its entirety and the following is inserted in lieu thereof:
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“Interest on this note (as amended
or restated, the “
Note
”) shall be paid in arrears in annual installments beginning on January 14, 2006 and continuing
on each successive anniversary of the date of this Note, provided that accrued interest on the Note for the twelve-month period
ended January 13, 2015 in the amount of $7,050 shall be due and payable on or before December 4, 2015.”
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2.
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The third sentence of the first paragraph of the Note
is hereby deleted in its entirety and the following is inserted in lieu thereof:
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“The
entire principal balance of this Note shall be due and payable in a single installment on the earliest of (w) January 14, 2019;
(x) five (5) business days following written notice by the Payee to the Maker of the occurrence of a Capital Event (defined below),
(y) five (5) business days following written notice to the Maker that (A) the Payee has ceased operations in the ordinary course
of business, or (B)
the Payee has dissolved (excluding an administrative dissolution resulting solely from the failure
of the Payee to file an annual report), or (z) the earlier of any date on which (A) Payee has commenced liquidation, or (B) a
receiver, conservator or similar officer has been appointed with respect to any material portion of the assets of the Payee, the
Payee has made an assignment for the benefit of creditors, or entered into a composition or other arrangement of similar import
with its creditors or any proceeding under any bankruptcy or insolvency law, now or hereafter enacted, by or with respect to the
Payee has been commenced, provided however that in the case of any involuntary proceeding, this Note shall only become due and
payable sixty (60) days after the commencement of the involuntary proceeding and only if the Payee has not obtained a dismissal
of such proceeding. A “
Capital Event
”
means any (i) sale, transfer or other disposition of all or a
material portion of the Payee's assets (in each case outside the usual and ordinary course of the Payee's business); (ii) Company
Sale; or (iii) any other event or transaction determined by the Board of Directors of the Payee in good faith to constitute a
capital event; “
Company Sale
”
means the sale of all or substantially all of the outstanding capital
stock, assets or business of the Payee, by merger, consolidation, sale of assets or otherwise (other than a merger or consolidation
in which all or substantially all of the individuals and entities who were beneficial owners of the outstanding capital stock
immediately prior to such transaction beneficially own, directly or indirectly, more than 50% of the outstanding securities entitled
to vote generally in the election of directors of the resulting, surviving or acquiring entity in such transaction).”
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3.
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The second paragraph of the Note is hereby deleted in
its entirety and the following is inserted in lieu thereof:
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“Notwithstanding the foregoing, in
the event the Payee pays any cash dividend or other distribution to the Maker with respect to the Pledged Common Stock held by
the Maker while this Note is outstanding, the Maker shall pay to the Payee, as mandatory prepayment of accrued interest of and
principal hereunder, the full amount of such dividend. The Payee shall determine the application of any such prepayments in its
discretion.”
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4.
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The Note is hereby amended by deleting numbered paragraph
5 in the definition of “Event of Default” in its entirety and inserting the following in lieu thereof:
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“5. Payee’s termination of the Maker’s
employment with the Payee for Cause (as defined in the Employment Agreement between the Parties dated as of June 9, 2004), or Maker’s
termination of his employment with Payee without Good Reason (as defined in the Employment Agreement).”
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5.
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The Note is hereby amended by adding the following text
as the last paragraph:
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“This Note may not be assigned by
the Maker. The Payee may assign its rights under the Note without the consent of the Maker. This Note is executed as an instrument
under seal.”
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6.
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All references to the Payee in the Note shall be deemed
to be references to Payee as now constituted as a Delaware corporation, and to its successors and assigns.
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7.
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Each reference in the Note to “this Note,”
“hereunder,” “hereof,” “herein” or words of like import, shall mean and be a reference to
the Note, as amended by this Allonge. Except as specifically amended in this Allonge, the Note and the other Financing Documents
shall remain in full force and effect and are hereby ratified and confirmed.
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8.
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The Maker hereby affirms its obligations to the Payee
under the Note and the other Financing Documents, and agrees that it has no offsets, counterclaims or any defenses to such obligations.
The Maker hereby reaffirms its grant of security, and hereby grants a security interest, to the Payee in and to all Collateral
(as defined in the Pledge Agreement), including without limitation, the 25,033 shares of Pledged Common Stock which were received
by the Maker in respect of, in exchange for or upon the conversion of the Series D Interests. As a condition to the execution
and delivery of this Allonge, Maker has delivered to the Company (i) the stock certificate evidencing the Pledged Common Stock
and (ii) an executed irrevocable stock power with respect to the Pledged Common Stock. The loan evidenced by the Note, is a full
recourse loan. Upon default, the Payee may seek repayment of all amounts outstanding under the Note, may proceed against the Maker
and any of Maker's assets and shall not be restricted to proceed against the collateral set forth in the Pledge.
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9.
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Notwithstanding anything to the contrary contained in
the Pledge Agreement, the undersigned agree that any of the Borrower's rights under Section 5(a)(i) of the Pledge Agreement shall
cease upon the occurrence and during the continuation of an Event of Default.
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10.
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All rights and obligations under the Note shall be governed
by the laws of the Commonwealth of Massachusetts (without giving
effect to principles of conflicts or choices of law).
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11.
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This Allonge may be executed in one or more
counterparts, each of which
shall
for
all purposes be deemed to be an original and all of which shall constitute
the same document. This Allonge shall be and remain attached to the Note and shall be
an integral part thereof.
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[remainder of page intentionally
left blank; signatures follow]
IN WITNESS WHEREOF,
the undersigned have caused this Allonge to be executed as an instrument under seal as of the day and year first written above,
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Maker
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/s/ Robert J.
Mears
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Robert J. Mears
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Payee
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MEARS Technologies, Inc.
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By:
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/s/ Scott A.
Bibaud
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Name:
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Scott A. Bibaud
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Title:
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CEO
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Exhibit 10.16
EMPLOYMENT AGREEMENT
THIS
EMPLOYMENT AGREEMENT
(“
Agreement
”)
is entered into on January
, 2016
(“
Effective
Date
”) by and between Mears Technologies, Inc., a Delaware corporation (“
Company
”),
and Erwin Trautmann
(“
Executive
”).
RECITAL
Company
is desirous of employing Executive in an executive capacity on the terms and conditions and for the consideration, hereinafter
set forth, and Executive is desirous of being employed by Company on such terms and conditions and for such consideration.
AGREEMENT
It
is agreed as follows:
ARTICLE I
DEFINITIONS
AND INTERPRETATIONS
1.1 Definitions.
(a)
“Annual
Base Salary”
shall mean Executive’s annual base salary as of the date of his Involuntary Termination, determined
pursuant to Section 4.1.
(b)
“Board”
shall mean the board of directors of Company.
(c)
“Cause”
shall mean Executive (i) has engaged in gross negligence, , or willful misconduct in the performance
of his duties at the Company, (ii) has refused, without proper reason, to perform his duties, (iii) has materially breached any
provision of this Agreement or of that certain Employee Confidentiality and Assignment Agreement dated December 1, 2015 between
the Company and Executive, (iv) has willfully and materially breached a significant corporate policy or code of conduct established
by Company, (v) has willfully engaged in conduct that is materially injurious to Company or its subsidiaries (monetarily or otherwise),
(vi) has committed an act of fraud, embezzlement, or breach of a fiduciary duty to Company or an affiliate of Company (including
the unauthorized disclosure of material confidential or proprietary information of the Company or an affiliate or intentional misrepresentation
in any employment application, background check, or willfully making false representations in any capacity), (vii) has been convicted
of (or pleaded no contest to) a criminal act involving fraud, dishonesty, or moral turpitude or any felony, or (viii) has been
convicted for any violation of U.S. or foreign securities laws or has entered into a cease and desist order with the Securities
and Exchange Commission alleging violation of U.S. or foreign securities laws.
(d)
“
Change
of Control
” shall
mean
(i) the
Company is merged, consolidated, or reorganized into or with another corporation or other legal person (an
“
Acquirer
”)
and as a result of such merger, consolidation, or reorganization, less than fifty-one percent (51%) of the outstanding
voting securities or other capital interests of the surviving, resulting, or acquiring corporation or other legal person are owned
in the aggregate by the stockholders of the Company, directly or indirectly, immediately prior to such merger, consolidation or
reorganization, other than by the Acquirer or any corporation or other legal person controlling, controlled by or under common
control with the Acquirer; or
(ii) the Company sells all or substantially all of its business and/or assets to an Acquirer, of which less than fifty-one percent (51%)
of the outstanding voting securities or other capital interests are owned in the aggregate by the stockholders of the Company,
directly or indirectly, immediately prior to such sale, other than by any corporation or other legal person controlling, controlled
by or under common control with the Acquirer.
(e)
“Code”
shall mean the Internal Revenue Code of 1986, as amended.
(f)
“Compensation
Committee
”
shall
mean the Compensation Committee of the Board.
(g)
“Disability”
shall mean that, as a result of Executive’s documented incapacity due to physical or mental illness, Executive
shall have been absent from the full-time performance of his duties for six consecutive months and shall not have returned to full-time
performance of his duties within 30 days after written notice of termination is given to Executive by Company (provided, however,
that such notice may not be given prior to 30 days before the expiration of such six-month period).
(h)
“Good
Reason”
shall mean the occurrence of any one or more of the following:
(i) a
diminution
in
Executive’s
Annual Base Salary not in accordance with Section 4.1;
(ii) a
material d
imin
ution in Executive’s
authority, duties, or responsibilities from those applicable to him as of the Effective Date;
(iii) a
material change in the geographic location at which Executive must perform services, which for purposes of this Agreement includes
only Company requiring Executive to involuntarily relocate to a geographic location other than the San Jose, California metropolitan
area or San Francisco Bay Area; or
(iv) a
material breach by Company of any provision of this Agreement (including, without limitation, the requirements of Sections 2.2,
4.2, 4.3 or 4.4 of this Agreement).
Notwithstanding
the foregoing provisions of this Section 1.1(h) or any other provision in this Agreement to the contrary, any assertion by Executive
of a termination of employment for “Good Reason” shall not be effective unless all of the following conditions are
satisfied: (1) any condition described in clauses (i) through (iv) of this Section 1.1(h) giving rise to Executive’s termination
of employment must have arisen without Executive’s consent; (2) Executive must provide written notice to Company of such
condition in accordance with Section 7.1 within 30 days of the initial existence of the condition; (3) the condition specified
in such notice must remain uncorrected for a period of 30 days following receipt of such notice by Company; and (4) the date of
Executive’s termination of employment must occur within one year following the initial existence of the condition specified
in such notice.
(i)
“Incentive
Plan”
shall mean the Mears Technologies, Inc. 2007 Stock Incentive Plan.
(j)
“Involuntary
Termination”
shall mean any termination of Executive’s employment with Company which results from either:
(i) A
termination by the Company without Cause; or
(ii) a
resignation by Executive for Good Reason;
provided
however, the term “Involuntary Termination” shall not include a termination for Cause or any termination as a result
of death or Disability.
(k)
“Payment
Date”
shall mean the later of (i) the date that is 30 days after Executive’s termination of employment with
Company or (ii) the date upon which the Release described in Section 5.4 becomes irrevocable by Executive.
1.2
Interpretations.
In this Agreement, unless a clear contrary intention appears, (a) the words “herein,” “hereof,”
“hereunder,” and other words of similar import refer to this Agreement as a whole and not to any particular Article,
Section, or other subdivision, (b) reference to any Article or Section means such Article or Section hereof, (c) the word “including”
(and with correlative meaning, “include”) means including, without limiting the generality of any description preceding
such term, and (d) where any provision of this Agreement refers to action to be taken by either party, or which such party is prohibited
from taking, such provision shall be applicable whether such action is taken directly or indirectly by such party.
ARTICLE II
EMPLOYMENT
AND DUTIES
2.1
Employment.
Effective as of the Effective Date and continuing for the period of time set forth in Section 3.1 of this Agreement,
Executive’s employment by Company shall be subject to the terms and conditions of this Agreement.
2.2
Positions.
From and after the Effective Date, Company shall employ Executive in the position of Executive Vice President of Strategic
Business Development of the Company or in such other position or positions as the parties mutually may agree.
2.3
Duties
and Services.
Executive agrees to serve in the position referred to in Section 2.2 and to perform diligently and to
the best of his abilities the duties and services appertaining to such office, as well as such additional duties and services appropriate
to such offices which the parties mutually may agree upon from time to time. Executive in his capacity as Executive Vice President
of Strategic Business Development of the Company shall have such authorities, duties and obligations as are assigned to him from
time to time by the Chief Executive Officer of the Company. Executive shall report to the Chief Executive Officer of the Company.
Executive also agrees to serve, if elected, as an officer or director of any wholly-owned subsidiary or affiliate of Company so
long as such service is commensurate with Executive’s duties and responsibilities to Company. Executive’s employment
shall also be subject to the policies maintained and established by Company that are of general applicability to Company’s
executive employees, as such policies may be amended from time to time.
2.4
Other
Interests.
Executive agrees, during the period of his employment by Company, to devote substantially all of his business
time, energy, and best efforts to the business and affairs of Company and its affiliates and not to engage, directly or indirectly,
in any other business or businesses, whether or not similar to that of Company, except as herein permitted or with the prior written
consent of the Board. The foregoing notwithstanding, the parties recognize and agree that Executive may engage in passive personal
investment and charitable activities and serve on corporate boards of directors that, in any case, do not conflict with the business
and affairs of Company or interfere with Executive’s performance of his duties hereunder, which shall be at the sole determination
of the Board.
2.5
Duty
of Loyalty.
Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty to act at all times in
the best interests of Company. In keeping with such duty, Executive shall make full disclosure to Company of all business opportunities
pertaining to Company’s business and shall not appropriate for Executive’s own benefit, or appropriate for the benefit
of any third party, business opportunities concerning Company’s business.
2.6
Place
of Employment.
Executive’s primary place of employment hereunder shall be at Company’s executive offices
in or within 50 miles of San Jose, California. Executive understands and agrees that he may be required to travel to other locations
depending on the Company’s business needs.
ARTICLE III
TERM
AND TERMINATION OF EMPLOYMENT
3.1
Term.
Unless sooner terminated pursuant to other provisions hereof, Company agrees to employ Executive for the period beginning
on the Effective Date and ending on the fourth anniversary of the Effective Date.
3.2
Company’s
Right to Terminate.
Notwithstanding the provisions of Section 3.1, Company shall have the right to terminate Executive’s
employment under this Agreement at any time for any of the following reasons:
(a) upon
Executive’s
death;
(b) upon
Executive’s
Disability;
(c) for
Cause
;
or
(d) at
any time, for any other reason whatsoever, in the sole discretion of the Board.
3.3
Executive’s
Right to Terminate.
Notwithstanding the provisions of Section 3.1, Executive shall have the right to terminate his employment
under this Agreement for any of the following reasons:
(a) for
Good Reason; or
(b) at
any time for any other reason whatsoever, in the sole discretion of Executive.
3.4
Notice
of Termination.
If Company desires to terminate Executive’s employment hereunder at any time prior to expiration
of the term of employment as provided in Section 3.1, it shall do so by giving a 30-day written notice to Executive that it has
elected to terminate Executive’s employment hereunder and stating the effective date and reason for such termination, provided
that no such action shall alter or amend any other provisions hereof or rights arising hereunder. If Executive desires to terminate
his employment hereunder at any time prior to expiration of the term of employment as provided in Section 3.1, he shall do so by
giving a 30-day written notice to Company that he has elected to terminate his employment hereunder and stating the effective date
and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising
hereunder.
3.5
Deemed
Resignations.
Unless otherwise agreed to in writing by Company and Executive prior to the termination of Executive’s
employment, any termination of Executive’s employment shall constitute an automatic resignation of Executive as an officer
of Company and each affiliate of Company and an automatic resignation of Executive from the Board (if applicable) and from the
board of directors or similar governing body of any affiliate of Company and from the board of directors or similar governing body
of any corporation, limited liability entity, or other entity in which Company or any affiliate holds an equity interest and with
respect to which board or similar governing body Executive serves as Company’s or such affiliate’s designee or other
representative.
3.6
Meaning
of Termination of Employment.
For all purposes of this Agreement, Executive shall be considered to have terminated employment
with Company when Executive incurs a “separation from service” with Company within the meaning of Section 409A(a)(2)(A)(i)
of the Code and applicable administrative guidance issued thereunder.
ARTICLE IV
COMPENSATION
AND BENEFITS
4.1
Base
Salary.
Executive shall receive a base salary of
$250,000
per annum during each full year of employment. Executive’s base salary shall be reviewed by the Chief Executive
Officer and the Compensation Committee on an annual basis, and, in the sole discretion of the Compensation Committee, such base
salary may be increased, but not decreased (except with the prior written consent of Executive), effective as of any date determined
by the Compensation Committee. Executive’s base salary shall be paid in equal installments in accordance with Company’s
standard policy regarding payment of compensation to executives but no less frequently than monthly.
4.2
Annual
Bonus.
Executive shall be eligible for an annual bonus of up to thirty percent (30%) of Executive’s Annual Base
Salary based on performance criteria set by the Chief Executive Officer of Company and Compensation Committee and to otherwise
participate in Company’s annual bonus plan or plans applicable to Executive, all as approved from time to time by the Compensation
Committee in amounts to be determined by the Compensation Co
mm
ittee
based upon criteria established by the Compensation Committee.
4.3
Long-Term
Incentive.
Subject to the sole discretion of the Compensation Committee, Executive shall also be eligible for participation
in the Incentive Plan or such other long-term incentive arrangement of Company as may from time to time be made available to other
executive officers of Company. Any awards made under the Incentive Plan or such other arrangements shall be governed by Section
5.7 herein.
4.4
Other
Perquisites
.
During his employment
hereunder, Executive shall be afforded the following benefits as incidences of his employment:
(a)
Business
and Entertainment Expenses
-
Subject
to Company’s standard
policies and procedures with respect to expense reimbursement as applied to its executive
employees generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable and appropriate expenses
incurred by Executive for business
-
related purposes, including dues and fees to industry and professional organizations
and costs of entertainment and business development. Company reserves the right to request valid documentation and receipts relating
to such expenses.
(b)
Company
Benefits
-
Executive and, to the extent applicable, Executive’s spouse, dependents, and beneficiaries,
shall be allowed to participate in all benefits, plans, and programs, including improvements or modifications of the same, which
are now, or may hereafter be, available to other executive employees of Company. Such benefits, plans, and programs shall include,
without limitation, any profit sharing plan, thrift plan, health insurance or health care plan, life insurance, disability insurance,
pension plan, supplemental retirement plan, vacation and sick leave plan, and the like which may be maintained by Company. Company
shall not, however, by reason of this paragraph be obligated to institute, maintain, or refrain from changing, amending, or discontinuing,
any such benefit plan or program, so long as such changes are similarly applicable to executive employees generally. See Attachment
A for the current Company Benefits Program.
ARTICLE V
EFFECT
OF TERMINATION ON COMPENSATION: ADDITIONAL PAYMENTS
5.1
Termination
Other Than an Involuntary Termination.
If Executive’s employment hereunder shall terminate upon expiration of
the term provided in Section 3.1 hereof
or
if
Executive’s
employment hereunder
shall terminate for any other reason except those described in Section 5.2, then Company shall continue
to provide all compensation and benefits
to Executive
hereunder until the date of such termination of employment, and such compensation and benefits shall terminate contemporaneously
with such termination of employment.
5.2
Involuntary
Termination.
Subject to the provisions of Sections 5.3 and 5.4 hereof, if Executive’s employment by Company or
any
successor thereto shall be subject
to an Involuntary Termination, then Company shall, as additional compensation for services rendered to Company (including its subsidiaries),
pay to Executive the following amounts and take the following actions:
(a) Pay
Executive a lump sum cash payment in an amount equal to six (6) months of Executive’s Annual Base Salary on or before the
Payment Date.
(b) During
the portion, if any, of the 6-month period commencing on the date of such Involuntary Termination that Executive is eligible to
elect and elects to continue coverage for himself and his eligible dependents under Company’s or a subsidiary’s group
health plans, as applicable, under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and/or Sections 601
through 608 of the Employee Retirement Income Security Act of 1974, as amended, Company shall promptly reimburse Executive on a
monthly basis for the difference between the amount Executive pays to effect and continue such coverage and the employee contribution
amount that active senior executive employees of Company pay for the same or similar coverage under such group health plans; provided,
however, that such reimbursement shall cease to be effective if and to the extent Executive becomes eligible to receive medical
and/or dental coverage from a subsequent employer (and any such eligibility shall be promptly reported to Company by Executive).
5.3
Change
of Control.
In the event of a Change of Control, vesting of all options or other types of equity granted to Executive
shall fully vest immediately prior to such Change of Control.
5.4
Release
and Full Settlement.
As a condition to the receipt of any severance compensation and benefits under this Agreement,
Executive must first execute a release and agreement, in a form reasonably satisfactory to Company, which (a) shall release and
discharge Company and its affiliates, and their officers, directors, employees, and agents, from any and all claims or causes of
action of any kind or character, including all claims or causes of action arising out of Executive’s employment with Company
or its affiliates or the termination of such employment, and (b) must be effective and irrevocable within 55 days after the termination
of Executive’s employment. If Executive is entitled to and receives the benefits provided hereunder, performance of the obligations
of Company hereunder will constitute full settlement of all claims that Executive might otherwise assert against Company on account
of Executive’s termination of employment.
5.5
Payments
Subject to Section 409A of the Code.
Notwithstanding the foregoing provisions of this Article 5, if the payment of any
severance compensation or severance benefits under this Agreement would be subject to additional taxes and interest under Section
409A of the Code because the timing of such payment is not delayed as provided in Section 409A(a)(2)(B) of the Code, then any such
payments that Executive (or Executive’s estate) would otherwise be entitled to during the first six months following the
date of Executive’s termination of employment shall be accumulated and paid on the date that is six months after the date
of Executive’s termination of employment (or if such payment date does not fall on a business day of Company, the next following
business day of Company), or such earlier date upon which such amount can be paid under Section 409A of the Code without being
subject to such additional taxes and interest. Executive hereby agrees to be bound by Company’s determination of its “specified
employees” (as such term is defined in Section 409A of the Code) in accordance with any of the methods permitted under the
regulations issued under Section 409A of the Code.
5.6
Liquidated
Damages.
In light of the difficulties in estimating the damages for an early termination of Executive’s employment
under this Agreement, Company and Executive hereby agree that the payments, if any, to be received by Executive pursuant to this
Article 5 shall be received by Executive as liquidated damages.
5.7
Other
Benefits.
This Agreement governs the rights and obligations of Executive and Company with respect to Executive’s
Annual Base Salary and certain perquisites of employment. Except as expressly provided herein, Executive’s rights and obligations
both during the term of his employment and thereafter with respect to stock options, restricted stock, incentive and deferred compensation,
life insurance policies insuring the life of Executive, and other benefits under the plans and programs maintained by Company shall
be governed by the separate agreements, plans and other documents and instruments governing such matters.
ARTICLE VI
DISPUTE
RESOLUTION
6.1
General.
Executive and the Company explicitly recognize that no provision of this Article VI shall prevent either party from
seeking to resolve any dispute arising under the Confidentiality and Assignment of Invention Agreement.
6.2
Negotiation.
The parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly
by negotiations between Executive and an executive officer of Company who has authority to settle the controversy. Any party may
give the other party written notice of any dispute not resolved in the normal course of business. Within ten days after the effective
date of such notice, Executive and an executive officer of Company shall meet at a mutually acceptable time and place within the
San Jose, California metropolitan area, and thereafter as often as they reasonably deem necessary, to exchange relevant information
and to attempt to resolve the dispute. If the matter has not been resolved within 30 days of the disputing party’s notice,
or if the parties fail to meet within ten days, either party may initiate arbitration of the controversy or claim as provided in
Section 6.3 below. If a negotiator intends to be accompanied at a meeting by an attorney, the other negotiator shall be given at
least three business days’ notice of such intention and may also be accompanied by an attorney. All negotiations pursuant
to this Section 6.2 shall be treated as compromise and settlement negotiations for the purposes of the federal and state rules
of evidence and procedure.
6.3
Arbitration.
Company and Executive agree that after efforts to negotiate any dispute in accordance with Section 6.2 have failed,
then either party may by written notice (the
“Notice”
)
demand arbitration of the dispute as set out below, and each party hereto expressly agrees to submit to, and be
bound by, such arbitration.
(a) Each
party will, within ten business days of the Notice, nominate an arbitrator, who shall be a non-neutral arbitrator. Each nominated
arbitrator must be someone experienced in dispute resolution and of good character without moral turpitude and not within the
employ or direct or indirect influence of the nominating party. The two nominated arbitrators will, within ten business days of
nomination, agree upon a third arbitrator, who shall be neutral. If the two appointed arbitrators cannot agree on a third arbitrator
within such period, the parties may seek such an appointment through any permitted court proceeding or by the American Arbitration
Association
(
“AAA”
).
The three arbitrators will set the rules and timing of the arbitration, but will generally follow the rules of the AAA
and this Agreement where same are applicable and shall provide for a reasoned opinion.
(b) The
arbitration hearing will in no event take place more than 180 days after the appointment of the third arbitrator.
(c) The
arbitration will take place in the San Jose, California metroplex unless otherwise unanimously agreed to by the parties.
(d) The
results of the arbitration and the decision of the arbitrators will be final and binding on the parties, and each party agrees
and acknowledges that these results shall be enforceable in a court of law.
(e) All
administrative costs and expenses of the mediation and arbitration shall be borne equally by the Company and Executive during the
pendency of the proceedings. Such costs and expenses do not include attorney’s fees, expert witness fees or other party generated
expenses. Upon the conclusion of the proceedings, the prevailing party shall be entitled to recover reasonable and necessary attorneys’
fees, expert witness fees, and costs and expenses of arbitration.
(f) This
agreement to arbitrate does not apply to claims or issues arising from performance of services on any federal government contract,
any claim for workers’ compensation or unemployment benefits, claims for vested benefits under a plan fund or program covered
by the Employee retirement Security Act of 1974, as amended or any claim brought under California Labor Code §2699
et.seq.
Further, Company and Executive agree that only individual employee claims may be brought and that no claim may be brought
or arbitrated hereunder as a collective action on behalf of other or as a class action absent a further specific agreement executed
at the time the dispute arises.
(g) Executive
understands that this Agreement requires that disputes that involve the matters subject to the Agreement be submitted to arbitration
pursuant to this Section 6.3 rather than to a judge or jury in court. However, Company and Executive agree that this agreement
to arbitrate shall not apply to any disputes or claims relating to or arising out of the misuse or misappropriation of Company’s
trade secrets, proprietary information, other proprietary rights or property. Executive must sign and return the Confidentiality
and Assignment Agreement.
ARTICLE VII
MISCELLANEOUS
7.1
Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 3:30 p.m. (Pacific
time) on any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States
(
“
Business
Day
”), (b) the next Business Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Business Day or
later than 3:30 p.m. (Pacific time) on any Business Day, (c) the 2nd Business Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. All notices
and demands to Executive or the Company may be given to them at the following addresses:
|
If to Executive to:
|
Erwin Trautmann_________________
|
|
|
San Jose, CA
95138
|
|
|
_______________________
|
|
|
|
|
If to Company:
|
Mears Technologies, Inc.
|
|
|
Wellesley Hills,
MA
02781
|
|
|
_______________________
|
Such
parties may designate in writing from time to time such other place or places that such notices and demands may be given.
7.2 Applicable
Law; Submission to Jurisdiction.
(a) This
Agreement is entered into under, and shall be governed for all purposes by, the laws of the State of California, without regard
to conflict of law principals thereof.
(b) With
respect to any claim or dispute related to or arising under this Agreement that is not subject to arbitration, the parties hereto
hereby consent to the exclusive jurisdiction, forum, and venue of the state or federal (to the extent federal jurisdiction exists)
courts located in Santa Clara County in the State of California.
7.3
No
Waiver.
No failure by either party hereto at any time to give notice of any breach by the other party of or to require
compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
7.4
Severability.
Any provision in this Agreement which is prohibited or unenforceable in any jurisdiction by reason of applicable law
shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
7.5
Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.
7.6
Withholding
of Taxes and Other Employee Deductions.
Company may withhold from any benefits and payments made pursuant to this Agreement
all federal, state, city, and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other
customary employee deductions made with respect to Company’s employees generally.
7.7
Headings.
The Section headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.
7.8
Gender
and Plurals.
Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular
number includes the plural and conversely.
7.9
Assignment.
This Agreement shall be binding upon and inure to the benefit of Company and any successor of Company, by merger or
otherwise. This Agreement shall also be binding upon and inure to the benefit of Executive and his heirs, representatives and assigns.
If Executive shall die prior to full payment of amounts due pursuant to this Agreement, such amounts shall continue to be payable
pursuant to the terms of this Agreement. Executive shall not have any right to pledge, hypothecate, anticipate, or assign any portion
of this Agreement or any of the rights hereunder, except by will or the laws of descent and distribution.
7.10
Term.
This Agreement has a term co-extensive with the term of employment provided in Section 3.1. Termination of this Agreement
shall not affect any right or obligation of any party which is accrued or vested prior to such termination. The provisions of Section
3.5 shall survive the termination of this Agreement and shall be binding upon Executive and his or her legal representatives, successors,
and assigns following such termination.
7.11 Entire
Agreement.
This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof and contains
all the covenants, promises, representations, warranties, and agreements between the parties with respect to such subject matter.
Without limiting the scope of the preceding sentence, all understandings and agreements preceding the date of execution of this
Agreement and relating to the subject matter hereof are hereby null and void and of no further force and effect, including, without
limitations, all prior employment and severance agreements, if any, by and between Company and Executive. Any modification of
this Agreement will be effective only if it is in writing and signed by the party to be charged.
7.12 Expenses.
Each party shall pay all fees and expenses
incurred by such party incident to the negotiation, preparation and execution of this Agreement.
IN
WITNESS WHEREOF,
the parties hereto have entered into this Agreement as of the date first written above.
|
|
“Company”
|
|
|
|
|
|
Mears Technologies, Inc.
|
|
|
a Delaware corporation
|
|
|
|
|
|
By:
|
/s/
Scott A. Bibaud
|
|
|
|
Scott A. Bibaud
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
“Executive”
|
|
|
|
|
|
Erwin Trautmann
|
|
|
|
|
|
/s/
Erwin Trautmann
|
Attachment A
2015 EMPLOYEE BENEFITS OVERVIEW
Health & Dental Care
|
|
❖
|
MEARS provides health care coverage under the “PPO Value” plan from
Harvard Pilgrim Health Plan
at
a nominal cost.
|
|
|
❖
|
MEARS provides dental care coverage under the “Dental Guard Preferred
PPO” plan from
Guardian Dental
at
no cost to the employee.
|
401k Plan
|
|
❖
|
MEARS employees are entitled to contribute to the
Nationwide
401k retirement plan after 60 days of employment with the company.
|
Life/AD&D and Disability Insurance
|
|
❖
|
MEARS provides Life/Accidental Death & Dismemberment insurance through the
Principal Financial Group
at 300%
of annual salary at no cost to the employee.
|
|
|
❖
|
MEARS provides Limited Disability insurance at 60% of pre-disability earnings
for up to 2 years at no cost to the employee.
|
Paid Time Off (Flex-Time)
|
|
❖
|
MEARS employees accrue paid leave based on years of service:
|
First
Year of Service 16 days
Third
Year of Service 21 days
Fifth
Year of Service 26 days
|
2015 Company Holidays
|
|
1.
|
JAN 1 –
|
New Year’s Day
|
|
2.
|
JAN
19 –
|
Martin Luther King Day
|
|
3.
|
FEB
16 –
|
Presidents Day
|
|
4.
|
APR
3 –
|
Good Friday
|
|
5.
|
MAY
25 –
|
Memorial Day
|
|
6.
|
JUL
3 –
|
Independence Day
|
|
7.
|
SEP
7 –
|
Labor
Day
|
|
8.
|
OCT
12 –
|
Columbus Day
|
|
9.
|
NOV 26 –
|
Thanksgiving
|
|
10.
|
NOV 27 –
|
Day after Thanksgiving
|
|
11.
|
DEC 24 –
|
Christmas Eve
|
|
12.
|
DEC 25 –
|
Christmas Day
|
Exhibit 10.17
EMPLOYMENT
AGREEMENT
THIS
EMPLOYMENT AGREEMENT
(“
Agreement
”)
is entered into on January 1, 2016
(“
Effective
Date
”)
by and between Mears Technologies, Inc., a Delaware corporation (“
Company
”),
and Ronald A. Cope (“
Executive
”).
RECITAL
Company
is desirous of employing Executive in an executive capacity on the terms and conditions and for the consideration, hereinafter
set forth, and Executive is desirous of being employed by Company on such terms and conditions and for such consideration.
AGREEMENT
It
is agreed as follows:
ARTICLE I
DEFINITIONS
AND INTERPRETATIONS
1.1 Definitions.
(a)
“Annual
Base Salary”
shall mean Executive’s annual base salary as of the date of his Involuntary Termination, determined
pursuant to Section 4.1.
(b)
“Board”
shall mean the board of directors of Company.
(c)
“Cause”
shall mean Executive (i) has engaged in gross negligence, gross incompetence, or willful misconduct in the performance
of his duties at the Company, (ii) has refused, without proper reason, to perform his duties, (iii) has materially breached any
provision of this Agreement or of that certain Employee Confidentiality and Assignment Agreement dated December 1, 2015 between
the Company and Executive, (iv) has willfully and materially breached a significant corporate policy or code of conduct established
by Company, (v) has willfully engaged in conduct that is materially injurious to Company or its subsidiaries (monetarily or otherwise),
(vi) has committed an act of fraud, embezzlement, or breach of a fiduciary duty to Company or an affiliate of Company (including
the unauthorized disclosure of material confidential or proprietary information of the Company or an affiliate or intentional misrepresentation
in any capacity), (vii) has been convicted of (or pleaded no contest to) a criminal act involving fraud, dishonesty, or moral turpitude
or any felony, or (viii) has been convicted for any violation of U.S. or foreign securities laws or has entered into a cease and
desist order with the Securities and Exchange Commission alleging violation of U.S. or foreign securities laws.
(d) “
Change
of Control
” shall mean
(i) the
Company is merged, consolidated, or reorganized into or with another corporation or other legal person (an “
Acquirer
”)
and as a result of such merger, consolidation, or reorganization, less than fifty-one percent (51%) of the outstanding voting securities
or other capital interests of the surviving, resulting, or acquiring corporation or other legal person are owned in the aggregate
by the stockholders of the Company, directly or indirectly, immediately prior to such merger, consolidation or reorganization,
other than by the Acquirer or any corporation or other legal person controlling, controlled by or under common control with the
Acquirer; or
(ii) the
Company sells all or substantially all of its business and/or assets to an Acquirer, of which less than fifty-one percent (51%)
of the outstanding voting securities or other capital interests are owned in the aggregate by the stockholders of the Company,
directly or indirectly, immediately prior to such sale, other than by any corporation or other legal person controlling, controlled
by or under common control with the Acquirer.
(e)
“Code”
shall mean the Internal Revenue Code of 1986, as amended.
(f)
“Compensation
Committee”
shall mean the Compensation Committee of the Board.
(g)
“Disability”
shall mean that, as a result of Executive’s documented incapacity due to physical or mental illness, Executive
shall have been absent from the full-time performance of his duties for six consecutive months and shall not have returned to full-time
performance of his duties within 30 days after written notice of termination is given to Executive by Company (provided, however,
that such notice may not be given prior to 30 days before the expiration of such six-month period).
(h)
“Good
Reason”
shall mean the occurrence of any one or more of the following:
(i) a
diminution in Executive’s Annual Base Salary not in accordance with Section 4.1;
(ii) a
material di
min
ution in Executive’s
authority, duties, or responsibilities from those applicable to him as of the Effective Date;
(iii) a
material change in the geographic location at which Executive must perform services, which for purposes of this Agreement
includes only Company requiring Executive to involuntarily relocate to a geographic location other than the Frisco, Texas
metropolitan area; or
(iv) a
material breach by Company of any provision of this Agreement (including, without limitation, the requirements of Sections
2.2, 4.2, 4.3 or 4.4 of this Agreement).
Notwithstanding
the foregoing provisions of this Section 1.1(h) or any other provision in this Agreement to the contrary, any assertion by Executive
of a termination of employment for “Good Reason” shall not be effective unless all of the following conditions are
satisfied: (1) any condition described in clauses (i) through (iv) of this Section 1.1(h) giving rise to Executive’s termination
of employment must have arisen without Executive’s consent; (2) Executive must provide written notice to Company of such
condition in accordance with Section 7.1 within 30 days of the initial existence of the condition; (3) the condition specified
in such notice must remain uncorrected for a period of 30 days following receipt of such notice by Company; and (4) the date of
Executive’s termination of employment must occur within one year following the initial existence of the condition specified
in such notice.
(i)
“Incentive
Plan”
shall mean the Mears Technologies, Inc. 2007 Stock Incentive Plan.
(j)
“Involuntary
Termination”
shall mean any termination of Executive’s employment with Company which results from
either:
(i) A
termination by the Company without Cause; or
(ii) a
resignation by Executive for Good Reason;
provided
however, the term “Involuntary Termination” shall not include a termination for Cause or any termination as a result
of death or Disability.
(k)
“Payment
Date”
shall mean the later of (i) the date that is 30 days after Executive’s termination of
employment with Company or (ii) the date upon which the Release described in Section 5.4 becomes irrevocable by
Executive.
1.2
Interpretations.
In this Agreement, unless a clear contrary intention appears, (a) the words “herein,” “hereof,”
“hereunder,” and other words of similar import refer to this Agreement as a whole and not to any particular Article,
Section, or other subdivision, (b) reference to any Article or Section means such Article or Section hereof, (c) the word “including”
(and with correlative meaning, “include”) means including, without limiting the generality of any description preceding
such term, and (d) where any provision of this Agreement refers to action to be taken by either party, or which such party is prohibited
from taking, such provision shall be applicable whether such action is taken directly or indirectly by such party.
ARTICLE II
EMPLOYMENT
AND DUTIES
2.1
Employment.
Effective as of the Effective Date and continuing for the period of time set forth in Section 3.1 of this Agreement,
Executive’s employment by Company shall be subject to the terms and conditions of this Agreement.
2.2
Positions.
From and after the Effective Date, Company shall employ Executive in the position of Chief Operating Officer of the
Company or in such other position or positions as the parties mutually may agree.
2.3
Duties
and Services.
Executive agrees to serve in the position referred to in Section 2.2 and to perform diligently and to
the best of his abilities the duties and services appertaining to such office, as well as such additional duties and services appropriate
to such offices which the parties mutually may agree upon from time to time. Executive in his capacity as Chief Operating Officer
of the Company shall have such authorities, duties and obligations as are assigned to him from time to time by the Chief Executive
Officer of the Company. Executive shall report to the Chief Executive Officer of the Company. Executive also agrees to serve, if
elected, as an officer or director of any wholly-owned subsidiary or affiliate of Company so long as such service is commensurate
with Executive’s duties and responsibilities to Company. Executive’s employment shall also be subject to the policies
maintained and established by Company that are of general applicability to Company’s executive employees, as such policies
may be amended from time to time.
2.4
Other
Interests.
Executive agrees, during the period of his employment by Company, to devote substantially all of his business
time, energy, and best efforts to the business and affairs of Company and its affiliates and not to engage, directly or indirectly,
in any other business or businesses, whether or not similar to that of Company, except as herein permitted or with the prior written
consent of the Board. The foregoing notwithstanding, the parties recognize and agree that Executive may engage in passive personal
investment and charitable activities and serve on corporate boards of directors that, in any case, do not conflict with the business
and affairs of Company or interfere with Executive’s performance of his duties hereunder, which shall be at the sole determination
of the Board.
2.5
Duty
of Loyalty.
Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty to act at all times in
the best interests of Company. In keeping with such duty, Executive shall make full disclosure to Company of all business opportunities
pertaining to Company’s business and shall not appropriate for Executive’s own benefit, or appropriate for the benefit
of any third party, business opportunities concerning Company’s business.
2.6
Place
of Employment.
Executive’s primary place of employment hereunder shall be at the Company’s executive offices,
however, Executive shall be allowed to provide his services hereunder from Executive’s home office maintained at Executive’s
principal residence. Executive understands and agrees that he may be required to travel to other locations depending on the Company’s
business needs.
ARTICLE III
TERM
AND TERMINATION OF EMPLOYMENT
3.1
Term.
Unless sooner terminated pursuant to other provisions hereof, Company agrees to employ Executive for the period beginning
on the Effective Date and ending on the fourth anniversary of the Effective Date.
3.2
Company’s
Right to Terminate.
Notwithstanding the provisions of Section 3.1, Company shall have the right to terminate Executive’s
employment under this Agreement at any time for any of the following reasons:
(a) upon
Executive’s death;
(b) upon
Executive’s Disability;
(c) for
Cause; or
(d) at
any time, for any other reason whatsoever, in the sole discretion of the Board.
3.3
Executive’s
Right to Terminate.
Notwithstanding the provisions of Section 3.1, Executive shall have the right to terminate his employment
under this Agreement for any of the following reasons:
(a) for
Good Reason; or
(b) at
any time for any other reason whatsoever, in the sole discretion of Executive.
3.4
Notice
of Termination.
If Company desires to terminate Executive’s employment hereunder at any time prior to expiration
of the term of employment as provided in Section 3.1, it shall do so by giving a 30-day written notice to Executive that it has
elected to terminate Executive’s employment hereunder and stating the effective date and reason for such termination, provided
that no such action shall alter or amend any other provisions hereof or rights arising hereunder. If Executive desires to terminate
his employment hereunder at any time prior to expiration of the term of employment as provided in Section 3.1, he shall do so by
giving a 30-day written notice to Company that he has elected to terminate his employment hereunder and stating the effective date
and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising
hereunder.
3.5
Deemed
Resignations.
Unless otherwise agreed to in writing by Company and Executive prior to the termination of Executive’s
employment, any termination of Executive’s employment shall constitute an automatic resignation of Executive as an officer
of Company and each affiliate of Company and an automatic resignation of Executive from the Board (if applicable) and from the
board of directors or similar governing body of any affiliate of Company and from the board of directors or similar governing body
of any corporation, limited liability entity, or other entity in which Company or any affiliate holds an equity interest and with
respect to which board or similar governing body Executive serves as Company’s or such affiliate’s designee or other
representative.
3.6
Meaning
of Termination of Employment.
For all purposes of this Agreement, Executive shall be considered to have terminated employment
with Company when Executive incurs a “separation from service” with Company within the meaning of Section 409A(a)(2)(A)(i)
of the Code and applicable administrative guidance issued thereunder.
ARTICLE IV
COMPENSATION
AND BENEFITS
4.1
Base
Salary.
Executive shall receive a base salary of
$220,000
per annum during each full year of employment. Executive’s base salary shall be reviewed by the Chief Executive Officer
and the Compensation Committee on an annual basis, and, in the sole discretion of the Compensation Committee, such base salary
may be increased, but not decreased (except with the prior written consent of Executive), effective as of any date determined
by the Compensation Committee. Executive’s base salary shall be paid in equal installments in accordance with Company’s
standard policy regarding payment of compensation to executives but no less frequently than monthly.
4.2
Annual
Bonus.
Executive shall be eligible for an annual bonus of up to fifteen percent (15%) of Executive’s Annual Base
Salary based on performance criteria set by the Chief Executive Officer of Company and Compensation Committee and to otherwise
participate in Company’s annual bonus plan or plans applicable to Executive, all as approved from time to time by the Compensation
Committee in amounts to be determined by the Compensation Committee based upon criteria established by the Compensation Committee.
4.3
Long-Term
Incentive.
Subject to the sole discretion of the Compensation Committee, Executive shall also be eligible for participation
in the Incentive Plan or such other long-term incentive arrangement of Company as may from time to time be made available to other
executive officers of Company. Any awards made under the Incentive Plan or such other arrangements shall be governed by Section
5.7 herein.
4.4
Other
Perquisites.
During his employment hereunder, Executive shall be afforded the following benefits as incidences of his
employment:
(a)
Business
and Entertainment Expenses
- Subject to Company’s standard policies and procedures with respect to expense reimbursement
as applied to its executive employees generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable
and appropriate expenses incurred by Executive for business-related purposes, including dues and fees to industry and professional
organizations and costs of entertainment and business development. Company reserves the right to request valid documentation and
receipts relating to such expenses.
(b)
Company
Benefits
- Executive and, to the extent applicable, Executive’s spouse, dependents, and beneficiaries, shall be
allowed to participate in all benefits, plans, and programs, including improvements or modifications of the same, which are now,
or may hereafter be, available to other executive employees of Company. Such benefits, plans, and programs shall include, without
limitation, any profit sharing plan, thrift plan, health insurance or health care plan, life insurance, disability insurance, pension
plan, supplemental retirement plan, vacation and sick leave plan, and the like which may be maintained by Company. Company shall
not, however, by reason of this paragraph be obligated to institute, maintain, or refrain from changing, amending, or discontinuing,
any such benefit plan or program, so long as such changes are similarly applicable to executive employees generally. See Attachment
A for the current Company Benefits Program.
ARTICLE V
EFFECT
OF TERMINATION ON COMPENSATION; ADDITIONAL PAYMENTS
5.1
Termination
Other Than an Involuntary Termination.
If Executive’s employment hereunder shall terminate upon expiration of
the term provided in Section 3.1 hereof or if Executive’s employment hereunder shall terminate for any other
reason
except those
described in Section 5.2, then Company shall continue to provide all compensation and benefits to Executive
hereunder until the date of such termination of employment, and such compensation and benefits shall terminate contemporaneously
with such termination of employment.
5.2
Involuntary
Termination.
Subject to the provisions of Sections 5.3 and 5.4 hereof, if Executive’s employment by Company or
any successor thereto shall be subject to an Involuntary Termination, then Company shall, as additional compensation for services
rendered to Company (including its subsidiaries), pay to Executive the following amounts and take the following actions:
(a) Pay
Executive a lump sum cash payment in an amount equal to six (6) months of Executive’s Annual Base Salary on or before the
Payment Date.
(b) During
the portion, if any, of the 6-month period commencing on the date of such Involuntary Termination that Executive is eligible to
elect and elects to continue coverage for himself and his eligible dependents under Company’s or a subsidiary’s group
health plans, as applicable, under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and/or Sections 601
through 608 of the Employee Retirement Income Security Act of 1974, as amended, Company shall promptly reimburse Executive on a
monthly basis for the difference between the amount Executive pays to effect and continue such coverage and the employee contribution
amount that active senior executive employees of Company pay for the same or similar coverage under such group health plans; provided,
however, that such reimbursement shall cease to be effective if and to the extent Executive becomes eligible to receive medical
and/or dental coverage from a subsequent employer (and any such eligibility shall be promptly reported to Company by Executive).
5.3
Change
of Control.
In the event of a Change of Control, vesting of all options or other types of equity granted to Executive
shall fully vest immediately prior to such Change of Control.
5.4
Release
and Full Settlement.
As a condition to the receipt of any severance compensation and benefits under this Agreement,
Executive must first execute a release and agreement, in a form reasonably satisfactory to Company, which (a) shall release and
discharge Company and its affiliates, and their officers, directors, employees, and agents, from any and all claims or causes of
action of any kind or character, including all claims or causes of action arising out of Executive’s employment with Company
or its affiliates or the termination of such employment, and (b) must be effective and irrevocable within 55 days after the termination
of Executive’s employment. If Executive is entitled to and receives the benefits provided hereunder, performance of the obligations
of Company hereunder will constitute full settlement of all claims that Executive might otherwise assert against Company on account
of Executive’s termination of employment.
5.5
Payments
Subject to Section 409A of the Code.
Notwithstanding the foregoing provisions of this Article 5, if the payment of any
severance compensation or severance benefits under this Agreement would be subject to additional taxes and interest under Section
409A of the Code because the timing of such payment is not delayed as provided in Section 409A(a)(2)(B) of the Code, then any such
payments that Executive (or Executive’s estate) would otherwise be entitled to during the first six months following the
date of Executive’s termination of employment shall be accumulated and paid on the date that is six months after the date
of Executive’s termination of employment (or if such payment date does not fall on a business day of Company, the next following
business day of Company), or such earlier date upon which such amount can be paid under Section 409A of the Code without being
subject to such additional
taxes
and
interest.
Executive
hereby agrees to be bound by Company’s determination of its “specified employees” (as such term
is defined in Section 409A of the Code) in accordance with any of the methods permitted under the regulations issued under Section
409A of the Code.
5.6
Liquidated
Damages.
In light of the difficulties in estimating the damages for an early termination of Executive’s employment
under this Agreement, Company and Executive hereby agree that the payments, if any, to be received by Executive pursuant to this
Article 5 shall be received by Executive as liquidated damages.
5.7
Other
Benefits.
This Agreement governs the rights and obligations of Executive and Company with respect to Executive’s
Annual Base Salary and certain perquisites of employment. Except as expressly provided herein, Executive’s rights and obligations
both during the term of his employment and thereafter with respect to stock options, restricted stock, incentive and deferred compensation,
life insurance policies insuring the life of Executive, and other benefits under the plans and programs maintained by Company shall
be governed by the separate agreements, plans and other documents and instruments governing such matters.
ARTICLE VI
DISPUTE
RESOLUTION
6.1
General.
Executive and the Company explicitly recognize that no provision of this Article VI shall prevent either party from
seeking to resolve any dispute arising under the Confidentiality and Assignment of Invention Agreement.
6.2
Negotiation.
The parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly
by negotiations between Executive and an executive officer of Company who has authority to settle the controversy. Any party may
give
the other party written
notice
of any
dispute
not
resolved
in
the
normal course of business. Within ten days after the effective date of such notice, Executive and an executive officer of Company
shall meet at a mutually acceptable time and place within the San Jose, California metropolitan area, and thereafter as often as
they reasonably deem necessary, to exchange relevant information and to attempt to resolve the dispute. If the matter has not been
resolved within 30 days of the disputing party’s notice, or if the parties fail to meet within ten days, either party may
initiate arbitration of the controversy or claim as provided
in
Section 6.3 below. If a negotiator intends to be accompanied at a meeting by an attorney, the other negotiator shall be
given at least three business days’ notice of such intention and may also be accompanied by an attorney. All negotiations
pursuant to this Section 6.2 shall be treated as compromise and settlement negotiations for the purposes of the federal and state
rules of evidence and procedure.
6.3
Arbitration.
Company and Executive agree that after efforts to negotiate any dispute in accordance with Section 6.2 have failed,
then either party may by written notice (the
“
Notice
”)
demand arbitration of the dispute as set out below, and each party hereto expressly agrees to submit to, and be
bound by, such arbitration.
(a) Each
party will, within ten business days of the Notice, nominate an arbitrator, who shall be a non-neutral arbitrator. Each nominated
arbitrator must be someone experienced in dispute resolution and of good character without moral turpitude and not within the
employ or direct or indirect influence of the nominating party. The two nominated arbitrators will, within ten business days of
nomination, agree upon a third arbitrator, who shall be neutral. If the two appointed arbitrators cannot agree on a third arbitrator
within such period, the parties may seek such an appointment through any permitted court proceeding or by the American Arbitration
Association
(“
AAA
”)
.
The three arbitrators will set the rules and timing of the arbitration, but will generally follow the rules of the
AAA and this Agreement where same are applicable and shall provide for a reasoned opinion.
(b) The
arbitration hearing will in no event take place more than 180 days after the appointment of the third arbitrator.
(c) The
arbitration will take place in the San Jose, California metroplex unless otherwise unanimously agreed to by the parties.
(d) The
results of the arbitration and the decision of the arbitrators will be final and binding on the parties, and each party agrees
and acknowledges that these results shall be enforceable in a court of law.
(e) All
administrative costs and expenses of the mediation and arbitration shall be borne equally by the Company and Executive during the
pendency of the proceedings. Such costs and expenses do not include attorney’s fees, expert witness fees or other party generated
expenses. Upon the conclusion of the proceedings, the prevailing party shall be entitled to recover reasonable and necessary attorneys’
fees, expert witness fees, and costs and expenses of arbitration.
(f) This
agreement to arbitrate does not apply to claims or issues arising from performance of services on any federal government contract,
any claim for workers’
compensation
or
unemployment benefits, claims for vested benefits under
a
plan fund or program covered by the Employee retirement Security Act of 1974, as amended or any claim brought under California
Labor Code §2699
et.seq.
Further, Company and Executive agree that only individual employee claims may be brought and that no claim may be brought or arbitrated
hereunder
as a collective
action on behalf of other or as a class action absent a further
specific
agreement executed at the time the dispute arises.
(g) Executive
understands that this Agreement requires that disputes that involve the matters subject to the Agreement be submitted to arbitration
pursuant to this Section 6.3 rather than to a judge or jury in court. However, Company and Executive agree that this agreement
to arbitrate shall not apply to any disputes or claims relating to or arising out of the misuse or misappropriation of Company’s
trade secrets, proprietary information, other proprietary rights or property. Executive must sign and return the Confidentiality
and Assignment Agreement.
ARTICLE VII
MISCELLANEOUS
7.1
Notices.
Any
and
all
notices or other communications
or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 3:30 p.m. (Pacific time) on any day except Saturday, Sunday and any
day which shall be a federal legal holiday in the United States
(“
Business
Day
”)
,
(b) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number set forth on the signature pages attached hereto on a day that is not a Business Day or later than 3:30
p.m. (Pacific time) on any Business Day, (c) the 2nd Business Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for
such notices and communications shall be as set forth on the signature pages attached hereto. All notices and demands to Executive
or the Company may be given to them at the following addresses:
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If to Executive to:
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If to Company:
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Mears Technologies, Inc.
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Such
parties may designate in writing from time to time such other place or places that such notices and demands may be given.
7.2 Applicable
Law; Submission to Jurisdiction.
(a) This
Agreement is entered into under, and shall be governed for all purposes by, the laws of the State of California, without regard
to conflict of law principals thereof.
(b) With
respect to any claim or dispute related to or arising under this Agreement that is not subject to arbitration, the parties hereto
hereby consent to the exclusive jurisdiction, forum, and venue of the state or federal (to the extent federal jurisdiction exists)
courts located in Santa Clara County in the State of California.
7.3
No
Waiver.
No failure by either party hereto at any time to give notice of any breach by the other party of or to require
compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
7.4
Severability.
Any provision in this Agreement which is prohibited or unenforceable in any jurisdiction by reason of applicable law
shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any
such
prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other
jurisdiction.
7.5
Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.
7.6
Withholding
of Taxes and Other Employee Deductions.
Company may withhold from any benefits and payments made pursuant to this Agreement
all federal, state, city, and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other
customary employee deductions made with respect to Company’s employees generally.
7.7
Headings.
The Section headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.
7.8
Gender
and Plurals.
Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular
number includes the plural and conversely.
7.9
Assignment.
This Agreement shall be binding upon and inure to the benefit of Company and any successor of Company, by merger or
otherwise. This Agreement shall also be binding upon and inure to the benefit of Executive and his heirs, representatives and assigns.
If Executive shall die prior to full payment of amounts due pursuant to this Agreement, such amounts shall continue to be payable
pursuant to the terms of this Agreement. Executive shall not have any right to pledge, hypothecate, anticipate, or assign any portion
of this Agreement or any of the rights hereunder, except by will or the laws of descent and distribution.
7.10
Term.
This Agreement has a term co-extensive with the term of employment provided in Section 3.1. Termination of this Agreement
shall not affect any right or obligation of any party which is accrued or vested prior to such termination. The provisions of Section
3.5 shall survive the termination of this Agreement and shall be binding upon Executive and his or her legal representatives, successors,
and assigns following such termination.
7.11
Entire
Agreement.
This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof and
contains all the covenants, promises, representations, warranties, and agreements between the parties with respect to such subject
matter. Without limiting the scope of the preceding sentence, all understandings and agreements preceding the date of execution
of this Agreement and relating to the subject matter hereof are hereby null and void and of no further force and effect, including,
without limitation, all prior employment and severance agreements, if any, by and between Company and Executive. Any modification
of this Agreement will be effective only if it is in writing and signed by the party to be charged.
7.12
Expenses.
Each party shall pay all fees and expenses incurred by such party incident to the negotiation, preparation and execution
of this Agreement.
IN
WITNESS WHEREOF,
the parties hereto have entered into this Agreement as of the date first written above.
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“Company”
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Mears Technologies, Inc.
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a Delaware corporation
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By:
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/s/ Scott A. Bibaud
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Scott A. Bibaud
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Chief Executive Officer
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“Executive”
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Ronald A. Cope
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/s/
Ronald A. Cope
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Attachment
A
2015
EMPLOYEE BENEFITS OVERVIEW
Health
& Dental Care
❖
MEARS
provides health care coverage under the “PPO Value” plan from
Harvard
Pilgrim Health Plan
at a nominal cost.
❖
MEARS
provides dental care coverage under the “Dental Guard Preferred PPO” plan from
Guardian
Dental
at no cost to the employee.
401k Plan
❖
MEARS
employees are entitled to contribute to the
Nationwide
401k retirement plan after 60 days of employment with the company.
Life/AD&D
and Disability Insurance
❖
MEARS
provides Life/Accidental Death & Dismemberment insurance through the
Principal
Financial Group
at 300% of annual salary at no cost to the employee.
❖
MEARS
provides Limited Disability insurance at 60% of pre-disability earnings for up to 2 years at no cost to the employee.
Paid Time
Off (Flex-Time)
❖
MEARS
employees accrue paid leave based on years of service:
First
Year of Service 16 days
Third
Year of Service 21 days
Fifth
Year of Service 26 days
2015
Company Holidays
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1.
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JAN 1 –
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New Year’s Day
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2.
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JAN
19 –
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Martin Luther King Day
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3.
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FEB
16 –
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Presidents Day
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4.
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APR3
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Good Friday
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5.
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MAY 25 –
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Memorial Day
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6.
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JUL3
–
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Independence Day
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7.
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SEP7
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Labor Day
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8.
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OCT 12 –
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Columbus Day
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9.
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NOV 26 –
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Thanksgiving
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10.
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NOV
27 –
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Day after Thanksgiving
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11.
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DEC 24 –
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Christmas Eve
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12.
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DEC 25 –
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Christmas Day
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Exhibit 10.18
EMPLOYMENT AGREEMENT
THIS
EMPLOYMENT AGREEMENT
(“
Agreement
”
)
is entered into on January 13
th
, 2016
(“
Effective
Date
”) by and between Mears Technologies, Inc., a Delaware corporation (“
Company
”),
and Robert Mears (“
Executive
”).
RECITAL
Company
is desirous of continuing to employ Executive in an executive capacity on the terms and conditions and for the consideration, hereinafter
set forth, and Executive is desirous of continuing to be employed by Company on such terms and conditions and for such consideration.
AGREEMENT
It
is agreed as follows:
ARTICLE I
DEFINITIONS
AND INTERPRETATIONS
1.1 Definitions.
(a)
“Base
Salary”
shall mean Executive’s annualized base salary as set forth in Section 4.1.
(b)
“Board”
shall mean the board of directors of Company.
(c)
“Cause”
shall mean a finding by the Company that Executive (i) has engaged in gross negligence, gross incompetence, or willful
misconduct in the performance of his duties at the Company, (ii) has refused, without proper reason, to perform his duties, (iii)
has materially breached any provision of this Agreement or of the Employee Confidentiality and Assignment Agreement attached hereto
as Attachment A, (iv) has willfully and materially breached a significant corporate policy or code of conduct established by Company,
(v) has willfully engaged in conduct that is materially injurious to Company or its subsidiaries (monetarily or otherwise), (vi)
has committed an act of fraud, embezzlement, or breach of a fiduciary duty to Company or an affiliate of Company (including the
unauthorized disclosure of material confidential or proprietary information of the Company or an affiliate or intentional misrepresentation
in any employment application, background check, or willfully making false representations in any capacity), (vii) has been convicted
of (or pleaded no contest to) a criminal act involving fraud, dishonesty, or moral turpitude or any felony, or (viii) has been
convicted for any violation of U.S. or foreign securities laws or has entered into a cease and desist order with the Securities
and Exchange Commission alleging violation of U.S. or foreign securities laws.
Notwithstanding
the foregoing provisions of this Section 1.1(c) or any other provision in this Agreement to the contrary, any assertion by the
Company of a termination of employment for “Cause” pursuant to clauses (i) through (v) of this Section 1.1(c) shall
not be effective unless all of the following conditions are satisfied: (1) the Company must provide written notice to the Executive
of such condition in accordance with Section 7.1 within 30 days of the initial existence of the condition; (2) the condition specified
in such notice must remain uncorrected for a period of 30 days following receipt of such notice by Company; and (3) the date of
the Company’s termination of the Executive’s employment must occur within ninety days following the initial existence
of the condition specified in such notice.
(d)
“Code”
shall mean the Internal Revenue Code of 1986, as amended.
(e)
“Compensation
Committee”
shall mean the Compensation Committee of the Board.
(f)
“Disability”
shall mean that, as a result of Executive’s documented incapacity due to physical or mental illness, Executive
shall have been absent from the full-time performance of his duties for six consecutive months and shall not have returned to full-time
performance of his duties within 30 days after written notice of termination is given to Executive by Company (provided, however,
that such notice may not be given prior to 30 days before the expiration of such six-month period). Any determination of Disability
shall be determined by an independent physician mutually acceptable to the Company and the Executive.
(g)
“Good
Reason”
shall mean the occurrence of any one or more of the following:
(i) a
material diminution in Executive’s Base Salary not in accordance with Section 4.1:
(ii) a
material diminution in Executive’s authority, duties, or responsibilities from those applicable to him as of the Effective
Date;
(iii) a
material change in the principal geographic location at which Executive must perform services, which for purposes of this Agreement
includes only Company requiring Executive to involuntarily relocate to a geographic location other than the greater Boston, Massachusetts
metropolitan area; or
(iv) a
material breach by Company of any provision of this Agreement.
Notwithstanding
the foregoing provisions of this Section 1.1(g) or any other provision in this Agreement to the contrary, any assertion by Executive
of a termination of employment for “Good Reason” shall not be effective unless all of the following conditions are
satisfied: (1) any condition described in clauses (i) through (iv) of this Section 1.1(g) giving rise to Executive’s termination
of employment must have arisen without Executive’s consent; (2) Executive must provide written notice to Company of such
condition in accordance with Section 7.1 within 30 days of the initial existence of the condition; (3) the condition specified
in such notice must remain uncorrected for a period of 30 days following receipt of such notice by Company; and (4) the date of
Executive’s termination of employment must occur within ninety days following the initial existence of the condition specified
in such notice.
(h)
“Incentive
Plan”
shall mean the Mears Technologies, Inc. 2007 Stock Incentive Plan.
(i)
“Involuntary
Termination”
shall mean any termination of Executive’s employment with Company which results from
either:
(i) A
termination by the Company without Cause; or
(ii) a
resignation by Executive for Good Reason;
provided
however, and for the avoidance of doubt, the term “Involuntary Termination” shall not include (x) a termination by
Company for Cause or by Executive without Good Reason, (y) any termination by either party upon or following expiration of the
term set forth in Section 3.1, or (z) any termination as a result of death or Disability.
1.2
Interpretations.
In this Agreement, unless a clear contrary intention appears, (a) the words “herein,” “hereof,”
“hereunder,” and other words of similar import refer to this Agreement as a whole and not to any particular Article,
Section, or other subdivision, (b) reference to any Article or Section means such Article or Section hereof, (c) the word “including”
(and with correlative meaning, “include”) means including, without limiting the generality of any description preceding
such term, and (d) where any provision of this Agreement refers to action to be taken by either party, or which such party is prohibited
from taking, such provision shall be applicable whether such action is taken directly or indirectly by such party.
ARTICLE II
EMPLOYMENT
AND DUTIES
2.1
Employment.
Effective as of the Effective Date and continuing for the period of time set forth in Section 3.1 of this Agreement,
Executive’s employment by Company shall be subject to the terms and conditions of this Agreement. As a condition of his continued
employment, Executive shall, prior to the Effective Date, execute and deliver to the Company an Employee Confidentiality and Assignment
Agreement in the form attached hereto as Attachment A.
2.2
Positions.
From and after the Effective Date, Company shall employ Executive in the position of Chief Technology Officer of the
Company or in such other position or positions as the parties mutually may agree.
2.3
Duties
and Services.
Executive agrees to serve in the position referred to in Section 2.2 and to perform diligently and to
the best of his abilities the duties and services appertaining to such office, as well as such additional duties and services appropriate
to such offices which the parties mutually may agree upon from time to time. Executive in his capacity as Chief Technology Officer
of the Company shall have such authorities, duties and obligations as are assigned to him from time to time by the Chief Executive
Officer of the Company and otherwise customarily assigned to a senior executive of a technology business. Executive shall report
to the Chief Executive Officer of the Company. Executive also agrees to serve, if elected, as an officer or director of any wholly-owned
subsidiary or affiliate of Company so long as such service is commensurate with Executive’s duties and responsibilities to
Company. Executive’s employment shall also be subject to the policies maintained and established by Company that are of general
applicability to Company’s executive employees, as such policies may be amended from time to time.
2.4
Other
Interests.
Executive agrees, during the period of his employment by Company, to devote substantially all of his business
time, energy, and best efforts to the business and affairs of Company and its affiliates and not to engage, directly or indirectly,
in any other business or businesses, whether or not similar to that of Company, except as herein permitted or with the prior written
consent of the Board. The foregoing notwithstanding, the parties recognize and agree that Executive may engage in passive personal
investment and charitable activities and serve on corporate boards of directors that, in any case, do not conflict with the business
and affairs of Company or interfere with Executive’s performance of his duties hereunder, which shall be at the sole determination
of the Board.
2.5
Duty
of Loyalty.
Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty to act at all times in
the best interests of Company. In keeping with such duty, Executive shall make full disclosure to Company of all business opportunities
pertaining to Company’s business and shall not appropriate for Executive’s own benefit, or appropriate for the benefit
of any third party, business opportunities concerning Company’s business.
2.6
Place
of Employment.
Executive’s primary place of employment hereunder shall be at Company’s executive offices
in or within 50 miles of Wellesley Hills, Massachusetts. Executive understands and agrees that he may be required to travel to
other locations depending on the Company’s business needs.
ARTICLE III
TERM AND TERMINATION
OF EMPLOYMENT
3.1
Term.
Unless sooner terminated pursuant to other provisions hereof, Company agrees to employ Executive for the period beginning
on the Effective Date and ending on the fourth anniversary of the Effective Date.
3.2
Company’s
Right to Terminate.
Notwithstanding the provisions of Section
3.1,
Company shall have the right to terminate Executive’s employment under this Agreement at any time for any of the
following reasons:
(a) upon
Executive’s death;
(b) upon
Executive’s Disability;
(c) for
Cause; or
(d) at
any time, for any other reason whatsoever, in the sole discretion of the Board.
3.3
Executive’s
Right to Terminate.
Notwithstanding the provisions of Section 3.1, Executive shall have the right to terminate his employment
under this Agreement for any of the following reasons:
(a) for
Good Reason; or
(b) at
any time for any other reason whatsoever, in the sole discretion of Executive.
3.4
Notice
of Termination.
If Company desires to terminate Executive’s employment hereunder at any time prior to expiration
of the term of employment as provided in Section 3.1, it shall do so by giving a 30-day written notice to Executive that it has
elected to terminate Executive’s employment hereunder and stating the effective date and reason for such termination, provided
that no such action shall alter or amend any other provisions hereof or rights arising hereunder. If Executive desires to terminate
his employment hereunder at any time prior to expiration of the term of employment as provided in Section 3.1, he shall do so by
giving a 30-day written notice to Company that he has elected to terminate his employment hereunder and stating the effective date
and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising
hereunder.
3.5
Deemed
Resignations.
Unless otherwise agreed to in writing by Company and Executive prior to the termination of Executive’s
employment, any termination of Executive’s employment shall constitute an automatic resignation of Executive as an officer
of Company and each affiliate of Company and an automatic resignation of Executive from the Board (if applicable) and from the
board of directors or similar governing body of any affiliate of Company and from the board of directors or similar governing body
of any corporation, limited liability entity, or other entity in which Company or any affiliate holds an equity interest and with
respect to which board or similar governing body Executive serves as Company’s or such affiliate’s designee or other
representative. Executive agrees to execute such documents and take such other actions as the Company may request to reflect such
resignation.
ARTICLE IV
COMPENSATION
AND BENEFITS
4.1
Base
Salary.
Executive shall receive a base salary at the annualized rate of $220,000 (the
“
Base
Salary
”).
Executive’s Base Salary shall be reviewed by the Chief Executive Officer and the Compensation
Committee on an annual basis, and, in the sole discretion of the Compensation Committee, such Base Salary may be increased, but
not decreased (except (a) with the prior written consent of Executive, or (b) in connection with, and in an amount substantially
proportionate to, reductions made by Company to the annualized base salaries of all other senior executives), effective as of
any date determined by the Compensation Committee. Executive’s Base Salary shall be paid in equal installments in accordance
with Company’s standard policy regarding payment of compensation to executives but no less frequently than monthly.
4.2
Annual
Bonus.
Executive shall be eligible for an annual bonus of up to fifteen percent (15%) of Executive’s Base Salary
based on performance criteria set by the Chief Executive Officer of Company and Compensation Committee and to otherwise participate
in Company’s annual bonus plan or plans applicable to Executive, all as approved from time to time by the Compensation Committee
in amounts to be determined by the Compensation Committee based upon criteria established by the Compensation Committee.
4.3
Long-Term
Incentive.
Subject to the sole discretion of the Compensation Committee, Executive shall also be eligible for participation
in the Incentive Plan or such other long-term incentive arrangement of Company as may from time to time be made available to other
executive officers of Company. Any awards made under the Incentive Plan or such other arrangements shall be governed by Section
5.5 herein.
4.4
Other
Perquisites.
During his employment hereunder, Executive shall be afforded the following benefits as incidences of his
employment:
(a)
Business
and Entertainment Expenses
- Subject to Company’s standard policies and procedures with respect to expense reimbursement
as applied to its executive employees generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable
and appropriate expenses incurred by Executive for business-related purposes, including dues and fees to industry and professional
organizations and costs of entertainment and business development. Company reserves the right to request valid documentation and
receipts relating to such expenses.
(b)
Company
Benefits
- Executive and, to the extent applicable, Executive’s spouse, dependents, and beneficiaries, shall be
allowed to participate in all benefits, plans, and programs, including improvements or modifications of the same, which are now,
or may hereafter be, available to other executive employees of Company, subject to the eligibility requirements and other terms
of such plans and programs. Such benefits, plans, and programs shall include, without limitation, any profit sharing plan, thrift
plan, health insurance or health care plan, life insurance, disability insurance, pension plan, supplemental retirement plan, vacation
and sick leave plan, and the like which may be maintained by Company. Company shall not, however, by reason of this paragraph be
obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such benefit plan or program, so long
as such changes are similarly applicable to executive employees generally. See Attachment B for the current Company Benefits Program.
ARTICLE
V
EFFECT
OF TERMINATION ON COMPENSATION; ADDITIONAL PAYMENTS
5.1
Termination
Other Than an Involuntary Termination.
If Executive’s employment hereunder shall terminate upon expiration of
the term provided in Section 3.1 hereof or if Executive’s employment hereunder shall terminate in any circumstance other
than an Involuntary Termination, then Company shall continue to provide all compensation and benefits to Executive hereunder until
the date of such termination of employment, and such compensation and benefits shall terminate contemporaneously with such termination
of employment. For the avoidance of doubt, should Executive’s employment with Company continue after expiration of the term
set forth in Section 3.1 hereof, such continued employment shall be at-will and he will not be eligible to receive any payments
or benefits from the Company upon termination from employment for any reason.
5.2
Involuntary
Termination.
Subject to the provisions of Sections 5.3 and 5.4 hereof, if Executive’s termination of employment
hereunder shall be an Involuntary Termination, then Company shall, provide to Executive the following severance benefits (the “Severance
Benefits”):
(a) Company
shall pay Executive a lump sum cash payment in an amount equal to six (6) months of Executive’s Base Salary, less applicable
taxes and withholdings.
(b) During
the portion, if any, of the 12-month period commencing on the date of such Involuntary Termination that Executive is eligible to
elect and elects to continue coverage for himself and his eligible dependents under Company’s or a subsidiary’s group
health plans, as applicable, under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and/or Sections 601
through 608 of the Employee Retirement Income Security Act of 1974, as amended, Company shall promptly reimburse Executive on a
monthly basis for the difference between the amount Executive pays to effect and continue such coverage and the employee contribution
amount that active senior executive employees of Company pay for the same or similar coverage under such group health plans; provided,
however, that such reimbursement shall cease to be effective if and to the extent Executive becomes eligible to receive medical
and/or dental coverage from a subsequent employer (and any such eligibility shall be promptly reported to Company in writing by
Executive).
5.3
Change
of Control.
In the event of a Change of Control, vesting of all options or other types of equity granted to Executive
shall fully vest immediately prior to such Change of Control.
5.4
Release
and Full Settlement.
As a condition to the receipt of any Severance Benefits under this Agreement, Executive must first
execute and deliver to Company a severance and release of claims agreement in a form to be provided by Company (the “Severance
Agreement”), which will include, at a minimum, Executive’s release of the Company and its affiliates, and their officers,
directors, employees, and agents, from any and all claims or causes of action of any kind or character, including all claims or
causes of action arising out of Executive’s employment with Company or its affiliates or the termination of such employment,
as well as obligations for Executive with respect to non-disparagement and cooperation. The Severance Agreement must become effective
and irrevocable within 55 days after the termination of Executive’s employment (or such shorter period as may be directed
by the Company). Executive’s receipt of any Severance Benefits to which he is entitled hereunder will constitute full settlement
of all claims that Executive might otherwise assert against Company for any reason, including without limitation on account of
Executive’s termination of employment. The Severance Benefits will be paid or commence, as may be applicable, in the first
regular payroll period after the Severance Agreement becomes effective and enforceable, provided that if the foregoing 55 day period
would end in a calendar year subsequent to the year in which Executive’s employment ends, the Severance Benefits will not
be paid or begin, as may be applicable, before the first payroll period of the subsequent calendar year.
5.5 Payments
Subject to Section 409A of the Code.
(a) Subject
to this Section 5.4, any severance payments that may be due under the Agreement shall begin only upon the date of the Executive’s
“separation from service” (determined as set forth below) which occurs on or after the termination of Executive’s
employment.
(b) The
determination of whether and when Executive’s separation from service from the Company has occurred shall be made and in
a manner consistent with, and based on the presumptions set forth in, Treasury Regulation Section 1.409A-l(h). Solely for purposes
of this Section 5.4(b), “Company” shall include all persons with whom the Company would be considered a single employer
under Section 414(b) and 414(c) of the Code.
(c) It
is intended that each installment of the severance payments under the Agreement provided under shall be treated as a separate “payment”
for purposes of Section 409A of the Code. Neither the Company nor Executive shall have the right to accelerate or defer the delivery
of any such payments except to the extent specifically permitted or required by Section 409A of the Code.
(d) Notwithstanding
the foregoing provisions of this Article 5, if the payment of any severance compensation or severance benefits under this Agreement
would be subject to additional taxes and interest under Section 409A of the Code because the timing of such payment is not delayed
as provided in Section 409A(a)(2)(B) of the Code, then any such payments that Executive (or Executive’s estate) would otherwise
be entitled to during the first six months following the date of Executive’s termination of employment shall be accumulated
and paid on the date that is six months after the date of Executive’s termination of employment (or if such payment date
does not fall on a business day of Company, the next following business day of Company), or such earlier date upon which such amount
can be paid under Section 409A of the Code without being subject to such additional taxes and interest. Executive hereby agrees
to be bound by Company’s determination of its “specified employees” (as such term is defined in Section 409A
of the Code) in accordance with any of the methods permitted under the regulations issued under Section 409A of the Code.
5.6
Other
Benefits.
This Agreement governs the rights and obligations of Executive and Company with respect to the matters set
forth herein, including, without limitation, Executive’s Base Salary, certain perquisites of employment, and payments upon
termination of employment. Except as expressly provided herein, Executive’s rights and obligations both during the term of
his employment and thereafter, with respect to stock options, restricted stock, incentive and deferred compensation, life insurance
policies insuring the life of Executive, and other benefits under the plans and programs maintained by Company shall be governed
by the separate agreements, plans and other documents and instruments governing such matters.
ARTICLE VI
DISPUTE
RESOLUTION
6.1
General.
Executive and Company explicitly recognize that no provision of this Article VI shall prevent either party from seeking
to resolve any dispute arising under the Confidentiality and Assignment Agreement.
6.2
Negotiation.
The parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement and/or the
Employee’s employment with the Company and/or the termination of such employment promptly by negotiations between Executive
and an executive officer of Company who has authority to settle the controversy. Any party may give the other party written notice
of any dispute not resolved in the normal course of business. Within ten days after the effective date of such notice, Executive
and an executive officer of Company shall meet at a mutually acceptable time and place within the Boston, Massachusetts metropolitan
area, and thereafter as often as they reasonably deem necessary, to exchange relevant information and to attempt to resolve the
dispute. If the matter has not been resolved within 30 days of the disputing party’s notice, or if the parties fail to meet
within ten days, either party may initiate arbitration of the controversy or claim as provided in Section 6.3 below. If a negotiator
intends to be accompanied at a meeting by an attorney, the other negotiator shall be given at least three business days’
notice of such intention and may also be accompanied by an attorney. All negotiations pursuant to this Section 6.2 shall be treated
as compromise and settlement negotiations for the purposes of the federal and state rules of evidence and procedure.
6.3
Arbitration.
Company and Executive agree that after efforts to negotiate any dispute in accordance with Section 6.2 have failed,
then either party may by written notice (the
“Notice”
)
demand arbitration of the dispute as set out below, and each party hereto expressly agrees to submit to, and be
bound by, such arbitration.
(a) Each
party will, within ten business days of the Notice, nominate an arbitrator, who shall be a non-neutral arbitrator. Each nominated
arbitrator must be someone experienced in dispute resolution and of good character without moral turpitude and not within the
employ or direct or indirect influence of the nominating party. The two nominated arbitrators will, within ten business days of
nomination, agree upon a third arbitrator, who shall be neutral. If the two appointed arbitrators cannot agree on a third arbitrator
within such period, the parties may seek such an appointment through any permitted court proceeding or by the American Arbitration
Association
(
“
AAA
”
).
The three arbitrators will set the rules and timing of the arbitration, but will generally follow the rules of the AAA
and this Agreement where same are applicable and shall provide for a reasoned opinion.
(b) The
arbitration hearing will in no event take place more than 180 days after the appointment of the third arbitrator.
(c) The
arbitration will take place in the Boston, Massachusetts metropolitan area unless otherwise unanimously agreed to by the parties.
(d) The
results of the arbitration and the decision of the arbitrators will be final and binding on the parties, and each party agrees
and acknowledges that these results shall be enforceable in a court of law.
(e) All
administrative costs and expenses of the mediation and arbitration shall be borne equally by the Company and Executive during the
pendency of the proceedings. Such costs and expenses do not include attorney’s fees, expert witness fees or other party generated
expenses. Upon the conclusion of the proceedings, the prevailing party shall be entitled to recover reasonable and necessary attorneys’
fees, expert witness fees, and costs and expenses of arbitration.
(f) This
agreement to arbitrate applies, but shall not be limited, to the following:
i. Any
claim alleging unlawful discrimination, harassment, or retaliation on any basis protected by any applicable federal, state, or
local law (for the avoidance of doubt, nothing herein prevents Employee from filing, cooperating with, or participating in any
proceeding before the EEOC or other federal or state fair employment practices agency (except that Employee acknowledges that he/she
may not be able to recover any monetaiy benefits in connection with any such claim, charge or proceeding));
ii. Any
claim for wages, bonuses, severance, incentive compensation or other equity, employee benefits or other compensation, whether
pursuant to contract, state wage and hour laws (including without limitation M.G.L. c. 149, § 148
et
seq.),
the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, as amended, or any other law concerning
wages, compensation or employee benefits;
iii. Any
claim under any statute, law, or ordinance not expressly set forth above;
iv. Any
claim arising out of any and all common law claims, including, but not limited to, tort claims, wrongful discharge claims, contract
claims, defamation claims and unfair business practices claims; and
v. Any
claim relating to the interpretation, existence, validity, scope, or enforceability of this Section, including, but not limited
to, any claim that all or any part of this Section is void or voidable and any other challenge by Employee to the arbitrability
of any dispute under this Agreement (but not including a dispute about the class action waiver set forth below).
(g) Notwithstanding
anything set forth in Section 6.3(f) above, this agreement to arbitrate does not apply to claims or issues arising from performance
of services on any federal government contract, any claim for workers’ compensation or unemployment benefits, claims for
vested benefits under a plan fund or program covered by the Employee Retirement Income Security Act of 1974, as amended., or claims
arising out of or relating to the Employee Confidentiality and Assignment Agreement or otherwise concerning trade secrets, confidential
information, intellectual property (including patents, copyrights and trademarks), or other proprietary rights or property. Further,
Company and Executive agree that only individual employee claims may be brought and that no claim may be brought or arbitrated
hereunder as a collective action on behalf of any others or as a class action absent a further specific agreement executed at the
time the dispute arises.
(h) Executive
understands that this Agreement requires disputes that involve the matters subject to the Agreement and/or Executive’s employment
or termination, except those set forth in Section 6.3(g) above, be submitted to arbitration pursuant to this Section 6.3 rather
than to a judge or jury in court.
ARTICLE
VII
MISCELLANEOUS
7.1
Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 6:30 p.m. (Eastern
time) on any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States
(“
Business
Day
”), (b) the next Business Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Business Day or
later than 6:30 p.m. (Eastern time) on any Business Day, (c) the 2nd Business Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. All notices
and demands to Executive or the Company may be given to them at the following addresses:
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If to Executive to:
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12 High Meadow Cis
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Wellesley
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MA 02482
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If to Company:
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Mears Technologies, Inc.
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Such
parties may designate in writing from time to time such other place or places that such notices and demands may be given.
7.2 Applicable
Law; Submission to Jurisdiction.
(a) This
Agreement is entered into under, and shall be governed for all purposes by, the laws of the Commonwealth of Massachusetts, without
regard to conflict of law principals thereof.
(b) With
respect to any claim or dispute related to or arising under this Agreement that is not subject to arbitration, the parties hereto
hereby consent to the exclusive jurisdiction, forum, and venue of the state or federal (to the extent federal jurisdiction exists)
courts located in the Commonwealth of Massachusetts.
7.3
No
Waiver.
No failure by either party hereto at any time to give notice of any breach by the other party of or to require
compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
7.4
Severability.
Any provision in this Agreement which is prohibited or unenforceable in any jurisdiction by reason of applicable law
shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
7.5
Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.
7.6
Withholding
of Taxes and Other Employee Deductions.
Company may withhold from any benefits and payments made pursuant to this Agreement
all federal, state, city, and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other
customary employee deductions made with respect to Company’s employees generally.
7.7
Headings.
The Section headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.
7.8
Gender
and Plurals.
Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular
number includes the plural and conversely.
7.9
Assignment.
This Agreement shall be binding upon and inure to the benefit of Company and any successor of Company, by merger or
otherwise. This Agreement shall also be binding upon and inure to the benefit of Executive and his heirs, representatives and assigns.
If Executive shall die prior to full payment of amounts due pursuant to this Agreement, such amounts shall continue to be payable
pursuant to the terms of this Agreement. Executive shall not have any right to pledge, hypothecate, anticipate, or assign any portion
of this Agreement or any of the rights hereunder, except by will or the laws of descent and distribution.
7.10
Term.
This Agreement has a term co-extensive with the term of employment provided in Section 3.1. Termination of this Agreement
shall not affect any right or obligation of any party which is accrued or vested prior to such termination. The provisions of Section
3.5 shall survive the termination of this Agreement and shall be binding upon Executive and his or her legal representatives, successors,
and assigns following such termination.
7.11
Entire
Agreement.
This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof and
contains all the covenants, promises, representations, warranties, and agreements between the parties with respect to such subject
matter. Without limiting the scope of the preceding sentence, all understandings and agreements preceding the date of execution
of this Agreement and relating to the subject matter hereof are hereby null and void and of no further force and effect, including,
without limitation, all prior employment and severance agreements, if any, by and between Company and Executive. Any modification
of this Agreement will be effective only if it is in writing and signed by the party to be charged.
7.12 Expenses.
Company shall reimburse Executive for his reasonable fees and expenses incurred by him incident to the negotiation, preparation
and execution of this Agreement.
IN
WITNESS WHEREOF,
the parties hereto have entered into this Agreement as of the date first written above.
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“Company”
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Mears Technologies, Inc.
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a Delaware corporation
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By:
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/s/ Scott Bibaud
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Scott Bibaud
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Chief Executive Officer
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“Executive”
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Robert Mears
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|
|
|
|
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/s/ Robert Mears
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Attachment
A
Employee
Confidentiality and Assignment Agreement
Attachment
B
2015 EMPLOYEE BENEFITS OVERVIEW (Current as of November
1,2015)
Health & Dental Care
|
|
❖
|
MEARS provides health care coverage under the “PPO Value” plan from
Harvard
Pilgrim Health Plan
at a nominal cost.
|
|
|
❖
|
MEARS provides dental care coverage under the “Dental Guard Preferred PPO” plan from
Guardian
Dental
at no cost to the employee.
|
401k Plan
|
|
❖
|
MEARS employees are entitled to contribute to the
Nationwide
401k retirement plan after 60 days of employment with the company.
|
Life/AD&D and Disability Insurance
|
|
❖
|
MEARS provides Life/Accidental Death & Dismemberment insurance through the
Principal
Financial Group
at 300% of annual salary at no cost to the employee.
|
|
|
❖
|
MEARS provides Limited Disability insurance at 60% of pre-disability earnings for up to 2 years at
no cost to the employee.
|
Paid Time Off (Flex-Time)
|
|
❖
|
MEARS employees accrue paid leave based on years of service:
|
First
Year of Service 16 days
Third
Year of Service 21 days
Fifth
Year of Service 26 days
2015
Company Holidays
|
1.
|
JAN 1 –
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New Year’s Day
|
|
2.
|
JAN 19 –
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Martin Luther King Day
|
|
3.
|
FEB 16 –
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Presidents Day
|
|
4.
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APR 3 –
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Good Friday
|
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5.
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MAY 25 –
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Memorial Day
|
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6.
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JUL 3 –
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Independence Day
|
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7.
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SEP 7 –
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Labor Day
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8.
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OCT 12 –
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Columbus Day
|
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9.
|
NOV 26 –
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Thanksgiving
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10.
|
NOV 27 –
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Day after Thanksgiving
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11.
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DEC 24 –
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Christmas Eve
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12.
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DEC 25 –
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Christmas Day
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Attachment
C
Allonge
to Secured Promissory Note
Exhibit 10.19
January 13, 2016
Robert J. Mears
12 High Meadow Circle
Wellesley, MA 02482
Dear Robert:
Reference
is hereby made to that certain Secured Promissory Note dated January 14, 2005 (as amended to date, the “Promissory Note”),
in the aggregate principal amount of $187,500.00 between you as “Maker” and RJ Mears, LLC as “Payee”.
By
signing below, (a) MEARS Technology, Inc., as successor in interest to the Payee (the “Company”), hereby agrees to
forgive, as of the date hereof, the entire principal amount owed by you to the Company pursuant to the Promissory Note (but not
the accrued interest thereon) and (b) in exchange therefor, you agree that (i) simultaneously with the execution of this agreement,
you will execute an Employment Agreement with the Company, substantially in the form set forth as Exhibit A hereto, together with
such other documents or agreements in connection therewith that the company may reasonably request, including without limitation,
non-disclosure and inventions assignment agreements substantially in the same fo
rms
that the Company has executed with its other executive officers and (ii) you will not directly or indirectly, form, work
or perform services for, own equity of, or otherwise be involved in any business or enterprise that uses the name “Mears”
in the field of materials developed for the enhancement of semiconductor devices other than the Company.
By
signing below, you also acknowledge and agree that (i) the Company is not forgiving the accrued but unpaid interest in the amount
of $7,050.00 on the Promissory Note through the date hereof (the “Unpaid Interest”), and (ii) the forgiveness of the
principal amount of the Promissory Note will constitute compensation income to you and will be subject to federal, state and local
withholding taxes in the amount of $13,998.25 (the “Withholding Taxes”). Simultaneously with the execution of this
agreement you will (i) pay the Company the Unpaid Interest and (ii) provide the Company with cash equal to the Withholding Taxes,
or other make provisions satisfactory to the Company for the payment of the Withholding Taxes.
By
signing below, each party hereby acknowledges and agrees that upon effectiveness of forgiveness, the Pledge and Security Agreement
dated as of January 14, 2005 (the “Pledge Agreement”) and the other Financing Agreements (as defined in the Pledge
Agreement) shall terminate and be of no further force or effect.
20
Walnut Street, Suite 8 • Wellesley Hills, MA 02481 • Phone:617-219-0600 • Fax:617-219-0660 •
www.mearstechnologies.com
|
By;
|
/s/ Scott A. Bibaud
|
|
|
Name:
|
Scott A. Bibaud
|
|
|
Title:
|
President and CEO
|
|
|
|
|
|
|
Agreed and acknowledged as of the date first written above.
|
|
|
|
|
|
/s/ Robert J. Mears
|
|
|
Robert J. Mears
|
|
20 Walnut
Street, Suite 8 • Wellesley Hills, MA 02481 • Phone:617-219-0600 • Fax:617-219-0660 •
www.mearstechnologies.com
Exhibit 10.20
750 UNIVERSITY, LLC
AND
ATOMERA INCORPORATED
LEASE
SUMMARY OF LEASE
|
1.
|
DATE
OF LEASE:
|
January
19, 2016
|
|
|
|
|
|
2.
|
LANDLORD:
|
750
University, LLC
|
|
|
|
750
University Avenue, Suite 270
|
|
|
|
Los
Gatos, California 95032
|
|
|
|
|
|
3.
|
TENANT:
|
Atomera
Incorporated, a Delaware corporation
|
|
|
|
(f/k/a
Mears Technologies, Inc.)
|
|
|
|
|
|
4.
|
PREMISES:
|
750
University Avenue, Suite 280
|
|
|
|
Los
Gatos, CA
|
|
|
|
|
|
5.
|
RENTABLE
SQUARE FEET:
|
3,396
square feet
|
|
|
|
|
|
6.
|
PERMITTED
USE:
|
General
office use
|
|
|
|
|
|
7.
|
TERM:
|
Two
(2) years
|
|
|
|
|
|
|
(a)
SCHEDULED COMMENCEMENT DATE:
|
February
1, 2016
|
|
|
|
|
|
|
(b)
SCHEDULED EXPIRATION DATE:
|
January
31, 2018
|
|
|
|
|
|
8.
|
RENT:
|
|
|
|
|
|
|
|
(a)
BASIC RENT:
|
$12,395.40
per month (Lease months 1-12)
|
|
|
|
$13,074.60
per month (Lease months 13-24)
|
|
|
|
|
|
|
(b)
DIRECT EXPENSE INCREASES:
|
See
paragraph 5
|
|
|
|
|
|
|
(c)
BASE YEAR
|
2016
|
|
|
|
|
|
9.
|
SECURITY
DEPOSIT:
|
$37,186.20
Letter of Credit
|
|
|
|
|
|
10.
|
PARKING
SPACES PROVIDED:
|
Thirteen
(13) spaces
|
|
|
|
|
|
11.
|
OTHER
IMPORTANT PROVISIONS:
|
Furniture
and Fixtures
|
|
|
|
|
|
12.
|
EXHIBITS:
|
Exhibit
A - Premises
|
|
|
|
Exhibit
B - Project
|
|
|
|
Exhibit
C - List of Landlord's Furniture and Fixtures
|
THIS SUMMARY OF LEASE IS INTENDED TO SUMMARIZE
CERTAIN KEY PROVISIONS IN THE ATTACHED LEASE. IN THE EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE PROVISIONS OF THIS SUMMARY
AND THE LEASE, THE PROVISIONS OF THE LEASE SHALL GOVERN.
TABLE OF CONTENTS
|
1.
|
USE
|
1
|
|
2.
|
TERM
|
1
|
|
3.
|
POSSESSION
|
1
|
|
4.
|
MONTHLY
RENT
|
2
|
|
5.
|
TENANT’S
SHARE OF INCREASED COSTS
|
4
|
|
6.
|
RESTRICTION
ON USE
|
7
|
|
7.
|
COMPLIANCE
WITH LAWS
|
7
|
|
8.
|
ALTERATIONS
|
8
|
|
9.
|
REPAIR
AND MAINTENANCE
|
9
|
|
10.
|
LIENS
|
9
|
|
11.
|
INSURANCE
|
10
|
|
12.
|
UTILITIES
AND SERVICE
|
11
|
|
13.
|
TAXES
AND OTHER CHARGES
|
13
|
|
14.
|
ENTRY
BY LANDLORD
|
14
|
|
15.
|
COMMON
AREA; PARKING
|
14
|
|
16.
|
DAMAGE
BY FIRE; CASUALTY
|
15
|
|
17.
|
INDEMNIFICATION
|
16
|
|
18.
|
ASSIGNMENT
AND SUBLETTING
|
17
|
|
19.
|
DEFAULT
|
22
|
|
20.
|
LANDLORD'S
RIGHT TO CURE TENANT'S DEFAULT
|
24
|
|
21.
|
EMINENT
DOMAIN
|
24
|
|
22.
|
NOTICE
AND COVENANT TO SURRENDER
|
25
|
|
23.
|
TENANT'S
QUITCLAIM
|
25
|
|
24.
|
HOLDING
OVER
|
26
|
|
25.
|
SUBORDINATION
|
26
|
|
26.
|
CERTIFICATE
OF ESTOPPEL
|
27
|
|
27.
|
SALE
BY LANDLORD
|
27
|
|
28.
|
ATTORNMENT
TO LENDER OR THIRD PARTY
|
28
|
|
29.
|
DEFAULT
BY LANDLORD
|
28
|
|
30.
|
CONSTRUCTION
CHANGES
|
28
|
|
31.
|
MEASUREMENT
OF PREMISES
|
29
|
|
32.
|
ATTORNEY
FEES
|
29
|
|
33.
|
SURRENDER
|
29
|
|
34.
|
WAIVER
|
30
|
|
35.
|
EASEMENTS;
AIRSPACE RIGHTS
|
30
|
|
36.
|
RULES
AND REGULATIONS
|
30
|
|
37.
|
NOTICES
|
31
|
|
38.
|
NAME
|
31
|
|
39.
|
GOVERNING
LAW; SEVERABILITY
|
32
|
|
40.
|
DEFINITIONS
|
32
|
|
41.
|
TIME
|
33
|
|
42.
|
INTEREST
ON PAST DUE OBLIGATIONS; LATE CHARGE
|
33
|
|
43.
|
ENTIRE
AGREEMENT
|
34
|
|
44.
|
AUTHORITY
|
34
|
|
45.
|
RECORDING
|
34
|
|
46.
|
EXHIBITS
AND ATTACHMENTS
|
34
|
|
47.
|
REAL
ESTATE BROKERS
|
34
|
|
48.
|
ENVIRONMENTAL
MATTERS
|
35
|
|
49.
|
SIGNAGE
|
36
|
|
50.
|
SUBMISSION
OF LEASE
|
37
|
|
51.
|
PREMISES
LEASED "AS IS"
|
37
|
|
52.
|
ADDITIONAL
RENT
|
37
|
|
53.
|
LANDLORD'S
OPTION TO RELOCATE PREMISES
|
37
|
|
54.
|
WAIVER
OF RIGHT TO JURY TRIAL
|
37
|
|
55.
|
SUBMISSION
TO JURISDICTION AND VENUE
|
37
|
|
56.
|
FURNITURE
AND FIXTURES
|
38
|
|
57.
|
CAPITAL
IMPROVEMENTS
|
38
|
|
58.
|
EARLY
POSSESSION
|
38
|
OFFICE LEASE
THIS LEASE
is
made as of the 19th day of January, 2016, by and between
750 UNIVERSITY, LLC,
a California limited liability company
("Landlord")
and
ATOMERA INCORPORATED,
a Delaware corporation ("Tenant").
WITNESSETH:
Landlord leases to
Tenant and Tenant leases from Landlord those certain premises shown on Exhibit A (the "Premises") commonly known as 750
University Avenue, Suite 280, Los Gatos, California, which Landlord and Tenant hereby agree consists of approximately three thousand
three hundred ninety-six (3,396) rentable square feet. As used herein the term "Project" shall mean and include all of
the land described in Exhibit B and all the buildings, improvements, fixtures and equipment now or hereafter situated on said land.
Tenant covenants, as
a material part of the consideration of this lease, to perform and observe each and all of the terms, covenants and conditions
set forth below, and this lease is made upon the condition of such performance and observance.
1. USE
Subject to the restrictions
contained in paragraph 6, Tenant shall use the Premises for general office use and shall not use or permit the Premises to be used
for any other purpose.
2. TERM
The term shall be for
two (2) years (unless sooner terminated as hereinafter provided) and, subject to paragraph 3, shall commence on February 1, 2016
and end on January 31, 2018.
3. POSSESSION
(a) If
Landlord for any reason cannot deliver possession of the Premises to Tenant by the scheduled commencement date set forth in paragraph
2, this lease shall not be void or voidable, Landlord shall not be liable to Tenant for any loss or damage on account thereof and
Tenant shall not be liable for rent until Landlord tenders possession of the Premises to Tenant. If the term commences on a date
other than the date specified in paragraph 2 above, then the parties shall immediately execute an amendment to this lease stating
(or a letter acknowledging) the actual date of commencement and the revised expiration date. The expiration date of the term shall
be extended by the same number of days that Tenant's possession of the Premises was delayed from that set forth in paragraph 2.
Notwithstanding the above,
if Landlord is unable to deliver possession of the Premises by March 1, 2016, plus the number of days of delay caused by Tenant,
or by force majeure (defined below), then Tenant may at its option, exercisable within ten (10) days following such date, and as
its sole remedy, terminate this lease; provided, however, if Tenant fails to timely exercise such right within such ten (10) day
period, Tenant's right to terminate shall lapse. If Tenant elects to terminate this lease as provided in this paragraph, all amounts
deposited with Landlord by Tenant shall be returned to Tenant and Landlord shall not be liable to Tenant for any loss, damage or
expense resulting from Landlord's failure to deliver possession. For purposes of this lease, the term "force majeure"
shall mean acts of God, strikes, lockouts, labor troubles, inability to procure labor or materials, fire, accident, riot, civil
commotion, laws or regulations of general applicability, acts of tenants, any cause that is not due to Landlord's negligence or
willful misconduct or any cause that is beyond Landlord's reasonable control.
(b) Tenant's
inability or failure to take possession of the Premises when delivery is tendered by Landlord shall not delay the commencement
of the term of this lease or Tenant's obligation to pay rent. Tenant acknowledges that Landlord shall incur significant expenses
upon the execution of this lease, even if Tenant never takes possession of the Premises, including without limitation brokerage
commissions and fees, legal fees and other professional fees. Without limiting any of Landlord’s rights and remedies under
this lease, at law or in equity, Tenant acknowledges that all of said expenses shall be included in measuring Landlord's damages
should Tenant breach the terms of this lease.
4. MONTHLY
RENT
(a)
Basic
Rent
. Tenant shall pay to Landlord throughout the term of this lease basic rent for the Premises as follows:
|
Lease months 1-12
|
$12,395.40 per month
|
|
Lease months 13-24
|
$13,074.60 per month
|
The basic rent shall
be payable monthly in the monthly amounts specified above, and each monthly payment shall be due on or before the first day of
the first full calendar month of the term hereof and on or before the first day of each and every successive calendar month thereafter
during the term hereof. In the event the term of this lease commences on a day other than the first day of a calendar month, then
the monthly rental for the first and last fractional months of the term hereof shall be prorated based on the actual number of
days during the lease term occurring in such month divided by the total number of days in such lease month.
(b)
Direct
Expense Increases
. In addition to the basic rent, and as additional rent, Tenant shall pay to Landlord Tenant's Percentage
Share of Direct Expense Increases as provided in paragraph 5 below.
(c)
Manner
and Place of Payment
. All rent, including, without limitation, basic rent and additional rent, shall be paid to Landlord, without
deduction or offset, in lawful money of the United States of America, at the office of Landlord at 750 University Avenue, Suite
270, Los Gatos, California 95032, or to such other person or at such other place as Landlord may from time to time designate in
writing.
(d)
First
Month's Basic Rent
. Concurrent with Tenant's execution of this Lease, Tenant shall deposit with Landlord the sum of Twelve
Thousand Three Hundred Ninety-five and 40/100 Dollars ($12,395.40) to be applied against the basic rent for the first lease month
of the term.
(e)
Application
of Payments
. All payments received by Landlord from Tenant may be applied by Landlord in Landlord's sole discretion to the
oldest payment obligation(s) owed by Tenant to Landlord or in such other order as Landlord determines in Landlord's sole and absolute
discretion. No designation by Tenant, either in a separate writing or on a check or money order, shall modify this clause or have
any force or effect. Notwithstanding the above, Landlord's determination not to apply such payments to the oldest payment obligations
first as specified above shall not constitute a waiver by Landlord with respect to Landlord's claims against Tenant for such prior
payment obligation(s) of Tenant or Landlord's right to apply future payments to such prior payment obligation(s) of Tenant in such
order as Landlord may determine in Landlord's sole and absolute discretion.
(f)
Security
Deposit
. Concurrent with Tenant's execution of this lease, Tenant shall deliver to Landlord an unconditional and irrevocable
letter of credit ("Letter of Credit") in the amount of Thirty-seven Thousand One Hundred Eighty-six and 20/100 Dollars
($37,186.20) to secure the faithful performance by Tenant of all of the terms, covenants and conditions of this lease to be kept
and performed by Tenant. The Letter of Credit shall be issued by a bank (the "L-C Bank") approved by Landlord and shall
be in a form that is acceptable to Landlord in Landlord's sole discretion. The L-C Bank shall be a bank that accepts deposits,
maintains accounts, has a local Santa Clara office that will negotiate a letter of credit, and the deposits of which are insured
by the Federal Deposit Insurance Corporation. Tenant shall pay all expenses, points, or fees incurred by Tenant in obtaining the
Letter of Credit. The Letter of Credit shall be available by draft at sight, subject only to receipt by the bank of a notarized
statement from Landlord or Landlord's authorized representative stating that Landlord is entitled to draw down the Letter of Credit
under the terms of this lease. The Letter of Credit shall be transferable by Landlord and Tenant shall cooperate as necessary in
connection with any such transfer. The Letter of Credit shall provide that (i) the initial expiration date shall be not less than
one year from the date issued, (ii) the expiration date shall be automatically extended for one (1) year periods unless Landlord
is notified by the L-C Bank in writing not less than ninety (90)days prior to such expiration date that the Letter of Credit will
not be extended, and (iii) the final expiration date shall be not less than sixty (60) days after the expiration date of this lease.
If the expiration date of this lease is extended, concurrent with such lease extension, Tenant shall provide Landlord with an amendment
to the Letter of Credit or a new letter of credit, that provides for a final expiration date which is not less than sixty (60)
days after the extended expiration date of this lease. In any event, unless Tenant deposits with Landlord a cash security deposit
of like amount as permitted below, said Letter of Credit shall be renewed by Tenant for successive periods of not less than one
year each to and including the date that is sixty (60) days after the expiration date of this lease. The bank's written renewal
of the Letter of Credit shall in each case be delivered to Landlord not less than ninety (90) days prior to the expiration date
of the then outstanding Letter of Credit. Tenant's failure to so deliver, renew (including specifically but not limited to the
delivery to Landlord of such renewal not less than ninety (90) days prior to expiration of the Letter of Credit) and maintain such
Letter of Credit, shall constitute a default under this lease without any further notice. The Letter of Credit shall provide that
the L-C Bank will honor the draw request of Landlord (or Landlord's authorized agent) without inquiry as to the accuracy thereof
and regardless of whether the Tenant disputes the content of such statement or objects to such draw. The Letter of Credit shall
be fully assignable by Landlord. In the event of a transfer of Landlord's interest in the Project, Landlord may transfer the Letter
of Credit, in whole or in part (or cause a substitute Letter of Credit to be delivered, as applicable), to the transferee and thereupon
the Landlord shall, without any further agreement between the parties, be released by Tenant from all liability therefor, and it
is agreed that the provisions hereof shall apply to every transfer or assignment of the whole or any portion of said Letter of
Credit to the new landlord. Tenant covenants and warrants that it will neither assign nor encumber the Letter of Credit or any
part thereof and that neither Landlord nor its successors or assigns will be bound by any such assignment, encumbrance, attempted
assignment or attempted encumbrance.
If Tenant defaults with
respect to any provision of this lease, Landlord may (but shall not be required to) without prejudice to any other rights or remedies
of Landlord under this lease, draw down such portion of the Letter of Credit as necessary (as determined by Landlord) to (a) pay
any rent or other sum which is in default, (b) to pay or reimburse Landlord for any amount which Landlord may spend by reason of
Tenant's default or (c) to compensate Landlord for any other expense, loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of said deposit is so used, Tenant shall, within five (5) days after written demand therefor, deposit a
replacement letter of credit satisfying the terms of this paragraph 4(f) or, at Landlord's option, cash with Landlord in the amount
required to restore the security deposit to its original amount and Tenant's failure to do so shall constitute a default under
this lease.
If (i) Tenant fails to
provide the replacement letter(s) of credit or cash security deposit for any partial draw by Landlord as required above, (ii) Tenant
fails to renew or replace the Letter of Credit at least ninety (90) days prior to its expiration, or (iii) Tenant is in default
under this lease, Landlord may, without prejudice to any other remedy available to Landlord, immediately and without further notice
draw down the entire amount of the Letter of Credit to be held and/or applied by Landlord as a cash security deposit for the faithful
performance by Tenant of all of the terms, covenants and conditions of this lease to be kept and performed by Tenant. Tenant's
failure to renew or replace the Letter of Credit as and when required above shall constitute a default under this lease.
5. TENANT'S
SHARE OF INCREASED COSTS
(a) In
addition to the basic rent specified in paragraph 4 above, for each calendar year subsequent to the calendar year 2016 (the "Base
Year") Tenant shall pay to Landlord, as additional rent, Tenant's Percentage Share of the increase, if any, in direct expenses
paid or incurred by Landlord in such year over direct expenses paid or incurred by Landlord in the Base Year ("Direct Expense
Increases"). Tenant shall not be entitled to any reduction in or credit against the basic rent if direct expenses for any
year are less than the Base Year direct expenses. As used herein, "Tenant's Percentage Share" shall be five and four
hundred seventy-four thousandths percent (5.474%) (3,396÷62,042), which is Tenant’s percentage of the rentable square
footage of the building in which the Premises are located. Tenant's Percentage Share of direct expenses may be adjusted by Landlord,
in Landlord's discretion, in the event that the load factor used by Landlord to determine the rentable square footage of the Premises
changes due to reconfiguration of the Project as reasonably determined by Landlord.
As used in this lease,
"direct expenses" shall include, but not be limited to, (i) real property taxes, assessments, and other costs identified
as direct expenses in paragraph 13, (ii) insurance premiums and other costs identified as direct expenses in paragraph 11, (iii)
the cost of all utilities and services including water, gas and sewer charges, electricity, heat, air conditioning, refuse collection,
and janitorial services identified as direct expenses in paragraph 12, (iv) the costs of operating and maintaining the Common Area
identified as direct expenses in paragraph 15, including, but not limited to, the landscaping, elevators, parking lots, paving,
sidewalks, showers, and security and exterminator services, (v) the costs and expenses of maintaining and repairing the Project
identified as direct expenses in paragraph 9, including, but not limited to mechanical, electrical, plumbing and sewage systems,
windows, glazing, gutters, downspouts, heating and ventilating and air conditioning systems, walls, floor coverings, roofs, structural
elements, exterior walls and the cost of maintenance contracts and supplies, materials, equipment and tools used in connection
therewith, (vi) the cost of certain alterations identified as direct expenses in paragraph 8, (vii) amortization of such capital
improvements having a useful life greater than one year as Landlord may have installed for the purpose of reducing operating costs
and/or to comply with all laws, rules and regulations of federal, state, county, municipal and other governmental authorities now
or hereafter in effect (the cost of such capital improvement shall be amortized over its useful life, including interest at the
rate of 2% over the then current Prime Rate as published by the Wall Street Journal on the date nearest to the date that such cost
is incurred, and the monthly amortized cost thereof shall be included in direct expenses), (viii) wages, salaries, employee benefits
(including union benefits) and related expenses of all on-site and off-site personnel engaged in the operation and maintenance
of the Project (or the building in which the Premises are located) and payroll taxes applicable thereto and all costs incurred
to maintain a management office in or near the Project (including, without limitation, rental payments therefor or the reasonable
rental value of the space so occupied), (ix) supplies, materials, equipment and tools used or required in connection with the operation
and maintenance of the Project, (x) licenses, permits and inspection fees, (xi) a reasonable reserve for repairs and replacement
of equipment used in the maintenance and operation of the Project, (xii) all other operating costs incurred by Landlord in maintaining
and operating the Project, and (xiii) an amount equal to five percent (5%) of the actual expenditures for the aggregate of all
other direct expenses as compensation for Landlord's accounting and processing services. Notwithstanding anything to the contrary
herein, “direct expenses” shall not include: (1 depreciation, interest or amortization on mortgages or ground lease
payments; (2) legal fees incurred in negotiating and enforcing tenant leases; (3) brokers’ commissions; (4) the cost of providing
any service to any tenant which is not provided to all tenants, or which is paid directly by any tenant; (5) initial improvements
or alterations to tenant spaces; and (6) cost of any items for which Landlord receives reimbursement from insurance proceeds or
from any other party.
(b) During
December of each calendar year or as soon thereafter as practicable, Landlord shall give Tenant written notice of its estimate
of amounts payable under paragraph 5(a) above for the ensuing calendar year. On or before the first day of each month during each
calendar year after the Base Year, Tenant shall pay to Landlord one-twelfth (1/12) of the estimated annual amount; provided that,
if such notice is not given in December, Tenant shall continue to pay on the basis of the prior year's estimate until the month
after such notice is given. If at any time or times it appears to Landlord that the amounts payable under paragraph 5(a) above
for the current calendar year will vary substantially from its estimate, Landlord may, by written notice to Tenant, revise its
estimate for such year, and subsequent payments by Tenant for such year shall be based upon such revised estimate.
(c) Within
one hundred twenty (120) days after the close of each calendar year or as soon after such 120-day period as practicable, Landlord
shall deliver to Tenant a statement of amounts payable under paragraph 5(a) above for such calendar year. If such statement shows
an amount owing by Tenant that is less than the estimated payments for such calendar year previously made by Tenant, the excess
amount shall be credited by Landlord against the basic rent next due from Tenant. If such statement shows an amount owing by Tenant
that is more than the estimated payments for such calendar year previously made by Tenant, Tenant shall pay the deficiency to Landlord
within thirty (30) days after delivery of the statement. If Tenant fails to pay the deficiency amount within such 30-day period,
Tenant shall pay an additional ten percent (10%) of the amount due as a penalty. The respective obligations of Landlord and Tenant
under this paragraph shall survive the expiration or earlier termination of this lease.
(d) If,
for any reason other than the default of Tenant, this Lease shall terminate on a day other than the last day of a calendar year,
the amount of increase (if any) in rental payable by Tenant applicable to the calendar year in which such termination shall occur
shall be prorated based on the ratio of the number of days from the commencement of such calendar year to and including such termination
date to three hundred and sixty-five (365).
(e) If
the occupancy of the Project, during any part of any calendar year (including the Base Year) is less than one hundred percent (100%),
Landlord shall make an appropriate adjustment of the variable components of direct expenses for that year, as reasonably determined
by Landlord using sound accounting and management principles, to determine the amount of direct expenses that would have been incurred
had the Project been one hundred percent (100%) occupied. This amount shall be considered to have been the amount of direct expenses
for that calendar year. For purposes of this subparagraph 5(e), "variable components" include only those component expenses
that are affected by variations in occupancy levels.
6. RESTRICTION
ON USE
Tenant shall not do or
permit to be done in or about the Premises or the Project, nor bring or keep or permit to be brought or kept in or about the Premises
or Project, anything which is prohibited by or will in any way increase the existing rate of, or otherwise affect, fire or any
other insurance covering the Project or any part thereof, or any of its contents, or will cause a cancellation of any insurance
covering the Project or any part thereof, or any of its contents. Tenant shall not do or permit to be done anything in or about
the Premises or the Project which will constitute waste or which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Project or injure or annoy them, or use or allow the Premises to be used for any unlawful purpose,
nor shall Tenant cause, maintain or permit any nuisance in or about the Premises or the Project. No loudspeaker or other device,
system or apparatus which can be heard outside the Premises shall be used in or at the Premises without the prior written consent
of Landlord. Tenant shall not use the Premises for sleeping, washing clothes, cooking or in any manner that will cause or emit
any objectionable odor, noise or light into the adjoining premises or Common Area. Tenant shall not do anything on the Premises
that will cause damage to the Project and Tenant shall not overload the floor capacity of the Premises or the Project. No machinery,
apparatus or other appliance shall be used or operated in or on the Premises that will in any manner injure, vibrate or shake the
Premises. Landlord shall be the sole judge of whether such odor, noise, light or vibration is such as to violate the provisions
of this paragraph 6. No waste materials or refuse shall be dumped upon or permitted to remain upon any part of the Premises or
the Project except in trash containers placed inside exterior enclosures designated for that purpose by Landlord, or where otherwise
designated by Landlord; and no toxic or hazardous materials shall be disposed of through the plumbing or sewage system. No materials,
supplies, equipment, finished products or semi-finished products, raw materials or articles of any nature shall be stored or permitted
to remain outside of the building proper. No retail sales shall be made on the Premises.
7. COMPLIANCE
WITH LAWS
Tenant shall, in connection
with its use and occupation of the Premises, at its sole cost and expense, promptly observe and comply with (i) all laws, statutes,
ordinances and governmental rules, regulations and requirements of federal, state, county, municipal and other governmental authorities,
now or hereafter in effect, which shall impose any duty on Landlord or Tenant with respect to the use, occupancy or alteration
by Tenant of the Premises, (ii) with the requirements of any board of fire underwriters or other similar body now or hereafter
constituted and (iii) with any direction or occupancy certificate issued pursuant to law by any public authority; provided, however,
that no such failure shall be deemed a breach of these provisions if Tenant, immediately upon notification, commences to remedy
or rectify said failure and diligently prosecutes same to completion. The judgment of any court of competent jurisdiction or the
admission of Tenant in any action against Tenant (whether or not Landlord is a party thereto), that Tenant has violated any such
law, statute, ordinance or governmental rule, regulation, requirement, direction or provision, shall be conclusive of that fact
as between Landlord and Tenant. This lease shall remain in full force and effect notwithstanding any loss of use or other effect
on Tenant's enjoyment of the Premises by reason of any governmental laws, statutes, ordinances, rules, regulations and requirements
now or hereafter in effect. Tenant shall comply with any covenant, condition or restriction ("CC&R's") affecting
the Premises.
8. ALTERATIONS
Tenant shall not make
or suffer to be made any alteration, addition or improvement to or of the Premises or any part thereof (collectively referred to
herein as "alterations") without (i) the prior written consent of Landlord, (ii) a valid building permit issued by the
appropriate governmental authority and (iii) otherwise complying with all applicable laws, regulations and requirements of governmental
agencies having jurisdiction and with the rules, regulations and requirements of any board of fire underwriters or similar body.
Landlord's consent to any requested alteration shall not create on the part of Landlord or cause Landlord to incur any responsibility
or liability for such alteration's compliance with all laws, rules and regulations of federal, state, county, municipal and other
governmental authorities. Any alteration made by Tenant (excluding moveable furniture and trade fixtures not attached to the Premises)
shall at once become a part of the Premises and belong to Landlord. Without limiting the foregoing, all heating, lighting, electrical
(including all wiring, conduit, outlets, drops, buss ducts, main and subpanels), air conditioning, partitioning, drapery, window
covering and carpet installations made by Tenant, regardless of how attached to the Premises, together with all other alterations
that have become an integral part of the Project in which the Premises are a part, shall be and become part of the Premises and
belong to Landlord upon installation and shall not be deemed trade fixtures and, subject to Landlord's right to require removal
and restoration as specified herein, shall remain upon and be surrendered with the Premises at the termination of the lease.
If Landlord consents
to the making of any alteration by Tenant, the same shall be made by Tenant at its sole risk, cost and expense and only after Landlord's
written approval of any contractor or person selected by Tenant for that purpose, and the same shall be made at such time and in
such manner as Landlord may from time to time designate. Tenant shall, if required by Landlord, secure at Tenant's cost a completion
and lien indemnity bond for such work. Upon the expiration or sooner termination of the term, Landlord may, at its sole option,
require Tenant, at Tenant's sole cost and expense, to promptly remove any such alteration made by Tenant and designated by Landlord
to be removed, repair any damage to the Premises caused by such removal and restore the Premises to their condition prior to Tenant's
alteration. Any moveable furniture and equipment or trade fixtures remaining on the Premises at the expiration or other termination
of the term shall become the property of the Landlord; provided, however, in addition to all other remedies available to Landlord
at law or in equity, Landlord may (i) require Tenant to remove same or (ii) remove same at Tenant's cost, and Tenant shall be liable
to Landlord for all damages incurred by Landlord related thereto.
Except as set forth in
the following sentence, if during the term any alteration, addition or change of the Premises is required by law, regulation, ordinance
or order of any public authority, Tenant, at its sole cost and expense, shall promptly make the same. If during the term any alterations,
additions or changes to the Common Area or to the Project or building in which the Premises is located (including the structural
portions of the building and the building systems which are in the Premises) is required by law, regulation, ordinance or order
of any public or quasi-public authority, and, in Landlord's judgment, it is impracticable for the tenants of the Project to individually
make such alterations, additions or changes, Landlord shall make such alterations, additions or changes and the cost thereof shall
be a direct expenses charge and Tenant shall pay its percentage share of said costs to Landlord as provided in paragraphs 4 and
5.
9. REPAIR
AND MAINTENANCE
Subject to paragraph
16, Landlord shall maintain and keep in good repair the Common Area and the mechanical, electrical, plumbing and sewage systems,
windows, window frames, plate glass, glazing, elevators, gutters and downspouts, the roof, exterior walls, structural elements
and the heating, ventilating and air conditioning systems (excepting special air conditioning of Tenant's computer room(s) as set
forth below) of the Premises and the Project; provided, however, that Landlord shall not be required to perform repairs made necessary
by the negligence or abuse of such improvements or property by Tenant or its employees, agents, subtenants or permitees. The cost
of all maintenance and repairs made by Landlord pursuant to this paragraph 9, including without limitation maintenance contracts
and supplies, materials, equipment and tools used in such repairs and maintenance, shall be direct expenses and Tenant shall pay
its percentage share of such costs to Landlord as provided in paragraphs 4 and 5.
By entry hereunder Tenant
accepts the Premises as being in good and sanitary order, condition and repair. Subject to paragraphs 16 and 21, and excepting
repairs and maintenance required by this paragraph 9 to be made by Landlord, Tenant at its cost shall keep the Premises and every
part thereof in good and sanitary order, condition and repair and Tenant shall be solely responsible for the cost and maintenance
of, and electricity supplied to, any special air conditioning for Tenant's computer facilities. Further, Tenant shall repair (or,
at the option of Landlord, reimburse Landlord if Landlord elects to repair) damage to improvements or other property located on
or about the Project where such repairs are made necessary by the negligence of or abuse of such improvement or other property
by Tenant or its employees, agents, subtenants or permitees. Tenant waives all rights and benefits under California Civil Code
Sections 1932(1), 1941, and 1942 and under any similar law, statute or ordinance now or hereafter in effect.
10. LIENS
Tenant shall keep the
Premises and the Project free from any liens arising out of any work performed, materials furnished or obligations incurred by
Tenant, its agents, employees or contractors. Upon Tenant's receipt of a preliminary twenty (20) day notice filed by a claimant
pursuant to California Civil Code Section 3097, Tenant shall immediately provide Landlord with a copy of such notice. Should any
lien be recorded against the Project, Tenant shall give immediate notice of such lien to Landlord. In the event that Tenant shall
not, within ten (10) days following the imposition of such lien, cause the same to be released of record, Landlord shall have,
in addition to all other remedies provided herein and by law, the right, but no obligation, to cause the same to be released by
such means as it shall deem proper, including payment of the claim giving rise to such lien. All sums paid by Landlord for such,
and all expenses (including attorneys' fees) incurred by it in connection therewith, shall be payable to Landlord by Tenant on
demand with interest at the rate of eighteen percent (18%) per annum or the maximum rate permitted by law, whichever is less. Landlord
shall have the right at all times to post and keep posted on the Premises any notices permitted or required by law, or which Landlord
shall deem proper for the protection of Landlord, the Premises and the Project and any other party having an interest therein,
from mechanics' and materialmen's liens and like liens. Tenant shall give Landlord at least fifteen (15) days' prior notice of
the date of commencement of any construction on the Premises in order to permit the posting of such notices. In the event Tenant
is required to post an improvement bond with a public agency in connection with any work performed by Tenant on or to the Premises,
Tenant shall include Landlord as an additional obligee.
11. INSURANCE
Tenant, at its sole cost
and expense, shall keep in force during the term (i) commercial general liability and property damage insurance with a combined
single limit of at least $2,000,000 per occurrence insuring against personal or bodily injury to or death of persons occurring
in, on or about the Premises or Project and any and all liability of the insureds with respect to the Premises or arising out of
Tenant's maintenance, use or occupancy of the Premises and all areas appurtenant thereto, (ii) direct physical loss-special insurance
covering the leasehold improvements in the Premises and all of Tenant's equipment, trade fixtures, appliances, furniture, furnishings,
and personal property from time to time located in, on or about the Premises, with coverage in the amount of the full replacement
cost thereof, and (iii) Worker's Compensation Insurance as required by law, together with employer's liability coverage with a
limit of not less than $1,000,000 for bodily injury for each accident and for bodily injury by disease for each employee. Tenant's
commercial general liability and property damage insurance and Tenant's Workers Compensation Insurance shall be endorsed to provide
that said insurance shall not be cancelled or reduced except upon at least thirty (30) days prior written notice to Landlord. Further,
Tenant's commercial general liability and property damage insurance shall be primary and shall be endorsed to provide that Landlord
and McCandless Management Corporation, and their respective partners, officers, directors and employees and such other persons
or entities as directed from time to time by Landlord shall be named as additional insureds for all liability using ISO Bureau
Form CG20111185 (or a successor form) or such other endorsement form reasonably acceptable to Landlord; shall contain a severability
of interest clause and a cross-liability endorsement; shall be endorsed to provide that the limits and aggregates apply per location
using ISO Bureau Form CG25041185 (or a successor form) or such other endorsement form reasonably acceptable to Landlord; and shall
be issued by an insurance company admitted to transact business in the State of California and rated A+VIII or better in Best's
Insurance Reports (or successor report). The deductibles for all insurance required to be maintained by Tenant hereunder shall
be satisfactory to Landlord. The commercial general liability insurance carried by Tenant shall specifically insure the performance
by Tenant of the indemnification provisions set forth in paragraph 17 of this lease provided, however, nothing contained in this
paragraph 11 shall be construed to limit the liability of Tenant under the indemnification provisions set forth in said paragraph
17. If Landlord or any of the additional insureds named on any of Tenant's insurance, have other insurance which is applicable
to the covered loss on a contributing, excess or contingent basis, the amount of the Tenant's insurance company's liability under
the policy of insurance maintained by Tenant shall not be reduced by the existence of such other insurance. Any insurance carried
by Landlord or any of the additional insureds named on Tenant's insurance policies shall be excess and non-contributing with the
insurance so provided by Tenant.
Tenant shall, prior to
the commencement of the term and at least thirty (30) days prior to any renewal date of any insurance policies required to be maintained
by Tenant pursuant to this paragraph, provide Landlord with a completed Certificate of Insurance, using a form acceptable in Landlord's
reasonable judgment, attaching thereto copies of all endorsements required to be provided by Tenant under this lease. Tenant agrees
to increase the coverage or otherwise comply with changes in connection with said commercial general liability, property damage,
direct physical loss and Worker's Compensation Insurance as Landlord or Landlord's lender may from time to time require.
Landlord shall obtain
and keep in force a policy or policies of insurance covering loss or damage to the Premises and Project, in the amount of the full
replacement value thereof, providing protection against those perils included within the classification of "all risk"
insurance, with increased cost of reconstruction and contingent liability (including demolition), plus a policy of rental income
insurance in the amount of one hundred percent (100%) of twelve (12) months' rent (including sums paid as additional rent) and
such other insurance as Landlord or Landlord's lender may from time to time require. Landlord may, but shall not be obligated to,
obtain flood and/or earthquake insurance. Landlord shall have no liability to Tenant if Landlord elects not to obtain flood and/or
earthquake insurance. The cost of all such insurance purchased by Landlord, plus any charges for deferred payment of premiums and
the amount of any deductible incurred upon any covered loss within the Project, shall be direct expenses and Tenant shall pay to
Landlord its percentage share of such costs as provided in paragraphs 4 and 5. If the cost of insurance is increased due to Tenant's
use of the Premises, then Tenant shall pay to Landlord upon demand the full cost of such increase.
Landlord and Tenant each
waive any and all rights of recovery either may have against the other for real or personal property loss or damage which is or
would be covered by the property insurance policies required to be carried under this paragraph 11 or otherwise covered by insurance
existing for the benefit of the respective parties, unless such waiver of liability is not permitted and the insured party notifies
the other party in writing that such waiver is not permitted and cannot be reasonably obtained. In addition, Landlord and Tenant
each agree to cause their respective property insurance policies to include a waiver of subrogation clause or endorsement in favor
of the other, unless such waiver of subrogation is not permitted and the insured party notifies the other party in writing that
such waiver is not permitted and cannot be reasonably obtained under such policy.
If Tenant does not take
out and maintain insurance as required pursuant to this paragraph 11, and such failure continues after three (3) business days’
notice from Landlord, Landlord may, but shall not be obligated to, take out the necessary insurance and pay the premium therefor,
and Tenant shall repay to Landlord promptly on demand, as additional rent, the amount so paid. In addition, Landlord may recover
from Tenant and Tenant agrees to pay, as additional rent, any and all reasonable expenses (including reasonable attorney fees)
and damages which Landlord may sustain by reason of the failure of Tenant to obtain and maintain such insurance, it being expressly
declared that the expenses and damages of Landlord shall not be limited to the amount of the premiums thereon.
12. UTILITIES
AND SERVICE
Landlord shall furnish
to the Premises and to the Project, during reasonable hours of generally recognized business days, to be determined by Landlord,
and subject to the rules and regulations of the Project, reasonable quantities of water, gas and electricity suitable for the intended
use of the Premises and the Project, heat and air conditioning required in Landlord's reasonable judgment for the comfortable use
and occupation of the Premises and the Project, refuse collection and janitorial services. Tenant agrees that at all times it will
cooperate fully with Landlord and abide by all regulations and requirements that Landlord may prescribe for the proper functioning
and protection of the heating, ventilating and air conditioning systems. The cost of all utilities and services furnished by Landlord
to the Premises and to the Project shall be direct expenses and Tenant shall pay its percentage share of such costs to Landlord
as provided in paragraphs 4 and 5.
Landlord shall not be
liable for, and Tenant shall not be entitled to any abatement or reduction of rent by reason of, Landlord's failure to furnish
any of the foregoing services when such failure is caused by accident, breakage, repairs, strikes, lockouts or other labor disturbances
or labor disputes of any character, governmental moratoriums, regulations or other governmental actions, or by any other cause,
similar or dissimilar, beyond the reasonable control of Landlord. In addition, Tenant shall not be relieved from the performance
of any covenant or agreement in this lease because of any such failure, and no eviction of Tenant shall result from such failure.
Notwithstanding anything
to the contrary in this lease, if: (a) any services or utilities are interrupted or discontinued due to Landlord's gross negligence
or willful misconduct and the Premises are untenantable as a result of such interruption or discontinuance, and (b) Tenant shall
have given written notice respecting such interruption or discontinuance to Landlord, and Landlord shall have failed to cure such
interruption or discontinuance within three (3) business days after receiving such notice, then Tenant shall as its sole remedy
against Landlord, be entitled to an equitable abatement of rent to the extent that Tenant's use of the Premises is thereafter prevented
by such interruption or discontinuance; provided, however, if such cure by its nature cannot be completed within such three (3)
day period and Landlord commences such cure within said three (3) day period and thereafter uses commercially reasonable efforts
to complete such cure, Landlord's time for performance shall be so extended and Tenant shall not be entitled to any rental abatement
during such extended period.
Tenant will not, without
the written consent of Landlord, use any apparatus or device in the Premises (including, without limitation, electronic data processing
machines, punch card machines or machines using current in excess of 110 volts) which will in any way increase the amount of electricity,
water or air conditioning usually furnished or supplied to premises in the Project being used as general office space, or connect
with electric current (except through existing electrical outlets in the Premises) or with water pipes any apparatus or device
for the purpose of using electric current or water. If Tenant shall require water or electric current in excess of that usually
furnished or supplied to premises in the Project being used as general office space, then Tenant shall first obtain the written
consent of Landlord, which consent shall not be unreasonably withheld, and Tenant shall pay to Landlord promptly on demand, as
additional rent, the full cost of such excess use. Landlord may cause an electric current or water meter to be installed in the
Premises in order to measure the amount of electric current or water consumed for any such excess use. In the event it is reasonably
determined that Tenant is or was using a materially excess amount of a utility, the cost of any such meter and of the installation,
maintenance and repair thereof, and all charges for such excess water and electric current consumed (as shown by meters and at
the rates then charged by the furnishing public utility) plus any additional expense incurred by Landlord in keeping account of
electric current or water so consumed, shall be paid by Tenant, and Tenant agrees to pay Landlord therefor promptly upon demand
by Landlord. Whenever heat generating machines or equipment are used in the Premises by Tenant which affect the temperature otherwise
maintained by the air conditioning system, Landlord shall have the right to install supplementary air conditioning units in the
Premises and the cost thereof, including the cost of installation and the cost of operation and maintenance thereof, shall be paid
by Tenant to Landlord upon demand by Landlord as additional rent.
13. TAXES
AND OTHER CHARGES
All real estate taxes
and assessments and other taxes, fees and charges of every kind or nature, foreseen or unforeseen, which are levied, assessed or
imposed upon Landlord and/or against the Premises, building, Common Area or Project or any part thereof by any federal, state,
county, regional, municipal or other governmental or quasi-governmental or special district authority, together with any increases
therein whether resulting from increased rate and/or valuation, shall be a direct expense and Tenant shall pay its percentage share
of such costs to Landlord as provided in paragraphs 4 and 5. By way of illustration and not limitation, "other taxes, fees
and charges" as used herein include any and all taxes payable by Landlord (other than state and federal personal or corporate
income taxes measured by the net income of Landlord from all sources, premium taxes and Landlord's franchise, estate, inheritance
and gift taxes), whether or not now customary or within the contemplation of the parties hereto, (i) upon, allocable to, or measured
by the rent payable hereunder, including, without limitation, any gross income or excise tax levied by the local, state or federal
government with respect to the receipt of such rent, (ii) upon or with respect to the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any part thereof, (iii) upon or measured by the
value of Tenant's personal property or leasehold improvements located in the Premises, (iv) upon this transaction or any document
to which Tenant is a party creating or transferring an interest or estate in the Premises, (v) upon or with respect to vehicles,
parking or the number of persons employed on or about the Project, and (vi) any tax, license, franchise fee or other imposition
upon Landlord which is otherwise measured by or based in whole or in part upon the Project or any portion thereof. If Landlord
contests any such tax, fee or charge, the cost and expense incurred by Landlord thereby (including, but not limited to, costs of
attorneys and experts) shall also be direct expenses and Tenant shall pay its percentage share of such costs to Landlord as provided
in paragraphs 4 and 5. In the event the Premises and any improvements installed therein by Tenant or Landlord are valued by the
assessor disproportionately higher than those of other tenants in the building or Project or in the event alterations or improvements
are made to the Premises, Tenant's percentage share of such taxes, assessments, fees and/or charges shall be readjusted upward
accordingly and Tenant agrees to pay such readjusted share. Such determination shall be made by Landlord from the respective valuations
assigned in the assessor's work sheet or such other information as may be reasonably available and Landlord's determination thereof
shall be conclusive.
Tenant agrees to pay,
before delinquency, any and all taxes levied or assessed during the term hereof upon Tenant's equipment, furniture, fixtures and
other personal property located in the Premises, including carpeting and other property installed by Tenant notwithstanding that
such carpeting or other property has become a part of the Premises. If any of Tenant's personal property shall be assessed with
the Project, Tenant shall pay to Landlord, as additional rent, the amounts attributable to Tenant's personal property within ten
(10) days after receipt of a written statement from Landlord setting forth the amount of such taxes, assessments and public charges
attributable to Tenant's personal property.
14. ENTRY
BY LANDLORD
Landlord reserves, and
shall at all reasonable times have, the right to enter the Premises upon one (1) business day’s prior notice to Tenant (except
in emergencies) (i) to inspect the Premises, (ii) to supply services to be provided by Landlord hereunder, (iii) to show the Premises
to prospective purchasers, lenders or tenants and to put 'for sale' or 'for lease' signs thereon, (iv) to post notices required
or allowed by this lease or by law, (v) to alter, improve or repair the Premises and any portion of the Project, and (vi) to erect
scaffolding and other necessary structures in or through the Premises or the Project where reasonably required by the character
of the work to be performed. Landlord shall not be liable in any manner for any inconvenience, disturbance, loss of business, nuisance
or other damage arising from Landlord's entry and acts pursuant to this paragraph 14 and Tenant shall not be entitled to an abatement
or reduction of rent if Landlord exercises any rights reserved in this paragraph 14. For each of the foregoing purposes, Landlord
shall at all times have and retain a key with which to unlock all of the doors in, on and about the Premises (excluding Tenant's
vaults, safes and similar areas designated in writing by Tenant in advance), and Landlord shall have the right to use any and all
means which Landlord may deem proper to open said doors in an emergency in order to obtain entry to the Premises. Any entry by
Landlord to the Premises pursuant to this paragraph 14 shall not under any circumstances be construed or deemed to be a forcible
or unlawful entry into or a detainer of the Premises or an eviction, actual or constructive, of Tenant from the Premises or any
portion thereof.
15. COMMON
AREA; PARKING
Subject to the terms
and conditions of this lease and such rules and regulations as Landlord may from time to time prescribe, Tenant and Tenant's employees
and invitees shall, in common with other occupants of the Project, and their respective employees and invitees and others entitled
to the use thereof, have the nonexclusive right to use those areas of the Common Area designated by Landlord for the general use
and convenience of the occupants of the Project (which areas and facilities shall include, but not be limited to, common lobbies,
corridors, restrooms and showers; telephone, electrical, janitorial and mechanical rooms; elevators, stairwells, vertical duct
shafts; sidewalks; parking, refuse, landscape and plaza areas; roofs; building exteriors; electrical, mechanical, plumbing and
HVAC systems; and storage areas), which areas and facilities are referred to herein as "Common Area". This right shall
terminate upon the termination of this lease.
Landlord reserves the
right from time to time to make changes in the shape, size, location, amount and extent of the Common Area. Landlord shall also
have the right at any time to change the name, number or designation by which the Project is commonly known. Landlord further reserves
the right to promulgate such reasonable rules and regulations relating to the use of the Common Area, and any part thereof, as
Landlord may deem appropriate for the best interests of the occupants of the Project. The rules and regulations shall be binding
upon Tenant upon delivery of a copy of them to Tenant and Tenant shall abide by them and cooperate in their observance. Such rules
and regulations may be amended by Landlord from time to time, with or without advance notice.
Tenant shall have the
nonexclusive use of thirteen (13) parking spaces in the Common Area as designated from time to time by Landlord. Landlord reserves
the right at its sole option to assign and label parking spaces, but it is specifically agreed that Landlord is not responsible
for policing any such parking spaces. Tenant shall not at any time park or permit the parking of Tenant's trucks or other vehicles,
or the trucks or other vehicles of others, adjacent to loading areas so as to interfere in any way with the use of such areas;
nor shall Tenant at any time park or permit the parking of Tenant's vehicles or trucks, or the vehicles or trucks of Tenant's suppliers
or others, in any portion of the Common Area not designated by Landlord for such use by Tenant. Tenant shall not park or permit
any inoperative vehicle or equipment to be parked on any portion of the Common Area.
Landlord shall operate,
manage and maintain the Common Area in good condition. The manner in which the Common Area shall be operated, managed and maintained
and the expenditures for such operation, management and maintenance shall be at the sole discretion of Landlord. The cost of such
maintenance, operation and management of the Common Area, together with the costs of security and exterminator services and salaries
and employee benefits (including union benefits) of on-site and accounting personnel engaged in such maintenance and operations
management, shall be a direct expense and Tenant shall pay to Landlord its percentage share of such costs as provided in paragraphs
4 and 5.
16. DAMAGE
BY FIRE; CASUALTY
In the event the Premises
are damaged by any casualty which is covered under an insurance policy required to be maintained by Landlord pursuant to paragraph
11, Landlord shall be entitled to the use of all insurance proceeds and shall repair such damage as soon as reasonably possible
and this lease shall continue in full force and effect.
In the event the Premises
are damaged by any casualty not covered under an insurance policy required to be maintained pursuant to paragraph 11, Landlord
may, at Landlord's option, either (i) repair such damage, at Landlord's expense, as soon as reasonably possible, in which event
this lease shall continue in full force and effect, or (ii) give written notice to Tenant within thirty (30) days after the date
of the occurrence of such damages of Landlord's intention to cancel and terminate this lease as of the date of the occurrence of
the damages; provided, however, that if such damage is caused by an act or omission of Tenant or its agent, servants or employees,
then Tenant shall repair such damage promptly at its sole cost and expense. In the event Landlord elects to terminate this lease
pursuant hereto, Tenant shall have the right within ten (10) days after receipt of the required notice to notify Landlord in writing
of Tenant's intention to repair such damage at Tenant's expense, without reimbursement from Landlord, in which event this lease
shall continue in full force and effect and Tenant shall proceed to make such repairs as soon as reasonably possible. If Tenant
does not give such notice within the ten (10) day period, this lease shall be cancelled and terminated as of the date of the occurrence
of such damage. Under no circumstances shall Landlord be required to repair any injury or damage to (by fire or other cause), or
to make any restoration or replacement of, any of Tenant's personal property, trade fixtures or property leased from third parties,
whether or not the same is attached to the Premises.
If the Premises are totally
destroyed during the term from any cause (including any destruction required by any authorized public authority), whether or not
covered by the insurance required under paragraph 11, this lease shall automatically terminate as of the date of such total destruction;
provided, however, that if the Premises can reasonably and lawfully be repaired or restored within twelve (12) months of the date
of destruction to substantially the condition existing prior to such destruction and if the proceeds of the insurance payable to
the Landlord by reason of such destruction are sufficient to pay the cost of such repair or restoration, then the said insurance
proceeds shall be so applied, Landlord shall promptly repair and restore the Premises and this lease shall continue, without interruption,
in full force and effect. If the Premises are totally destroyed during the last twelve (12) months of the term, Landlord may at
Landlord's option cancel and terminate this lease as of the date of occurrence of such damage by giving written notice to Tenant
of Landlord's election to do so within thirty (30) days after the occurrence of such damage.
Rent payable under this
Lease shall be abated proportionately during any period in which, by reason of any casualty, there is interference with the operation
of Tenant’s business in the Premises, in proportion to the amount of rentable area of the Premises that is not available
for Tenant’s use due to such interference. Such abatement shall continue for the period commencing with such damage or destruction
and ending with the date that business may be fully resumed on the Premises. Tenant shall have no claim against Landlord for any
damage, loss or expense suffered by reason of any such damage, destruction, repair or restoration. The parties waive the provisions
of California Civil Code Sections 1932(2) and 1933(4) (which provisions permit the termination of a lease upon destruction of the
leased premises), and hereby agree that the provisions of this paragraph 16 shall govern in the event of such destruction.
Landlord and Tenant shall
each have the right to terminate this lease if (a) a casualty causing damage to the Premises or access to the Premises cannot be
repaired within one hundred twenty (120) days from the date of damage of destruction as reasonably estimated by Landlord within
ten (10) business days after the date of such damage, or (b) any substantial damage to thirty percent (30%) or more of the Premises
and such portion is not reasonably usable by Tenant during the last twelve (12) months of the term of this lease.
17. INDEMNIFICATION
Landlord shall not be
liable to Tenant and Tenant hereby waives all claims against Landlord for any injury to or death of any person or damage to or
destruction of property in or about the Premises or the Project by or from any cause whatsoever except the failure of Landlord
to perform its obligations under this lease where such failure has persisted for an unreasonable period of time after notice of
such failure. Without limiting the foregoing, Landlord shall not be liable to Tenant for any injury to or death of any person or
damages to or destruction of property by reason of, or arising from, any latent defect in the Premises or Project or the act or
negligence of any other tenant of the Project. Tenant shall immediately notify Landlord of any defect in the Premises or Project.
This exculpation clause shall not apply to claims against Landlord to the extent that a final judgment of a court of competent
jurisdiction establishes that the injury, loss, damage, or destruction was proximately caused by Landlord's fraud, willful injury
to a person or property, or violation of law.
Except as to injury to
persons or damage to property the principal cause of which is the failure by Landlord to observe any of the terms and conditions
of this lease, Tenant shall hold Landlord harmless from and indemnify and defend Landlord against any claim, liability, loss, damage
or expense (including attorney fees) arising out of any injury to or death of any person or damage to or destruction of property
occurring in, on or about the Premises from any cause whatsoever or on account of the use, condition, occupational safety or occupancy
of the Premises. Tenant shall further hold Landlord harmless from and indemnify and defend Landlord against any claim, liability,
loss, damage or expense (including attorney fees) arising (i) from Tenant's use of the Premises or from the conduct of its business
or from any activity or work done, permitted or suffered by Tenant or its agents or employees in or about the Premises or Project,
(ii) out of the failure of Tenant to observe or comply with Tenant's obligation to observe and comply with laws or other requirements
as set forth in paragraph 7, (iii) by reason of Tenant's use, handling, storage, or disposal of toxic or hazardous materials or
waste, (iv) by reason of any labor or service performed for, or materials used by or furnished to, Tenant or any contractor engaged
by Tenant with respect to the Premises, or (v) from any other act, neglect, fault or omission of Tenant or its agents or employees.
The provisions of this
paragraph 17 shall survive the expiration or earlier termination of this lease.
18. ASSIGNMENT
AND SUBLETTING
Tenant shall not voluntarily
assign, encumber or otherwise transfer its interest in this lease or in the Premises, or sublease all or any part of the Premises,
or allow any other person or entity to occupy or use all or any part of the Premises, without first obtaining Landlord's written
consent, which consent shall not be unreasonably withheld, and otherwise complying with the requirements of this paragraph 18.
Any assignment, encumbrance, sublease or other such transfer ("Transfer") without Landlord's written consent, shall constitute
a default. The proposed assignee, subtenant or other transferee is referred to herein as the "Transferee". Reasonable
grounds for denying consent to a proposed Transfer include, without limitation, any of the following:
(a) Transferee's
character, reputation, credit history, or business is not consistent with the character or quality of the Project;
(b) Transferee
would be a significantly less prestigious occupant of the Project than Tenant;
(c) Transferee
is either a government agency or an instrumentality of one;
(d) Transferee's
intended use of the Premises is inconsistent with the permitted use specified in this lease or will materially and adversely affect
Landlord's interest;
(e) Transferee's
financial condition is or may be inadequate to support the lease obligations of Transferee under the Transfer;
(f) The
Transfer would cause Landlord to violate another lease or agreement to which Landlord is a party or would give another tenant in
the Project the right to cancel its lease or the Transferee is a primary competitor of another tenant leasing space in the Project
and such tenant objects to such Transfer;
(g) Transferee
occupies space in the Project and is negotiating with Landlord to lease space in the Project, or has negotiated with Landlord during
the six (6) months immediately preceding notice of the proposed Transfer to Landlord;
(h) Transferee
does not intend to occupy the entire Premises and conduct business there for a substantial portion of the term of the Transfer;
or
(i) The
rent charged by Tenant to Transferee during the term of the Transfer, using a present-value analysis, is less than ninety-five
percent (95%) of the rent then being quoted by Landlord for comparable space in the Project for a comparable term, using a present-value
analysis.
If Tenant desires to
Transfer all or any portion of the Premises, Tenant shall give Landlord written notice ("Transfer Notice") thereof, specifying
the projected commencement date of the proposed Transfer (which date shall be not less than thirty (30) days nor more than ninety
(90) days after the date of Landlord's receipt of such notice), the portion of the Premises which is the subject of the proposed
Transfer (the "Subject Space"), a description of any planned alterations or improvements to the Subject Space, the terms
and conditions of the proposed Transfer (including the rent to be paid by the Transferee and any and all other consideration to
be given by the Transferee), the name, address and telephone number of the Transferee, and a detailed calculation of the Transfer
Premium (certified by Tenant's chief financial officer) to be paid as provided below. Tenant shall further provide Landlord with
such other information concerning the Transferee as requested by Landlord. Landlord shall have the right to communicate with the
Transferee to discuss the terms of the proposed Transfer, to discuss and negotiate, if Landlord desires, the terms of a direct
lease between Landlord and Transferee, or any other matter and to enter into a direct lease agreement with Transferee as provided
below and failure of Transferee to meet with Landlord and to negotiate in good faith the terms of a direct lease with Landlord
shall constitute grounds for Landlord's refusal to consent to the proposed Transfer. For a period of thirty (30) days after Landlord's
receipt of the Transfer Notice, Landlord shall have the option, exercisable by delivering written notice to Tenant, to terminate
this lease for the Subject Space or for the entire Premises, in Landlord's discretion, as of the date specified in Landlord's written
notice to Tenant, which date shall not be less than thirty (30) days nor more than ninety (90) days after the date of Landlord's
written notice to Tenant. If Landlord exercises its option to terminate this lease as provided in the foregoing sentence, Landlord
may, if it so elects, enter into a new lease for the Premises or any portion thereof with the Transferee or any other third party
on such terms as Landlord and the Transferee or other third party may agree; in such event, Tenant shall not be entitled to any
portion of the profit, if any, which Landlord may realize on account of such termination and reletting. If Landlord exercises its
option to terminate this lease with respect to the Subject Space only (i.e., less than the entire Premises), then Tenant shall
continue to be obligated under this lease as to the remaining space (i.e., the Premises less the Subject Space) and basic rent
and direct expenses payable by Tenant under this lease shall be adjusted as follows: (i) the basic rent amount(s) specified in
paragraph 4 of this lease shall be multiplied by a fraction, the numerator of which is the square feet of the Premises retained
by Tenant after Landlord's recapture of the Subject Space and the denominator of which is the total square feet of the Premises
before Landlord's recapture; (ii) Tenant's Percentage Share of direct expenses as provided in paragraph 5 of this lease shall be
reduced to reflect Tenant's percentage share based on the square feet of the Premises retained by Tenant after Landlord's recapture.
This lease as so amended shall continue thereafter in full force and effect. Either party may require written confirmation of the
amendments to this lease necessitated by Landlord's recapture of the Subject Space. If Landlord recaptures the Subject Space, Landlord
shall, at Landlord's sole expense, construct any partitions required to segregate the Subject Space from the remaining Premises
retained by Tenant. Tenant shall, however, pay for painting, covering, or otherwise decorating the surfaces of the partitions facing
the remaining Premises retained by Tenant.
If Landlord does not
elect to terminate this lease as provided hereinabove in this paragraph 18 and if Landlord consents in writing to the proposed
Transfer, Tenant shall be free to make such Transfer subject to the following conditions: (i) any Transfer shall be on the same
terms set forth in the Transfer Notice given to Landlord; (ii) no Transfer shall be valid and no Transferee shall take possession
of the Subject Space until an executed counterpart of such Transfer has been delivered to Landlord; (iii) no Transferee shall have
a further right to assign, sublet or transfer; (iv) eighty percent (80%) of the Bonus Rent (as defined below), if any, shall be
paid by Tenant to Landlord monthly as additional rent under this lease without affecting or reducing any other obligation of Tenant
hereunder (such amounts are referred to herein as the "Transfer Premium"); (v) no Transfer shall release Tenant of Tenant's
obligation or alter the primary liability of Tenant to pay the rent and to perform all other obligations to be performed by Tenant
hereunder; (vi) any assignee or subtenant must expressly agree to assume and perform all of the covenants and conditions of Tenant
under this lease; (vii) any modification or amendment of any such Transfer shall be deemed to be a separate Transfer transaction
and shall be subject to Landlord's right to recapture, Landlord's prior written consent and the other terms and provisions of this
paragraph 18; and (viii) any sublease must specifically state (and, if it does not, it will be deemed to specifically state) that
at Landlord's election, in Landlord's sole and absolute discretion, the subtenant will attorn to Landlord and recognize Landlord
as Tenant's successor under the sublease for the balance of the sublease term if this lease is surrendered by Tenant or terminated
by reason of Tenant's default, provided, however, that Landlord shall not be (a) liable for any failure of Tenant as Sublandlord
to perform any obligations of Sublandlord under the Sublease which have accrued prior to the date on which Landlord elects to require
attornment, (b) subject to any offsets, defenses, abatements or counterclaims which shall have accrued in favor of Subtenant against
Sublandlord prior to the date that Landlord succeeds to Sublandlord's interest, (c) liable for the return of rental security deposits,
if any, paid by Subtenant to Sublandlord in accordance with the Sublease unless such sums are actually received by Landlord, (d)
bound by any payment of rents, additional rents or other sums which Subtenant may have paid more than one (1) month in advance
to Sublandlord unless (1) such sums are actually received by Landlord or (2) such prepayment shall have been expressly approved
of by Landlord or (e) bound by any agreement terminating or amending or modifying the rent, term, commencement date or other material
term of the Sublease, or any voluntary surrender of the premises demised under the Sublease, made without Landlord's prior written
consent prior to the date that Landlord succeeds to Sublandlord's interest. Tenant shall pay to Landlord promptly upon demand as
additional rent, Landlord's actual attorneys' fees and other costs incurred for reviewing, processing or documenting any requested
Transfer, whether or not Landlord's consent is granted. Tenant shall not be entitled to assign this lease or sublease all or any
part of the Premises (and any attempt to do so shall be voidable by Landlord) during any period in which Tenant is in default under
this lease.
For purposes of this
paragraph 18, the term "Bonus Rent" shall mean the Transfer Payments (as defined below) less the amounts specified in
(A) and (B), where (A) is a monthly credit amount equal to the sum of (1) and (2) divided by the total number of months in the
term of the Transfer, where (1) is the actual out-of-pocket cost of building standard leasehold improvements paid by Tenant to
third party contractors and constructed specifically for the exclusive benefit of such Transferee in the Subject Space, but specifically
excluding any costs related to (i) the initial tenant improvements to be constructed in the Premises pursuant to the terms of this
lease, if any, (ii) the installation, modification and/or removal of security systems, data cabling and telephone and communication
systems, and (iii) the installation, modification and/or removal of any furniture, fixtures or equipment or any personal property,
and (2) is the amount of broker fees paid by Tenant in connection with such Transfer, and (B) is a monthly credit amount equal
to the monthly basic rent and direct expenses which Tenant is obligated to pay Landlord under this lease during the term of such
Transfer (prorated in the case of a sublease to reflect the obligations allocable to that portion of the Premises subject to such
sublease). As a condition precedent to allowing the deduction for the cost of leasehold improvements specified above, Tenant shall
furnish a complete statement, certified by an independent certified public accountant or Tenant's chief financial officer, describing
in detail the computation of any Transfer Premium that Tenant has derived or will derive from the Transfer. Landlord or Landlord's
agent shall have the right to review Tenant's books and records relating to the calculation of Bonus Rent, including the right
to have an independent certified public accountant review same. If Landlord's independent certified public accountant finds that
the Bonus Rent for any Transfer has been understated, Tenant shall, within thirty (30) days after demand, pay the deficiency and
Landlord's costs of that review.
For purposes of this
paragraph 18, the term "Transfer Payments" shall mean any and all sums or other consideration payable to or received
by Tenant as a result of or in connection with a Transfer whether denominated rent or otherwise, including any amounts payable
to Tenant for (x) services to be provided to Transferee by Tenant or (y) the sale, lease or use of Tenant's furniture, fixtures
and equipment or other personal property.
If Tenant is a partnership,
a withdrawal or change, voluntary or involuntary or by operation of law, of any general partner or the dissolution of the partnership
shall be deemed an assignment of this lease subject to all the conditions of this paragraph 18. If Tenant is a corporation any
dissolution, merger, consolidation or other reorganization of Tenant or the sale or other transfer of a controlling percentage
of the capital stock of Tenant or the sale of more than fifty percent (50%) of the value of Tenant's assets shall be an assignment
of this lease subject to all the conditions of this paragraph 18. The term "controlling percentage" means the ownership
of, and the right to vote, stock possessing more than 50% of the total combined voting power of all classes of Tenant's capital
stock issued, outstanding and entitled to vote. This subparagraph of this paragraph 18 shall not apply if Tenant is (i) a corporation
the stock of which is traded on the New York Stock Exchange, the American Stock Exchange or NASDAQ, or (ii) a corporation which
sells its shares in connection with an initial public offering of stock which is to be traded on the New York Stock Exchange, the
American Stock Exchange or NASDAQ.
The acceptance of rent
by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. Consent to one Transfer
shall not be deemed consent to any subsequent Transfer. In the event of default by any Transferee of Tenant or any successor of
Tenant in the performance of any of the terms hereof, Landlord may proceed directly against Tenant without the necessity of exhausting
remedies against such Transferee or successor. Landlord may consent to subsequent Transfers of this lease or amendments or modifications
to this lease with Transferees of Tenant, without notifying Tenant, or any successor of Tenant, and without obtaining its or their
consent thereto and such action shall not relieve Tenant of liability under this lease.
No interest of Tenant
in this lease shall be assignable by operation of law (including, without limitation, the transfer of this lease by testacy or
intestacy). Each of the following acts shall be considered an involuntary assignment: (i) if Tenant is or becomes bankrupt or insolvent,
makes an assignment for the benefit of creditors or institutes a proceeding under the Bankruptcy Act in which Tenant is the bankrupt;
or, if Tenant is a partnership or consists of more than one person or entity, if any partner of the partnership or other person
or entity is or becomes bankrupt or insolvent, or makes an assignment for the benefit of creditors; (ii) if a writ of attachment
or execution is levied on this lease; or (iii) if, in any proceeding or action to which Tenant is a party, a receiver is appointed
with authority to take possession of the Premises. An involuntary assignment shall constitute a default by Tenant and Landlord
shall have the right to elect to terminate this lease, in which case this lease shall not be treated as an asset of Tenant.
Tenant immediately and
irrevocably assigns to Landlord, as security for Tenant's obligations under this lease, all rent or other consideration from any
Transfer of all or a part of the Premises as permitted by this lease, and Landlord, as assignee and as attorney-in-fact for Tenant,
or a receiver of Tenant appointed on Landlord's application, may collect such rent or other consideration and apply it toward Tenant's
obligations under this lease and any Transferee agrees to make such payments directly to Landlord upon Landlord's written request;
provided that, until the occurrence of a default by Tenant, Tenant shall have the right to collect such rent, subject to promptly
forwarding to Landlord any portion thereof to which Landlord is entitled pursuant to this paragraph 18. Neither the making of such
written request by Landlord for direct payment from a subtenant nor the receipt by Landlord of such direct payments from any subtenant
shall cause Landlord to assume any of Tenant's duties, obligations and/or liabilities under the sublease nor shall such event impose
upon Landlord the duty or obligation to honor the sublease nor subsequently to accept the subtenant's attornment.
19. DEFAULT
The occurrence of any
of the following shall constitute a default by Tenant: (i) failure of Tenant to pay any rent or other sum within five (5) days
of when due; (ii) abandonment of the Premises; (iii) failure of Tenant to deliver to Landlord any instrument, assurance, financial
statement, subordination agreement or certificate of estoppel required under this lease within the time period specified for such
performance if the failure continues for five (5) days after written notice of the failure from Landlord to Tenant; (iv) failure
of Tenant to deliver to Landlord any letter of credit (or renewal or replacement letter of credit) required under this lease (if
applicable) on or before the date that such delivery is required; (v) failure of Tenant to restore the security deposit to the
amount required under paragraph 4(e) of this lease within five (5) days after written demand from Landlord of the amount required
for such restoration; or (vi) failure of Tenant to perform any other obligation under this lease if the failure to perform is not
cured within fifteen (15) days after written notice thereof has been given to Tenant, except in the case of an emergency or dangerous
condition, in which case Tenant's time to perform shall be that time period which is reasonable under the circumstances, but not
more than fifteen (15) days. The notice referred to in clauses (iii), (iv), (v) and (vi) above shall specify the obligations Tenant
has failed to perform. No notice shall be deemed a forfeiture or termination of this lease unless Landlord so elects in the notice.
No notice shall be required in the event of abandonment of the Premises. The notices required in clauses (iii), (iv), (v) and (vi)
above shall replace rather than supplement any equivalent or similar statutory notice, including any notices required by Code of
Civil Procedure Section 1161 or any similar or successor statute. When a statute requires service of a notice in a particular manner,
service of that notice (or a similar notice required by this lease) in the manner required by paragraph 37 of this lease shall
replace and satisfy the statutory service-of-notice procedures, including those required by Code of Civil Procedure Section 1162
or any similar or successor statute.
In addition to the above,
the occurrence of any of the following events shall also constitute a default by Tenant: (i) Tenant fails to pay its debts as they
become due or admits in writing its inability to pay its debts, or makes a general assignment for the benefit of creditors or (ii)
the filing of any petition by or against Tenant under any chapter of the Bankruptcy Act, or the adjudication of Tenant as a bankrupt
or insolvent; or the appointment of a receiver or trustee to take possession of all or substantially all of the assets of Tenant,
or a general assignment by Tenant for the benefit of creditors; or any other action taken or suffered by Tenant under any State
of Federal insolvency or bankruptcy act and the continuation thereof for more than ninety (90) days.
In the event of a default
by Tenant beyond all applicable notice and cure periods provided above or elsewhere in this lease, then Landlord, in addition to
any other rights and remedies of Landlord at law or in equity, shall have the right either to terminate Tenant's right to possession
of the Premises (and thereby terminate this lease) or, from time to time and without termination of this lease, to relet the Premises
or any part thereof for the account and in the name of Tenant for such term and on such terms and conditions as Landlord in its
sole discretion may deem advisable, with the right to make alterations and repairs to the Premises. Notwithstanding any abandonment
or surrender of the Premises by Tenant and/or any termination of Tenant's right to possession of the Premises prior to the expiration
date of this lease, with or without Landlord's consent or acceptance, such abandonment, surrender or early termination shall not
constitute a waiver by Landlord of any of Landlord's rights or remedies under this lease in the event of a default by Tenant as
provided in this paragraph 19.
Should Landlord elect
to keep this lease in full force and effect, Landlord shall have the right to enforce all of Landlord's rights and remedies under
this lease, including but not limited to the right to recover and to relet the Premises and such other rights and remedies as Landlord
may have under California Civil Code Section 1951.4, which Section provides that the landlord may continue the Lease in effect
after the tenant's breach and abandonment and recover rent as it becomes due, when the tenant has the right to sublet or assign,
subject only to reasonable limitations (or successor Code section) or any other California statute. If Landlord relets the Premises,
then Tenant shall pay to Landlord, as soon as ascertained, the costs and expenses incurred by Landlord in such reletting and in
making alterations and repairs. Rentals received by Landlord from such reletting shall be applied (i) to the payment of any indebtedness
due hereunder, other than basic rent and direct expenses, from Tenant to Landlord; (ii) to the payment of the cost of any repairs
necessary to return the Premises to good condition normal wear and tear excepted, including the cost of alterations and the cost
of storing any of Tenant's property left on the Premises at the time of reletting; and (iii) to the payment of basic rent or direct
expenses due and unpaid hereunder. The residue, if any, shall be held by Landlord and applied in payment of future rent or damages
in the event of termination as the same may become due and payable hereunder and the balance, if any at the end of the term of
this lease, shall be paid to Tenant. Should the basic rent and direct expenses received from time to time from such reletting during
any month be less than that agreed to be paid during that month by Tenant hereunder, Tenant shall pay such deficiency to Landlord.
Such deficiency shall be calculated and paid monthly. No such reletting of the Premises by Landlord shall be construed as an election
on its part to terminate this lease unless a written notice of such intention is given to Tenant or unless the termination hereof
is decreed by a court of competent jurisdiction. Notwithstanding any such election by Landlord to keep the lease in effect after
a default by Tenant and/or reletting without termination, Landlord may at any time thereafter elect to terminate this lease for
such previous breach, provided it has not been cured and upon such termination Landlord shall have the rights and remedies set
forth in the following paragraph.
Should Landlord at any
time terminate this lease for any breach, in addition to any other remedy it may have, it shall have the immediate right of entry
and may remove all persons and property from the Premises and shall have all the rights and remedies of a landlord provided by
California Civil Code Section 1951.2 or any successor code section. Upon such termination, in addition to all its other rights
and remedies, Landlord shall be entitled to recover from Tenant all damages it may incur by reason of such breach, including the
cost of recovering the Premises and including (i) the worth at the time of award of the unpaid rent which had been earned at the
time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided;
(iii) the worth at the time of the award of the amount by which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; and (iv) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this lease or which in the
ordinary course of events would be likely to result therefrom. The "worth at the time of award" of the amounts referred
to in (i) and (ii) above is computed by allowing interest at the rate of twelve percent (12%) per annum but in no case greater
than the maximum rate of interest permitted by law. The "worth at the time of award" of the amount referred to in (iii)
above shall be computed by discounting such amount at the discount rate of the federal reserve bank of San Francisco at the time
of award plus one percent (1%). Tenant waives the provisions of Section 1179 of the California Code of Civil Procedure (which Section
allows Tenant to petition of court of competent jurisdiction for relief against forfeiture of this lease). Property removed from
the Premises may be stored in a public or private warehouse or elsewhere at the sole cost and expense of Tenant. In the event that
Tenant shall not immediately pay the cost of storage of such property after the same has been stored for a period of thirty (30)
days or more, Landlord may sell any or all thereof at a public or private sale in such manner and at such times and places that
Landlord, in its sole discretion, may deem proper, without notice to or demand upon Tenant.
20. LANDLORD'S
RIGHT TO CURE TENANT'S DEFAULT
Landlord, at any time
after Tenant commits a default, may, but shall not be obligated to, cure the default at Tenant's cost. If Landlord at any time,
by reason of Tenant's default, pays any sum or does any act that requires the payment of any sum, the sum paid by Landlord shall
be due immediately from Tenant to Landlord and shall bear interest at the rate of twelve percent (12%) per annum or the maximum
rate permitted by law, whichever is less, from the date the sum is paid by Landlord until Landlord is reimbursed by Tenant. Amounts
due Landlord hereunder shall be additional rent.
21. EMINENT
DOMAIN
If all or any part of
the Premises shall be taken by any public or quasi-public authority under the power of eminent domain or conveyance in lieu thereof,
this lease shall terminate as to any portion of the Premises so taken or conveyed on the date when title vests in the condemnor,
and Landlord shall be entitled to any and all payments, income, rent, award or any interest therein whatsoever which may be paid
or made in connection with such taking or conveyance. Tenant shall have no claim against Landlord or otherwise for the value of
any unexpired term of this lease. Notwithstanding the foregoing, Tenant shall be entitled to any compensation for depreciation
to and cost of removal of Tenant's equipment and fixtures and any compensation for its relocation expenses necessitated by such
taking, but in each case only to the extent the condemning authority makes a separate award therefor or specifically identifies
a portion of the award as being therefor. Each party waives the provisions of Section 1265.130 of the California Code of Civil
Procedure (which section allows either party to petition the Superior Court to terminate this lease in the event of a partial taking
of the Premises).
If any action or proceeding
is commenced for such taking of the Premises or any portion thereof or of any other space in the Project, or if Landlord is advised
in writing by any entity or body having the right or power of condemnation of its intention to condemn the premises or any portion
thereof or of any other space in the Project, and Landlord shall decide to discontinue the use and operation of the Project or
decide to demolish, alter or rebuild the Project, then Landlord shall have the right to terminate this lease by giving Tenant written
notice thereof within sixty (60) days of the earlier of the date of Landlord's receipt of such notice of intention to condemn or
the commencement of said action or proceeding. Such termination shall be effective as of the last day of the calendar month next
following the month in which such notice is given or the date on which title shall vest in the condemnor, whichever occurs first.
In the event of a partial
taking, or conveyance in lieu thereof, of the Premises and fifty percent (50%) or more of the number of square feet in the Premises
are taken then Tenant may terminate this lease. Any election by Tenant to so terminate shall be by written notice given to Landlord
within sixty (60) days from the date of such taking or conveyance and shall be effective on the last day of the calendar month
next following the month in which such notice is given or the date on which title shall vest in the condemnor, whichever occurs
first.
If a portion of the Premises
is taken by power of eminent domain or conveyance in lieu thereof and neither Landlord nor Tenant terminates this lease as provided
above, then this lease shall continue in full force and effect as to the part of the Premises not so taken or conveyed and all
payments of rent shall be apportioned as of the date of such taking or conveyance so that thereafter the amounts to be paid by
Tenant shall be in the ratio that the area of the portion of the Premises not so taken bears to the total area of the Premises
prior to such taking.
22. NOTICE
AND COVENANT TO SURRENDER
On the last day of the
term or on the effective date of any earlier termination, Tenant shall surrender to Landlord the Premises in its condition existing
as of the commencement of the term and, except for restoration as otherwise required by Landlord pursuant to the terms of paragraph
8 of this lease, all of the improvements and alterations made to the Premises in their condition existing as of the date of completion
of construction and/or installation (normal wear and tear excepted), with all originally painted interior walls washed or repainted
if marked or damaged, interior vinyl covered walls cleaned and repaired or replaced if marked or damaged, all carpets shampooed
and cleaned, and all floors cleaned and waxed; all to the reasonable satisfaction of Landlord. Any restoration shall be in compliance
with all laws at the time of surrender. On or prior to the last day of the term or the effective date of any earlier termination,
Tenant shall remove all of Tenant's personal property and trade fixtures, together with improvements or alterations that Tenant
is obligated to remove pursuant to the provisions of paragraph 8 of this lease, from the Premises, and all such property not removed
shall be deemed abandoned. In addition, on or prior to the expiration or earlier termination of this lease, Tenant shall remove,
at Tenant's sole cost and expense, all telephone, other communication, computer and any other cabling and wiring or any sort installed
by Tenant or Tenant's agents or contractors in the space above the suspended ceiling of the Premises or anywhere else in the Premises
and shall promptly repair any damage to the suspended ceiling, lights, light fixtures, walls and any other part of the Premises
resulting from such removal.
If the Premises are not
surrendered as required in this paragraph 22, Tenant shall indemnify Landlord against all loss, liability and expense (including,
but not limited to, attorney fees) resulting from the failure by Tenant in so surrendering the Premises, including, without limitation,
any claims made by any succeeding tenants. It is agreed between Landlord and Tenant that the provisions of this paragraph 22 shall
survive termination of this lease.
23. TENANT'S
QUITCLAIM
At the expiration or
earlier termination of this lease, Tenant shall execute, acknowledge and deliver to Landlord, within ten (10) days after written
demand from Landlord to Tenant, any quitclaim deed or other document required to remove the cloud or encumbrance created by this
lease from the real property of which the Premises are a part. This obligation shall survive said expiration or termination.
24. HOLDING
OVER
Any holding over after
the expiration or termination of this lease with the written consent of Landlord shall be construed to be a tenancy from month-to-month
at the monthly rent agreed upon by Landlord and Tenant, but in no event less than the monthly rent payable under this lease for
the last lease month before the date of such expiration or termination. All provisions of this lease, except (i) as modified by
the preceding sentence and (ii) those provisions pertaining to the term, expansion rights and any option to extend, shall apply
to the month-to-month tenancy.
If Tenant shall retain
possession of the Premises or any part thereof without Landlord's written consent following the expiration or sooner termination
of this lease for any reason, then Tenant shall pay to Landlord as rent during the holdover period an amount equal to the greater
of (i) two hundred percent (200%) of the amount of the monthly rent in effect during the last full lease month prior to the date
of such expiration or termination or (ii) one hundred fifty percent (150%) of the fair market rental (as reasonably determined
by Landlord) for the Premises. Tenant shall also indemnify and hold Landlord harmless from any loss, liability and expense (including,
but not limited to, attorneys fees) resulting from delay by Tenant in surrendering the Premises, including without limitation any
claims made by any succeeding tenant founded on such delay. Acceptance of rent by Landlord following expiration or termination
shall not constitute a renewal of this lease, and nothing contained in this paragraph shall waive Landlord's right of re-entry
or any other right. Tenant shall be only a tenant at sufferance, whether or not Landlord accepts any rent from Tenant, while Tenant
is holding over without Landlord's written consent.
The provisions of this
paragraph 24 are in addition to, and do not affect, Landlord's right of re-entry or other rights hereunder or provided by law.
Nothing in this paragraph 24 shall be construed as implied consent by Landlord to any holding over by Tenant. Landlord expressly
reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this lease on expiration
or other termination of this lease. The provisions of this paragraph 24 shall not be considered to limit or constitute a waiver
of any other rights or remedies of Landlord provided in this lease or at law. The provisions of this paragraph 24 shall survive
the expiration or early termination of this lease.
25. SUBORDINATION
This lease is subject
and subordinate to the lien of any present or future mortgages, deeds of trust, or other encumbrances ("Encumbrances")
of Landlord's title or leasehold interest and all renewals, extensions, modifications, consolidations, and replacements of such
Encumbrances. Notwithstanding any other provision herein, any Encumbrance holder may elect that this lease shall be senior to and
have priority over that Encumbrance whether this lease is dated before or after the date of the Encumbrance.
This subordination is
self-operative, and no further instrument of subordination shall be required to make it effective. To confirm this subordination,
however, Tenant shall, at the request of Landlord or the lender, execute in writing, within five (5) calendar days after such request,
an agreement subordinating its rights under this lease to the lien of such Encumbrance, or, if so requested, agreeing that the
lien of such Encumbrance shall be or remain subject and subordinate to the rights of Tenant under this lease. Tenant hereby irrevocably
appoints Landlord the attorney-in-fact of Tenant to execute, deliver and record any such instrument or instruments for and in the
name and on behalf of Tenant. This authorization shall in no way release Tenant of the obligation to execute such instrument(s)
of subordination or superiority and Tenant's failure to do so shall constitute a default under this lease if Tenant fails to execute
such instrument within three (3) business days of notice from Landlord of such failure. In addition, if in connection with any
loan to Landlord the lender shall request modifications of this lease as a condition to such financing, Tenant will not unreasonably
withhold, delay or defer its consent thereof, provided that such modifications do not increase the rent obligations of Tenant hereunder
or materially adversely affect the leasehold interest hereby created or Tenant's rights hereunder.
26. CERTIFICATE
OF ESTOPPEL
Each party shall, within
five (5) calendar days after request therefor, execute and deliver to the other party, in recordable form, a certificate stating
that the lease is unmodified and in full force and effect, or in full force and effect as modified and stating the modifications.
The certificate shall also state the amount of the monthly rent, the date to which monthly rent has been paid in advance, the amount
of the security deposit and/or prepaid monthly rent, and, if the request is made by Landlord, shall include such other items as
Landlord or Landlord's lender may reasonably request. Failure to deliver such certificate within such time shall constitute a conclusive
acknowledgment by the party failing to deliver the certificate that the lease is in full force and effect and has not been modified
except as may be represented by the party requesting the certificate. Any such certificate requested by Landlord may be conclusively
relied upon by any prospective purchaser or encumbrancer of the Premises or Project and their successors and assigns. Tenant hereby
irrevocably appoints Landlord as attorney-in-fact for the Tenant with full power and authority to execute and deliver in the name
of Tenant such estoppel certificate if Tenant fails to deliver the same within such five (5) day period and such certificate as
signed by Landlord shall be fully binding on Tenant if Tenant fails to deliver a contrary certificate within five (5) days after
receipt by Tenant of a copy of the certificate executed by Landlord on behalf of Tenant. This authorization shall in no way relieve
Tenant of the obligation to execute such estoppel certificate and Tenant's failure to do so shall constitute a default under this
lease if Tenant fails to execute such instrument within three (3) business days of notice from Landlord of such failure. Further,
within five (5) calendar days following written request made from time to time by Landlord, Tenant shall furnish to Landlord current
financial statements of Tenant.
27. SALE
BY LANDLORD
In the event the original
Landlord hereunder, or any successor owner of the Project or Premises, shall sell or convey the Project or Premises, all liabilities
and obligations on the part of the original Landlord, or such successor owner, under this lease accruing thereafter shall terminate,
and thereupon all such liabilities and obligations shall be binding upon the new owner. Tenant agrees to attorn to such new owner
and to look solely to such new owner for performance of any and all such liabilities and obligations.
28. ATTORNMENT
TO LENDER OR THIRD PARTY
In the event the interest
of Landlord in the land and buildings in which the Premises are located (whether such interest of Landlord is a fee title interest
or a leasehold interest) is encumbered by deed of trust, and such interest is acquired by a lender or any other third party through
judicial foreclosure, by deed in lieu of foreclosure, or by exercise of a power of sale at private trustee's foreclosure sale,
Tenant hereby agrees to release Landlord of any obligation arising on or after any such foreclosure sale or transfer and, if requested
to do so by the transferee, to attorn to such transferee and to recognize such transferee as the Landlord under this lease.
29. DEFAULT
BY LANDLORD
Landlord shall not be
in default unless Landlord fails to perform obligations required of Landlord within a reasonable time, but in no event earlier
than fifteen (15) days after written notice by Tenant to Landlord and to the holder of any first mortgage or deed of trust covering
the Premises specifying wherein Landlord has failed to perform such obligations; provided, however, that if the nature of Landlord's
obligations is such that more than fifteen (15) days are required for performance, then Landlord shall not be in default if Landlord
commences performance within such fifteen (15) day period and thereafter diligently prosecutes the same to completion.
If Landlord is in default
of this lease, Tenant's sole remedy shall be to institute suit against Landlord in a court of competent jurisdiction, and Tenant
shall have no right to offset any sums expended by Tenant as a result of Landlord's default against future rent and other sums
due and payable pursuant to this lease. If Landlord is in default of this lease, and as a consequence Tenant recovers a money judgment
against Landlord, the judgment shall be satisfied only out of the proceeds of sale received on execution of the judgment and levy
against the right, title and interest of Landlord in the Project of which the Premises are a part, and out of rent or other income
from such real property receivable by Landlord or out of the consideration received by Landlord from the sale or other disposition
of all or any part of Landlord's right, title and interest in the Project of which the Premises are a part. Neither Landlord nor
any of the partners comprising the partnership designated as Landlord shall be personally liable for any deficiency.
30. CONSTRUCTION
CHANGES
It is understood that
the description of the Premises and the location of ductwork, plumbing and other facilities therein are subject to such changes
as Landlord or Landlord's architect determines to be desirable in the course of construction of the Premises and/or the improvements
constructed or being constructed therein, and no such changes or any changes in plans for any other portions of the Project, shall
affect this lease or entitle Tenant to any reduction of rent hereunder or result in any liability of Landlord to Tenant, except
as may be otherwise provided elsewhere in this lease.
31. MEASUREMENT
OF PREMISES
Tenant understands and
agrees that any reference to square footage of the Premises is approximate only and is based on Landlord’s calculation of
the rentable square footage of the Premises. The rentable square footage for purposes of this lease means the usable square footage
of the Premises, including all interior partitions and columns, one-half of exterior walls, and one-half of the partitions separating
the Premises from the rest of the Project, plus a load factor based on an allocate portion of the building common areas of the
Project including, without limitation, any common hallways, lobbies, restrooms, showers, conference rooms, utility rooms, elevators
and the like. Tenant waives any claim against Landlord regarding the accuracy of any such measurement and Landlord and Tenant agree
that there shall not be any adjustment in basic rent or direct expenses or other amounts payable hereunder by reason of inaccuracies
in such measurement.
32. ATTORNEY
FEES
If Tenant or Landlord
shall be in default under this lease, such party (the "Defaulting Party") shall reimburse the other party (the "Nondefaulting
Party") upon demand for any costs or expenses that the Nondefaulting Party incurs in connection with any such default of the
Defaulting Party under this lease, whether or not suit is commenced or judgment entered. Such costs shall include reasonable legal
fees and costs incurred for the negotiation of a settlement, enforcement of rights or otherwise. Furthermore, if either party commences
an action against the other party arising out of or in connection with this lease, the prevailing party shall be entitled to have
and recover from the losing party all expenses of litigation, including, without limitation, travel expenses, attorney fees, expert
witness fees, trial and appellate court costs, and deposition and transcript expenses. If either party becomes a party to any litigation
concerning this lease, or concerning the Premises or the Project, by reason of any act or omission of the other party or its authorized
representatives, the party that causes the other party to become involved in the litigation shall be liable to the other party
for all expenses of litigation, including, without limitation, travel expenses, attorney fees, expert witness fees, trial and appellate
court costs, and deposition and transcript expenses.
33. SURRENDER
The voluntary or other
surrender of this lease or the Premises by Tenant, or a mutual cancellation of this lease, shall not work a merger, and at the
option of Landlord shall either terminate all or any existing subleases or subtenancies or operate as an assignment to Landlord
of all or any such subleases or subtenancies.
34. WAIVER
No delay or omission
in the exercise of any right or remedy of Landlord on any default by Tenant shall impair such right or remedy or be construed as
a waiver. The receipt and acceptance by Landlord of delinquent rent or other payments shall not constitute a waiver of any other
default and acceptance of partial payments shall not be construed as a waiver of the balance of such payment due. Landlord may
accept Tenant's partial rent payments without waiving any rights under this Lease, including rights under a previously served notice
of default and any other rights to recover possession of the Premises and this provision constitutes actual notice thereof to Tenant
as required under California Code of Civil Procedure §1161.1(c). If Landlord accepts payments after serving a notice of default,
Landlord may nevertheless commence and/or pursue an action to enforce its rights and remedies under the previously served notice
of default. No act or conduct of Landlord, including, without limitation, the acceptance of keys to the Premises, shall constitute
an acceptance of the surrender of the Premises by Tenant before the expiration of the term. Only a written notice from Landlord
to Tenant shall constitute acceptance of the surrender of the Premises and accomplish a termination of this lease. Landlord's consent
to or approval of any act by Tenant requiring Landlord's consent or approval shall not be deemed to waive or render unnecessary
Landlord's consent to or approval of any subsequent act by Tenant. Any waiver by Landlord of any default must be in writing and
shall not be a waiver of any other default concerning the same or any other provision of this lease.
35. EASEMENTS;
AIRSPACE RIGHTS
Landlord reserves the
right to alter the boundaries of the Project and grant easements and dedicate for public use portions of the Project without Tenant's
consent, provided that no such grant or dedication shall materially interfere with Tenant's use of the Premises or otherwise cause
Tenant to incur cost or expense. From time to time, and upon Landlord's demand, Tenant shall execute, acknowledge and deliver to
Landlord, in accordance with Landlord's instructions, any and all documents, instruments, maps or plats reasonably requested by
Landlord and necessary to effectuate Tenant's covenants hereunder.
This lease confers no
rights either with regard to the subsurface of or airspace above the land on which the Project is located or with regard to airspace
above the building of which the Premises are a part. Tenant agrees that no diminution or shutting off of light or view by a structure
which is or may be erected (whether or not by Landlord) on property adjacent to the building of which the Premises are a part or
to property adjacent thereto, shall in any way affect this lease, or entitle Tenant to any reduction of rent, or result in any
liability of Landlord to Tenant.
36. RULES
AND REGULATIONS
Landlord shall have the
right from time to time to promulgate reasonable rules and regulations for the safety, care and cleanliness of the Premises, the
Project and the Common Area, or for the preservation of good order. On delivery of a copy of such reasonable rules and regulations
to Tenant, Tenant shall comply with the rules and regulations, and a violation of any of them shall constitute a default by Tenant
under this lease. If there is a conflict between the rules and regulations and any of the provisions of this lease, the provisions
of this lease shall prevail. Such rules and regulations may be amended by Landlord from time to time with or without advance notice.
37. NOTICES
Except for legal process
and service of any notice required under (i) Code of Civil Procedure Section 1161, (ii) Civil Code Section 1951.3, or any similar
or successor statutes, each of which may be served either as provided by law or as provided herein, all notices, demands, requests,
consents, approvals and other communications ("Notices") which may be given or are required to be given by either party
to the other shall be in writing and shall be deemed given to and received by the party intended to receive such Notice and deemed
sufficiently given for all purposes as follows:
(a) when
personally delivered to the recipient, notice is effective on delivery;
(b) when
mailed first class to the last address of the recipient known to the party giving notice, notice is effective on delivery;
(c) when
mailed by certified mail with return receipt requested, notice is effective on receipt if delivery is confirmed by a return receipt;
or
(d) when
delivered by reputable overnight courier (e.g. Federal Express, Airborne) or other comparable service with charges prepaid or charged
to the sender's account, notice is effective on delivery if delivery is confirmed by the courier service.
Any correctly addressed
Notice that is refused, unclaimed, or undeliverable because of an act or omission of the party to be notified shall be deemed effective
as of the first date that the Notice was refused, unclaimed, or considered undeliverable by the postal authorities, messenger,
or overnight delivery service.
When a statute requires
service of a notice in a particular manner, service of that notice (or a similar notice required by this lease) in the manner specified
in this paragraph 37 shall replace and satisfy the statutory service-of-notice procedures, including those required by Code of
Civil Procedure Section 1162 or any similar or successor statute.
Prior to the commencement
date, all such Notices from Landlord to Tenant shall be served or addressed to Tenant at 20 Walnut Street, Suite 8, Wellesley Hills,
MA 02481. On or after the commencement date all such Notices from Landlord to Tenant shall be addressed to Tenant at the Premises.
All such Notices by Tenant
to Landlord shall be sent to Landlord at its offices at 750 University Avenue, Suite 270, Los Gatos, California 95032.
Either party may change
its address by giving the other party notice of such change in any manner permitted by this paragraph 37.
38. NAME
Tenant shall not use
the name of the Project for any purpose other than as the address of the business conducted by Tenant in the Premises without the
prior written consent of Landlord.
39. GOVERNING
LAW; SEVERABILITY
This lease shall in all
respects be governed by and construed in accordance with the laws of the State of California. If any provision of this lease shall
be held or rendered invalid, unenforceable or ineffective for any reason whatsoever, all other provisions hereof shall be and remain
in full force and effect.
40. DEFINITIONS
As used in this lease,
the following words and phrases shall have the following meanings:
authorized representative
:
any officer, agent, employee or independent contractor retained or employed by either party, acting within authority given him
by that party.
encumbrance
:
any deed of trust, mortgage or other written security device or agreement affecting the Premises or the Project that constitutes
security for the payment of a debt or performance of an obligation, and the note or obligation secured by such deed of trust, mortgage
or other written security device or agreement.
lease month
:
the period of time determined by reference to the day of the month in which the term commences and continuing to one day short
of the same numbered day in the next succeeding month; e.g., the tenth day of one month to and including the ninth day in the next
succeeding month.
lender
:
the beneficiary, mortgagee or other holder of an encumbrance, as defined above.
lien
: a
charge imposed on the Premises by someone other than Landlord, by which the Premises are made security for the performance of an
act. Most of the liens referred to in this lease are mechanic's liens.
maintenance
:
repairs, replacement, repainting and cleaning.
monthly rent
:
the sum of the monthly payments of basic rent and Direct Expense Increases.
person
:
one or more human beings, or legal entities or other artificial persons, including, without limitation, partnerships, corporations,
trusts, estates, associations and any combination of human being and legal entities.
provision
:
any term, agreement, covenant, condition, clause, qualification, restriction, reservation or other stipulation in the lease that
defines or otherwise controls, establishes or limits the performance required or permitted by either party.
rent
: basic
rent, direct expenses, additional rent and all other amounts payable by Tenant to Landlord required by this lease or arising by
subsequent actions of the parties made pursuant to this lease.
Words used in any gender
include other genders. If more than one individual or entity comprises Tenant, the obligations imposed on each individual or entity
that comprises Tenant under this lease are and shall be joint and several. All provisions whether covenants or conditions, on the
part of Tenant shall be deemed to be both covenants and conditions. If any words or phrases in this lease have been stricken out
or otherwise eliminated, whether or not any other words or phrases have been added, this shall be construed as if the words or
phrases so stricken out or otherwise eliminated were never included in this lease and no implication or inference shall be drawn
from the fact that said words or phrases were so stricken out or otherwise eliminated. The paragraph headings are for convenience
of reference only and shall have no effect upon the construction or interpretation of any provision hereof.
41. TIME
Time is of the essence
of this lease and of each and all of its provisions.
42. INTEREST
ON PAST DUE OBLIGATIONS; LATE CHARGE
Any amount due from Tenant
to Landlord hereunder which is not paid when due shall bear interest at the rate of ten percent (10%) per annum from when due until
paid, unless otherwise specifically provided herein, but the payment of such interest shall not excuse or cure any default by Tenant
under this lease. In addition, Tenant acknowledges that late payment by Tenant to Landlord of basic rent or direct expenses or
of any other amount due Landlord from Tenant, will cause Landlord to incur costs not contemplated by this lease, the exact amount
of such costs being extremely difficult and impractical to fix. Such costs include, without limitation, processing and accounting
charges, costs to arrange alternate financing, and late charges that may be imposed on Landlord (e.g., by the terms of any encumbrance
and/or note secured by any encumbrance covering the Premises). Therefore, if any such payment due from Tenant is not received in
full by Landlord when due, which payments are subject to application by Landlord as provided in paragraph 4 of this lease, Tenant
shall pay to Landlord an additional sum of five percent (5%) of the entire payment as a late charge, as liquidated damages, in
lieu of actual damages (other than interest and attorney fees and costs). The parties agree that this late charge represents a
fair and reasonable estimate of the costs that Landlord will incur by reason of late payment by Tenant (other than interest and
attorney fees and costs). Acceptance of any late charge shall not constitute a waiver of Tenant's default with respect to the overdue
amount, nor prevent Landlord from exercising any of the other rights and remedies available to Landlord. No notice to Tenant of
failure to pay shall be required prior to the imposition of such interest and/or late charge, and any notice period provided for
in paragraph 19 shall not affect the imposition of such interest and/or late charge. Any interest and late charge imposed pursuant
to this paragraph shall be and constitute additional rent payable by Tenant to Landlord.
43. ENTIRE
AGREEMENT
This lease, including
any exhibits and attachments, constitutes the entire agreement between Landlord and Tenant relative to the Premises and this lease
and the exhibits and attachments may be altered, amended or revoked only by an instrument in writing signed by both Landlord and
Tenant. Landlord and Tenant agree hereby that all prior or contemporaneous oral agreements between and among themselves or their
agents or representatives relative to the leasing of the Premises are merged in or revoked by this lease.
44. AUTHORITY
Each individual executing
this lease on behalf of Tenant represents and warrants that (i) he/she is duly authorized to execute and deliver this lease on
behalf of Tenant and: (a) if Tenant is a corporation, such authorization is in accordance with a duly adopted resolution of the
Board of Directors of said corporation, (b) if Tenant is a partnership, such authorization is in accordance with the partnership
agreement now in effect, and (c) if Tenant is a limited liability company, such authorization is in accordance with the company's
governing documents; and (ii) this lease is binding upon Tenant in accordance with its terms. Upon Landlord's request, Tenant shall
deliver to Landlord within ten (10) days after such request evidence of the authorization specified above as Landlord may reasonably
request, including, without limitation, in the case where Tenant is a corporation, a copy of the resolution of the Board of Directors
of Tenant authorizing the execution of this lease and naming the officers that are authorized to execute this lease on behalf of
Tenant, which copy shall be certified by Tenant's secretary as correct and in full force and effect.
45. RECORDING
Neither Landlord nor
Tenant shall record this lease or a short form memorandum hereof without the consent of the other.
46. EXHIBITS
AND ATTACHMENTS
All exhibits and attachments
to this lease are a part hereof and the terms and provisions thereof are incorporated into this lease by this reference as though
set forth herein in full.
47. REAL
ESTATE BROKERS
Each party represents
and warrants to the other party that it has not had dealings in any manner with any real estate broker, finder or other person
with respect to the Premises and the negotiation and execution of this lease except McCandless Management Corporation. Except for
the commissions and fees to be paid to McCandless Management Corporation as provided in this paragraph, each party shall indemnify
and hold harmless the other party from all damage, loss, liability and expense (including attorneys' fees and related costs) arising
out of or resulting from any claims for commissions or fees that have been or may be asserted against the other party by any broker,
finder or other person with whom the indemnifying party has dealt, or purportedly has dealt, in connection with the Premises and
the negotiation and execution of this lease. Landlord shall pay broker leasing commissions to McCandless Management Corporation
in connection with the Premises and the negotiation and execution of this lease, to the extent agreed to between Landlord and McCandless
Management Corporation. Landlord and Tenant agree that Landlord shall not be obligated to pay any broker leasing commissions, consulting
fees, finder fees or any other fees or commissions arising out of or relating to any extended term of this lease or to any expansion
or relocation of the Premises at any time.
48. ENVIRONMENTAL
MATTERS
A.
Tenant's
Covenants Regarding Hazardous Materials
.
(1)
Hazardous
Materials Handling
.
Tenant, its agents, invitees, employees, contractors, sublessees, assigns and/or successors shall not
use, store, dispose, release or otherwise cause to be present or permit the use, storage, disposal, release or presence of Hazardous
Materials (as defined below) on or about the Premises or Project, except for general office supplies within the Premises of a kind
typically used in normal office areas in the ordinary course of business (such as copier toner, correction fluid, glue, ink and
cleaning solvents). As used herein "Hazardous Materials" shall mean any petroleum or petroleum by-products, flammable
explosives, asbestos, urea formaldehyde, radioactive materials or waste and any "hazardous substance", "hazardous
waste", "hazardous materials", "toxic substance" or "toxic waste" as those terms are defined
under the provisions of the California Health and Safety Code and/or the provisions of the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), as amended by the Superfund Amendments and Reauthorization Act
of 1986 (42 U.S.C. Section 9601 et seq.), or any other hazardous or toxic substance, material or waste which is or becomes regulated
by any local governmental authority, the State of California or any agency thereof, or the United States Government or any agency
thereof.
(2)
Notices
.
Tenant shall immediately notify Landlord in writing of: (i) any enforcement, cleanup, removal or other governmental or regulatory
action instituted, completed or threatened pursuant to any law, regulation or ordinance relating to the industrial hygiene, environmental
protection or the use, analysis, generation, manufacture, storage, presence, disposal or transportation of any Hazardous Materials
(collectively "Hazardous Materials Laws"); (ii) any claim made or threatened by any person against Tenant, the Premises,
Project or buildings within the Project relating to damage, contribution, cost recovery, compensation, loss or injury resulting
from or claimed to result from any Hazardous Materials; and (iii) any reports made to any environmental agency arising out of or
in connection with any Hazardous Materials in, on or removed from the Premises, Project or buildings within the Project, including
any complaints, notices, warnings, reports or asserted violations in connection therewith. Tenant shall also supply to Landlord
as promptly as possible, and in any event within five (5) business days after Tenant first receives or sends the same, with copies
of all claims, reports, complaints, notices, warnings or asserted violations relating in any way to the Premises, Project or buildings
within the Project or Tenant's use thereof. Tenant shall promptly deliver to Landlord copies of hazardous waste manifests reflecting
the legal and proper disposal of all Hazardous Materials removed from the Premises.
B.
Indemnification
of Landlord
.
Tenant shall indemnify, defend (by counsel acceptable to Landlord), protect, and hold Landlord, and each of
Landlord's partners, employees, agents, attorneys, successors and assigns, free and harmless from and against any and all claims,
liabilities, penalties, forfeitures, losses or expenses (including attorneys' fees) for death of or injury to any person or damage
to any property whatsoever (including water tables and atmosphere), arising from or caused in whole or in part, directly or indirectly,
by (i) Tenant's breach of its covenants set forth in paragraphs 48A(1) and 48A(2) above, or (ii) Tenant's failure to comply with
any Hazardous Materials Laws whether knowingly, unknowingly, intentionally or unintentionally. Tenant's obligations hereunder shall
include, without limitation, and whether foreseeable or unforeseeable, all costs of any required or necessary repair, cleanup or
detoxification or decontamination of the Premises, Project or buildings within the Project, and the preparation and implementation
of any closure, remedial action or other required plans in connection therewith. In addition, Tenant shall reimburse Landlord for
(i) losses in or reductions to rental income, (ii) all costs of refitting or other alterations to the Premises, Project or buildings
within the Project including, without limitation, alterations required to accommodate an alternate use of the Premises, Project
or buildings within the Project, and (iii) any diminution in the fair market value of the Premises, Project or buildings within
the Project, caused by Tenant's breach of its covenants set forth in paragraphs 48A(1) and 48A(2) above or Tenant's failure to
comply with any Hazardous Materials Laws whether knowingly, unknowingly, intentionally or unintentionally. For purposes of this
paragraph 48, any acts or omissions of Tenant, or by employees, agents, assignees, contractors or subcontractors of Tenant or others
acting for or on behalf of Tenant (whether or not they are negligent, intentional, willful or unlawful) shall be strictly attributable
to Tenant.
C.
Survival
.
The provisions of this paragraph 48 shall survive the expiration or earlier termination of the term of this lease.
49. SIGNAGE
Tenant shall not, without
obtaining the prior written consent of Landlord, install or attach any sign or advertising material on any part of the outside
of the Premises, or on any part of the inside of the Premises which is visible from the outside of the Premises, or in the halls,
lobbies, windows or elevators of the building in which the Premises are located or on or about any other portion of the Common
Area or Project. If Landlord consents to the installation of any sign or other advertising material, the location, size, design,
color and other physical aspects thereof shall be subject to Landlord's prior written approval and shall be in accordance with
any sign program applicable to the Project. In addition to any other requirements of this paragraph 49, the installation of any
sign or other advertising material by or for Tenant must comply with all applicable laws, statutes, requirements, rules, ordinances
and any CC&R's or other similar requirements. With respect to any permitted sign installed by or for Tenant, Tenant shall maintain
such sign or other advertising material in good condition and repair and shall remove such sign or other advertising material on
the expiration or earlier termination of the term of this lease. The cost of any permitted sign or advertising material and all
costs associated with the installation, maintenance and removal thereof shall be paid for solely by Tenant. If Tenant fails to
properly maintain or remove any permitted sign or other advertising material, Landlord may do so at Tenant's expense. Any cost
incurred by Landlord in connection with such maintenance or removal shall be deemed additional rent and shall be paid by Tenant
to Landlord within ten (10) days following notice from Landlord. Landlord may remove any unpermitted sign or advertising material
without notice to Tenant and the cost of such removal shall be additional rent and shall be paid by Tenant within ten (10) days
following notice from Landlord. Landlord shall not be liable to Tenant for any damage, loss or expense resulting from Landlord's
removal of any sign or advertising material in accordance with this paragraph 49. The provisions of this paragraph 49 shall survive
the expiration or earlier termination of this lease.
50. SUBMISSION
OF LEASE
The submission of this
lease to Tenant for examination or signature by Tenant is not an offer to lease the Premises to Tenant nor an agreement by Landlord
to reserve the Premises for Tenant. Landlord will not be bound to Tenant until this lease has been duly executed and delivered
by both Landlord and Tenant.
51. PREMISES
LEASED "AS IS"
Tenant is leasing the
Premises from Landlord "AS IS" in their condition existing as of the date hereof. Landlord shall have no obligation
to alter or improve the Premises.
52. ADDITIONAL
RENT
All costs, charges, fees,
penalties, interest, late charges and any other payments (including Tenant's reimbursement to Landlord of costs incurred by Landlord)
which Tenant is required to make to Landlord pursuant to the terms and conditions of this lease and any amendments to this lease
shall be and constitute additional rent payable by Tenant to Landlord when due as specified in this lease and any amendments to
this lease.
53. INTENTIONALLY
DELETED
54. WAIVER
OF RIGHT TO JURY TRIAL
Landlord and Tenant waive
their respective rights to trial by jury of any contract or tort claim, counterclaim, cross-complaint, or cause of action in any
action, proceeding, or hearing brought by either party against the other on any matter arising out of or in any way connected with
this lease, the relationship of Landlord and Tenant, or Tenant's use or occupancy of the Premises, including, without limitation,
any claim of injury or damage or the enforcement of any remedy under any current or future law, statute, regulation, code, or ordinance.
55. SUBMISSION
TO JURISDICTION AND VENUE
With respect to any claim
or action arising out of or in any way connected with this lease, Tenant (a) irrevocably submits to the nonexclusive jurisdiction
of the courts of the State of California located in Santa Clara County, California, (b) irrevocably waives any objection which
it may have at any time to the laying of venue of any suit, action or proceeding arising out of or relating to this lease brought
in any such court, and (c) irrevocably waives any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
56. FURNITURE
AND FIXTURES
Tenant shall have use
of the furniture and fixtures currently existing in the Premises and listed on Exhibit C attached hereto. Such furniture and fixtures
shall be deemed to be part of the Premises and leased to Tenant "as is" in their current condition at no additional cost
to Tenant during the term of this lease, subject to the terms and conditions of this lease. Tenant shall be responsible for any
damage to or destruction of the furniture and fixtures caused by or resulting from Tenant's use thereof, customary wear and tear
excepted.
57. CAPITAL
IMPROVEMENTS
Notwithstanding
any provision to the contrary in this lease, as to any capital improvement to the common area, the Project, or the Premises made
by Landlord under paragraphs 8, 9 or 15 of this lease which (i) is not due to Tenant’s particular use, occupancy or alteration
of the Premises (which use or occupancy is something other than general office use), or (ii) if not specifically required in this
lease to be made at Tenant's expense, the cost thereof shall be included in direct expenses in the year incurred, provided, however,
if the cost of such capital improvement exceeds $50,000, the amount includible in direct expenses shall be limited to the amortized
cost thereof, determined by amortizing the total cost of such capital improvement over its useful life (including interest at a
rate of two percent (2%) over the then current Prime Rate as published by the Wall Street Journal) and Tenant shall pay its proportionate
share thereof as provided in paragraphs 4(b) and 5(b) of this lease. Any determination of what constitutes a capital improvement
and what is the useful life of a capital improvement, as such terms are used in this paragraph 57, shall be made by Landlord in
accordance with generally accepted accounting principles.
58. EARLY
POSSESSION
Tenant may take possession
of the Premises at any time prior to the commencement of the term provided Landlord and Tenant have executed and delivered this
lease and Tenant has delivered the first month's rent and the letter of credit to Landlord required under paragraph 4 herein and
proof that Tenant has satisfied Tenant's insurance requirements set forth in paragraph 11 of this lease. Tenant's possession of
the Premises pursuant to this paragraph shall be subject to all the terms and conditions of this lease provided, however, such
early possession of the Premises shall not accelerate the commencement or termination dates of this lease as set forth in paragraph
2 hereof. for purposes of payment of monthly rent and Tenant shall not be obligated to pay basic rent or direct expenses until
the commencement of the term.
IN WITNESS WHEREOF,
Landlord and Tenant have executed and delivered this lease on the date first above written.
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Landlord
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Tenant
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750 UNIVERSITY, LLC,
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ATOMERA INCORPORATED,
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a California limited liability company
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a Delaware corporation
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By:
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McCandless Management corporation,
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By
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/s/ Ronald Cope
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a California corporation, its
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Authorized Agent
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Name:
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Ronald Cope
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By:
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s/ Steven E. Sund
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Title:
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Chief Operating Officer
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Name:
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Steven E. Sund
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Date:
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January 19, 2016
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Title:
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President
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By:
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Date:
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January 20, 2016
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Name:
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Title:
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Date:
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Exhibit 10.21
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT
(“
Agreement
”) is entered into on February 23, 2016 (“
Effective Date
”)
by and between Atomera Incorporated., a Delaware corporation (“
Company
”), and Frank Laurencio (“
Executive
”).
RECITAL
Company is desirous of
employing Executive in an executive capacity on the terms and conditions and for the consideration, hereinafter set forth, and
Executive is desirous of being employed by Company on such terms and conditions and for such consideration.
AGREEMENT
It is agreed as follows:
ARTICLE
I
DEFINITIONS AND INTERPRETATIONS
1.1 Definitions
.
(a)
“Annual
Base Salary”
shall mean Executive’s annual base salary as of the date of his Involuntary Termination, determined
pursuant to Section 4.1.
(b)
“Board”
shall mean the board of directors of Company.
(c)
“Cause”
shall mean Executive (i) has engaged in gross negligence, gross incompetence, or willful misconduct in the performance of his duties
at the Company, (ii) has refused, without proper reason, to perform his duties, (iii) has materially breached any provision
of this Agreement or of that certain Employee Confidentiality and Assignment Agreement dated February 10, 2016 between the Company
and Executive, (iv) has willfully and materially breached a significant corporate policy or code of conduct established by Company,
(v) has willfully engaged in conduct that is materially injurious to Company or its subsidiaries (monetarily or otherwise), (vi)
has committed an act of fraud, embezzlement, or breach of a fiduciary duty to Company or an affiliate of Company (including the
unauthorized disclosure of material confidential or proprietary information of the Company or an affiliate or intentional misrepresentation
in any employment application, background check, or willfully making false representations in any capacity), (vii) has been convicted
of (or pleaded no contest to) a criminal act involving fraud, dishonesty, or moral turpitude or any felony, or (viii) has been
convicted for any violation of U.S. or foreign securities laws or has entered into a cease and desist order with the Securities
and Exchange Commission alleging violation of U.S. or foreign securities laws.
(d) “
Change
of Control
” shall mean
(i) the
Company is merged, consolidated, or reorganized into or with another corporation or other legal person (an “
Acquirer
”)
and as a result of such merger, consolidation, or reorganization, less than fifty-one percent (51%) of the outstanding voting securities
or other capital interests of the surviving, resulting, or acquiring corporation or other legal person are owned in the aggregate
by the stockholders of the Company, directly or indirectly, immediately prior to such merger, consolidation or reorganization,
other than by the Acquirer or any corporation or other legal person controlling, controlled by or under common control with the
Acquirer; or
(ii) the
Company sells all or substantially all of its business and/or assets to an Acquirer, of which less than fifty-one percent (51%)
of the outstanding voting securities or other capital interests are owned in the aggregate by the stockholders of the Company,
directly or indirectly, immediately prior to such sale, other than by any corporation or other legal person controlling, controlled
by or under common control with the Acquirer.
(e)
“Code”
shall mean the Internal Revenue Code of 1986, as amended.
(f)
“Compensation
Committee”
shall mean the Compensation Committee of the Board.
(g)
“Disability”
shall mean that, as a result of Executive’s documented incapacity due to physical or mental illness, Executive shall have
been absent from the full-time performance of his duties for six consecutive months and shall not have returned to full-time performance
of his duties within 30 days after written notice of termination is given to Executive by Company (provided, however, that such
notice may not be given prior to 30 days before the expiration of such six-month period).
(h)
“Good
Reason”
shall mean the occurrence of any one or more of the following:
(i) a
diminution in Executive’s Annual Base Salary not in accordance with Section 4.1;
(ii) a
material diminution in Executive’s authority, duties, or responsibilities from those applicable to him as of the Effective
Date;
(iii) a
material change in the geographic location at which Executive must perform services, which for purposes of this Agreement includes
only Company requiring Executive to involuntarily relocate to a geographic location other than the San Jose, California metropolitan
area or San Francisco Bay Area; or
(iv) a
material breach by Company of any provision of this Agreement (including, without limitation, the requirements of Sections 2.2,
4.2, 4.3, 4.4 or 4.5 of this Agreement).
Notwithstanding the foregoing provisions
of this Section 1.1(h) or any other provision in this Agreement to the contrary, any assertion by Executive of a termination of
employment for “Good Reason” shall not be effective unless all of the following conditions are satisfied: (1) any condition
described in clauses (i) through (iv) of this Section 1.1(h) giving rise to Executive’s termination of employment must have
arisen without Executive’s consent; (2) Executive must provide written notice to Company of such condition in accordance
with Section 7.1 within 30 days of the initial existence of the condition; (3) the condition specified in such notice must remain
uncorrected for a period of 30 days following receipt of such notice by Company; and (4) the date of Executive’s termination
of employment must occur within one year following the initial existence of the condition specified in such notice.
(i)
“Incentive
Plan”
shall mean the Atomera Incorporated 2007 Stock Incentive Plan.
(j)
“Involuntary
Termination”
shall mean any termination of Executive’s employment with Company which results from either:
(i) A
termination by the Company without Cause; or
(ii) a
resignation by Executive for Good Reason;
provided however, the term “Involuntary
Termination” shall not include a termination for Cause or any termination as a result of death or Disability.
(k)
“Payment
Date”
shall mean the later of (i) the date that is 30 days after Executive’s termination of employment with Company
or (ii) the date upon which the Release described in Section 5.4 becomes irrevocable by Executive.
1.2 Interpretations
.
In this Agreement, unless a clear contrary intention appears, (a) the words “herein,” “hereof,” “hereunder,”
and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, or other subdivision,
(b) reference to any Article or Section means such Article or Section hereof, (c) the word “including” (and with correlative
meaning, “include”) means including, without limiting the generality of any description preceding such term, and (d)
where any provision of this Agreement refers to action to be taken by either party, or which such party is prohibited from taking,
such provision shall be applicable whether such action is taken directly or indirectly by such party.
ARTICLE
II
EMPLOYMENT AND DUTIES
2.1 Employment
.
Effective as of the Effective Date and continuing for the period of time set forth in Section 3.1 of this Agreement, Executive’s
employment by Company shall be subject to the terms and conditions of this Agreement.
2.2 Positions
.
From and after the Effective Date, Company shall employ Executive in the position of chief financial officer and treasurer of the
Company or in such other position or positions as the parties mutually may agree.
2.3 Duties
and Services
. Executive agrees to serve in the position referred to in Section 2.2 and to perform diligently and to the best
of his abilities the duties and services appertaining to such office, as well as such additional duties and services appropriate
to such offices which the parties mutually may agree upon from time to time. Executive in his capacity as chief financial officer
and treasurer of the Company shall have such authorities, duties and obligations as are assigned to him from time to time by the
Chief Executive Officer of the Company and otherwise customarily assigned to the chief financial officer and treasurer of a technology
business. Executive shall report to the Chief Executive Officer of the Company. Executive also agrees to serve, if elected, as
an officer or director of any wholly-owned subsidiary or affiliate of Company so long as such service is commensurate with Executive’s
duties and responsibilities to Company. Executive’s employment shall also be subject to the policies maintained and established
by Company that are of general applicability to Company’s executive employees, as such policies may be amended from time
to time.
2.4 Other
Interests
. Executive agrees, during the period of his employment by Company, to devote substantially all of his business time,
energy, and best efforts to the business and affairs of Company and its affiliates and not to engage, directly or indirectly, in
any other business or businesses, whether or not similar to that of Company, except as herein permitted or with the prior written
consent of the Board. The foregoing notwithstanding, the parties recognize and agree that Executive may engage in passive personal
investment and charitable activities and serve on corporate boards of directors that, in any case, do not conflict with the business
and affairs of Company or interfere with Executive’s performance of his duties hereunder, which shall be at the sole determination
of the Board.
2.5 Duty
of Loyalty
. Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty to act at all times in the best
interests of Company. In keeping with such duty, Executive shall make full disclosure to Company of all business opportunities
pertaining to Company’s business and shall not appropriate for Executive’s own benefit, or appropriate for the benefit
of any third party, business opportunities concerning Company’s business.
2.6 Place
of Employment
. Executive’s primary place of employment hereunder shall be at Company’s executive offices in or
within 50 miles of San Jose, California. Executive understands and agrees that he may be required to travel to other locations
depending on the Company’s business needs.
ARTICLE
III
TERM AND TERMINATION OF EMPLOYMENT
3.1 Term
.
Unless sooner terminated pursuant to other provisions hereof, Company agrees to employ Executive for the period beginning on the
Effective Date and ending on the fourth anniversary of the Effective Date.
3.2 Company’s
Right to Terminate
. Notwithstanding the provisions of Section 3.1, Company shall have the right to terminate Executive’s
employment under this Agreement at any time for any of the following reasons:
(a) upon
Executive’s death;
(b) upon
Executive’s Disability;
(c) for
Cause; or
(d) at
any time, for any other reason whatsoever, in the sole discretion of the Board.
3.3 Executive’s
Right to Terminate
. Notwithstanding the provisions of Section 3.1, Executive shall have the right to terminate his employment
under this Agreement for any of the following reasons:
(a) for
Good Reason; or
(b) at
any time for any other reason whatsoever, in the sole discretion of Executive.
3.4 Notice
of Termination
. If Company desires to terminate Executive’s employment hereunder at any time prior to expiration of the
term of employment as provided in Section 3.1, it shall do so by giving a 30-day written notice to Executive that it has elected
to terminate Executive’s employment hereunder and stating the effective date and reason for such termination, provided that
no such action shall alter or amend any other provisions hereof or rights arising hereunder. If Executive desires to terminate
his employment hereunder at any time prior to expiration of the term of employment as provided in Section 3.1, he shall do so by
giving a 30-day written notice to Company that he has elected to terminate his employment hereunder and stating the effective date
and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising
hereunder.
3.5 Deemed
Resignations
. Unless otherwise agreed to in writing by Company and Executive prior to the termination of Executive’s
employment, any termination of Executive’s employment shall constitute an automatic resignation of Executive as an officer
of Company and each affiliate of Company and an automatic resignation of Executive from the Board (if applicable) and from the
board of directors or similar governing body of any affiliate of Company and from the board of directors or similar governing body
of any corporation, limited liability entity, or other entity in which Company or any affiliate holds an equity interest and with
respect to which board or similar governing body Executive serves as Company’s or such affiliate’s designee or other
representative.
3.6 Meaning
of Termination of Employment
. For all purposes of this Agreement, Executive shall be considered to have terminated employment
with Company when Executive incurs a “separation from service” with Company within the meaning of Section 409A(a)(2)(A)(i)
of the Code and applicable administrative guidance issued thereunder.
ARTICLE
IV
COMPENSATION AND BENEFITS
4.1 Base
Salary
. Executive shall receive a base salary of $225,000 per annum during each full year of employment. Executive’s
base salary shall be reviewed by the Chief Executive Officer and the Compensation Committee on an annual basis, and, in the sole
discretion of the Compensation Committee, such base salary may be increased, but not decreased (except with the prior written consent
of Executive), effective as of any date determined by the Compensation Committee. Executive’s base salary shall be paid in
equal installments in accordance with Company’s standard policy regarding payment of compensation to executives but no less
frequently than monthly.
4.2 Annual
Bonus
. Executive shall be eligible for an annual bonus of up to thirty percent (30%) of Executive’s Annual Base Salary
based on performance criteria set by the Chief Executive Officer of Company and Compensation Committee and to otherwise participate
in Company’s annual bonus plan or plans applicable to Executive, all as approved from time to time by the Compensation Committee
in amounts to be determined by the Compensation Committee based upon criteria established by the Compensation Committee.
4.3 Option
Compensation
. Upon the date of this Agreement, Executive shall receive a grant of options
(“
Options
”) to purchase 21,834 shares of the $0.001 par value common stock (“
Common Stock
”)
of the Company. The strike price of the Options shall be $5.70 per share, representing the fair market value of one share of Common
Stock as of the date of this Agreement. The Options shall be granted pursuant to the terms and subject to the conditions of a
Stock Option Agreement of even date herewith between Executive and Company. Upon, and subject to, the completion of the IPO, Executive
shall be granted additional stock options (“
Gross Up Options
”), which together with the Options, will
represent one and thirty-five hundredths percent (1.35%) of the outstanding shares of Common Stock on a fully-diluted basis after
giving effect to the IPO. The strike price of the Gross Up Options shall be the public offering price in the IPO and the Gross
Up Options shall be granted pursuant to the terms and subject to the conditions of a similar Stock Option Agreement.
(a)
Vesting
of Options
. In addition to the time-based vesting provisions set forth hereafter in this subpart (a), Options to purchase 5,661
shares of Common Stock shall vest and become exercisable subject to the conversion of all principal and accrued interest under
the Notes into shares of Common Stock on or before May 31, 2017. In addition to the afore-mentioned performance-based vesting condition
with respect to Options to purchase 5,661 shares of Common Stock, all of the Options will vest over a four-year period from the
date of grant as follows: one-fourth of the Options shall vest and first become exercisable on the one year anniversary of the
date of grant (such amount to be equal to one-fourth of the Options outstanding as of the one year anniversary date after giving
effect to the potential cancellation of Options to purchase 5,661 shares of Common Stock in the event of the failure to satisfy
the above-mentioned performance-based vesting condition) and the balance of the Options shall vest in 36 equal monthly installments
commencing on the 13 month following the date of grant.
(b)
Vesting
of Gross Up Options
. The Gross Up Options will vest as follows: a Ratable Portion (as defined below) of the Gross Up Options
shall vest and first become exercisable on the later of the one year anniversary of the date of grant of the Options or the completion
date of the IPO (the latter of the two dates referred to as the “
Initial Vesting Date
”), and the balance
of the Gross Up Options shall vest in equal monthly installments, commencing on the one month anniversary of the Initial Vesting
Date, over a number of months equal to 48 less the Variable Number (as defined below). The term “
Ratable Portion”
shall mean a portion of the Gross Up Options equal to the total number of Gross Up Options multiplied by the product of .25 times
a fraction, the denominator of which is 12 and the numerator of which is the lesser of 12 and the Variable Number. The term “
Variable
Number
” means number of 30-day periods, or portions thereof, between the grant date of the Options and the Initial
Vesting Date.
4.4 Long-Term
Incentive
. Subject to the sole discretion of the Compensation Committee, Executive shall also be eligible for participation
in the Incentive Plan or such other long-term incentive arrangement of Company as may from time to time be made available to other
executive officers of Company. Any awards made under the Incentive Plan or such other arrangements shall be governed by Section
5.7 herein.
4.5 Other
Perquisites
. During his employment hereunder, Executive shall be afforded the following benefits as incidences of his employment:
(a)
Business
and Entertainment Expenses
- Subject to Company’s standard policies and procedures with respect to expense reimbursement
as applied to its executive employees generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable
and appropriate expenses incurred by Executive for business-related purposes, including dues and fees to industry and professional
organizations and costs of entertainment and business development. Company reserves the right to request valid documentation and
receipts relating to such expenses.
(b)
Company
Benefits
- Executive and, to the extent applicable, Executive’s spouse, dependents, and beneficiaries, shall be allowed
to participate in all benefits, plans, and programs, including improvements or modifications of the same, which are now, or may
hereafter be, available to other executive employees of Company. Such benefits, plans, and programs shall include, without limitation,
any profit sharing plan, thrift plan, health insurance or health care plan, life insurance, disability insurance, pension plan,
supplemental retirement plan, vacation and sick leave plan, and the like which may be maintained by Company. Company shall not,
however, by reason of this paragraph be obligated to institute, maintain, or refrain from changing, amending, or discontinuing,
any such benefit plan or program, so long as such changes are similarly applicable to executive employees generally. See Attachment
A for the current Company Benefits Program.
ARTICLE
V
EFFECT OF TERMINATION ON COMPENSATION; ADDITIONAL PAYMENTS
5.1 Termination
Other Than an Involuntary Termination
. If Executive’s employment hereunder shall terminate upon expiration of the term
provided in Section 3.1 hereof or if Executive’s employment hereunder shall terminate for any other reason except those described
in Section 5.2, then Company shall continue to provide all compensation and benefits to Executive hereunder until the date of such
termination of employment, and such compensation and benefits shall terminate contemporaneously with such termination of employment.
5.2 Involuntary
Termination
. Subject to the provisions of Sections 5.3 and 5.4 hereof, if Executive’s employment by Company or any successor
thereto shall be subject to an Involuntary Termination, then Company shall, as additional compensation for services rendered to
Company (including its subsidiaries), pay to Executive the following amounts and take the following actions:
(a) Pay
Executive a lump sum cash payment in an amount equal to six (6) months of Executive’s Annual Base Salary on or before the
Payment Date.
(b) During
the portion, if any, of the 6-month period commencing on the date of such Involuntary Termination that Executive is eligible to
elect and elects to continue coverage for himself and his eligible dependents under Company’s or a subsidiary’s group
health plans, as applicable, under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and/or Sections 601
through 608 of the Employee Retirement Income Security Act of 1974, as amended, Company shall promptly reimburse Executive on a
monthly basis for the difference between the amount Executive pays to effect and continue such coverage and the employee contribution
amount that active senior executive employees of Company pay for the same or similar coverage under such group health plans; provided,
however, that such reimbursement shall cease to be effective if and to the extent Executive becomes eligible to receive medical
and/or dental coverage from a subsequent employer (and any such eligibility shall be promptly reported to Company by Executive).
5.3 Change
of Control
. In the event of a Change of Control, vesting of all options or other types of equity granted to Executive shall
fully vest immediately prior to such Change of Control.
5.4 Release
and Full Settlement
. As a condition to the receipt of any severance compensation and benefits under this Agreement, Executive
must first execute a release and agreement, in a form reasonably satisfactory to Company, which (a) shall release and discharge
Company and its affiliates, and their officers, directors, employees, and agents, from any and all claims or causes of action of
any kind or character, including all claims or causes of action arising out of Executive’s employment with Company or its
affiliates or the termination of such employment, and (b) must be effective and irrevocable within 55 days after the termination
of Executive’s employment. If Executive is entitled to and receives the benefits provided hereunder, performance of the obligations
of Company hereunder will constitute full settlement of all claims that Executive might otherwise assert against Company on account
of Executive’s termination of employment.
5.5 Payments
Subject to Section 409A of the Code
. Notwithstanding the foregoing provisions of this Article 5, if the payment of any severance
compensation or severance benefits under this Agreement would be subject to additional taxes and interest under Section 409A of
the Code because the timing of such payment is not delayed as provided in Section 409A(a)(2)(B) of the Code, then any such payments
that Executive (or Executive’s estate) would otherwise be entitled to during the first six months following the date of Executive’s
termination of employment shall be accumulated and paid on the date that is six months after the date of Executive’s termination
of employment (or if such payment date does not fall on a business day of Company, the next following business day of Company),
or such earlier date upon which such amount can be paid under Section 409A of the Code without being subject to such additional
taxes and interest. Executive hereby agrees to be bound by Company’s determination of its “specified employees”
(as such term is defined in Section 409A of the Code) in accordance with any of the methods permitted under the regulations issued
under Section 409A of the Code.
5.6 Liquidated
Damages
. In light of the difficulties in estimating the damages for an early termination of Executive’s employment under
this Agreement, Company and Executive hereby agree that the payments, if any, to be received by Executive pursuant to this Article
5 shall be received by Executive as liquidated damages.
5.7 Other
Benefits
. This Agreement governs the rights and obligations of Executive and Company with respect to Executive’s Annual
Base Salary and certain perquisites of employment. Except as expressly provided herein, Executive’s rights and obligations
both during the term of his employment and thereafter with respect to stock options, restricted stock, incentive and deferred compensation,
life insurance policies insuring the life of Executive, and other benefits under the plans and programs maintained by Company shall
be governed by the separate agreements, plans and other documents and instruments governing such matters.
ARTICLE
VI
DISPUTE RESOLUTION
6.1 General
.
Executive and the Company explicitly recognize that no provision of this Article VI shall prevent either party from seeking to
resolve any dispute arising under the Confidentiality and Assignment of Invention Agreement.
6.2 Negotiation
.
The parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly by negotiations
between Executive and an executive officer of Company who has authority to settle the controversy. Any party may give the other
party written notice of any dispute not resolved in the normal course of business. Within ten days after the effective date of
such notice, Executive and an executive officer of Company shall meet at a mutually acceptable time and place within the San Jose,
California metropolitan area, and thereafter as often as they reasonably deem necessary, to exchange relevant information and to
attempt to resolve the dispute. If the matter has not been resolved within 30 days of the disputing party’s notice, or if
the parties fail to meet within ten days, either party may initiate arbitration of the controversy or claim as provided in Section
6.3 below. If a negotiator intends to be accompanied at a meeting by an attorney, the other negotiator shall be given at least
three business days’ notice of such intention and may also be accompanied by an attorney. All negotiations pursuant to this
Section 6.2 shall be treated as compromise and settlement negotiations for the purposes of the federal and state rules of evidence
and procedure.
6.3 Arbitration
.
Company and Executive agree that after efforts to negotiate any dispute in accordance with Section 6.2 have failed, then either
party may by written notice (the
“Notice”
) demand arbitration of the dispute as set out below, and each
party hereto expressly agrees to submit to, and be bound by, such arbitration.
(a) Each
party will, within ten business days of the Notice, nominate an arbitrator, who shall be a non-neutral arbitrator. Each nominated
arbitrator must be someone experienced in dispute resolution and of good character without moral turpitude and not within the employ
or direct or indirect influence of the nominating party. The two nominated arbitrators will, within ten business days of nomination,
agree upon a third arbitrator, who shall be neutral. If the two appointed arbitrators cannot agree on a third arbitrator within
such period, the parties may seek such an appointment through any permitted court proceeding or by the American Arbitration Association
(“
AAA
”). The three arbitrators will set the rules and timing of the arbitration, but will generally follow
the rules of the AAA and this Agreement where same are applicable and shall provide for a reasoned opinion.
(b) The
arbitration hearing will in no event take place more than 180 days after the appointment of the third arbitrator.
(c) The
arbitration will take place in the San Jose, California metroplex unless otherwise unanimously agreed to by the parties.
(d) The
results of the arbitration and the decision of the arbitrators will be final and binding on the parties, and each party agrees
and acknowledges that these results shall be enforceable in a court of law.
(e) All
administrative costs and expenses of the mediation and arbitration shall be borne equally by the Company and Executive during the
pendency of the proceedings. Such costs and expenses do not include attorney’s fees, expert witness fees or other party generated
expenses. Upon the conclusion of the proceedings, the prevailing party shall be entitled to recover reasonable and necessary attorneys’
fees, expert witness fees, and costs and expenses of arbitration.
(f) This
agreement to arbitrate does not apply to claims or issues arising from performance of services on any federal government contract,
any claim for workers’ compensation or unemployment benefits, claims for vested benefits under a plan fund or program covered
by the Employee retirement Security Act of 1974, as amended or any claim brought under California Labor Code §2699
et.seq
.
Further, Company and Executive agree that only individual employee claims may be brought and that no claim may be brought or arbitrated
hereunder as a collective action on behalf of other or as a class action absent a further specific agreement executed at the time
the dispute arises.
(g) Executive
understands that this Agreement requires that disputes that involve the matters subject to the Agreement be submitted to arbitration
pursuant to this Section 6.3 rather than to a judge or jury in court. However, Company and Executive agree that this agreement
to arbitrate shall not apply to any disputes or claims relating to or arising out of the misuse or misappropriation of Company’s
trade secrets, proprietary information, other proprietary rights or property. Executive must sign and return the Confidentiality
and Assignment Agreement.
ARTICLE
VII
MISCELLANEOUS
7.1 Notices
.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 3:30 p.m. (Pacific time) on
any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States (“
Business
Day
”), (b) the next Business Day after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Business Day or later
than 3:30 p.m. (Pacific time) on any Business Day, (c) the 2nd Business Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be as set forth on the signature pages attached hereto. All notices and demands
to Executive or the Company may be given to them at the following addresses:
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If to Executive to:
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Frank Laurencio
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253 West Main Street
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Los Gatos, California 95032
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If to Company:
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Atomera Incorporated
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750 University Avenue, Suite 280
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Los Gatos, California 95032
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Attn: Scott Bibaud, Chief Executive Officer
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Such parties may designate in writing from
time to time such other place or places that such notices and demands may be given.
7.2 Applicable
Law; Submission to Jurisdiction
.
(a) This
Agreement is entered into under, and shall be governed for all purposes by, the laws of the State of California, without regard
to conflict of law principals thereof.
(b) With
respect to any claim or dispute related to or arising under this Agreement that is not subject to arbitration, the parties hereto
hereby consent to the exclusive jurisdiction, forum, and venue of the state or federal (to the extent federal jurisdiction exists)
courts located in Santa Clara County in the State of California.
7.3 No
Waiver
. No failure by either party hereto at any time to give notice of any breach by the other party of or to require compliance
with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
7.4 Severability
.
Any provision in this Agreement which is prohibited or unenforceable in any jurisdiction by reason of applicable law shall, as
to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating or affecting
the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
7.5 Counterparts
.
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together
will constitute one and the same Agreement.
7.6 Withholding
of Taxes and Other Employee Deductions
. Company may withhold from any benefits and payments made pursuant to this Agreement
all federal, state, city, and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other
customary employee deductions made with respect to Company’s employees generally.
7.7 Headings
.
The Section headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.
7.8 Gender
and Plurals
. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number
includes the plural and conversely.
7.9 Assignment
.
This Agreement shall be binding upon and inure to the benefit of Company and any successor of Company, by merger or otherwise.
This Agreement shall also be binding upon and inure to the benefit of Executive and his heirs, representatives and assigns. If
Executive shall die prior to full payment of amounts due pursuant to this Agreement, such amounts shall continue to be payable
pursuant to the terms of this Agreement. Executive shall not have any right to pledge, hypothecate, anticipate, or assign any portion
of this Agreement or any of the rights hereunder, except by will or the laws of descent and distribution.
7.10 Term
.
This Agreement has a term co-extensive with the term of employment provided in Section 3.1. Termination of this Agreement shall
not affect any right or obligation of any party which is accrued or vested prior to such termination. The provisions of Section
3.5 shall survive the termination of this Agreement and shall be binding upon Executive and his or her legal representatives, successors,
and assigns following such termination.
7.11 Entire
Agreement
. This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof and contains
all the covenants, promises, representations, warranties, and agreements between the parties with respect to such subject matter.
Without limiting the scope of the preceding sentence, all understandings and agreements preceding the date of execution of this
Agreement and relating to the subject matter hereof are hereby null and void and of no further force and effect, including, without
limitation, all prior employment and severance agreements, if any, by and between Company and Executive. Any modification of this
Agreement will be effective only if it is in writing and signed by the party to be charged.
7.12 Expenses
.
Each party shall pay all fees and expenses incurred by such party incident to the negotiation, preparation and execution of this
Agreement.
IN WITNESS WHEREOF,
the parties hereto have entered into this Agreement as of the date first written above.
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“
Company”
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Atomera Incorporated
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a Delaware corporation
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By:
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/s/ Scott A. Bibaud
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Scott A. Bibaud
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Chief Executive Officer
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“
Executive”
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Francis Laurencio
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/s/ Francis Laurencio
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Attachment A
2015 EMPLOYEE BENEFITS OVERVIEW
Health & Dental Care
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v
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ATOMERA provides health care coverage under the “PPO Value” plan from
Harvard Pilgrim
Health Plan
at a nominal cost.
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v
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ATOMERA provides dental care coverage under the “Dental Guard Preferred PPO” plan from
Guardian Dental
at no cost to the employee.
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401k Plan
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v
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ATOMERA employees are entitled to contribute to the
Nationwide
401k retirement plan after 60
days of employment with the company.
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Life/AD&D and Disability Insurance
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v
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ATOMERA provides Life/Accidental Death & Dismemberment insurance through the
Principal Financial
Group
at 300% of annual salary at no cost to the employee.
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v
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ATOMERA provides Limited Disability insurance at 60% of pre-disability earnings for up to 2 years
at no cost to the employee.
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Paid Time Off (Flex-Time)
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v
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ATOMERA employees accrue paid leave based on years of service:
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First Year of Service 16 days
Third Year of Service 21 days
Fifth Year of Service 26 days
2015 Company Holidays
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1.
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JAN 1 –
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New Year’s Day
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2.
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JAN 19 –
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Martin Luther King Day
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3.
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FEB 16 –
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Presidents Day
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4.
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APR 3 –
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Good Friday
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5.
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MAY 25 –
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Memorial Day
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6.
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JUL 3 –
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Independence Day
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7.
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SEP 7 –
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Labor Day
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8.
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OCT 12 –
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Columbus Day
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9.
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NOV 26 –
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Thanksgiving
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10.
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NOV 27 –
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Day after Thanksgiving
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11.
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DEC 24 –
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Christmas Eve
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12.
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DEC 25 –
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Christmas Day
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Exhibit 10.22
AMENDMENT
NO. 1 TO EMPLOYMENT AGREEMENT
This AMENDMENT NO. 1
TO EMPLOYMENT AGREEMENT (“
Amendment
”) is entered into as of February 26, 2016 by and between Atomera Incorporated,
a Delaware corporation formerly known as Mears Technologies, Inc. (“
Company
”), and Scott A. Bibaud (“
Executive
”).
RECITAL
A. The
parties hereto have previously entered into that certain Employment Agreement dated October 16, 2015 (the “
Employment
Agreement
”).
B. The
parties hereto desire to amend the Employment Agreement as set forth below.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants, promises and agreements contained herein, the parties agree as follows:
1. Section
4.2 of the Employment Agreement is hereby amended by deleting it in its entirety and replacing it with the following new Section
4.2:
“4.2
Onetime Incentive Bonus.
Executive shall receive a onetime Incentive Bonus of $250,000. This onetime Incentive Bonus shall
be awarded to Executive if the IPO occurs (a) prior to May 31, 2017 or, (b) if the maturity date of the Senior Secured Convertible
Notes (“
Notes
”) under the Company’s February 18, 2015 offering is extended, prior to June
30, 2017.”
2. Section
4.3(a) of the Employment Agreement is hereby amended by deleting it in its entirety and replacing it with the following new Section
4.3(a):
“(a)
Vesting of Options
. In addition to the time-based vesting provisions set forth hereafter in this subpart (a), Options to
purchase 2,077,727 shares of Common Stock shall vest and become exercisable subject to the conversion of all principal and accrued
interest under the Notes into shares of Common Stock on or before May 31, 2017, unless such date is extended by the holders of
the Notes to no later than June 30, 2017. In addition to the afore-mentioned performance-based vesting condition with respect to
Options to purchase 2,077,727 shares of Common Stock, all of the Options will vest over a four-year period from the date of grant
as follows: one-fourth of the Options shall vest and first become exercisable on the one year anniversary of the date of grant
(such amount to be equal to one-fourth of the Options outstanding as of the one year anniversary date after giving effect to the
potential cancellation of Options to purchase 2,077,727 shares of Common Stock in the event of the failure to satisfy the above-mentioned
performance-based vesting condition) and the balance of the Options shall vest in 36 equal monthly installments commencing on the
13 month following the date of grant. ”
3. The
parties recognize that the share amounts set forth in the amendments to Sections 4.2 and 4.3(a) of the Employment Agreement set
forth above represent pre-split share amounts that do not give effect to the 1-for 15 reverse split of the Company’s outstanding
common stock effected on December 11, 2015.
4. This
Amendment may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5. Except
as set forth in this Amendment, all other provisions of the Employment Agreement shall remain in full force and effect.
IN WITNESS WHEREOF,
the parties hereto have entered into this Amendment as of the date first written above.
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“
Company”
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Atomera Incorporated,
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a Delaware corporation
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By:
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/s/ John D.T. Gerber
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John D.T. Gerber
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Chairman of the Board
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“
Executive”
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/s/ Scott A. Bibaud
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Scott A. Bibaud
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Exhibit 10.23
CONSENT
AND AMENDMENT AGREEMENT
This
CONSENT
AND AMENDMENT AGREEMENT
(this “
Agreement
”), dated as of April 1, 2016, is by and among Atomera Incorporated
(f/k/a Mears Technologies, Inc.), a Delaware corporation (the “
Company
”), and the other Persons party hereto.
Capitalized terms used, but not defined, herein shall have the same meaning ascribed to such terms in the 2015 Convertible Notes
(as defined below).
RECITALS
A. On
March 17, 2015, the Company issued senior secured convertible notes having an aggregate principal amount of $14,750,000 (the “
2015
Convertible Notes
”) and, in connection therewith, the Company entered into a Securities Purchase Agreement, Security
Agreement and Registration Rights Agreement with the holders of the 2015 Convertible Notes (the “
Existing Noteholders
”).
B. On
the date hereof, the Company proposes to issued senior secured convertible notes having an aggregate principal amount of up to
$6,000,000 (the “
2016 Convertible Notes
”) and, in connection therewith, the Company will enter into a securities
purchase agreement and a form of senior secured convertible note, on terms substantially similar to the Securities Purchase Agreement
and the 2015 Convertible
Note, with the holders of the 2016 Convertible Notes. In addition, the Company proposes to amend
and restate the Security Agreement and Registration Rights Agreement and enter into the amended and restated Security Agreement
and Registration Rights Agreement with the holders of the 2016 Convertible Notes.
C. This
Agreement, including the amended and restated the Security Agreement and Registration Rights Agreement, is a condition precedent
to the issuance of the 2016 Convertible Notes and the consummation of the transactions contemplated thereby (the “
2016
Note Offering
”) and as creditors of the Company the Existing Noteholders will derive substantial benefit from the consummation
of the 2016 Note Offering.
D. The
Existing Noteholders wish to (i) consent to the issuance of the 2016
Convertible Notes and allow the 2016 Convertible Notes to be
pari passu
in all respects with the 2015 Convertible Notes,
(ii) amend and restate the Security Agreement and Registration Rights Agreement and (iii) make certain amendments to the 2015 Convertible
Notes and Securities Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
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1.
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Consent to Issuance of 2016 Convertible Notes
.
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(a) The
Existing Noteholders hereby consent to the issuance of the 2016 Convertible Notes and waive any breach or default such issuance
may cause under the Securities Purchase Agreement, including, but not limited to, under Sections 4(k) or 4(m) of the Securities
Purchase Agreement.
(b) The
Existing Noteholders hereby acknowledge and agree that the 2016 Convertible Notes shall be
pari passu
in all respects, including
in terms of payment, security and registration rights, with the 2015 Convertible Notes
(c) The
Existing Noteholders hereby acknowledge and agree that the terms “Other Notes” and “Notes” as used in the
2016 Convertible Notes shall for all purposes include the 2015 Convertible Notes.
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2.
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Amendments to the 2015 Convertible Notes.
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(a)
Notes
.
The term “Notes” as defined in opening paragraph of the 2015 Convertible Notes and used throughout therein shall mean,
collectively, the Other Notes, the 2015 Convertible Notes and the 2016 Convertible Notes.
(b)
Maturity
Date
. The date “May 31, 2016” as set forth in the definition of “Maturity Date” in Section 23(j) of
the 2015 Convertible Notes shall be removed and replaced with the date “May 31, 2017”.
(c)
IPO
Outside Date
. The date “February 14, 2016” as set forth in the definition of “IPO Outside Date” in
Section 23(h) of the 2015 Convertible Notes shall be removed and replaced with the date “December 31, 2016”.
(a) The
Existing Noteholders hereby consent to the granting of the Security Interest in the Collateral (as that term are defined in the
Security Agreement) by the Company to the holders of the 2016 Convertible Notes to secure the Secured Obligations (as that term
is defined in the Security Agreement).
(b) The
Existing Noteholders hereby acknowledge and agree that that for all purposes of the Security Agreement, the Collateral Agent appointed
by the Existing Noteholders pursuant to Section 20 of the Security Agreement (the “
Collateral Agent
”) shall
be the same Collateral Agent as appointed by the holders of the 2016 Convertible Notes.
(c) The
Existing Noteholders hereby acknowledge and agree that, in the event of a distribution of proceeds of Collateral by the Collateral
Agent pursuant to Section 17 of the Security Agreement, all such proceeds of Collateral shall be applied by the Collateral Agent
pari passu
among the Existing Noteholders and the holders of the 2016 Convertible Notes.
(d) The
Existing Noteholders hereby acknowledge and agree that the Collateral Agent shall, on behalf of the Existing Noteholders, enter
into an amended and restated Security Agreement, in the form presented to them, with the Company and the holders of the 2016 Convertible
Notes for purposes of carrying out the grants and terms of (a) through (c) above and otherwise making the holders of the 2016 Convertible
Notes parties to the Security Agreement, as amended and restated.
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4.
|
Registration Rights Agreement
.
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(a) The
Existing Noteholders hereby acknowledge and agree that the term “Registrable Securities” as used in the Registration
Rights Agreement shall for all purposes include the shares of common stock issued upon conversion of the 2016 Convertible Notes.
(b) The
Existing Noteholders hereby acknowledge and agree that for purposes of exercising and implementing the Piggyback Registration Rights
granted under Section 1 of the Registration Rights Agreement, the terms “Holder” and “Holders” shall also
include the holders of the 2016 Convertible Notes and their assignees or successors in interest.
(c) The
Existing Noteholders hereby acknowledge and agree that for purposes of exercising and implementing the Demand Registration Rights
granted under Section 2 of the Registration Rights Agreement, the terms “Holder” and “Holders” shall also
include the holders of the 2016 Convertible Notes and their assignees or successors in interest.
(d) The
Existing Noteholders hereby agree to the form of amended and restated Registration Rights Agreement, in the form presented to them,
for purposes of carrying out the terms of (a) through (c) above and otherwise making the holders of the 2016 Convertible Notes
parties to the Registration Rights Agreement, as amended and restated, and that the execution and delivery of this Agreement by
each Existing Noteholder shall constitute their execution and delivery of the amended and restated Registration Rights Agreement
without their need to separately sign the amended and restated Registration Rights Agreement.
5. Amendments
to Securities Purchase Agreement
.
Section 4(w) of the
Securities Purchase Agreement is hereby deleted in its entirety and replaced with the following: “
IPO Commitment
.
The Company shall use its best efforts to file with the SEC a registration statement on Form S-1 (or any successor form thereto)
to register and sell Common Stock in an IPO (the “
IPO Registration Statement
”)
by no later than December 31, 2016. In the event that the Company has not filed the IPO Registration Statement with the SEC within
five (5) months of the Closing Date, then the Company shall not file the IPO Registration Statement with the SEC until at least
six (6) months and one (1) day after the Closing Date.” In addition, the last sentence of Section 9(e) of the Securities
Purchase Agreement is hereby deleted in its entirety and replaced with the following: “‘Required Buyers” means
Buyers holding Notes and the parties holding the 2016 Convertible Notes (as such term is defined in that Consent and Amendment
Agreement dated April 1, 2016 between the Company and the other Persons who are parties thereto) having an aggregate outstanding
principal amount that represents a majority of the aggregate principal amount of all Notes and 2016 Convertible Notes.”
(a)
Governing
Law; Jurisdiction; Jury Trial
. All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b)
Severability
.
If any provision(s) of this Agreement shall be determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof, and any such illegal or unenforceable provisions shall be
performed by mutual consent of the parties to reflect the intended purpose of such provision.
(c)
Notices
.
Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must
be in writing and will be deemed to have been delivered: (i) upon receipt, if delivered personally; (ii) when sent, if sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party);
(iii) when sent, if sent by e-mail (provided that such sent e-mail is kept on file (whether electronically or otherwise) by the
sending party and the sending party does not receive an automatically generated message from the recipient’s e-mail server
that such e-mail could not be delivered to such recipient) and (iv) if sent by overnight courier service, one (1) Business Day
after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party
to receive the same. The addresses, facsimile numbers and e-mail addresses for such communications shall be:
If to the Company:
Atomera Incorporated
750 University Avenue, Suite 280
Los Gatos, CA 95032
E-mail: sbibaud@atomera.com
Attn: Chief Executive Officer
with a copy (for informational
purposes only) to:
Greenberg Traurig, LLP
3161 Michelson Drive, Suite 1000
Irvine, CA 92612
Facsimile: (949) 732-6501
E-mail:
DonahueD@gtlaw.com
Attn: Daniel K. Donahue, Esq.
If to an Existing Noteholder, to its address,
facsimile number or e-mail address set forth on such Existing Noteholder’s signature page to the Securities Purchase Agreement,
with a copy before July 1, 2016
(for informational purposes only) to:
Golenbock Eiseman Assor Bell &
Peskoe LLP
437 Madison Avenue, 40th Floor
New York, NY 10022
Facsimile: (212) 754-0330
E-mail:
ahudders@golenbock.com
cvandemark@golenbock.com
Attention: Andrew D. Hudders, Esq.
Carl Van Demark,
Esq.
and with a copy on or after July
1, 2016 (for informational purposes only) to:
Golenbock Eiseman Assor Bell &
Peskoe LLP
711 Third Avenue
New York, NY 10017
Facsimile: (212) 754-0330
E-mail:
ahudders@golenbock.com
cvandemark@golenbock.com
Attention: Andrew D. Hudders, Esq.
Carl Van Demark,
Esq.
or to such other address, facsimile number
or e-mail address and/or to the attention of such other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient
of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile
machine containing the time, date and recipient facsimile number or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i),
(ii) or (iv) above, respectively. A copy of the e-mail transmission containing the time, date and recipient e-mail address shall
be rebuttable evidence of receipt by e-mail in accordance with clause (iii) above.
(d)
Binding
Effect
. This Agreement shall be binding upon and shall insure to the benefit of the parties hereto, their respective successors,
assigns, legal representative, estates, executors, administrators and heirs.
(e)
Counterparts
.
This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that
any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an
executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such signature page were an original thereof.
[
Signature pages follow
]
IN WITNESS WHEREOF,
the undersigned have caused their respective signature page to this Agreement to be duly executed as of the date first written
above.
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COMPANY:
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ATOMERA INCORPORATED,
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a Delaware corporation
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By:
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/s/ Scott A. Bibaud
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Scott A. Bibaud,
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President and Chief Executive Officer
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[Signature Page to Consent and Amendment
Agreement]
IN WITNESS WHEREOF,
the undersigned have caused their respective signature page to this Agreement to be duly executed as of the date first written
above.
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For Entity Investors:
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For Individual Investors:
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Print Name:
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Print Name:
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Signature:
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Signature:
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Name of Signatory:
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If Joint Investment, 2
nd
investor should complete:
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Title:
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Print Name:
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Signature:
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[Signature Page to Consent and Amendment
Agreement]
Exhibit 10.24
SECURITIES
PURCHASE AGREEMENT
This
SECURITIES
PURCHASE AGREEMENT
(this “
Agreement
”), dated as of April 1, 2016 (the “
Effective Date
”),
is by and among Atomera Incorporated, a Delaware corporation (the “
Company
”), and the investors that have executed
this Agreement and are listed on the Schedule of Buyers, attached hereto as
Exhibit A
(individually, a “
Buyer
”
and collectively, the “
Buyers
”).
RECITALS
A. The
Company and each Buyer is executing and delivering this Agreement in reliance upon the exemption from securities registration afforded
by Section 4(a)(2) of the Securities Act of 1933, as amended (the “
1933 Act
”), and Rule 506 of Regulation D
(“
Regulation D
”), as promulgated by the United States Securities and Exchange Commission (the “
SEC
”)
under the 1933 Act.
B. The
Company has authorized the issuance of senior secured convertible notes in the aggregate original principal amount of up to $6,000,000,
in the form attached hereto as
Exhibit B
(the “
Notes
”), which Notes shall be convertible into
shares of Common Stock (as defined in the Notes) (as converted, collectively, the “
Conversion Shares
”), in accordance
with the terms of the Notes.
C. On
March 17, 2015, the Company issued similar senior convertible notes having an aggregate principal amount of $14.75 million (the
“
2015 Convertible Notes
”) and, pursuant to an agreement among the holders of the 2015 Convertible Notes, dated
the date hereof (the “
Earlier Investors
”), the Earlier Investors have agreed that the Notes are
pari passu
in all respects, including in terms of payment, security and registration rights, with the 2015 Convertible Notes.
D. Each
Buyer wishes to purchase and the Company wishes to sell upon the terms and conditions stated in this Agreement, the aggregate original
principal amount of the Notes set forth opposite such Buyer’s name in column (2) on the Schedule of Buyers.
E. At
the Closing, the parties hereto shall execute and deliver a Registration Rights Agreement, in the form attached hereto as
Exhibit
C
(the “
Registration Rights Agreement
”), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Registrable Securities (as defined in the Registration Rights Agreement), under the 1933
Act and the rules and regulations promulgated thereunder, and applicable state securities laws.
F. In
connection with the Offering, the Company, together with National Securities Corporation (the “
Placement Agent
”),
have entered into an escrow agreement, in the form attached hereto as
Exhibit D
(the “
Escrow Agreement
”),
with U.S. Bank National Association (the (“
Escrow Agent
”), to hold the Purchase Price (as hereinafter defined),
to be released at the Closing to the Company, upon the written consent of the Company and the Placement Agent.
G. The
Notes and the Conversion Shares are collectively referred to herein as the “
Securities
.”
H. The
Notes, along with the 2015 Convertible Notes, will be secured by a first priority perfected security interest in all or substantially
all of the assets of the Company as evidenced by a security agreement in the form attached hereto as
Exhibit E
(the
“
Security Agreement
” and together with the other security documents and agreements entered into in connection
with this Agreement and each of such other documents and agreements, as each may be amended or modified from time to time, collectively,
the “
Security Documents
”).
AGREEMENT
NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and each Buyer hereby agree as follows:
1. PURCHASE
AND SALE OF NOTES.
(a)
Notes
Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue to
each Buyer, and each Buyer severally, but not jointly, shall purchase from the Company on the Closing Date (as defined below),
a Note in the original principal amount as is set forth opposite such Buyer’s name in column (2) on the Schedule of Buyers.
(b)
Closing
.
The closing (the “
Closing
”) of the purchase or exchange of the Notes by the Buyers shall occur at the offices
of Greenberg Traurig, LLP, 3161 Michelson Drive, Irvine, CA 92612. The date and time of the Closing (the “
Closing Date
”)
shall be 11:00 a.m., Eastern Standard Time, on the first Business Day on which the conditions to the Closing set forth in Sections
6 and 7 below are satisfied or waived (or such later date as is mutually agreed to by the Company and each Buyer). As used herein
“
Business Day
” means any day other than a Saturday, Sunday or other day on which commercial banks in New York,
New York are authorized or required by law to remain closed.
(c)
Purchase
Price
. The purchase price for each Note to be purchased by each Buyer (the “
Purchase Price
”) shall be equal
to the original principal amount of the Note set forth opposite such Buyer’s name in column (2) on the Schedule of Buyers.
(d)
Payment
of Purchase Price; Delivery of Notes
. On the Closing Date, (i) each Buyer shall pay its respective Purchase Price to the Company
through the Escrow Agent for their respective Note to be issued and sold to such Buyer at the Closing, and (ii) the Company shall
deliver to each Buyer a Note (in such amount as is set forth opposite such Buyer’s name in column (2) on the Schedule of
Buyers), in all cases, duly executed on behalf of the Company and registered in the name of such Buyer or its designee.
2. BUYER’S
REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants to the
Company with respect to only itself that:
(a)
Organization;
Authority
. Such Buyer (i) if an entity, is duly organized, validly existing and in good standing under the laws of the jurisdiction
of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the
Transaction Documents (as defined below) to which it is a party and otherwise to carry out its obligations hereunder and thereunder,
or (ii) if an individual, has the legal capacity to enter into and to consummate the transactions contemplated by the Transaction
Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder.
(b)
No
Public Sale or Distribution
. Such Buyer (i) is acquiring its Note, and (ii) upon conversion of its Note will acquire the Conversion
Shares issuable upon conversion thereof, in each case, for its own account and not with a view towards, or for resale in connection
with, the public sale or distribution thereof in violation of applicable securities laws, except pursuant to sales registered or
exempted under the 1933 Act; provided, however, by making the representations herein, such Buyer does not agree, or make any representation
or warranty, to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities
at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. Such Buyer does not
presently have any agreement or understanding, directly or indirectly, with any Person (as defined below) to distribute any of
the Securities in violation of applicable securities laws.
(c)
Accredited
Investor Status
. Such Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.
(d)
Reliance
on Exemptions
. Such Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon
the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility
of such Buyer to acquire the Securities.
(e)
Information
.
Such Buyer and its advisors, if any, have been furnished with the Company’s private placement memorandum dated February 25,
2016 (the “
Private Placement Memorandum
”) and with all other materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the Securities which have been requested by such Buyer.
Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Such Buyer understands
that its investment in the Securities involves a high degree of risk. Such Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.
(f)
No
Governmental Review
. Such Buyer understands that no United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
(g)
Transfer
or Resale
. Such Buyer understands that except as provided in the Registration Rights Agreement or Section 4(h) hereof: (i)
the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered
for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company (if requested by the Company) an opinion of counsel to such Buyer, in a form reasonably acceptable to the Company, to the
effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) such Buyer provides the Company with reasonable assurance and documentation as may be requested by the
Company or its legal counsel that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated
under the 1933 Act (or a successor rule thereto) (collectively, “
Rule 144
”); (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable,
any resale of the Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC promulgated thereunder; and (iii) neither the Company nor any other Person is under
any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder.
(h)
Validity;
Enforcement
. This Agreement and the other Transaction Documents executed by the Buyer have been duly and validly authorized,
executed and delivered on behalf of such Buyer and constitutes the legal, valid and binding obligations of such Buyer enforceable
against such Buyer in accordance with their respective terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and remedies.
(i)
No
Conflicts
. The execution, delivery and performance by such Buyer of this Agreement and the other Transaction Documents executed
by the Buyer and the consummation by such Buyer of the transactions contemplated hereby and thereby will not (i) result in a violation
of the organizational documents of such Buyer, (ii) conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which such Buyer is a party or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws) applicable to such Buyer, except in the case of clauses
(ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the ability of such Buyer to perform its obligations hereunder.
(j)
Buyer’s
Principal Residence/Office
. The address of Buyer’s principal residence, if Buyer is a natural Person, or principal office,
if Buyer is a non-natural Person, such as a corporation, limited liability company or other entity, is set forth on the Buyer’s
signature page hereto.
(k)
No
Engagements
. Such Buyer has not engaged any brokers, finders or agents, and the Company has not, nor will, incur, directly
or indirectly, as a result of any action taken by such Buyer, any liability for brokerage or finders’ fees or agents’
commissions or any similar charges in connection with the transactions consummated under this Agreement. Neither such Buyer, nor
any of Buyer’s officers, directors, employees, agents, stockholders or partners has either directly or indirectly, including
through a broker or finder: (i) engaged in or received any general solicitation or (ii) published or received any advertisement
in connection with the offer or sale of the Securities.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The Company represents
and warrants to each of the Buyers that, except as set forth on the Disclosure Letter (as defined below), which exceptions shall
be deemed to be part of the representations and warranties made hereunder, the following representations are true and complete
as of the Closing Date, except as otherwise indicated. The Disclosure Letter shall be arranged in sections corresponding to the
numbered and lettered sections and subsections contained in this
Section 3
and certain other sections of this agreement,
and the disclosures in any section or subsection of the Disclosure Letter shall qualify other sections and subsections in this
Section 3
only to the extent it is readily apparent from a reading of the disclosure that such disclosure is applicable
to such other sections and subsections.
(a)
Organization
and Qualification
. The Company is an entity duly organized and validly existing and in good standing under the laws of the
jurisdiction in which it is formed, and has the requisite power and authorization to own its properties and to carry on its business
as now being conducted and as presently proposed to be conducted. The Company is duly qualified as a foreign entity to do business
and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not be
reasonably expected to have a Material Adverse Effect. “
Material Adverse Effect
” means any material adverse
effect on (i) the business, properties, assets, liabilities, operations (including results thereof) or condition (financial or
otherwise) of the Company, either individually or taken as a whole, (ii) the transactions contemplated hereby or in any of the
other Transaction Documents, or (iii) the authority or ability of the Company to perform any of its obligations under any of the
Transaction Documents. The Company has no Subsidiaries. “
Subsidiaries
” means any Person in which the Company,
directly or indirectly, owns a majority of the outstanding capital stock or holds any equity or similar interest of such Person,
and each of the foregoing, is individually referred to herein as a “
Subsidiary
.” Additionally, to the extent
that any Subsidiary is hereafter created, and the context of the provision of this Agreement would ordinarily include a Subsidiary,
then the term “Company” will be deemed to include such Subsidiary.
(b)
Authorization;
Enforcement; Validity
. The Company has the requisite power and authority to enter into and perform its obligations under this
Agreement and the other Transaction Documents and to issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of this Agreement and the other Transaction Documents by the Company, and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Notes and the reservation
for issuance and issuance of the Conversion Shares issuable upon conversion of the Notes) have been duly authorized by the Company’s
board of directors or other governing body, as applicable, and (other than the filing with the SEC of one or more Registration
Statements (as defined in the Registration Rights Agreement) in accordance with the requirements of the Registration Rights Agreement,
a Form D with the SEC and any other filings as may be required by any state securities agencies) no further filing, consent or
authorization is required by the Company, its respective boards of directors or the stockholders or other governing body. This
Agreement has been, and the other Transaction Documents will be prior to the Closing, duly executed and delivered by the Company,
and each constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with
its respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law.
“
Transaction Documents
” means, collectively, this Agreement, the Notes, the Security Documents, the Registration
Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in the Registration Rights Agreement) and each of the
other agreements and instruments entered into or delivered by any of the parties hereto in connection with the consummation of
the transactions contemplated hereby and thereby, as may be amended from time to time.
(c)
Issuance
of Conversion Shares
. The Conversion Shares, when issued in accordance with the terms of the Notes, will be validly issued,
fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with
respect to the issue thereof under the terms thereof, with the holders being entitled to all rights accorded to a holder of Common
Stock. The Company shall have reserved from its duly authorized capital stock not less than one hundred ten percent (110%) of the
maximum number of Conversion Shares issuable upon conversion of the Notes in accordance with their terms. Subject to the accuracy
of the representations and warranties of the Buyers in this Agreement, the offer and issuance by the Company of the Securities
is exempt from registration under the 1933 Act.
(d)
No
Conflicts
. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Notes, the Conversion
Shares upon conversion of the Notes, the reservation for issuance of the Conversion Shares and the creation of the security interests
represented by the Security Documents) will not (i) result in a violation of the Certificate of Incorporation (as defined below)
(including, without limitation, any certificate of designation contained therein) or other organizational documents of the Company,
any capital stock of the Company or Bylaws (as defined below) of the Company, (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party, including, without limitation,
the 2015 Convertible Notes, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including,
without limitation, foreign, federal and state securities laws and regulations) applicable to the Company or by which any property
or asset of the Company is bound or affected except, in the case of clause (ii) or (iii) above, to the extent such violations that
could not reasonably be expected to have a Material Adverse Effect.
(e)
Consents
.
Other than the consent of the Earlier Investors, the Company is not required to obtain any consent from, authorization or order
of, or make any filing or registration with (other than the filing with the SEC of one or more Registration Statements in accordance
with the requirements of the Registration Rights Agreement, a Form D with the SEC and any other filings as may be required by any
state securities agencies), any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its respective obligations under, or contemplated by, the Transaction Documents, in
each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which
the Company is required to obtain at or prior to the Closing have been or will be obtained or made on or prior to the Closing Date,
and the Company is not aware of any facts or circumstances which might prevent the Company from obtaining or effecting any of the
registration, application or filings contemplated by the Transaction Documents.
(f)
Acknowledgment
Regarding Buyer’s Purchase of Securities
. The Company acknowledges that no Buyer is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated
hereby and thereby, and any advice given by a Buyer or any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely incidental to such Buyer’s purchase of the Securities.
The Company further represents to each Buyer that the Company’s decision to enter into the Transaction Documents to which
it is a party has been based solely on the independent evaluation by the Company and its respective representatives.
(g)
No
General Solicitation; Placement Agent’s Fees
. Neither the Company nor any Person acting on its behalf, has engaged in
any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale
of the Securities. The Company shall be responsible for the payment of any Placement Agent’s fees, financial advisory fees,
or brokers’ commissions (other than for Persons engaged by any Buyer or its investment advisor) relating to or arising out
of the transactions contemplated hereby. Other than the Placement Agent, to which a cash fee of 10% of the gross proceeds and a
warrant equal to 10% of the Conversion Shares, the Company has not engaged any placement agent or other broker or dealer in connection
with the offer or sale of the Securities.
(h)
No
Integrated Offering
. None of the Company or, to its knowledge, any of its affiliates, nor any Person acting on its behalf has,
directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances
that would require registration of the issuance of any of the Securities under the 1933 Act, whether through integration with prior
offerings or otherwise, or cause this offering of the Securities to require approval of stockholders of the Company under any applicable
stockholder approval provisions. None of the Company, nor its affiliates nor any Person acting on their behalf will take any action
or steps that would require registration of the issuance of any of the Securities under the 1933 Act or cause the offering of any
of the Securities to be integrated with other offerings of securities of the Company.
(i)
Dilutive
Effect
. The Company understands and acknowledges that the number of Conversion Shares may increase in certain circumstances.
The Company further acknowledges that its obligation to issue the Conversion Shares upon conversion of the Notes in accordance
with this Agreement and the Notes is absolute and unconditional, regardless of the dilutive effect that such issuance may have
on the ownership interests of other stockholders of the Company.
(j)
Application
of Takeover Protections; Rights Agreement
. The Company and its board of directors have taken all necessary action, if any,
in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including,
without limitation, any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of
Incorporation, Bylaws or other organizational documents which is or could become applicable to any Buyer as a result of the consummation
of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Securities
and any Buyer’s ownership of the Securities. The Company and its board of directors have taken all necessary action, if any,
in order to render inapplicable any stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership
of shares of Common Stock or a change in control of the Company.
(k)
Placement
Documents; Financial Statements
. The Private Placement Memorandum provided to the Buyers in connection with the sale of the
Notes, at the time of the date thereon, as it may be amended from time to time, did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The financial statements, including the notes thereto, included
in the Private Placement Memo fairly present the financial position and the results of operations of the Company at the dates and
for the periods to which they apply; and such financial statements have been prepared in conformity with generally accepted accounting
principles, consistently applied throughout the periods involved. No other information provided by or on behalf of the Company
to any of the Buyers taken together with such Private Placement Memorandum contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements therein not misleading, in the light of the circumstance
under which they are or were made.
(l)
Absence
of Certain Changes
. Since the date of the Company’s most recent financial statements contained in the Private Placement
Memorandum provided to the Buyers in connection with the sale of the Notes, there has been no material adverse change and no material
adverse development in the business, assets, liabilities, properties, operations (including results thereof) or condition (financial
or otherwise) of the Company. Since the date of the Company’s most recent financial statements contained in in the Private
Placement Memorandum provided to the Buyer in connection with the sale of the Notes, the Company has not (i) declared or paid any
dividends (whether by cash, property or securities), (ii) sold any assets, individually or in the aggregate, outside of the ordinary
course of business or (iii) made any capital expenditures, individually or in the aggregate, outside of the ordinary course of
business. The Company has not taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency,
reorganization, receivership, liquidation or winding up, nor does the Company have any knowledge or reason to believe that any
of its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably
lead a creditor to do so. The Company is not as of the date hereof, and after giving effect to the transactions contemplated hereby
to occur at the Closing, will not be Insolvent (as defined below). “
Insolvent
” means (i) the present fair saleable
value of the Company’s assets is less than the amount required to pay the Company’s total Indebtedness (as defined
below) as it becomes due, (ii) the Company is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured or (iii) the Company intends to incur or believe that it will incur debts
that would be beyond its ability to pay as such debts mature.
(m)
No
Material Adverse Effect
. The Company has no knowledge of any event, liability, development or circumstance that has occurred
or exists, or that is reasonably expected to occur or exist with respect to the Company or any of its business, properties, liabilities,
operations (including results thereof) or condition (financial or otherwise), that would have a Material Adverse Effect.
(n)
Conduct
of Business; Regulatory Permits
. The Company is not in violation of any term of or in default under its Certificate of Incorporation
or Bylaws. The Company is not in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable
to the Company, and the Company will not conduct its business in violation of any of the foregoing, except in all cases for possible
violations which could not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth on
Schedule
3(n)
attached to the Disclosure Letter, the Company possess all certificates, authorizations and permits issued by the appropriate
regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and the Company has not
received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.
(o)
Foreign
Corrupt Practices
. The Company and none of its directors, officers, agents, employees or other Persons acting on behalf of
the Company has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment
to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision
of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government official or employee.
(p)
Sarbanes-Oxley
Act
. The Company is in compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002 and all applicable rules
and regulations promulgated by the SEC thereunder.
(q)
Transactions
With Affiliates
. Except as set forth on
Schedule 3(q)
attached to the Disclosure Letter or in the Private Placement
Memorandum provided to the Buyers in connection with the sale of the Notes, none of the officers, directors, employees or affiliates
of the Company is presently a party to any transaction with the Company (other than for ordinary course services as employees,
officers or directors and immaterial transactions), including any contract, agreement or other arrangement providing for the furnishing
of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from
any such officer, director, employee or affiliate or, to the knowledge of the Company, any corporation, partnership, trust or other
Person in which any such officer, director, employee or affiliate has a substantial interest or is an employee, officer, director,
trustee or partner.
(r)
Equity
Capitalization
. As of the date hereof, the authorized capital stock of the Company consists solely of 50,000,000 shares, consisting
of (i) 47,500,000 shares of Common Stock, of which 1,617,312 are issued and outstanding as of the Effective Date and (ii) 2,500,000
shares of Preferred Stock, of which no shares are issued or outstanding as of the Effective Date. No approval of the shareholders
is required for the issuance of the Notes or the Conversion Shares or any of the Convertible Securities. No shares of Common Stock
are held in treasury. All of the outstanding shares are duly authorized and have been, or upon issuance will be, validly issued
and are fully paid and non-assessable.
Schedule 3(r)
attached to the Disclosure Letter discloses all issued and outstanding
shares of Common Stock that as of the date hereof are owned by Persons who are “affiliates” (as defined in Rule 405
of the 1933 Act and calculated based on the assumption that only officers, directors and holders of at least 10% of the Company’s
issued and outstanding Common Stock are “affiliates” without conceding that any such Persons are “affiliates”
for purposes of federal securities laws) of the Company. To the Company’s knowledge, except as disclosed on
Schedule 3(r)
attached to the Disclosure Letter, no Person owns 10% or more of the Company’s issued and outstanding shares of Common Stock
(calculated based on the assumption that all Convertible Securities, whether or not presently exercisable or convertible, have
been fully exercised or converted (as the case may be) taking account of any limitations on exercise or conversion (including “blockers”)
contained therein without conceding in the private placement documentation that such identified Person is a 10% stockholder for
purposes of federal securities laws). Except as set forth on
Schedule 3(r)
attached to the Disclosure Letter, (i) none of
the Company’s capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered
or permitted by the Company; (ii) except for the 2015 Convertible Notes and as disclosed on
Schedule 3(r)
attached to the
Disclosure Letter or in the Private Placement Memorandum, there are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable
for, any capital stock of the Company, or contracts, commitments, understandings or arrangements by which the Company is or may
become bound to issue additional capital stock of the Company or options, warrants, scrip, rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital
stock of the Company; (iii) except for the 2015 Convertible Notes, there are no outstanding debt securities, notes, credit agreements,
credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or by which the Company
is or may become bound; (iv) except in connection with the 2015 Convertible Notes, there are no financing statements securing obligations
in any amounts filed in connection with the Company; (v) except in connection with the 2015 Convertible Notes, there are no agreements
or arrangements under which the Company is obligated to register the sale of any of their securities under the 1933 Act (except
pursuant to the Registration Rights Agreement and a warrant issued to the Placement Agent); (vi) there are no outstanding securities
or instruments of the Company by which the Company is or may become bound to redeem a security of the Company; (vii) there are
no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities;
and (viii) the Company has not issued any stock appreciation rights or “phantom stock” plans or agreements or any similar
plan or agreement. The Company has furnished to the Buyers true, correct and complete copies of the Company’s Certificate
of Incorporation, as amended and as in effect on the date hereof (the “
Certificate of Incorporation
”), and the
Company’s bylaws, as amended and as in effect on the date hereof (the “
Bylaws
”), and the terms of all
securities convertible into, or exercisable or exchangeable for, shares of Common Stock and the material rights of the holders
thereof in respect thereto. “
Convertible Securities
” means preferred stock, options, warrants or other securities
directly or indirectly convertible into, exchangeable for or exercisable for Common Stock of the Company.
(s)
Indebtedness
and Other Contracts
. The Company, except as disclosed on
Schedule 3(s)
attached to the Disclosure Letter, (i) has no
outstanding Indebtedness (as defined below) other than the 2015 Convertible Notes, (ii) is not a party to any contract, agreement
or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument
could reasonably be expected to result in a Material Adverse Effect, (iii) is not in violation of any term of, or in default under,
any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, and (iv) is not a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to
have a Material Adverse Effect. “
Indebtedness
” of any Person means, without duplication (A) all indebtedness
for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including,
without limitation, “capital leases” in accordance with generally accepted accounting principles as in effect on the
Closing Date) (other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations
with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses,
(E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing,
in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property),
(F) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital lease (in accordance with generally accepted accounting
principles as in effect on the Closing Date), (G) all indebtedness referred to in clauses (A) through (F) above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights)
owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment
of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred
to in clauses (A) through (G) above. “
Contingent Obligation
” means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.
“
Person
” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
(t)
Absence
of Litigation
. Except as set forth on
Schedule 3(t)
attached to the Disclosure Letter, there is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the Company, threatened (i) against the Company or any of the Company’s officers or directors with
respect to their services to the Company or material to the Company; or (ii) that questions the validity of this Agreement or the
right of the Company to enter into this Agreement or to consummate the transactions contemplated hereby. There has not been, and
to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC or other United States governmental
agency involving the Company or, to the Company’s knowledge, any current or former director or officer of the Company.
(u)
Insurance
.
Except as set forth in
Schedule 3(u)
attached to the Disclosure Letter, the Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent
and customary in the businesses in which the Company is engaged. The Company has not been refused any insurance coverage sought
or applied for, and the Company has no any reason to believe that it will be unable to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business
at a cost that would not have a Material Adverse Effect.
(v)
Employee
Relations
. The Company is not a party to any collective bargaining agreement and does not employ any member of a union. No
executive officer (as defined in Rule 501(f) promulgated under the 1933 Act) or other key employee of the Company has notified
the Company that such officer intends to leave the Company or otherwise terminate such officer’s employment with the Company.
To the Company’s knowledge, no executive officer or other key employee of the Company is, or is now expected to be, in violation
of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive
officer or other key employee (as the case may be) does not subject the Company to any liability with respect to any of the foregoing
matters. The Company is in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment
and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance
would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(w)
Title
.
The Company has good and marketable title to all personal property owned by it which is material to the business of the Company,
in each case, free and clear of all liens, encumbrances and defects except such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property by the Company.
(x)
Intellectual
Property Rights
. To the Company’s knowledge, the Company owns or possesses adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, original works, inventions,
licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and
registrations therefor (“
Intellectual Property Rights
”) necessary to conduct its business as now conducted and
as presently proposed to be conducted. None of the Company’s Intellectual Property Rights have expired, terminated or been
abandoned, or are expected to expire, terminate or be abandoned, within three years from the date of this Agreement. The Company
has no knowledge of any infringement by the Company of Intellectual Property Rights of others. There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company, being threatened, against the Company regarding its Intellectual Property
Rights. The Company is not aware of any facts or circumstances which might give rise to any of the foregoing infringements or claims,
actions or proceedings. The Company has taken reasonable security measures to protect the secrecy, confidentiality and value of
all of its Intellectual Property Rights.
(y)
Environmental
Laws
. The Company (i) is in compliance with all Environmental Laws (as defined below), (ii) except as set forth on
Schedule
3(y)
attached to the Disclosure Letter, has received all permits, licenses or other approvals required of it under applicable
Environmental Laws to conduct its business, and (iii) is in compliance with all terms and conditions of any such permit, license
or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected
to have, individually or in the aggregate, a Material Adverse Effect. “
Environmental Laws
” means all federal,
state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “
Hazardous Materials
”) into the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes,
decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder.
(z)
Tax
Status
. The Company (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any
such claim. The Company is not operated in such a manner as to qualify as a passive foreign investment company, as defined in Section
1297 of the U.S. Internal Revenue Code of 1986, as amended.
(aa)
Internal
Accounting and Disclosure Controls
. Except as set forth on
Schedule 3(aa)
attached to the Disclosure Letter, the Company
maintains internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder (the “
1934 Act
”)) that is effective
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes, including that (i) transactions are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements to maintain asset and liability accountability,
(iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities
at reasonable intervals and appropriate action is taken with respect to any difference. The Company has not received any notice
or correspondence from any accountant or other Person relating to any potential material weakness or significant deficiency in
any part of the internal controls over financial reporting of the Company.
(bb)
Off
Balance Sheet Arrangements
. There is no transaction, arrangement, or other relationship involving the Company in respect of
an off-balance sheet entity that would be required to be disclosed by the Company in a 1934 Act filing or that otherwise could
be reasonably likely to have a Material Adverse Effect.
(cc)
Investment
Company Status
. The Company is not, and upon consummation of the sale of the Securities will not be, an “investment company,”
or, to the knowledge of the Company, an affiliate of an “investment company,” a company controlled by an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter” for,
an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.
(dd)
U.S.
Real Property Holding Corporation
. The Company is not, and has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon any Buyer’s
request.
(ee)
Transfer
Taxes
. On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be
paid in connection with the issuance, sale and transfer of the Securities to be sold to each Buyer hereunder will be, or will have
been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.
(ff)
Bank
Holding Company Act
. The Company is not subject to the Bank Holding Company Act of 1956, as amended (the “
BHCA
”)
and to regulation by the Board of Governors of the Federal Reserve System (the “
Federal Reserve
”). Neither the
Company nor, to the Company’s knowledge, any of its affiliates owns or controls, directly or indirectly, five percent (5%)
or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of
a bank or any equity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor, to the Company’s
knowledge, any of its affiliates exercises a controlling influence over the management or policies of a bank or any entity that
is subject to the BHCA and to regulation by the Federal Reserve.
(gg)
Shell
Company Status
. The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i).
(hh)
Public
Utility Holding Act
. The Company is not a “holding company,” or an “affiliate” of a “holding
company,” as such terms are defined in the Public Utility Holding Act of 2005.
(ii)
Federal
Power Act
. The Company is not subject to regulation as a “public utility” under the Federal Power Act, as amended.
(jj)
No
Additional Agreements
. The Company does not have any agreement or understanding with any Buyer with respect to the transactions
contemplated by the Transaction Documents other than as specified in the Transaction Documents.
(kk)
Real
Property
. The Company holds good title to all real property, leases in real property, or other interests in real property stated
as owned or held by the Company (the “
Real Property
”). The Real Property owned by the Company is free and clear
of all mortgages, defects, claims, liens, pledges, charges, taxes, rights of first refusal, encumbrances, security interests and
other encumbrances (collectively “
Encumbrances
”) and is not subject to any rights of way, building use restrictions,
exceptions, variances, reservations, or limitations of any nature except for (i) liens for current taxes not yet due, and (ii)
zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto.
Any Real Property held under lease by the Company is held under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company.
(ll)
Fixtures
and Equipment
. The Company has good title to, or a valid leasehold interest in, the tangible personal property, equipment,
improvements, fixtures, and other personal property and appurtenances that are used by the Company in connection with the conduct
of its business (the “
Fixtures and Equipment
”). The Fixtures and Equipment are structurally sound, are in good
operating condition and repair, are adequate for the uses to which they are being put, are not in need of maintenance or repairs
except for ordinary, routine maintenance and repairs and are sufficient for the conduct of the Company’s business in the
manner as conducted prior to the Closing. The Company owns all of its Fixtures and Equipment free and clear of all Encumbrances
except for (i) liens for current taxes not yet due, and (ii) zoning laws and other land use restrictions that do not impair the
present or anticipated use of the property subject thereto.
(mm)
Illegal
or Unauthorized Payments; Political Contributions
. Neither the Company nor, to the Company’s knowledge, any of its officers,
directors, employees, agents or other representatives, when acting in their capacity as officers, directors, employees, agents
or representatives of the Company, has, directly or indirectly, made or authorized any payment, contribution or gift of money,
property, or services, whether or not in contravention of applicable law, (i) as a kickback or bribe to any Person or (ii) to any
political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political
contributions not involving the direct or indirect use of funds of the Company.
(nn)
Money
Laundering
. The Company is in compliance with, and has not previously violated, the USA Patriot Act of 2001 and all other applicable
U.S. and non-U.S. anti-money laundering laws and regulations, including, without limitation, the laws, regulations and Executive
Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, without limitation, (i) Executive
Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten
to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter
V.
(oo)
Ranking
of Notes
. No indebtedness of the Company, at the Closing, will be senior to the Notes in right of payment, whether with respect
to payment or redemptions, interest, damages, upon liquidation or dissolution or otherwise. Except for the 2015 Convertible Notes,
no indebtedness of the Company, at the Closing, will be
pari passu
to the Notes in right of payment, whether with respect
to payment or redemptions, interest, damages, upon liquidation or dissolution or otherwise.
(pp)
Disclosure
.
The Company understands and confirms that each of the Buyers will rely on the foregoing representations in effecting the transactions
consummated hereunder. The Company acknowledges and agrees that no Buyer makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically set forth in Section 2.
4. COVENANTS.
(a)
Best
Efforts
. Each Buyer shall use its best efforts to timely satisfy each of the conditions to be satisfied by it as provided in
Section 6 of this Agreement. The Company shall use its best efforts to timely satisfy each of the conditions to be satisfied by
it as provided in Section 7 of this Agreement.
(b)
Form
D and Blue Sky
. The Company shall file a Form D with respect to the Securities as required under Regulation D and provide a
copy thereof to the Placement Agent promptly after such filing. The Company shall, on or before the Closing Date, take such action,
if any, as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to, qualify the Securities
for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of
the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action
so taken to the Placement Agent on or prior to the Closing Date. Without limiting any other obligation of the Company under this
Agreement, the Company shall timely make all filings and reports relating to the offer and sale of the Securities required in connection
with the consummation of the transactions consummated hereunder under all applicable securities laws (including, without limitation,
all applicable federal securities laws and all applicable “Blue Sky” laws), and the Company shall comply with all applicable
federal, foreign, state and local laws, statutes, rules, regulations and the like relating to the offering and sale of the Securities
to the Buyers.
(c)
Reporting
Status
. After the date the Company becomes subject to the periodic reporting requirements under Sections 13 or 15(d) of the
1934 Act, as amended from time to time, together with the regulations promulgated thereunder (a “
Reporting Company
”),
and until the date on which the Buyers shall have sold all of the Registrable Securities (such period, to end in any event, whether
or not such securities have been sold, not later than five years after such date, the “
Reporting Period
”), the
Company shall use commercially reasonable efforts to timely file all reports required to be filed with the SEC pursuant to the
1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would no longer require or otherwise permit such termination unless such termination
is approved by the holders of a majority stockholders of the voting power of the Company, or unless no Buyer has demand registration
rights under the Registration Rights Agreement or unless no Buyer is a holder of record of Conversion Shares (collectively, the
“
Termination Conditions
”).
(d)
Use
of Proceeds
. The Company shall use the proceeds from the sale of the Securities for general corporate purposes as set forth
in the Private Placement Memorandum; provided, however, that the Company shall not use any of the proceeds to make or repay loans
to, or purchase assets from, any officer, director or member of executive management of the Company or any of the Company’s
affiliates.
(e) [
Reserved
.]
(f)
Listing
.
If the Company becomes a Reporting Company, the Company shall in connection with any proper demand for registration of Registrable
Securities under the Registration Rights Agreement (if the same has not previously occurred) promptly secure the listing or designation
for quotation (as the case may be) of all of the Registrable Securities upon each national securities exchange and automated quotation
system, if any, upon which the Common Stock is then listed or designated for quotation (as the case may be) (subject to official
notice of issuance) and shall thereafter maintain such listing or designation for quotation (as the case may be) of all Registrable
Securities from time to time issuable under the terms of the Transaction Documents on such national securities exchange or automated
quotation system unless one of the Termination Conditions has occurred. During any period that the Common Stock is listed or designated,
the Company shall use commercially reasonable efforts to maintain the Common Stock’s listing or designation for quotation
(as the case may be) on The New York Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market or
the Nasdaq Capital Market (each, an “
Eligible Market
”). During the Reporting Period, the Company shall use commercially
reasonable efforts not to take any action which could be reasonably expected to prevent a listing or result in the delisting or
suspension of the Common Stock from an Eligible Market. The Company shall pay all fees and expenses in connection with satisfying
its obligations under this Section 4(f).
(g)
Fees
.
The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or broker’s
commissions (other than for Persons engaged by any Buyer) relating to or arising out of the transactions contemplated hereby and
resulting from the retention by the Company of any placement agent, financial advisor or broker (including, without limitation,
any fees payable to the Placement Agent, who is the Company’s sole placement agent in connection with the transactions contemplated
by this Agreement). Except where Buyer has breached Section 2(k) hereof, the Company shall pay, and hold each Buyer harmless against,
any liability, loss or expense (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses) arising
in connection with any claim relating to any such payment. Except as otherwise set forth in the Transaction Documents, each party
to this Agreement shall bear its own expenses in connection with the sale of the Securities to the Buyers.
(h)
Pledge
of Securities
. Notwithstanding anything to the contrary contained in this Agreement, the Company acknowledges and agrees that
the Securities may be pledged by a Buyer in connection with a bona fide margin agreement or other bona fide loan or financing arrangement
that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities
hereunder, and no Buyer making a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or any other Transaction Document. The Company hereby agrees to execute
and deliver such documentation as a holder of the Securities may reasonably request in connection with a pledge of the Securities
to such pledgee by a Buyer.
(i)
Reservation
of Shares
. The Company will take all action necessary to at all times have authorized, and reserved for the purpose of issuance,
no less than one hundred ten percent (110%) of the maximum number of Conversion Shares issuable upon conversion of the Notes.
(j)
Conduct
of Business
. So long as any of the Securities are held by the Buyers and their successors in interest and assigns, the business
of the Company shall not be conducted in violation of any law, ordinance or regulation of any governmental entity, except where
such violations would not result, either individually or in the aggregate, in a Material Adverse Effect.
(k)
Subsequent
Placements
. Except as set forth on
Schedule 4(k)
attached to the Disclosure Letter, so long as the Notes are outstanding,
the Company shall, without the prior written consent of the Required Buyers (as defined below), be prohibited from effecting or
entering into an agreement to effect any offering or placement of equity or equity linked securities or debt of the Company (“
Subsequent
Placement
”), other than (i) a firm commitment underwritten initial public offering through a registered broker-dealer
(an “
IPO
”); (ii) prior to the “
IPO Outside Date
” (as defined in the Senior Secured Convertible
Notes), with LVP’s prior written consent, a Subsequent Placement (or series of Subsequent Placements) in which in the aggregate
gross proceeds to the Company do not exceed $2 million; (iii) prior to the IPO Outside Date, without the consent of LVP, a Subsequent
Placement (or series of Subsequent Placements) to one or more of the Company’s industry partners and/or customers (including,
without limitation, an Original Equipment Manufacturer, Integrated Device Manufacturer, and/or foundry) in a transaction, the principal
purpose of which is not to raise equity capital; or (iv) shares of Common Stock or Convertible Securities issued to employees or
directors of, or consultants or advisors to, the Company or any of its subsidiaries pursuant to its Stock Incentive Plan (as defined
below).
(l)
Change
of Control
. Prior to the IPO Outside Date, the Company may not effect a Specified Change of Control without the prior written
consent of the Required Buyers. “
Specified
Change in Control
” means (x) the acquisition of the Company
by another entity by means of any transaction to which the Company is a party (including, without limitation, any merger or consolidation)
that contemplates an enterprise value of the Company of less than $75 million, or (y) a sale of all or substantially all of the
assets of the Company for an aggregate purchase price of less than $75 million (including, for purposes of this section, the sale
or exclusive license of intellectual property rights which, in the aggregate, constitutes substantially all of the corporation’s
material intellectual property assets).
(m)
Variable
Rate Transaction
. Notwithstanding anything in this Agreement to the contrary, until the later of (i) none of the Notes being
outstanding or (ii) three years after the Company becomes a Reporting Company, the Company shall be prohibited from effecting or
entering into any Subsequent Placement
involving a Variable Rate Transaction. “
Variable Rate Transaction
”
means a transaction in which the Company (i) issues or sells any Convertible Securities either (A) at a conversion, exercise or
exchange rate or other price that is based upon and/or varies with the trading prices of, or quotations for, the shares of Common
Stock at any time after the initial issuance of such Convertible Securities, or (B) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the initial issuance of such Convertible Securities or upon the occurrence
of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock,
other than pursuant to a customary “weighted average” anti-dilution provision or in connection with any stock dividend,
stock split, combination or other similar recapitalization or (ii) enters into any agreement (including, without limitation, an
“equity line of credit” or an “at the market offering”) whereby the Company may sell securities at a future
determined price (other than standard and customary “preemptive” or “participation” rights). The Buyers,
by action of the Required Buyers, shall be entitled to obtain injunctive relief against the Company to preclude any such issuance,
which remedy shall be in addition to any right to collect damages.
(n)
Passive
Foreign Investment Company
. For the period ending on the third year anniversary after the Company becomes a Reporting Company,
the Company shall conduct its business in such a manner as will ensure that the Company will not be deemed to constitute a passive
foreign investment company within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.
(o)
Restriction
on Redemption and Cash Dividends
. So long as any Notes are outstanding, the Company shall not, directly or indirectly, redeem
(other than repurchases of stock from former employees, advisors, directors, consultants or other persons who provided services
on behalf of the Company or a Subsidiary at the original purchase price thereof), or declare or pay any cash dividend or distribution
on, any securities of the Company without the prior express written consent of the Required Buyers.
(p)
Corporate
Existence
. So long as any Notes are outstanding, the Company shall maintain its corporate existence.
(q)
[Reserved
.]
(r)
[Reserved
.]
(s)
Incentive
Equity
. The Company will take the necessary actions to amend its stock incentive plan (the “
Stock Incentive Plan
”)
to provide that the number of shares of Common Stock reserved for issuance thereunder, together with any stock that may be awarded
for performance bonuses related to a successful IPO, shall equal to no more than fifteen percent (15%) of the number of fully diluted
shares of Common Stock (based on an assumed conversion price of the Notes (including the 2015 Convertible Notes) of $6.60) during
the period up to and including the date of the IPO and giving effect to the IPO and debt conversions triggered by the IPO, unless
otherwise mutually agreed between the Company and LVP in writing. From and after the Effective Date and through and including the
consummation of the IPO, the Company shall not issue any options or other equity awards under the Stock Incentive Plan or otherwise
to any employee, officer or director of the Company as of the Effective Date, except as disclosed in the Private Placement Memorandum,
unless otherwise mutually agreed between the Company and LVP in writing.
(t) [
Reserved
.]
(u)
Lock-Up
.
In connection with any IPO, the Company will use its best efforts to obtain lock-up agreements in a form reasonably acceptable
to the Placement Agent from the persons indicated in the below tables, covering themselves and their affiliates, in respect of
the securities issued by the Company held at the commencement of the IPO of the Company, including any common stock into which
those securities may be converted, exercised or exchanged into shares of Common Stock, for the time periods as indicated in the
below tables (for clarity, the lock-up does not apply to any of the securities to be offered to the public in the IPO through an
underwriter or selling group member or any securities acquired in the public market in, or at any time after, the IPO):
(A)
365 Day Lock-Up Table
For the period commencing on the offering
date of the IPO of the Company and extending for 365 days thereafter:
|
|
·
|
Officers and directors serving in such capacities at the commencement of the IPO (for clarity,
if any director and officer who executed a formal lock-up agreement for a 365 day lock-up period is no longer a director or officer
at the time of the IPO, such person will be fully released from the agreement at the time of the IPO, provided that they execute
a substitute lock-up agreement as provided below under the terms of the General Lock Up Table); and
|
|
|
·
|
The Placement Agent, provided, however the Placement Agent or its affiliates may exercise their
respective warrants to convert them into shares of Common Stock during the 365 day lock-up period.
|
(B)
General Lock-Up Table
For the period commencing on the offering
date of the IPO of the Company and extending thereafter as indicated below:
|
|
·
|
All Employees (other than officers);
|
|
|
·
|
All existing shareholders, if not otherwise covered by a lock-up with a greater time period; and
|
|
|
·
|
All holders of Convertible Securities (other than the 2015 Convertible Notes) outstanding at the
time of the IPO.
|
Under the General Lock-Up, those persons
named above will be prohibited from offering, selling, transferring directly or indirectly, pledging, or offering to do any of
the same directly or indirectly, any of the securities of the Company (including any securities convertible, exercisable or exchangeable
into shares of Common Stock), for a period of 180 days following the effective date of the registration statement for the IPO (the
“
IPO Commencement Date
”), and on the 181
st
day following the IPO Commencement Date and on every subsequent
31
st
day thereafter, 15% of the securities shall be released from the General Lock-Up until the 366
th
day
following the IPO Commencement Date when all such prohibitions shall have been removed. For purpose of clarity, below is a summary
of the lock-up period.
|
Days Following the IPO
|
|
% of Securities
Subject to Lock-Up
|
|
|
1-180
|
|
|
100
|
%
|
|
181-211
|
|
|
85
|
%
|
|
212-242
|
|
|
70
|
%
|
|
243-273
|
|
|
55
|
%
|
|
274-304
|
|
|
40
|
%
|
|
305-335
|
|
|
25
|
%
|
|
336-365
|
|
|
10
|
%
|
|
366 and thereafter
|
|
|
0
|
%
|
(v)
Investor
Market Stand-Off
. In connection with the IPO, if any, each Buyer hereby agrees that, for a period of 365 days following the
IPO Commencement Date (the “
Restricted Period
”), it will not (i) 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, lend
or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, whether now owned or hereafter acquired or with respect to which such Buyer has or hereafter acquires the power
of disposition, other than any of the securities to be offered to the public in the IPO through an underwriter or selling group
member or any securities acquired in the public market in, or at any time after, the IPO (collectively, “
Restricted Stock
”);
or (ii) enter into any swap or other agreement, arrangement or transaction that transfers to another, in whole or in part, directly
or indirectly, any of the economic consequence of ownership of any Restricted Stock, whether any transaction described in clause
(i) or (ii) is to be settled by delivery of Common Stock, other securities, in cash or otherwise, without the prior written consent
of the managing or lead underwriter of such offering; provided, however that, (A) on the 181
st
day following the IPO
Commencement Date and on every subsequent 31
st
day thereafter, 15% of the securities shall be released from this lock-up
provision until the 366
th
day following the date of the IPO Commencement Date when all such prohibitions shall have
been removed (for purpose of clarity, the table below contains a summary of the lock-up period); and (B) notwithstanding the foregoing,
if during the last seventeen (17) days of the one hundred eighty (180) day period following the IPO Commencement Date (the “
FINRA
Restricted Period
”) the Company issues an earnings release or material news or a material event relating to the Company
occurs, or prior to the expiration of the FINRA Restricted Period the Company announces that it will release earnings results during
the sixteen (16) day period beginning on the last day of the restricted period, then, upon the request of the managing or lead
underwriter, to the extent required by any FINRA rules, the restrictions imposed by this Section 4(v) shall continue to apply until
the end of the third (3
rd
) trading day following the expiration of the fifteen (15) day period beginning on the issuance
of the earnings release or the occurrence of the material news or material event. In order to enforce the restrictions agreed to
by Buyer in this Section 4(v), the Company may impose stop-transfer instructions with respect to any security acquired under or
subject to this Agreement until the end of the Restricted Period. The Company’s underwriters shall be third-party beneficiaries
of the restrictions set forth in this Section 4(v).
|
Days Following the IPO
|
|
% of Securities
Subject to Lock-Up
|
|
|
1-180
|
|
|
100
|
%
|
|
181-211
|
|
|
85
|
%
|
|
212-242
|
|
|
70
|
%
|
|
243-273
|
|
|
55
|
%
|
|
274-304
|
|
|
40
|
%
|
|
305-335
|
|
|
25
|
%
|
|
336-365
|
|
|
10
|
%
|
|
366 and thereafter
|
|
|
0
|
%
|
(w)
IPO
Commitment
. The Company shall use its best efforts to file with the SEC a registration statement on Form S-1 (or any successor
form thereto) to register and sell Common Stock in an IPO (the “
IPO Registration Statement
”) by no later than
December 31, 2016. In the event that the Company has not filed the IPO Registration Statement with the SEC within five (5) months
of the Closing Date, then the Company shall not file the IPO Registration Statement with the SEC until at least six (6) months
and one (1) day after the Closing Date.
5. REGISTER;
TRANSFER AGENT INSTRUCTIONS; LEGEND.
(a)
Register
.
The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate
by notice to each holder of Securities), a register for the Notes and, if issued, the Conversion Shares in which the Company shall
record the name and address of the Person in whose name the Notes and/or Conversion Shares have been issued (including the name
and address of each transferee), the principal amount of the Notes or aggregate number of Conversion Shares held by such Person,
and any tax related information required to be maintained. The Company shall keep the register open and available at all times
during business hours for inspection of any Buyer or its legal representatives.
(b)
Transfer
Agent Instructions
. If a Buyer effects a sale, assignment or transfer of the Conversion Shares in compliance with all applicable
securities laws, the Company shall permit the transfer and shall promptly issue, or shall promptly instruct its transfer agent
to issue, as applicable, one or more certificates or, if the Conversion Shares are eligible for legend removal under Section 5(d),
credit shares to the applicable balance accounts at the Depository Trust Company (“
DTC
”) in such name and in
such denominations as specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment
or transfer involves Conversion Shares sold, assigned or transferred pursuant to an effective registration statement or in compliance
with Rule 144, the transfer agent shall issue such shares to such Buyer, assignee or transferee (as the case may be) without any
restrictive legend in accordance with Section 5(d) below. The Company acknowledges that a breach by it of its obligations under
this Section 5(b) will cause irreparable harm to each Buyer. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5(b) will be inadequate and agrees, in the event of a breach or threatened breach
by the Company of the provisions of this Section 5(b), that each Buyer shall be entitled, in addition to all other available remedies,
to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required. The Company shall cause its counsel to issue the legal opinion
referred to in the Irrevocable Transfer Agent Instructions to the Company’s transfer agent on each Effective Date (as defined
and provided in the Registration Rights Agreement), provided that the applicable Buyer(s) or its or their representatives and/or
brokers have provided the documentation to counsel reasonably necessary or required for the basis of such legal opinion. Any fees
(with respect to the transfer agent, counsel to the Company or otherwise) associated with the issuance of such opinion or the removal
of any legends on any of the Securities shall be borne by the Company.
(c)
Legends
.
Each Buyer understands that the Securities have been issued (or will be issued in the case of the Conversion Shares) pursuant to
an exemption from registration or qualification under the 1933 Act and applicable state securities laws, and except as set forth
below, the Securities shall bear any legend as required by the “Blue Sky” laws of any state and a restrictive legend
in substantially the following form (and a stop-transfer order may be placed against transfer of such Securities):
[NEITHER THE ISSUANCE AND SALE
OF THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN]/[THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED
BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
(d)
Removal
of Legends
. Certificates evidencing Securities shall not be required to contain the legend set forth in Section 5(c) above
or any other legend (i) following any sale of such Securities pursuant to an effective registration statement covering the resale
of such Securities is effective under the 1933 Act, (ii) following any sale of such Securities pursuant to Rule 144, (iii) if such
Securities are eligible to be sold, assigned or transferred under Rule 144(b)(1) (provided that a Buyer provides the Company with
reasonable assurances that such Securities are eligible and will remain for sale, assignment or transfer under Rule 144(b)(1) which
shall not include an opinion of counsel), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144),
provided that such Buyer provides the Company with an opinion of counsel to such Buyer, in a generally acceptable form, to the
effect that such sale, assignment or transfer of the Securities may be made without restrictive legends and thereafter made without
registration under the applicable requirements of the 1933 Act, or (v) if such legend is not required under applicable requirements
of the 1933 Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the SEC, provided
that Buyer provides the Company with an opinion of counsel to such effect). If the Company is a Reporting Company and a legend
is not required pursuant to the foregoing, the Company, at its expense, shall no later than three (3) Business Days following the
delivery by a Buyer to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such
Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance
and/or transfer, if applicable), together with any other deliveries from such Buyer as may be required above in this Section 5(d),
as directed by such Buyer, either: (A) provided that the Company’s transfer agent is participating in the DTC Fast Automated
Securities Transfer Program and such Securities are Conversion Shares, credit the aggregate number of shares of Common Stock to
which such Buyer shall be entitled to the balance account of such Buyer or the purchaser of such Conversion Shares, as the case
may be (the “
Designated Recipient
”) with the DTC through its Deposit/Withdrawal at Custodian system or (B) if
the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch
for delivery (via reputable overnight courier) to such Designated Recipient, a certificate representing such Securities that is
free from all restrictive and other legends, registered in the name of such Designated Recipient (the date by which such credit
is so required to be made to the balance account of such Designated Recipient with DTC or such certificate is required to be delivered
to such Designated Recipient pursuant to the foregoing is referred to herein as the “
Required Delivery Date
”).
(e)
Failure
to Timely Deliver; Buy-In
. If the Company is a Reporting Company and the Company improperly fails to (i) issue and dispatch
for delivery (or cause to be so dispatched) to a Designated Recipient by the Required Delivery Date a certificate representing
the Securities so delivered to the Company by such Buyer that is free from all restrictive and other legends or (ii) credit the
balance account of such Designated Recipient’s or such Designated Recipient’s nominee with DTC for such number of Conversion
Shares so delivered to the Company, and if on or after the business day immediately following the Required Delivery Date such Buyer
(or any other Person in respect, or on behalf, of such Buyer) purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by such Buyer of all or any portion of the number of shares of Common Stock,
or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, that such
Buyer so anticipated receiving from the Company without any restrictive legend (the “
Buy-In Shares
”), then the
Company shall, within five (5) Business Days after such Buyer’s request and in such Buyer’s sole discretion, either
(x) pay cash to such Buyer in an amount equal to such Buyer’s total purchase price (including brokerage commissions and other
out of pocket expenses, if any) for such Buy-In Shares (the “
Buy-In Price
”), at which point the Company’s
obligation to so deliver such certificate or credit such Designated Recipient’s balance account shall terminate and such
shares shall be cancelled, or (y) promptly honor its obligation to so deliver to such Designated Recipient a certificate or certificates
or credit such Designated Recipient’s DTC account representing such number of shares of Common Stock that would have been
so delivered if the Company timely complied with its obligations hereunder and pay cash to such Buyer in an amount equal to the
excess (if any) of the Buy-In Price over the product of (A) such number of shares of Conversion Shares that the Company was required
to deliver to such Designated Recipient by the Required Delivery Date multiplied by (B) the lowest closing sale price of the Common
Stock on the Business Days during the period commencing on the date of the delivery by such Designated Recipient to the Company
of the applicable Conversion Shares and ending on the date of such delivery and payment under this clause (y).
6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
(a) The
obligation of the Company hereunder to issue and sell the Notes to each Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole discretion by providing each Buyer with prior written notice thereof:
(i) Such
Buyer shall have executed each of the other Transaction Documents to which it is a party and an Investor Questionnaire, and delivered
the same to the Company.
(ii) Such
Buyer and each other Buyer shall have delivered to the Escrow Agent on behalf of the Company the Purchase Price for the Note being
purchased by such Buyer at the Closing by check in collected funds through the Escrow Agent or wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.
(iii) The
representations and warranties of such Buyer shall be true and correct in all material respects as of the date when made and as
of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date), and such Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by
such Buyer at or prior to the Closing Date.
(iv) The
Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities.
(v) No
statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated
by the Transaction Documents.
(vi) Since
the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result
in a Material Adverse Effect.
(vii) That
the Earlier Investors shall have entered into a Consent and Modification Agreement, in the form attached hereto as
Exhibit
F
, with the Company.
(viii) That
Notes having an aggregate principal amount of at least $5,000,000 are purchased by the Buyers.
7. CONDITIONS
TO EACH BUYER’S OBLIGATION TO PURCHASE.
(a) The
obligation of each Buyer hereunder to purchase its Note at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are for each Buyer’s sole benefit and may be waived
by such Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:
(i) The
Company shall have duly executed and delivered to such Buyer each of the Transaction Documents to which it is a party and the Company
shall have duly executed and delivered to such Buyer a Note (in such original principal amount as is set forth across from such
Buyer’s name in column (2) of the Schedule of Buyers) being purchased by such Buyer at the Closing pursuant to this Agreement.
(ii) Buyer
shall have received an opinion of Greenberg Traurig, LLP, the Company’s counsel, dated the date of the issuance of the Note
to such Buyer, stating that the Company is a corporation incorporated under the laws of the State of Delaware, the Transaction
Documents have been duly authorized by all requisite corporate action on the part of the Company, and that the Conversion Shares,
if and when issued in accordance with the terms of the Notes, will be duly authorized, fully paid and non-assessable, which opinion
may be subject to such assumptions and conditions are normally set forth in opinions of legal counsel in respect of such matters.
(iii) The
Company shall have delivered to such Buyer a certificate evidencing the formation and good standing of the Company in its jurisdiction
of formation issued by the Secretary of State (or comparable office) of such jurisdiction of formation as of a date within ten
(10) days of the Closing Date.
(iv) The
Company shall have delivered to such Buyer a certificate or other reasonably acceptable evidence evidencing the Company’s
qualification as a foreign corporation and good standing issued by the Secretary of State (or comparable office) of each jurisdiction
in which the Company conducts business and is required to so qualify, as of a date within ten (10) days of the Closing Date.
(v) The
Company shall have delivered to such Buyer a certified copy of the Certificate of Incorporation as certified by the Secretary of
State of the Company’s jurisdiction of incorporation within ten (10) days of the Closing Date.
(vi) The
Company shall have delivered to such Buyer a certificate, in the form acceptable to such Buyer, executed by the Secretary of the
Company dated as of the Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted by the Company’s
board of directors in a form reasonably acceptable to such Buyer, (ii) the Certificate of Incorporation of the Company and (iii)
the Bylaws of the Company as in effect at the Closing.
(vii) Each
and every representation and warranty of the Company shall be true and correct as of the applicable Closing Date in all material
respects (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such
date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and
conditions required to be performed, satisfied or complied with by the Company at or prior to the Closing Date. Such Buyer shall
have received a certificate, executed by the President of the Company, dated as of the Closing Date, to the foregoing effect and
as to such other matters as may be reasonably requested by such Buyer in the form reasonably acceptable to such Buyer.
(viii) The
Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities.
(ix) No
statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated
by the Transaction Documents.
(x) Since
the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result
in a Material Adverse Effect.
(xi) In
accordance with the terms of the Security Documents, the Company shall have delivered to such Buyer copies of appropriate financing
statements on Form UCC-1 duly filed in such office or offices and in the offices of the United States Patent and Trademark Office
as may be necessary or, in the opinion of the Buyers, desirable to perfect the first priority security interests purported to be
created by each Security Document.
(xii) (i)
Within two (2) Business Days prior to the Closing, the Company shall have delivered or caused to be delivered to each Buyer true
copies of UCC search results in the Company’s jurisdiction of incorporation, listing all effective financing statements which
name as debtor the Company filed in the prior five years to perfect an interest in any assets thereof, together with copies of
such financing statements, none of which, except for those filed in connection with the 2015 Convertible Notes, shall cover any
of the Collateral (as defined in the Security Documents) and the results of searches for any tax lien and judgment lien in the
jurisdiction of the Company’s principal place of business filed against such Person or its property, which results, except
as otherwise agreed to in writing by the Required Buyers shall not show any such Liens (as defined in the Security Documents);
and (ii) at the Closing, the Company shall have delivered or caused to be delivered to each Buyer a perfection certificate, duly
completed and executed by the Company, in form and substance reasonably satisfactory to the Required Buyers.
(xiii) Since
the Effective Date, the Company shall not have amended, modified, waived compliance with or terminated, revoked or rescinded in
any manner or respect (and the Company shall not have taken any action, or permitted any action to be taken (whether through the
Company’s inaction or otherwise), that has a similar effect to any of the foregoing) any provision of any of material agreements
and all of such agreements shall be in full force and effect.
(xiv) The
Company shall have delivered to such Buyer a letter dated as of the Closing Date, in a form reasonably acceptable to such Buyer,
executed by the Company (the “
Disclosure Letter
”).
(xv) The
Company shall have delivered to such Buyer such other documents, instruments or certificates relating to the transactions contemplated
by this Agreement as such Buyer or its counsel may reasonably request.
(xvi) That
the Earlier Investors shall have entered into a Consent and Modification Agreement, in the form attached hereto as
Exhibit
F
, with the Company.
(xvii) That
Notes having an aggregate principal amount of at least $5,000,000 are purchased by the Buyers.
8. TERMINATION.
(a) This
Agreement may be terminated prior to Closing:
(i) by
written agreement of the Buyers and the Company; or
(ii) by
either the Company or a Buyer (as to itself but no other Buyer) upon written notice to the other, if the Closing shall not have
taken place by 6:30 p.m. Eastern time on March 31, 2016; provided, that the right to terminate this Agreement under this Section
8(a)(ii) shall not be available to any party whose failure to comply with its obligations under this Agreement has been the cause
of or resulted in the failure of the Closing to occur on or before such time.
(b) No
termination of this Agreement shall affect any obligation of the Company under this Agreement to reimburse such Buyer for the expenses
described in Section 4(g) above. Nothing contained in this Section 8 shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right
of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction
Documents.
9. MISCELLANEOUS.
(a)
Governing
Law; Jurisdiction; Jury Trial
. All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed
or operate to preclude any Buyer from bringing suit or taking other legal action against the Company in any other jurisdiction
to collect on the Company’s obligations to such Buyer or to enforce a judgment or other court ruling in favor of such Buyer.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b)
Counterparts
.
This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that
any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an
executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such signature page were an original thereof.
(c)
Headings;
Gender
. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation
of, this Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine,
feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include”
and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,”
“hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision
in which they are found.
(d)
Severability
.
If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations
of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s),
the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s). Notwithstanding
anything to the contrary contained in this Agreement or any other Transaction Document (and without implication that the following
is required or applicable), it is the intention of the parties that in no event shall amounts and value paid by the Company, or
payable to or received by any of the Buyers, under the Transaction Documents (including without limitation, any amounts that would
be characterized as “interest” under applicable law) exceed amounts permitted under any applicable law. Accordingly,
if any obligation to pay, payment made to any Buyer, or collection by any Buyer pursuant the Transaction Documents is finally judicially
determined to be contrary to any such applicable law, such obligation to pay, payment or collection shall be deemed to have been
made by mutual mistake of such Buyer, and the Company and such amount shall be deemed to have been adjusted with retroactive effect
to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by the applicable law. Such adjustment
shall be effected, to the extent necessary, by reducing or refunding, at the option of such Buyer, the amount of interest or any
other amounts which would constitute unlawful amounts required to be paid or actually paid to such Buyer under the Transaction
Documents. For greater certainty, to the extent that any interest, charges, fees, expenses or other amounts required to be paid
to or received by such Buyer under any of the Transaction Documents or related thereto are held to be within the meaning of “interest”
or another applicable term to otherwise be violative of applicable law, such amounts shall be pro-rated over the period of time
to which they relate.
(e)
Entire
Agreement; Amendments
. This Agreement, the other Transaction Documents and the schedules and exhibits attached hereto and thereto
and the instruments referenced herein and therein supersede all other prior oral or written agreements between the Buyers, the
Company, their affiliates and Persons acting on their behalf solely with respect to the matters contained herein and therein, and
this Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced
herein and therein contain the entire understanding of the parties solely with respect to the matters covered herein and therein;
provided, however, except as explicitly stated herein, nothing contained in this Agreement or any other Transaction Document shall
(or shall be deemed to) (i) have any effect on any agreements any Buyer has entered into with, or any instruments any Buyer has
received from, the Company prior to the date hereof with respect to any prior investment made by such Buyer in the Company or (ii)
waive, alter, modify or amend in any respect any obligations of the Company, or any rights of or benefits to any Buyer or any other
Person, in any agreement entered into prior to the date hereof between or among the Company and any Buyer, or any instruments any
Buyer received from the Company prior to the date hereof, and all such agreements and instruments shall continue in full force
and effect. Except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. For clarification purposes, the Recitals are part of this Agreement. No provision
of this Agreement may be amended other than by an instrument in writing signed by the Company and the Required Buyers. Any amendment
to any provision of this Agreement made in conformity with the provisions of this Section 9(e) shall be binding on all Buyers and
holders of Securities, as applicable, provided that no such amendment shall be effective to the extent that it (1) applies to less
than all of the holders of the Securities then outstanding or (2) imposes any obligation or liability on any Buyer without such
Buyer’s prior written consent (which may be granted or withheld in such Buyer’s sole discretion). No waiver shall be
effective unless it is in writing and signed by an authorized representative of the waiving party, provided that the Required Buyers
may waive any provision of this Agreement, and any waiver of any provision of this Agreement made in conformity with the provisions
of this Section 9(e) shall be binding on all Buyers and holders of Securities, as applicable, provided that no such waiver shall
be effective to the extent that it (1) applies to less than all of the holders of the Securities then outstanding (unless a party
gives a waiver as to itself only) or (2) imposes any obligation or liability on any Buyer without such Buyer’s prior written
consent (which may be granted or withheld in such Buyer’s sole discretion). No consideration shall be offered or paid to
any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same
consideration also is offered to all of the parties to the Transaction Documents who are holders of Notes. The Company has not,
directly or indirectly, made any agreements with any Buyers relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms
that, except as set forth in this Agreement, no Buyer has made any commitment or promise or has any other obligation to provide
any financing to the Company or otherwise. As a material inducement for each Buyer to enter into this Agreement, the Company expressly
acknowledges and agrees that no due diligence or other investigation or inquiry conducted by a Buyer, any of its advisors or any
of its representatives shall affect such Buyer’s right to rely on, or shall modify or qualify in any manner or be an exception
to any of, the Company’s representations and warranties contained in this Agreement or any other Transaction Document. “
Required
Buyers
” means Buyers holding Notes and 2015 Convertible Notes having an aggregate outstanding principal amount that represents
a majority of the aggregate outstanding principal amount of all Notes and 2015 Convertible Notes.
(f)
Notices
.
Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must
be in writing and will be deemed to have been delivered: (i) upon receipt, if delivered personally; (ii) when sent, if sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party);
(iii) when sent, if sent by e-mail (provided that such sent e-mail is kept on file (whether electronically or otherwise) by the
sending party and the sending party does not receive an automatically generated message from the recipient’s e-mail server
that such e-mail could not be delivered to such recipient) and (iv) if sent by overnight courier service, one (1) Business Day
after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party
to receive the same. The addresses, facsimile numbers and e-mail addresses for such communications shall be:
If to the Company:
Atomera Incorporated
750 University Avenue, Suite 280
Los Gatos, CA 95032
Attn: Chief Executive Officer
with a copy (for informational
purposes only) to:
Greenberg Traurig, LLP
3161 Michelson Drive, Suite 1000
Irvine, CA 92612
E-mail:
DonahueD@gtlaw.com
Att: Daniel K. Donahue, Esq.
If to a Buyer, to its address, facsimile
number or e-mail address set forth on such Buyer’s signature page hereto,
with a copy (for informational
purposes only) to:
Golenbock Eiseman Assor Bell &
Peskoe LLP
437 Madison Avenue, 40th Floor
New York, NY 10022
Facsimile: (212) 754-0330
E-mail:
ahudders@golenbock.com
cvandemark@golenbock.com
Attention: Andrew D. Hudders, Esq.
Carl Van Demark,
Esq.
or to such other address, facsimile number
or e-mail address and/or to the attention of such other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient
of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile
machine containing the time, date and recipient facsimile number or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i),
(ii) or (iv) above, respectively. A copy of the e-mail transmission containing the time, date and recipient e-mail address shall
be rebuttable evidence of receipt by e-mail in accordance with clause (iii) above.
(g)
Successors
and Assigns
. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and
assigns, including, as contemplated below, any assignee of any of the Securities. The Company shall not assign this Agreement or
any rights or obligations hereunder without the prior written consent of the Required Buyers; except in the event of a Change in
Control (as defined in the Notes) where the Company repays in full the outstanding Notes of each Buyer or offers each Buyer an
election to be repaid in full under such outstanding notes contingent only upon consummation of such Change in Control. A Buyer
may assign some or all of its rights hereunder in connection with any transfer of any of its Securities without the consent of
the Company, in which event such assignee shall be deemed to be a Buyer hereunder with respect to such assigned rights.
(h)
No
Third Party Beneficiaries
. This Agreement is intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than
the Indemnitees referred to in Section 9(k).
(i)
Survival.
The representations, warranties, agreements and covenants shall survive the Closing and shall expire on the conversion of the Notes
into Conversion Shares. Each Buyer shall be responsible only for its own representations, warranties, agreements and covenants
hereunder.
(j)
Further
Assurances
. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(k)
Indemnification
.
In consideration of each Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each holder of any Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing Persons’ agents or other representatives (including,
without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “
Indemnitees
”)
from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages,
and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys’ fees and disbursements for one (1) counsel to all the Buyers (the
“
Indemnified Liabilities
”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the Company in any of the Transaction Documents, (b)
any breach of any covenant, agreement or obligation of the Company contained in any of the Transaction Documents, or (c) any cause
of action, suit, proceeding or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative
action brought on behalf of the Company) or which otherwise involves such Indemnitee that arises out of or results from (i) the
execution, delivery, performance or successful enforcement of any of the Transaction Documents, or (ii) the status of such Buyer
as a Note holder as a result of the transactions contemplated by the Transaction Documents or as a party to this Agreement (including,
without limitation, as a party in interest or otherwise in any action or proceeding for injunctive or other equitable relief).
To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.
Except as otherwise set forth herein, the mechanics and procedures with respect to the rights and obligations under this Section
9(k) shall be the same as those set forth in Section 6 of the Registration Rights Agreement. No Indemnitee shall be entitled to
indemnification under this Section 9(k) to the extent an Indemnified Liability arises out of the gross negligence or willful misconduct
of such Indemnitee. The Company shall not be obligated hereunder for any settlement entered into by an Indemnitee without the Company’s
prior written consent; provided, however, that the Company shall not unreasonably withhold, delay or condition its consent.
(l)
Construction
.
The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and
no rules of strict construction will be applied against any party. No specific representation or warranty shall limit the generality
or applicability of a more general representation or warranty. Each and every reference to share prices, shares of Common Stock
and any other numbers in this Agreement that relate to the Common Stock shall be automatically adjusted for stock dividends, stock
splits, stock combinations and other similar transactions that occur with respect to the Common Stock after the date of this Agreement.
(m)
Remedies
.
Each Person having any rights under any provision of this Agreement shall have all rights and remedies set forth in the Transaction
Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement shall
be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or all of its obligations under the Transaction Documents,
any remedy at law may prove to be inadequate relief to the Buyers. The Company therefore agrees that the Buyers shall be entitled
to seek specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of
competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security.
(n)
Withdrawal
Right
. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Buyer exercises a right, election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then such Buyer may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
(o)
Payment
Set Aside; Currency
. To the extent that the Company makes a payment or payments to any Buyer hereunder or pursuant to any of
the other Transaction Documents or any of the Buyers enforce or exercise their rights hereunder or thereunder, and such payment
or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred. Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement and the other
Transaction Documents are in United States Dollars (“
U.S. Dollars
”), and all amounts owing under this Agreement
and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be
converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “
Exchange
Rate
”
means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement,
the U.S. Dollar exchange rate as published in
The Wall Street Journal
on the relevant date of calculation.
(p)
Independent
Nature of Buyers’ Obligations and Rights
. The obligations of each Buyer under the Transaction Documents are several and
not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance of the obligations
of any other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action
taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers as, and the Company acknowledges that the
Buyers do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption
that the Buyers are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated
by the Transaction Documents or any matters, and the Company acknowledges that the Buyers are not acting in concert or as a group,
and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by the Transaction
Documents. The decision of each Buyer to purchase Securities pursuant to the Transaction Documents has been made by such Buyer
independently of any other Buyer. Each Buyer acknowledges that no other Buyer has acted as agent for such Buyer in connection with
such Buyer making its investment hereunder and that no other Buyer will be acting as agent of such Buyer in connection with monitoring
such Buyer’s investment in the Securities or enforcing its rights under the Transaction Documents. The Company and each Buyer
confirms that each Buyer has independently participated with the Company in the negotiation of the transaction contemplated hereby
with the advice of its own counsel and advisors. Each Buyer shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall
not be necessary for any other Buyer to be joined as an additional party in any proceeding for such purpose. The use of a single
agreement to effectuate the purchase and sale of the Securities contemplated hereby was solely in the control of the Company, not
the action or decision of any Buyer, and was done solely for the convenience of the Company and not because it was required or
requested to do so by any Buyer. It is expressly understood and agreed that each provision contained in this Agreement and in each
other Transaction Document is between the Company and a Buyer, solely, and not between the Company and the Buyers collectively
and not between and among the Buyers.
IN WITNESS WHEREOF,
Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written
above.
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COMPANY:
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ATOMERA INCORPORATED,
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a Delaware corporation
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By:
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/s/ Scott A. Bibaud
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Scott A. Bibaud,
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President And Chief Executive Officer
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[Signature
Page to Securities Purchase Agreement]
IN WITNESS WHEREOF,
Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written
above.
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BUYERS:
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For Entity Investors
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For Individual Investors:
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Name of Signatory:
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Social Security # or Fed ID #:
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Title:
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If Joint Investment, 2
nd
investor should complete:
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Telephone No.
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Print Name:
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Facsimile Number:
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Signature:
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E-mail Address:
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Social Security # or Fed ID #:
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Social Security # or Fed ID #
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Telephone No.
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Facsimile No.
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Street Address
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Street Address – 2
nd
line
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Street Address
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City, State, Zip
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Street Address – 2
nd
line
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City, State, Zip
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[
See Next Page for Buyer Addendum
Re Escrow
]
[Signature
Page to Securities Purchase Agreement]
BUYER ADDENDUM RE ESCROW
(
this information is required
)
By signing above the above signed Buyer
hereby certifies and confirms that: In the event that the Escrow Agent makes a disbursement to the above signed Buyer, which may
or may not occur, such Buyer hereby confirms that such disbursement is to be made by wire transfer using the following wire transfer
instructions. The Escrow Agent, the Company and the Placement Agent can rely on this confirmation and I will not revoke this confirmation
unless I confirm to the Company on this form replacement wire transfer instructions at least two Business Days before revoking
this confirmation. The Company may instruct the Escrow Agent to, or the Escrow Agent may on its own, withhold any such disbursement
until the Company is reasonably satisfied and the Escrow Agent is satisfied in its sole discretion with the instructions and procedures
for making such disbursement.
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Bank Name:
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Bank Address:
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ABA Number:
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Account Number:
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Account Name:
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Reference:
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[Signature Page
to Buyer Addendum Escrow]
EXHIBIT A
SCHEDULE OF BUYERS
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(2)
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(1)
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Original Principal
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(3)
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Buyer
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Amount
of Note
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Purchase
Price
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EXHIBIT B
NOTES
SENIOR SECURED CONVERTIBLE NOTE
NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED HEREBY NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
ATOMERA
INCORPORATED
Senior
Secured Convertible Note
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Issuance Date: April 1, 2016
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Principal Amount: U.S. $_________
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FOR VALUE RECEIVED,
Atomera Incorporated, a Delaware corporation (the “
Company
”), hereby promises to pay to the order of ____________
or its registered assigns (“
Holder
”) the amount set out above as the Principal Amount (the “
Principal
”)
when due, whether upon the Maturity Date (as defined below), acceleration, prepayment or otherwise (in each case in accordance
with the terms hereof) and to pay interest (“
Interest
”) on the outstanding Principal at the applicable Interest
Rate (as defined below) from the date set out above as the Issuance Date (the “
Issuance
Date
”) until
the same becomes due and payable, whether upon the Maturity Date or acceleration, conversion, prepayment or otherwise (in each
case in accordance with the terms hereof). This Senior Secured Convertible Note (this “
Note
”) is one of an issue
of Senior Secured Convertible Notes issued either (i) pursuant to the Securities Purchase Agreement (as defined below) on the Closing
Date (as defined below); or (ii) pursuant to that certain securities purchase agreement, dated as of March 17, 2015, by and among
Atomera Incorporated (f/k/a Mears Technologies, Inc.) and the investors listed on the Schedule of Buyers attached thereto (collectively,
the “
Other Notes
” and together with this Note, the “
Notes
”). Certain capitalized terms used
herein are defined in Section 22. All other capitalized terms not defined herein shall have the meaning given to such terms in
the Securities Purchase Agreement.
1.
PREPAYMENT
.
The Company may, at any time prior to the Maturity Date, prepay this Note in full, and in part, including all unpaid and accrued
interest thereon, provided however that the written consent of the Required Holders shall be required if prepaid before the IPO
Outside Date. In the event the Company wishes to prepay this Note on or before the IPO Outside Date, it shall notify the Holder
and the holders of the Other Notes to obtain the requisite consents. A prepayment made pursuant to this Section 1 shall be made
pro rata among all Note holders.
2.
INTEREST
RATE
. So long as no Event of Default shall have occurred and be continuing, Interest on this Note shall accrue at a rate equal
to ten percent (10%) simple interest per annum. Interest shall be payable on the Maturity Date, or such earlier date as is required
pursuant to this Note. If an Event of Default shall have occurred and be continuing, the Interest Rate shall automatically be increased
to twelve percent (12%) simple interest during the period of such Event of Default, until such Event of Default is later cured.
Interest due on this Note shall be computed on the basis of a three hundred sixty-five (365)-day year.
3.
CONVERSION
OF NOTES
. This Note shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock (as defined
below), on the terms and conditions set forth in this Section 3.
(a)
Mandatory
Conversion - IPO
. Upon consummation of the IPO (as defined below), this Note shall automatically convert, through no further
action on the part of the Company or the Holder, into that number of shares of Common Stock equal to the quotient of (A) the Conversion
Amount (as defined below) divided by (B) the Conversion Price. For the purpose of this Section 3(a), the “
Conversion Price
”
shall be equal to fifty percent (50%) of the IPO Price to Public (as defined below) (rounded to two decimal places);
provided
;
however
, that in no event shall the Conversion Price be greater than $7.362 or nor less than $3.681, in each case as adjusted
for stock splits, stock dividends, stock combinations, recapitalizations, or the like that occur after the Issuance Date in accordance
with Section 5.
(b)
Optional
Conversion – Financing
. Upon consummation of a Subsequent Placement other than the IPO pursuant to Section 4(k) of the
Securities Purchase Agreement, the Holder shall be entitled to elect to convert all of the Notes into shares of Common Stock. In
the event that the Holder so elects to convert, this Note shall convert into that number of shares of Common Stock equal to the
quotient of (A) the Conversion Amount divided by (B) the Conversion Price. For the purposes of this Section 3(b), the “
Conversion
Price
” shall be equal to fifty percent (50%) of the purchase price of the securities being sold by the Company in such
Subsequent Placement (rounded to two decimal places);
provided
;
however
, that in no event shall the Conversion Price
be greater than $7.362 or nor less than $3.681, in each case as adjusted for stock splits, stock dividends, stock combinations,
recapitalizations, or the like that occur after the Issuance Date in accordance with Section 5.
(c)
Optional
Conversion
. At any time after the Issuance Date and until ten (10) calendar days prior to the consummation of the IPO, the
Holder shall be entitled to elect to convert all of this Note into shares of Common Stock. In the event that the Holder so elects
to convert, this Note shall convert into that number of shares of Common Stock equal to the quotient of (A) the Conversion Amount
divided by (B) the Conversion Price. For the purposes of this Section 3(c), the “
Conversion Price
” shall be
equal to $7.362, as adjusted for stock splits, stock dividends, stock combinations, recapitalizations, or the like that occur after
the Issuance Date in accordance with Section 5.
(d)
Mechanics
of Conversion
.
(i)
Conversion;
Issuance of Shares
. To convert the Notes pursuant to Sections 3(b) or 3(c) above into shares of Common Stock on any date (a
“
Conversion Date
”), the Holder shall deliver (whether via facsimile or otherwise) a copy of a properly and fully-completed
and executed notice of conversion in the form attached hereto as
Exhibit I
(the “
Conversion Notice
”)
to the Company and to each other holder of a Note. Promptly following the date of receipt of such Conversion Notice, or, with respect
to a mandatory conversion pursuant to Section 3(a), upon the consummation of the IPO, and following the Holder’s delivery
of this original Note to the Company for cancellation, the Company shall issue and deliver (via reputable overnight courier) to
the Holder a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which
the Holder shall be entitled, with the legends required by the Securities Purchase Agreement or applicable law.
(ii)
Registration
.
The Company shall maintain a register (the “
Register
”) for the recordation of the names and addresses of the
holders of each Note and the principal amount of the Notes held by such holders (the “
Registered Notes
”). The
entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders of
the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes (including, without
limitation, the right to receive payments of Principal and Interest hereunder) notwithstanding notice to the contrary. A Registered
Note may be assigned, transferred or sold in whole or in part only by registration of such assignment or sale on the Register.
Upon its receipt of a written request to assign, transfer or sell all or part of any Registered Note by the holder thereof and
subject to the holder’s compliance with Section 11, the Company shall record the information contained therein in the Register
and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered Registered
Note to the designated assignee or transferee pursuant to Section 12, provided that if the Company does not so record an assignment,
transfer or sale (as the case may be) of all or part of any Registered Note within two (2) Business Days of its receipt of such
a request, then the Register shall be automatically updated to reflect such assignment, transfer or sale (as the case may be).
The Holder and the Company shall maintain records showing the Principal and Interest converted and/or paid (as the case may be)
and the dates of such conversion and/or payments (as the case may be) or shall use such other method, reasonably satisfactory to
the Holder and the Company, so as not to require physical surrender of this Note upon conversion.
(iii)
No
Fractional Shares; Transfer Taxes
. The Company shall not issue any fraction of a share of Common Stock upon any conversion.
If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of
a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer, stamp, issuance and similar
taxes that may be payable with respect to the issuance and delivery of Common Stock upon any conversion.
4.
RIGHTS
UPON EVENT OF DEFAULT
.
(a)
Event
of Default
. Each of the following events shall constitute an “
Event of Default
”:
(i)
the
Company’s failure to pay to the Holder any amount of Principal or Interest when and as due if such failure remains uncured
for a period of at least five (5) Business Days;
(ii)
liquidation
proceedings shall be instituted by or against the Company and, if instituted against the Company by a third party, shall not be
dismissed within sixty (60) days of their initiation;
(iii)
bankruptcy,
insolvency, reorganization or other proceedings for the relief of debtors shall be instituted against the Company and shall not
be dismissed within sixty (60) days of their initiation;
(iv)
the
commencement by the Company of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or the consent by it to the entry of a decree, order, judgment or other similar document in
respect of the Company in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign
law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence
of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts
generally as they become due, the taking of corporate action by the Company in furtherance of any such action;
(v)
the
entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company of a voluntary or involuntary
case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law;
or (ii) a decree, order, judgment or other similar document adjudging the Company as bankrupt or insolvent, or approving as properly
filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company under
any applicable federal, state or foreign law; or (iii) a decree, order, judgment or other similar document appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or
other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period
of sixty (60) consecutive days;
(vi)
a
final judgment or judgments for the payment of money aggregating in excess of $250,000 are rendered against the Company and which
judgments are not, within sixty (60) days after the entry thereof, satisfied, bonded, discharged or stayed pending appeal, or are
not satisfied, bonded or discharged within sixty (60) days after the expiration of such stay;
(vii)
the
Company fails to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness in excess of
$250,000 due to any third party (other than, with respect to unsecured Indebtedness only, payments contested by the Company in
good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance
with GAAP) or is otherwise in breach or violation of any agreement for monies owed or owing by the Company in an amount in excess
of $250,000, which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due
thereunder;
(viii)
other
than as specifically set forth in another clause of this Section 4(a), the Company breaches any material covenant or other term
or condition of any Transaction Document, if such breach remains uncured for a period of thirty (30) days after actual knowledge
of the Company of such breach, or any representation or warranty made by the Company in any Transaction Document is not accurate
in any material respect when made or deemed made;
(ix)
the
validity or enforceability of any provision of any Transaction Document shall be contested by the Company, or a proceeding shall
be commenced by the Company seeking to establish the invalidity or unenforceability thereof;
(x)
the
Security Documents shall for any reason, except (A) to the extent permitted by the terms hereof or thereof, or (B) as a result
of the act or omission of Holder or the holder of any Other Note and not materially related to the failure of the Company to satisfy
or tender to satisfy its obligations under the Security Documents, fail or cease to create a separate valid and perfected first
priority Lien on the Collateral (as defined in the Security Agreement) in favor of each of the Secured Parties (as defined in the
Security Agreement) and such breach remains uncured for a period of ten (10) Business Days after notice from Holder or the holder
of any Other Note of such failure or ceasing; or
(xi)
any
Event of Default (as defined in the Other Notes) occurs with respect to any of the Other Notes.
(b)
Notice
of an Event of Default
. Upon the occurrence of an Event of Default with respect to this Note or any Other Note, the Company
shall within five (5) Business Days deliver written notice thereof via facsimile and overnight courier (with next day delivery
specified) (an “
Event of Default Notice
”) to the Holder. At any time after the occurrence of an Event of Default,
the Required Holders may, by notice to the Company, declare all of the Notes to be forthwith due and payable, whereupon the Principal
and all accrued and unpaid Interest thereon, plus all costs of enforcement and collection (including court costs and reasonable
attorney’s fees), shall immediately become and be forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Company.
5.
ADJUSTMENT
OF CONVERSION PRICE
.
(a)
Adjustment
of Conversion Price Collar upon Subdivision or Combination of Common Stock
. If the Company subdivides (by any stock split,
stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number
of shares, the Conversion Price (and the minimum and maximum amounts of the Conversion Price) in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time combines (by combination, reverse stock split or otherwise)
one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price (and the minimum
and maximum amounts of the Conversion Price) in effect immediately prior to such combination will be proportionately increased.
Any adjustment pursuant to this Section 5(a) shall become effective immediately after the effective date of such subdivision or
combination.
(b)
Other
Events
. In the event that the Company shall take any action to which the provisions of Section 5(a) are not strictly applicable,
or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the
provisions of this Section 5 but not expressly provided for by such provisions, then the Company’s Board of Directors shall
in good faith determine and implement an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder,
provided that no such adjustment pursuant to this Section 5(b) will increase the Conversion Price as otherwise determined pursuant
to this Section 5, provided further that if the Holder does not accept such adjustments as appropriately protecting its interests
hereunder against such dilution, then the Company’s Board of Directors and the Holder shall agree, in good faith, upon an
independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be
final and binding and whose fees and expenses shall be borne by the Company.
6.
NONCIRCUMVENTION
.
The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation or Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities,
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will
at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights
of the Holder of this Note. Without limiting the generality of the foregoing, so long as any of the Notes remain outstanding, the
Company (i) shall not increase the par value of any shares of Common Stock receivable upon conversion of this Note above the
Conversion Price then in effect and (ii) shall take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the conversion of this Note, including
without limitation complying with Section 7(b) hereof.
7.
RESERVATION
OF AUTHORIZED SHARES
.
(a)
Reservation
.
The Company shall at all times during which the Notes are outstanding reserve and keep available out of its authorized but unissued
shares Common Stock, solely for the purpose of effecting the conversion of the Notes, no less than one hundred ten percent (110%)
of the maximum number of shares issuable on conversion of the Notes (the “
Required Reserve Amount
”).
(b)
Insufficient
Authorized Shares
. If, notwithstanding Section 7(a), and not in limitation thereof, at any time while any of the Notes remain
outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation
to reserve a number of shares of Common Stock equal to the Required Reserve Amount (an “
Authorized Share Failure
”),
then the Company shall as soon as reasonably practicable take all action within its power necessary to increase the Company’s
authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes
then outstanding, including without limitation using its best efforts to secure necessary Board of Directors and stockholder approvals,
as further described below, to appropriately amend the Company’s Certificate of Incorporation to provide for such increase.
Without limiting the generality of the foregoing sentence, if not earlier approved by written consent of the stockholders, as soon
as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than seventy (70) days after
the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase
in the number of authorized shares of Common Stock; in connection with any such meeting, the Company shall provide each stockholders
with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized
shares of Common Stock and to cause its Board of Directors to recommend to the stockholders that they approve such proposal.
8.
COVENANTS
.
Until all of the Notes have been converted or otherwise satisfied in accordance with their terms:
(a)
Rank
.
All payments due under this Note shall rank
pari passu
with all Other Notes.
(b)
New
Subsidiaries
. Simultaneously with the acquisition or formation of each New Subsidiary, other than a Foreign Subsidiary, the
Company shall cause such New Subsidiary to execute, and deliver to each holder of Notes, all joinders to, or as applicable additional,
Security Documents (as defined in the Security Agreement) as requested by the Holder. The Company shall not, directly or indirectly,
acquire or form any New Subsidiary if such New Subsidiary would not be wholly-owned, directly or indirectly, by the Company.
9.
SECURITY
.
This Note and the Other Notes are secured to the extent and in the manner set forth in the Transaction Documents (including, without
limitation, the Security Agreement and the other Security Documents).
10.
AMENDING
THE TERMS OF THIS NOTE
. No provision of this Note may be amended other than by an instrument in writing signed by the Company
and the Required Holders, and any amendment to any provision of this Note made in conformity with the provisions of this Section
10 shall be binding on all Holders, provided that no such amendment shall be effective to the extent that it (1) applies to less
than all of the holders of the Notes then outstanding or (2) imposes any obligation or liability on any Holder without such Holder’s
prior written consent (which may be granted or withheld in such Holder’s sole discretion). No waiver of any provision of
this Note shall be effective unless it is in writing and signed by an authorized representative of the waiving party, provided
that the Required Holders may waive any provision of this Note, and any waiver of any provision of this Note made in conformity
with the provisions of this Section 10 shall be binding on all Holders, provided that no such waiver shall be effective to the
extent that it (1) applies to less than all of the holders of the Notes then outstanding (unless a party gives a waiver as to itself
only) or (2) imposes any obligation or liability on any Holder without such Holder’s prior written consent (which may be
granted or withheld in such Holder’s sole discretion). No amendment to or waiver of any provision this Note shall amend or
waive any provision of any other Transaction Document.
11.
TRANSFER
.
This Note and any shares of Common Stock issued upon conversion of this Note (the “
Conversion Shares
”) may be
offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section
2(g) of the Securities Purchase Agreement and any other restrictions that may be mutually agreed by the Company and the Holder
hereof. Notwithstanding anything in this Note to the contrary, neither this Note nor any Conversion Shares may be sold, assigned
or transferred by the Holder unless the recipient of such agrees in writing to be bound by the terms and conditions of the Securities
Purchase Agreement and the Registration Rights Agreement.
12.
REISSUANCE
OF THIS NOTE
.
(a)
Transfer
.
If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section 12(d)), registered as the Holder may request, representing
the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred,
a new Note (in accordance with Section 12(d)) to the Holder representing the outstanding Principal not being transferred.
(b)
Lost,
Stolen or Mutilated Note
. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated below shall suffice
as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company
in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall
execute and deliver to the Holder a new Note (in accordance with Section 12(d)) representing the outstanding Principal.
(c)
Note
Exchangeable for Different Denominations
. This Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section 12(d) and in principal amounts of at least $1,000) representing
in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding
Principal as is designated by the Holder at the time of such surrender.
(d)
Issuance
of New Notes
. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall
be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding
(or in the case of a new Note being issued pursuant to Section 12(a) or Section 12(c), the Principal designated by the Holder which,
when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal
remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated
on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions
as this Note, and (v) shall represent accrued and unpaid Interest on the Principal of this Note, from the Issuance Date.
13.
REMEDIES,
CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF
. The remedies provided in this Note shall be cumulative
and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief); provided, the Holder shall not be entitled to any
duplication or multiplication of damages. The Company covenants to the Holder that there shall be no characterization concerning
this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion
and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly
provided herein or in the other Transaction Documents, be subject to any other obligation of the Company (or the performance thereof).
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened
breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach
or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required.
The Company shall provide all information and documentation to the Holder that is reasonably requested by the Holder to enable
the Holder to confirm the Company’s compliance with the terms and conditions of this Note (including, without limitation,
compliance with Section 5).
14.
PAYMENT
OF COLLECTION, ENFORCEMENT AND OTHER COSTS
. If (a) this Note is placed in the hands of an attorney for collection or enforcement
of the debt evidenced hereby or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect
amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership
of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company
shall pay the reasonable costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, without limitation, reasonable attorneys’ fees and disbursements.
15.
CONSTRUCTION;
HEADINGS
. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against
any Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect
the interpretation of, this Note.
16.
FAILURE
OR INDULGENCE NOT WAIVER
. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and
signed by an authorized representative of the waiving party.
17.
DISPUTE
RESOLUTION
. If the Holder and the Company are unable to agree as to the arithmetic calculation of the Conversion Price the
Holder and the Company will confer in good faith to resolve such disagreement and the Company shall promptly issue upon conversion
of this Note at the number of shares of Common Stock that are uncontested. Thereafter, the Company and Holder will confer in good
faith to attempt to reach agreement regarding the Conversion Price with the Required Holders; if the Required Holders and the Company
agree in writing upon a Conversion Price, that agreement will be binding on Holder and all holders of the Other Notes.
18.
NOTICES;
PAYMENTS
.
(a)
Notices
.
Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance
with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all
actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefor. Without
limiting the generality of the foregoing, the Company will give written notice to the Holder (i) promptly, but in any event within
ten (10) calendar days, upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation
of such adjustment and (ii) at least ten (10) calendar days prior to the date on which the Company established a record date with
respect to any dividend or Distribution upon the Common Stock.
(b)
Payments
.
Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise expressly set forth
herein, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company
and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address,
in the case of each of the Buyers, which shall initially the address set forth on the Schedule of Buyers attached to the Securities
Purchase Agreement), provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available
funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions.
Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall
instead be due on the next succeeding day which is a Business Day.
19.
CANCELLATION
.
After all Principal, accrued Interest and other amounts at any time owed on this Note have been paid or converted in full, this
Note shall automatically be deemed canceled, shall be surrendered promptly, but in any event within ten (10) calendar days, to
the Company by the Holder for cancellation and shall not be reissued.
20.
WAIVER
OF NOTICE
. To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment, protest and all
other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note.
21.
GOVERNING
LAW
. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication
of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue
of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. In the event that any provision of this Note is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall
be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision of this Note. Nothing contained herein shall be
deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction
to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations,
or to enforce a judgment or other court ruling in favor of the Holder.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ANY RIGHT SUCH PARTY MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
22.
CERTAIN
DEFINITIONS
. For purposes of this Note, the following terms shall have the following meanings:
(a)
“
Business
Day
” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.
(b)
“
Closing
Date
” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially
issued Notes pursuant to the terms of the Securities Purchase Agreement.
(c)
“
Common
Stock
” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock
into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.
(d)
“
Conversion
Amount
” means the sum of the outstanding and unpaid Principal plus all accrued and unpaid Interest thereon plus, if any,
other unpaid amounts due under this Note.
(e)
“
GAAP
”
means United States generally accepted accounting principles, consistently applied.
(f)
“
IPO
”
means a firm commitment underwritten initial public offering of the Company’s Common Stock pursuant to a registration statement
filed on Form S-1 (or any successor from thereto) that is declared effective by the SEC and consummated prior to the Maturity Date.
(g)
“
IPO
Price to Public
” means the price to public specified in the IPO registration statement.
(h)
“
IPO
Outside Date
” shall mean December 31, 2016.
(i)
“
Interest
Rate
” means ten percent (10%) simple interest per annum, as may be adjusted from time to time in accordance with Section
2.
(j)
“
Maturity
Date
” shall mean May 31, 2017.
(k)
“
New
Subsidiary
” means, as of any date of determination, any Person in which the Company after the Closing Date, directly
or indirectly, (i) owns or acquires any of the outstanding capital stock or holds any equity or similar interest of such Person
or (ii) controls or operates all or any part of the business, operations or administration of such Person, and all of the foregoing,
collectively, “
New Subsidiaries
.”
(l)
“
Person
”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization,
any other entity or a government or any department or agency thereof.
(m)
“
Registration
Rights Agreement
” means that certain registration rights agreement, dated as of the Closing Date, by and among the Company
and the other parties signatory thereto, as may be amended from time to time.
(n)
“
Required
Holders
” means holders of Notes having outstanding principal amounts in the aggregate that represent a majority of the
then outstanding principal amounts of all of the Notes (including this Note).
(o)
“
SEC
”
means the United States Securities and Exchange Commission or the successor thereto.
(p)
“
Securities
Purchase Agreement
” means that certain securities purchase agreement, dated as of April 1, 2016, by and among the Company
and the investors listed on the Schedule of Buyers attached thereto, as may be amended from time to time.
(q)
“
Security
Agreement
” means that certain security agreement, dated as of the Closing Date, by and among the Company and the other
parties signatory thereto, as may be amended from time to time.
23.
MAXIMUM
PAYMENTS
. Nothing contained in this Note shall, or shall be deemed to, establish or require the payment of a rate of interest
or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid
or other charges under this Note exceeds the maximum permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Holder and thus refunded to the Company.
24.
SURRENDER
OR ACKNOWLEDGEMENT AND CERTIFICATION
: Upon payment in full or conversion of this Note, Holder shall surrender the original
physical copy of this Note for cancellation; alternatively, if the Holder promptly requests in connection with such payment or
conversion, the Holder may deliver to the Company a signed acknowledgement of payment in full and a certification that the Holder
has cancelled or destroyed the Note in a form reasonably acceptable to the Company.
IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed as of the Issuance Date set out above.
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ATOMERA INCORPORATED,
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a Delaware corporation
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By:
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Scott A. Bibaud,
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President and Chief Executive Officer
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[Signature Page to Senior Secured Convertible Note]
EXHIBIT I
ATOMERA INCORPORATED
CONVERSION NOTICE
Reference is made to
the Senior Secured Convertible Note (the “
Note
”) issued to the undersigned by Atomera Incorporated (the “
Company
”).
In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the
Note) of the Note indicated below into shares of common stock, $0.001 par value per share (the “
Common Stock
”),
of the Company, as of the date specified below.
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Date of Conversion:
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Aggregate Conversion Amount to be converted:
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Conversion Price:
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Number of shares of Common Stock to be issued:
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Please issue the Common Stock into which the Note is being converted in the following name and to the following address:
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Issue to:
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Facsimile Number:
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Holder:
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By:
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Title:
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Dated:
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EXHIBIT C
Registration
Rights Agreement
AMENDED AND RESTATED REGISTRATION
RIGHTS AGREEMENT
THIS AMENDED AND
RESTATED REGISTRATION RIGHTS AGREEMENT
(this “
Agreement
”) is made as of April 1, 2016 by and among Atomera
Incorporated, a Delaware corporation (the “
Company
”), and the persons listed on Schedule A hereto, referred
to individually as the “
Holder
” and collectively as the “
Holders
”.
A. Pursuant
to that certain securities purchase agreement, dated March 17, 2015 (as amended, restated, supplemented, or otherwise modified
from time to time, including all schedules and exhibits thereto, collectively the “
2015 Purchase Agreement
”),
by and among the Company (f/k/a Mears Technologies, Inc.) and the investors listed on the Schedule of Buyers attached thereto (the
“
Existing Noteholders
”), the Company has sold, and each of the Existing Noteholders have purchased, severally
and not jointly, certain senior secured convertible notes in the aggregate original principal amount of up to $14,750,000 (the
“
2015 Offering Notes
”).
B. In
respect of the 2015 Offering Notes, the Company, pursuant to this registration rights agreement, originally dated March 17, 2015
(the “
2015 Registration Rights Agreement
”), by and among the Company and the Existing Noteholders, provided
to the Existing Noteholders, and their assignees or successors in interest, certain rights to provide for the registration for
resale of their Conversion Shares by means of a Registration Statement under the Securities Act (as those terms are defined in
the 2015 Registration Rights Agreement).
C. Pursuant
to that certain securities purchase agreement, dated even date herewith (as may be amended, restated, supplemented, or otherwise
modified from time to time, including all schedules and exhibits thereto, collectively, the “
2016 Purchase Agreement
”),
by and among the Company and the investors listed on the Schedule of Buyers attached thereto (the “
New Noteholders
”),
the Company has agreed to sell, and each of the New Noteholders have agreed to purchase, severally and not jointly, certain senior
secured convertible notes in the aggregate original principal amount of up to $6,000,000 (the “
2016 Offering Notes
”).
D. To
induce the New Noteholders to purchase, severally and not jointly, the 2016 Offering Notes as provided for in the 2016 Purchase
Agreement, the Company has agreed to provide to the New Noteholders, and their assignees or successors in interest, certain rights
to provide for the registration for resale of their Conversion Shares by means of a Registration Statement under the Securities
Act (as those terms are defined below).
E. The
Existing Noteholders have consented to allow the 2016 Offering Notes to be, in all respects,
pari passu
with the 2015 Offering
Notes in respect of this Agreement, and the Existing Noteholders now wish to amend and restate the 2015 Registration Rights Agreement
to allow each New Noteholder to become a party hereto. Accordingly, for purposes of this Agreement, the term “Holders”
shall mean both the Existing Noteholders and the New Noteholders.
F. Unless
otherwise provided in this Agreement, capitalized terms used herein shall have the respective meanings set forth in Section 13
hereof.
NOW, THEREFORE
,
in consideration of the above premises and the mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and Holder hereby agree as follows:
1.
Registration
.
(a)
Piggyback
Registrations Rights
. If, at any time after the Company shall become subject to the periodic reporting obligations (a “
Reporting
Company
”) under the Securities Exchange Act through the date that is five years after the date the Company becomes a
Reporting Company, there is not an effective Registration Statement covering the Registrable Securities and the Company shall determine
to prepare and file with the Commission a Registration Statement relating to an offering for its own account or the account of
others under the Securities Act of any of its equity securities (other than on Form S-4 or Form S-8, each as promulgated under
the Securities Act, or their then equivalent relating to equity securities to be issued solely in connection with any acquisition
of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans), then
the Company shall send to the Holders a written notice of such determination at least twenty (20) days prior to the filing of any
such Registration Statement and shall include in such Registration Statement all Registrable Securities requested by any Holder
hereunder to be included in the registration within ten (10) days after the Company sends such notice to the Holders (the “
Piggyback
Shares
”) for resale and offer on a continuous basis pursuant to Rule 415; provided, that (i) if, at any time after giving
written notice of its intention to register any securities and prior to the effective date of the Registration Statement filed
in connection with such registration, the Company determines for any reason not to proceed with or terminate such registration,
the Company will be relieved of its obligation to register any Registrable Securities in connection with such registration, (ii)
in case of a determination by the Company to delay registration of its securities, the Company will be permitted to delay the registration
of Registrable Securities for the same period as the delay in registering such other securities, (iii) each Holder is subject to
confidentiality obligations and shall not use or disclose any information gained in this process or any other material non-public
information he, she or it obtains, (iv) each Holder or assignee or successor in interest shall comply with all applicable laws
relating to insider trading or similar restrictions; and (v) if all of the Registrable Securities of the Holders cannot be so included
due to Commission Comments, Commission Guidance or Underwriter Cutbacks, then the Company may reduce, in accordance with the provisions
of Section 1(c) hereof, the number of Piggyback Shares included in such Registration Statement required to comply with such Commission
Comments, Commission Guidance or Underwriter Cutbacks.
(b)
Initial
Registration Statement
. At the election of each Holder, the Company shall be required to include up to all Piggyback Shares
held by such Holder for resale and offer on a continuous basis pursuant to Rule 415 in the first Registration Statement filed after
the date that it becomes a Reporting Company (the “
Initial Registration Statement
”);
provided, however,
that if all of the Piggyback Shares of the Holders cannot be so included due to Commission Comments, Commission Guidance or Underwriter
Cutbacks, then the Company may reduce, in accordance with the provisions of Section 1(c) hereof, the number of Piggyback Shares
included in such Registration Statement required to comply with such Commission Comments, Commission Guidance or Underwriter Cutbacks.
(c)
Cutback
Provisions
. In the event all of the Registrable Securities cannot be or are not included in a Registration Statement due to
Commission Comments, Commission Guidance or Underwriter Cutbacks, the Company and the Holders agree that securities shall be removed
from such Registration Statement in the following order until no further removal is required by Commission Comments, Commission
Guidance or Underwriter Cutbacks:
(i) First,
any securities held by any former employee, consultant or affiliate of the Company shall be removed, pro rata based on the number
of securities being registered for such former employees, consultants or affiliates held by all of the former employees of the
Company and any of their affiliates and successors in interest, whether pursuant to agreement or otherwise and any other person
with any registration rights outstanding on the date hereof;
(ii) Second,
the securities held by National Securities Corporation (“
National Securities
”) and its members and affiliates,
if any, obtained solely by reason of providing services to the Company, which are being registered pursuant to any registration
rights agreement or otherwise (for clarity, any securities held by National Securities or its members or affiliates which were
acquired upon payment of a purchase price in cash or property will not be subject to this provision (c)(ii)); and
(iii) Third,
the Registrable Securities held by the Holders that are requested to be included in the Registration Statement shall be removed,
pro rata based on the number of Registrable Shares held by each Holder in comparison to the number of Registrable Securities held
by all Holders who have requested to include any Registrable Securities in the Registration Statement.
(d)
Filing;
Content
. The Company will use its commercially reasonable efforts to cause each Registration Statement pursuant to which any
Registrable Securities are included, including the Initial Registration Statement, to contain the Plan of Distribution substantially
similar to that attached hereto as
Schedule B
. The Company shall use its commercially reasonable efforts to cause any Registration
Statement filed under this Section 1, including the Initial Registration Statement, to be declared effective under the Securities
Act as promptly as practicable after the filing thereof and shall keep such Registration Statement continuously effective under
the Securities Act until the earlier of (i) one year after its Effective Date (provided, however, the one year period shall be
extended for any Grace Period), (ii) such time as all of the Registrable Securities covered by such Registration Statement have
been publicly sold by the Holders, or (iii) such time as all of the Registrable Securities covered by such Registration Statement
may be sold by the Holders pursuant to Rule 144 without regard to both the volume limitations for sales as provided in Rule 144
and the limitations for such sales provided in Rule 144(i), if applicable, as determined by the counsel to the Company pursuant
to a written opinion letter to such effect, addressed and acceptable to the Company's transfer agent and the affected Holder (“
Effectiveness
Period
”). By 5:00 p.m. (New York City time) on the business day immediately following the Effective Date of a Registration
Statement, the Company shall file with the Commission in accordance with Rule 424 under the Securities Act the final Prospectus
to be used in connection with sales pursuant to such Registration Statement (whether or not such filing is technically required
under such Rule). Notwithstanding the foregoing portion of this Section 1(e), the Company shall have the right in its sole discretion
to withdraw any Registration Statement filed under this Section 1 prior to its effectiveness.
(e)
Termination
of Piggyback Registration Rights
. The registration rights afforded to each Holder under this Section 1 shall terminate on the
earliest date when all Registrable Securities of the Holder either: (i) have been publicly sold by the Holder pursuant to a Registration
Statement, (ii) have been covered by an effective Registration Statement which has been effective for an aggregate period of sixteen
(16) months (whether or not consecutive), provided, however, the time period shall be calculated so as to exclude any Grace Period,
or (iii) may be sold by the Holder pursuant to Rule 144 without regard to both the volume limitations for sales as provided in
Rule 144 and the limitations for such sales provided in Rule 144(i), if applicable, as determined by the counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected
Holder in its reasonable discretion.
2.
Demand
Registration Rights
.
(a)
Demand
Right
. Commencing on the date that is one hundred eighty (180) days after the Company becomes a Reporting Company, the Holders
as a group representing at least 50% of the Registrable Securities (a “
Requesting Group
”) shall have a separate
one-time right, by written notice to the Company, signed by such Holders (the “
Demand Notice
”), to request the
Company to register for resale all Registrable Securities included by the Requesting Group in the Demand Notice (the “
Demand
Shares
”) under and in accordance with the provisions of the Securities Act by filing with the Commission a Registration
Statement covering the resale of such Demand Shares (the “
Demand Registration Statement
”). A copy of the Demand
Notice also shall be provided by the Company to each of the other Holders who will have fifteen (15) days to notify the Company
in writing to include their Registrable Securities as part of the Demand Shares, the failure of which, however, shall not in any
way affect the rights of the Requesting Group pursuant to this Section 2(a). The Demand Registration Statement required hereunder
shall be on any form of registration statement then available for the registration of the Registrable Securities, as selected by
the Company in accordance with applicable law and regulation. The Company will use its commercially reasonable efforts to file
the Demand Registration Statement within forty-five (45) days of the receipt of the Demand Notice, provided if the Demand Notice
is given within the forty-five (45) days after the prior fiscal year end, then the Company will use its reasonably commercial efforts
to file the Demand Registration Statement within ninety (90) days of the fiscal year end of the Company. The Company shall use
its commercially reasonable efforts to cause the Demand Registration Statement to be declared effective under the Securities Act
as promptly as practicable after the filing thereof and to keep the Demand Registration Statement continuously effective under
the Securities Act during the Effectiveness Period.
(b)
Inclusion
of Other Registrable Shares and Cutback Provisions
. If as a result of Commission Comments or Commission Guidance, not all shares
are included that are desired to be included in a Registration Statement for the Demand Shares, the provisions of Section 1(c)
shall apply, subject to the Demand Priority (as defined below) of the Requesting Group. Pursuant to the piggyback registration
rights granted under this Agreement, the Company may include the Registrable Shares of the other Holders which will be subject
to the provision of Section 1(c) hereof, except that under Section 1(c)(iii), there will be no cutback of the Registrable Securities
of the Requesting Group until the Holders of Piggyback Shares and the shares of any other person exercising piggyback rights under
any other registration rights agreement (except for National Securities and their current and former affiliates, which shall have
the priority established in Section 1(c)) have been removed, and thereafter if any further Registrable Securities have to be removed
then those of the Requesting Group will be removed pro rata (the “
Demand Priority
”). Notwithstanding the foregoing,
if any other securities of any person other than the Holders or the Requesting Group or National Securities and their current and
former affiliates are included on the Demand Registration Statement, such securities will be removed, if required pursuant to Commission
Comments, after removal of the securities indicated in Section 1(c)(i) and before the securities indicated in Section 1(c)(ii),
as such persons decide among themselves, and if there is no agreement at to such removal provided to the Company within a reasonable
time, time being of the essence, then all the such securities will be removed.
(c)
Termination
of Demand Registration Rights
. The registration rights afforded to each Holder under this Section 2 shall terminate on the
earliest date when all Registrable Securities of the Holder either: (i) have been publicly sold by the Holder pursuant to a Registration
Statement, (ii) have been covered by an effective Registration Statement which has been effective for an aggregate period of sixteen
(16) months (whether or not consecutive),
provided
,
however
, the time period shall be calculated so as to exclude
any Grace Period, or (iii) may be sold by the Holder pursuant to Rule 144 without regard to both the volume limitations for sales
as provided in Rule 144 and the limitations for such sales provided in Rule 144(i), if applicable, as determined by the counsel
to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent
and the affected Holder in its reasonable discretion.
3.
Registration
Procedures
. Whenever any Registrable Securities are to be registered pursuant to this Agreement, the Company shall use its
commercially reasonable efforts to effect the registration and sale of such Registrable Securities in accordance with the intended
method of disposition thereof, and pursuant thereto the Company shall have the following obligations:
(a) The
Company shall prepare and file with the Commission a Registration Statement with respect to such Registrable Securities and use
its commercially reasonable efforts to cause such Registration Statement to become effective.
(b) The
Company shall prepare and file with the Commission such amendments (including post-effective amendments) and supplements to a Registration
Statement and the Prospectus used in connection with such Registration Statement, which Prospectus is to be filed pursuant to Rule
424 promulgated under the Securities Act, as may be necessary to keep such Registration Statement effective at all times during
the Effectiveness Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by such Registration Statement. In the case of amendments and supplements
to a Registration Statement which are required to be filed pursuant to this Agreement by reason of the Company filing a report
on Forms 10-K, 10-Q or Current Report on Form 8-K, or any analogous report under the Securities Exchange Act, the Company shall
have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements
with the Commission on the same day on which the Securities Exchange Act report is filed which created the requirement for the
Company to amend or supplement such Registration Statement.
(c) The
Company shall furnish to each Holder of Registrable Securities in any Registration Statement, without charge, (i) promptly after
the same is prepared and filed with the Commission at least one copy of such Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein by reference, if requested by such seller, all
exhibits and each preliminary Prospectus, (ii) unless such Holder is exempt from the prospectus delivery requirements pursuant
to Rule 172 of the Securities Act, upon the effectiveness of any Registration Statement, ten (10) copies of the Prospectus included
in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such seller may reasonably
request), and (iii) such other documents, including copies of any preliminary or final Prospectus, as such seller may reasonably
request from time to time in order to facilitate the disposition of the Registrable Securities owned by such seller.
(d) The
Company shall use its commercially reasonable efforts to (i) register and qualify, unless an exemption from registration and qualification
applies, the resale by any seller of the Registrable Securities covered by a Registration Statement under such other securities
or “blue sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions,
such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary
to maintain the effectiveness thereof during the Effectiveness Period, (iii) take such other actions as may be necessary to maintain
such registrations and qualifications in effect at all times during the Effectiveness Period, and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided
,
however
, that
the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such jurisdiction.
(e) The
Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of
a Registration Statement, or the suspension of the qualification of any of Registrable Securities for sale in any jurisdiction
and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest practicable
time and to notify the Holder of any Registrable Securities included in the offering under such Registration Statement of such
order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
(f) The
Company shall notify the Holder in writing of the happening of any event, as promptly as practicable after becoming aware of such
event, as a result of which the Prospectus included in a Registration Statement, as then in effect, includes an untrue statement
of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain
any material, nonpublic information), and, subject to Section 3(r), promptly prepare a supplement or amendment to such Registration
Statement to correct such untrue statement or omission, and, unless such Holder is exempt from the prospectus delivery requirements
pursuant to Rule 172 of the Securities Act, deliver ten (10) copies of such supplement or amendment to the Holder (or such other
number of copies as the Holder may reasonably request).
(g) The
Company shall promptly notify the Holder in writing (i) when a Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness
shall be delivered to the Holder by email or facsimile on the same day of such effectiveness or by overnight delivery), (ii) of
any request by the Commission for amendments or supplements to a Registration Statement or related Prospectus or related information,
and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be
appropriate.
(h) If
the Holder is required under applicable Commission Guidance to be described in a Registration Statement as an underwriter, at the
reasonable request of such Holder, the Company shall use its best efforts to furnish to such Holder, on the date of the effectiveness
of such Registration Statement and thereafter from time to time on such dates as the Holder may reasonably request (i) a letter,
dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given
by independent certified public accountants to underwriters in an underwritten public offering, addressed to the Holder, and (ii)
an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope
and substance as is customarily given in an underwritten public offering, addressed to the Holder.
(i) If
the Holder is required under applicable Commission Guidance to be described in a Registration Statement as an underwriter, then
at the request of such Holder in connection with such Holder’s due diligence requirements, the Company shall make available
for inspection by (i) the Holder, (ii) the Holder’s legal counsel, and (iii) one firm of accountants or other agents retained
by the Holder (collectively, the “
Inspectors
”), all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the “
Records
”), as shall be reasonably deemed necessary
by each Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector
may reasonably request;
provided
,
however
, that each Inspector shall agree to hold in strict confidence and shall
not make any disclosure (except to the Holder) or use of any Record or other information which the Company determines in good faith
to be confidential, and of which determination the Inspectors are so notified, unless (a) the release of such Records is ordered
pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (b) the information
in such Records has been made generally available to the public other than by disclosure in violation of this or any other agreement
of which the Inspector has knowledge. Each Holder agrees that it shall, upon learning that disclosure of such Records is sought
in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential. Nothing herein (or in any other confidentiality agreement between the Company and the Holder) shall
be deemed to limit the Holder’s ability to sell Registrable Securities in a manner which is otherwise consistent with applicable
laws and regulations. Notwithstanding the foregoing, each Holder acknowledges that the Records may contain material non-public
information and agrees that it shall strictly comply with the insider trading rules prohibiting the purchasing, selling or the
Company’s securities while in the possession of any such material non-public information.
(j) The
Company shall hold in confidence and not make any disclosure of information concerning the Holder provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information
is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information
is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction,
(iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or
any other agreement, or (v) the Holder provides information to the Company intended for inclusion in a Registration Statement.
The Company agrees that it shall, upon learning that disclosure of such information concerning the Holder is sought in or by a
court or governmental body of competent jurisdiction or through other means, give prompt written notice to the Holder if permitted
by applicable law or regulation and allow the Holder, at the Holder’s expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
(k) The
Company shall (i) if applicable, use its best efforts to cause all of the Registrable Securities covered by a Registration Statement
to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed,
if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, or (ii) otherwise, use
its commercially reasonable efforts to secure designation and quotation of all of the Registrable Securities covered by a Registration
Statement on any one of the different levels of The NASDAQ Stock Market, or (iii) if, despite the Company’s best efforts
or commercially reasonable efforts, as applicable, to satisfy, the preceding clauses (i) and (ii) the Company is unsuccessful in
satisfying the preceding clauses (i) and (ii), to instead secure the inclusion for quotation on the Over-the-Counter Bulletin Board
for such Registrable Securities and, without limiting the generality of the foregoing, to use its commercially reasonable efforts
to encourage at least two market makers to register with the Financial Industry Regulatory Authority, Inc. (“
FINRA
”)
as such with respect to such Registrable Securities. For the avoidance of doubt, subject to and in accordance with Section 5, the
Company shall pay all fees and expenses of the Company in connection with satisfying its obligation under this Section 3(k).
(l) If
requested by the Holder, and permissible under Commission Guidance, the Company shall (i) as soon as practicable incorporate in
a Prospectus supplement or post-effective amendment such information as the Holder reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the Registrable
Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering; (ii) as soon as practicable make all required filings of such Prospectus supplement or
post-effective amendment after being notified of the matters to be incorporated in such Prospectus supplement or post-effective
amendment; and (iii) as soon as practicable, supplement or make amendments to any Registration Statement if reasonably requested
by the Holder holding any Registrable Securities.
(m) The
Company shall cooperate with each Holder who holds Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities
to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the
case may be, as the Holder may reasonably request and registered in such names as the Holder may request.
(n) The
Company shall use its commercially reasonable efforts to cause the Registrable Securities covered by a Registration Statement to
be registered with or approved by such other U.S. governmental agencies or authorities, but only in matters not contemplated Section
3(d) by or reasonably related to such matters (which matters are to be governed exclusively by Section 3(d)), as may be strictly
necessary to consummate the disposition of such Registrable Securities by the Holder strictly in accordance with the Plan of Distribution
included in the Registration Statement (as such Plan of Distribution may be modified from time to time in any filing with the Commission).
(o) The
Company shall make generally available to its security holders as soon as practicable, but not later than ninety (90) days after
the close of the period covered thereby (or, if different, within the period permitted for the filing of reports on Forms 10-K
or 10-Q), an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the Securities
Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following
the Effective Date of a Registration Statement.
(p) The
Company shall otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission
in connection with any registration hereunder.
(q) Within
two (2) business days after a Registration Statement which covers Registrable Securities is ordered effective by the Commission,
the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Holder whose Registrable Securities are included in such Registration Statement) confirmation that
such Registration Statement has been declared effective by the Commission in the form attached hereto as
Exhibit A
and the
Irrevocable Transfer Agent Instructions in the form attached hereto as
Exhibit B
.
(r) Notwithstanding
anything to the contrary herein, at any time after the Effective Date of a Registration Statement, the Company may delay the disclosure
of material, non-public information concerning the Company the disclosure of which at the time is not, in the good faith opinion
of the Board of Directors of the Company, in the best interest of the Company and not, after consultation with legal counsel, otherwise
required (a “
Grace Period
”); provided, that the Company shall promptly (i) notify the Holder in writing of the
existence of material, non-public information giving rise to a Grace Period (provided that in each notice the Company will not
disclose the content of such material, non-public information to the Holder) and the date on which the Grace Period will begin,
and (ii) notify the Holder in writing of the date on which the Grace Period ends; and, provided further, that no Grace Period shall
exceed sixty (60) consecutive days and during any three hundred sixty-five (365) day period such Grace Periods shall not exceed
an aggregate of one hundred twenty (120) days (each, an “
Allowable Grace Period
”). For purposes of determining
the length of a Grace Period above, the Grace Period shall begin on and include the date the Holder receives the notice referred
to in clause (i) and shall end on and include the later of the date the Holder receives the notice referred to in clause (ii) and
the date referred to in such notice. The provisions of Section 3(f) hereof shall not be applicable during the period of any Allowable
Grace Period. Upon expiration of the Grace Period, the Company shall again be bound by Section 3(f) with respect to the information
giving rise thereto unless such material, non-public information is no longer applicable. Notwithstanding anything to the contrary,
the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of the Holder in connection
with any sale of Registrable Securities with respect to which the Holder has entered into a contract for sale, and delivered a
copy of the Prospectus included as part of the applicable Registration Statement (unless an exemption from such Prospectus delivery
requirements exists), prior to the Holder’s receipt of the notice of a Grace Period or, if earlier, Holders knowledge of
the material, non-public information concerning the Company that gave rise to the Grace Period, and for which the Holder has not
yet settled.
4.
Obligations
of the Holders
.
(a) At
least five (5) business days prior to the first anticipated filing date of a Registration Statement, the Company shall notify the
Holders in writing of the information the Company requires from each Holder if the Holder’s Registrable Securities are to
be included in such Registration Statement. It shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to any Registrable Securities of the Holder that the Holder shall furnish
to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition
of the Registrable Securities held by it as shall be reasonably required to effect the effectiveness of the registration of such
Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.
(b) The
Holder, by the Holder’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested
by the Company in connection with the preparation and filing of any Registration Statement hereunder, unless the Holder has notified
the Company in writing of the Holder's election to exclude all of the Holder’s Registrable Securities from such Registration
Statement.
(c) The
Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Sections
3(e) or 3(f) or of a Grace Period under Section 3(r), the Holder will immediately discontinue disposition of Registrable Securities
pursuant to any Registration Statement(s) covering such Registrable Securities until the Holder’s receipt of the copies of
the supplemented or amended Prospectus contemplated by Sections 3(e) or 3(f) or receipt of notice that no supplement or amendment
is required. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares
of Common Stock to a transferee of the Holder in connection with any sale of Registrable Securities with respect to which the Holder
has entered into a contract for sale prior to the Holder’s receipt of a notice from the Company of the happening of any event
of the kind described in Sections 3(e) or 3(f) or of any Grace Period, or, if earlier, Holders knowledge of the material, non-public
information concerning the Company or the facts or circumstances that gave rise to the Grace Period or of the Section 3(e) or 3(f)
event, and for which the Holder has not yet settled.
(d) The
Holder covenants and agrees that it will comply with the Prospectus delivery requirements of the Securities Act as applicable to
it or an exemption therefrom in connection with sales of Registrable Securities pursuant to a Registration Statement.
5.
Registration
Expenses
. All expenses incident to the Company’s performance of or compliance with this Agreement, including without
limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, fees and disbursements of custodians, and fees and disbursements of counsel for the Company and
all independent certified public accountants, underwriters retained by the Company (excluding discounts, commissions and placement
agent fees) and other Persons retained by the Company (all such expenses being herein called “
Registration Expenses
”),
shall be borne by the Company. Further, the Company shall pay its internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities
exchange on which similar securities issued by the Company are then listed.
6.
Indemnification
.
In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To
the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Holder, the directors,
officers, members, partners, employees, agents, representatives of, and each Person, if any, who controls the Holder within the
meaning of the Securities Act or the Securities Exchange Act (each, an “
Indemnified Person
”), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement
or expenses, joint or several, (collectively, “
Claims
”) incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or the Commission, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto (“
Indemnified Damages
”), to which any of them may become subject insofar
as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky”
laws of any jurisdiction in which Registrable Securities are offered, or the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary Prospectus if used prior to the effective date of such Registration
Statement, or contained in the final Prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement
thereto with the Commission) or the omission or alleged omission to state therein any material fact necessary to make the statements
made therein, in the light of the circumstances under which the statements therein were made, not misleading, (iii) any violation
or alleged violation by the Company of the Securities Act or the Securities Exchange Act, any other law, including, without limitation,
any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant
to a Registration Statement or (iv) any violation of this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, “
Violations
”). Subject to Section 6(c), the Company shall reimburse the Indemnified Persons, promptly
as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection
with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon
a Violation which occurs based on a Holder’s material breach of its covenants or agreements in Section 4(c) or (d) or in
reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person or by a Related
Information Provider expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof
or supplement thereto and (ii) shall not be available to the extent such Claim is based on a failure of the Holder to deliver or
to cause to be delivered the Prospectus made available by the Company, including a corrected Prospectus, if such Prospectus or
corrected Prospectus was timely made available by the Company pursuant to Section 3(c); and (iii) shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made
by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Holder pursuant to
Section 10. “
Related Information Provider
” means, in respect of any Indemnified Person, the Holder to which
such Indemnified Person is related or another Indemnified Person that is related to the Holder to which such Indemnified Person
is related.
(b) To
the fullest extent permitted by law, in connection with any Registration Statement in which a Holder’s Registrable Securities
are included or in which a Holder is otherwise participating, such Holder will severally and not jointly indemnify and hold harmless
the Company, 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, any underwriter, any other Holder or other Person selling securities in such
Registration Statement and any controlling person of any such underwriter or other Holder or other Person (each an “
Other
Indemnified Person
”), against any Claims or Indemnified Damages to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation,
in each case to the extent, and only to the extent, that such Violation occurs based on a Holder’s material breach of its
covenants or agreements in Section 4(c) or (d) or in reliance upon and in conformity with written information furnished by such
Holder or by a Related Information Provider expressly for use in connection with such Registration Statement; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any Other Indemnified Person intended to be indemnified
pursuant to this Section 6(b), in connection with investigating or defending any such Claim;
provided
,
however
, that
the indemnity agreement contained in this Section 6(b) shall not apply to amounts paid in settlement of any such Claim if such
settlement is effected without the prior written consent of the Holder, which consent shall not be unreasonably withheld;
provided
,
further
,
however
, that the Holder shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to the Holder as a result of the sale of Registrable Securities pursuant to such Registration
Statement, except in the case of fraud by such Holder. Such indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Other Indemnified Person and shall survive the transfer of the Registrable Securities by the Holder
pursuant to Section 10.
(c) Promptly
after receipt by an Indemnified Person or Other Indemnified Person under this Section 6 of notice of the commencement of any action
or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Other Indemnified
Person shall, if a claim for indemnification in respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right
to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed,
to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and reasonably satisfactory
to the Indemnified Person or the Other Indemnified Person, as the case may be;
provided
,
however
, that an Indemnified
Person or Other Indemnified Person shall have the right to retain its own counsel with the fees and expenses of not more than one
counsel for all such Indemnified Persons or all such Other Indemnified Persons to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person
or Other Indemnified Person and the indemnifying party would be inappropriate due to actual or potential differing interests between
such Indemnified Person or Other Indemnified Person and any other party represented by such counsel in such proceeding. The Other
Indemnified Person or Indemnified Person, as applicable, shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information
reasonably available to such Other Indemnified Person or such Indemnified Person which relates to such action or Claim. The indemnifying
party shall keep the Other Indemnified Person or Indemnified Person, as applicable, reasonably apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement
of any action, claim or proceeding effected without its prior written consent;
provided
,
however
, that the indemnifying
party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent
of the Other Indemnified Person or Indemnified Person, as applicable, consent to entry of any judgment or enter into any settlement
or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Other
Indemnified Person or such Indemnified Person of a release from all liability in respect to the Claim at issue, and such settlement
shall not include any admission as to fault on the part of such Other Indemnified Person or such Indemnified Person. Following
indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Other Indemnified Person
or Indemnified Person, as applicable, with respect to all third parties, firms or corporations relating to the matter for which
indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Other Indemnified
Person, as applicable, under this Section 6, except to the extent that the indemnifying party is materially prejudiced in its ability
to defend such action.
(d) The
indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred, subject to an undertaking by the Indemnified Person
or the Other Indemnified Person, as applicable, to return such payments to the extent a court of competent jurisdiction or other
competent authority determines that such payments were unlawful or were not required under this Agreement.
(e) Without
any duplication or multiplication of damages, the indemnity agreements contained herein shall be in addition to (i) any cause of
action or similar right of the Other Indemnified Person or Indemnified Person against the indemnifying party or others, and (ii)
any liabilities the indemnifying party may be subject to pursuant to the law.
(f) Unless
suspended by the underwriting agreement applicable to any registration, the obligations of the Company and Holders under this Section
6 shall survive the completion of any offering of Registrable Securities in a Registration Statement under this Agreement, or otherwise.
7.
Contribution
.
To the extent any indemnification by an indemnifying party is prohibited or limited by law, such indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent
permitted by law;
provided
,
however
, that: (i) no Person involved in the sale of Registrable Securities which Person
is guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the Securities Act) in connection with such sale
shall be entitled to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities pursuant to such Registration Statement.
8.
No
Delay of Registration
. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any
registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Agreement.
9.
Reports
under Securities Exchange Act
. With a view to making available to the Holder the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the Commission that may at any time permit the Holder to sell securities
of the Company to the public without registration, once the Company becomes a Reporting Company, the Company agrees to use its
commercially reasonable efforts to continue to be a Reporting Company for five years and further during such time it is a Reporting
Company the Company agrees to use its best efforts to:
(a) make
and keep public information available, as those terms are understood and defined in Rule 144;
(b) file
with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the
Securities Exchange Act so long as the Company remains subject to such requirements and the filing of such reports and other documents
is required for the applicable provisions of Rule 144; and
(c) furnish
to the Holder so long as the Holder owns Registrable Securities, promptly upon request, (i) a written statement by the Company,
if true, that it has complied with the reporting requirements of Rule 144, the Securities Act and the Securities Exchange Act,
(ii) unless available on the Commission’s EDGAR website, 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 to
permit the Holder to sell such securities pursuant to Rule 144 without registration.
10.
Assignment
of Registration Rights
. The rights under this Agreement shall be automatically assignable by the Holder to any transferee of
all or any portion of the Holder’s Registrable Securities if: (i) the Holder agrees in writing with the transferee or assignee
to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment;
(ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name
and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred
or assigned; (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee
or assignee is or might be restricted under the Securities Act and applicable state securities laws; and (iv) at or before the
time the Company receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein.
11.
Subsequent
Registration Rights
. The Company agrees that after the date hereof and excluding any registration rights agreement with National
Securities or its members and affiliates, it will not grant to any person any registration right or proceed to register any securities
of any person unless it provides in such agreement or registration that any securities being registered under such agreement or
registration will be subject to the cutback provisions of this Agreement as provided in Section 1(c) and Section 2(b).
12.
Amendment
of Registration Rights
. Provisions of this Agreement may be amended and the observance thereof may be waived (either generally
or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders
of at least a majority of the then outstanding Registrable Securities. Any amendment so effected will be binding upon all Holders,
whether or not such Holder consents thereto.
13.
Definitions
.
(a) “
Commission
”
means the Securities and Exchange Commission.
(b) “
Commission
Comments
” means written comments pertaining solely to Rule 415 or other comments to the extent they relate to Rule 415
which are received by the Company from the Commission, and a copy of which shall have been provided by the Company to the Holder,
to a filed Registration Statement which limit the amount of shares which may be included therein to a number of shares which is
less than such amount sought to be included thereon as filed with the Commission.
(c) “
Commission
Guidance
” means (i) any guidance, comments, requirements or requests of the Commission staff that is publicly available
in oral or written form and any comments or guidance provided by the Commission staff directly to the Company in written form,
(ii) the Securities Act and the rules and regulations promulgated thereunder or (iii) the Securities Exchange Act and the rules
and regulations promulgated thereunder.
(d) “
Common
Stock
” means the common stock, $0.001 par value per share, of the Company.
(e) “
Conversion
Shares
” means shares of Common Stock issuable upon conversion of the Notes.
(f) “
Effective
Date
” means, as to a Registration Statement, the date on which such Registration Statement is first declared effective
by the Commission.
(g) “
Notes
”
means, collectively, the 2015 Offering Notes and the 2016 Offering Notes.
(h) “
Person
”
means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
(i) “
Prospectus
”
means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference
in such Prospectus
(j) “
Registrable
Securities
” means (i) the Conversion Shares issued or issuable to the holder or its assignees or successor in interest
pursuant to conversion of the Notes and (ii) any other shares of Common Stock or any other securities issued or issuable with respect
to the securities referred to in clause (i) by way of a stock dividend or stock split or in connection with an exchange or combination
of shares, recapitalization, merger, consolidation or other reorganization.
(k) “
Registration
Statement
” means any registration statement (including, without limitation, the Initial Registration Statement or the
Follow-up Registration Statement) required to be filed hereunder (which, at the Company’s option, may be an existing registration
statement of the Company previously filed with the Commission, but not declared effective), including (in each case) the Prospectus,
amendments and supplements to the Registration Statement or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated by reference in the Registration Statement.
(l) “
Reporting
Company
” means a company that is obligated to file periodic reports under Sections 13 or 15(d) of the Securities Exchange
Act.
(m) “
Rule
144
” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the Commission that may at any time permit the Holder to sell securities
of the Company to the public without registration.
(n) “
Rule
415
” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
(o) “
Rule
424
” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
(p) “
Securities
Act
” means the Securities Act of 1933, as amended from time to time together with the regulations promulgated thereunder.
(q) “
Securities
Exchange Act
” means the Securities Exchange Act of 1934, as amended from time to time, together with the regulations
promulgated thereunder.
(r) “
Underwriter
Cutbacks
” means any reduction in the number of shares suggested by any managing underwriter to be included in a registration
under a Registration Statement based upon the guidance in this Section 13(p). In connection with any offering involving an underwriting
of shares of the Company’s capital stock, the Company shall not be required under Section 1 to include any of the Holders’
securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters,
and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering
by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in
such offering exceeds the amount of securities to be sold other than by the Company that the underwriters determine in their sole
discretion 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 determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling shareholders according
to the total amount of securities entitled to be included therein owned by each selling shareholder or in such other proportions
as shall mutually be agreed to by such selling shareholders); provided, that any such cutback will be effected in accordance with
the priorities established by Section 1(c); provided further that in no event shall the amount of securities of the selling Holders
included in an offering pursuant to Section 1 be reduced below 30% of the total amount of securities included in such offering.
14.
Market
Stand-Off
. Each Holder agrees that prior to the Company’s IPO (as that term is defined in the Securities Purchase Agreement)
it will not transfer securities of the Company unless each transferee agrees in writing to be bound by all of the provisions of
Section 4(v) of the Securities Purchase Agreement.
Each Holder agrees
that a legend reading substantially as follows shall be placed on all certificates representing all Registrable Securities of each
Holder issued before the Company’s IPO (and the shares or securities of every other person subject to the restriction contained
in Section 4(v) of the Securities Purchase Agreement):
THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD FOLLOWING THE EFFECTIVE DATE OF THE ISSUER’S IPO REGISTRATION STATEMENT
FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF
THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE ISSUER’S PRINCIPAL OFFICE. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES
OF THESE SHARES.
After the Company’s IPO and expiration
of any lock-up period, upon request of any Holder who is a holder of record of the shares represented by any stock certificate(s)
bearing such legend and the surrender of such certificate(s) in connection with such request, the Company shall cause its transfer
agent to promptly issue replacement certificate(s) not bearing such legend representing the shares represented by such surrendered
stock certificate(s).
15.
Miscellaneous
.
(a) A
Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record
owner of such Registrable Securities.
(b) Any
notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be
in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent
by facsimile or email (provided confirmation of transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one business day after deposit with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
Atomera Incorporated
750 University Avenue, Suite 280
Los Gatos, CA 95032
Attn: Chief Executive Officer
With a copy (for informational
purposes only) to:
Greenberg Traurig, LLP
3161 Michelson Drive, Suite
1000
Irvine, CA 92612
Facsimile: (949) 732-6501
E-mail: DonahueD@gtlaw.com
Attn: Daniel K. Donahue, Esq.
and
If to any Holder,
at the address for such Holder on the records of the Company, which may include the information on Schedule A hereto.
or to such other address and/or facsimile
number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other
party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine
or email service containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C)
provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt
from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
(c) Failure
of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) All
questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal
laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State
of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the
State of New York, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction
or the validity or enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(e) This
Agreement and the instruments referenced herein and therein constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the instruments referenced herein and therein supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter hereof and thereof.
(f) Subject
to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
(g) The
headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(h) This
Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute
one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission
or other electronic transmission (such as but not limited to an email attachment in PDF format) of a copy of this Agreement bearing
the signature of the party so delivering this Agreement. This Agreement may also be executed by electronic signature of such Person.
(i) Each
party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(j) All
consents and other determinations required to be made by the Holder pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by the Holder.
(k) The
language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any party.
(l) This
Agreement is intended for the benefit of, and shall be binding upon, the parties hereto and their respective successors and permitted
assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
(m) The
obligations of each Holder hereunder are several and not joint with the obligations of any other Holder, and no provision of this
Agreement is intended to confer any obligations on a Holder vis-à-vis any other Holder. Nothing contained herein, and no
action taken by any Holder pursuant hereto, shall be deemed to constitute the Holder as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holder are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated herein.
(n)
Currency
.
As used herein, “Dollar”, “US Dollar” and “$” each mean the lawful money of the United States.
(o) For
the avoidance of doubt, this Agreement hereby amends and restates the 2015 Registration Rights Agreement in its entirety.
[Signature pages follow immediately]
IN WITNESS WHEREOF
,
the parties have executed this Registration Rights Agreement as of the date first written above.
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COMPANY:
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ATOMERA INCORPORATED
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By:
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Scott A. Bibaud,
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President and Chief Executive Officer
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HOLDERS:
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For Entity Investors:
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For Individual Investors:
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Name of Signatory:
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If Joint Investment, 2
nd
investor should complete:
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[Signature Page to Amended and Restated
Registration Rights Agreement]
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Transfer Agent]
[Address]
Attention:
Re:
Atomera
Incorporated
Ladies and Gentlemen:
[We are][I am] counsel
to Atomera Incorporated, a Delaware corporation (the “Company”), and have represented the Company in connection with
that certain Amended and Restated Registration Rights Agreement with _____________ (the “Holder”) (the “Registration
Rights Agreement”) pursuant to which the Company agreed, among other things, to register certain of the Registrable Securities
(as defined in the Registration Rights Agreement) held by the Holder, under the Securities Act of 1933, as amended (the “1933
Act”). In connection with the Company's obligations under the Registration Rights Agreement, on ____________ ___, 20__, the
Company filed a registration statement on Form S-[1] (File No. 333-_____________) (the “Registration Statement”) with
the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names the Holder as
a selling stockholder thereunder.
In connection with the
foregoing, [we][I] advise you that a member of the SEC’s staff has advised [us][me] by telephone that the SEC has entered
an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS]
and [we][I] have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its
effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the Registration Statement.
If applicable, you may
receive notices from the Company pursuant to the Company’s rights or obligations under the Registration Rights Agreement
in connection with stop orders or other restrictions on transfer of the shares included in such Registration Statement, but [we][I]
[are][am] not obligated to update this letter or otherwise inform you of any such stop order or restriction.
[Other applicable disclosure
to be inserted here, if appropriate.]
EXHIBIT B
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
_______________, 201[_]
[Addressed to Transfer Agent]
_______________________
_______________________
Attention: [________________________]
Ladies and Gentlemen:
Reference is made to
that certain Amended and Restated Registration Rights Agreement, dated as of April 1, 20116 (the “
Agreement
”),
by and among Atomera Incorporated, a Delaware corporation (the “
Company
”), _________________________ (the “
Holder
”)
and certain other securityholders of the Company, pursuant to which the Company is obligated to register certain shares held by
the Holder (the “
Holder Shares
”) of Common Stock of the Company, par value $0.001 per share (the “
Common
Stock
”).
This letter shall serve
as our irrevocable authorization and direction to you (provided that you are the transfer agent of the Company at such time) to
issue shares of Common Stock upon transfer or resale of the Holder Shares, unless we have otherwise informed you of the termination
of effectiveness of the registration statement in which the Holder Shares are included, a stop order or another transfer restriction.
We may also later inform you that after the termination of effectiveness of such registration statement that a registration statement
in which the Holder’s Shares are included, or that such stop order has been lifted or that such transfer restriction is not
applicable, in which case this authorization and direction shall be reinstated and be effective.
You acknowledge and agree
that so long as you have previously received (a) written confirmation from the Company's legal counsel that either (i) a registration
statement covering resales of the Holder Shares has been declared and remains effective by the Securities and Exchange Commission
(the “
SEC
”) under the Securities Act of 1933, as amended (the “
1933 Act
”), or (ii) sales
of the Holder Shares may be made in conformity with Rule 144 under the 1933 Act (“
Rule 144
”), (b) if applicable,
a copy of such registration statement, and (c) notice from legal counsel to the Company or any Holder that a transfer of Holder
Shares has been effected either pursuant to the registration statement (and a prospectus delivered to the transferee) or pursuant
to Rule 144
,
then as promptly as practicable
,
you shall issue the certificates representing the Holder Shares registered
in the names of such transferees, and such certificates shall not bear any legend restricting transfer of the Common Stock evidenced
thereby and should not be subject to any stop-transfer restriction; provided, however, that if such shares of Common Stock and
are not registered for resale under the 1933 Act or able to be sold under Rule 144, then the certificates for such Common Shares
shall bear the following legend:
THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.
A form of written confirmation
from the Company’s outside legal counsel that a registration statement covering resales of the Holder Shares has been declared
effective by the SEC under the 1933 Act is attached hereto. We will inform you of any stop orders or other transfer restrictions.
Please execute this letter
in the space indicated to acknowledge your agreement to act in accordance with these instructions. Should you have any questions
concerning this matter, please contact me at ____________.
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Very truly yours,
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Atomera Incorporated
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By:
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Name:
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Title:
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THE FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED AND AGREED TO
this ___ day of ________________, 201[_]
[TRANSFER AGENT]
Enclosures
Copy: Holder
SCHEDULE A
LIST OF HOLDERS
SCHEDULE B
SELLING STOCKHOLDERS
The shares of common
stock being offered by the selling stockholders are those issuable to the selling stockholders upon [conversion of the notes and
exercise of the warrants]. For additional information regarding the issuance of the [notes and the warrants], see “Private
Placement of Notes” above. We are registering the shares of common stock in order to permit the selling stockholders to offer
the shares for resale [from time to time]. Except for the ownership of [the notes issued pursuant to and in connection with the
Securities Purchase Agreement, and the warrants issued pursuant to and the agreements governing our engagement of National Securities
Corporation as a placement agent for the private placement of the notes and the engagement of National Securities Corporation as
an underwriter for a public offering of common stock by the Company] the selling stockholders have not had any material relationship
with us within the past three years.
The table below lists
the selling stockholders and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder) of the shares of common stock held by each of the selling
stockholders. The second column lists the number of shares of common stock beneficially owned by the selling stockholders, based
on their respective ownership of shares of common stock [, notes and warrants,] as of ________, 20__, [assuming conversion of the
notes and exercise of the warrants held by each such selling stockholder on that date but taking account of any limitations on
conversion and exercise set forth therein].
The third column lists
the shares of common stock being offered by this prospectus by the selling stockholders [and does not take into account any limitations
on (i) conversion of the notes set forth therein or (ii) exercise of the warrants set forth therein].
In accordance with
the terms of a registration rights agreement with the holders of the notes and the warrants, this prospectus generally covers the
resale of [(i) the shares of common stock issued upon conversion of the notes and (ii) the maximum number of shares of common stock
issuable upon exercise of the warrants, in each case, determined as if the outstanding notes and warrants were converted or exercised
(as the case may be) in full (without regard to any limitations on conversion or exercise contained therein) as of the trading
day immediately preceding the date this registration statement was initially filed with the SEC]. Because the conversion price
of the notes and the exercise price of the warrants may be adjusted, the number of shares that will actually be issued may be more
or less than the number of shares being offered by this prospectus. The fourth column assumes the sale of all of the shares offered
by the selling stockholders pursuant to this prospectus.
See “Plan of
Distribution.”
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Name of Selling Stockholder
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Number of Shares of
Common Stock
Owned Prior to the
Offering
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Maximum Number of
Shares of Common
Stock to be Sold
Pursuant to this
Prospectus
|
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Number of Shares of
Common Stock
Owned After the
Offering
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[Notes (1) . . .]
PLAN OF DISTRIBUTION
We are registering
the shares of common stock issued upon [conversion of the notes and issuable on exercise of the warrants] to permit the resale
of these shares of common stock by the holders of [the notes and warrants] [from time to time] after the date of this prospectus.
We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all
fees and expenses incident to our obligation to register the shares of common stock.
The selling stockholders
may sell all or a portion of the shares of common stock held by them and offered hereby [from time to time] [directly or] through
one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers,
the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares
of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at
varying prices determined at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve
crosses or block transactions, pursuant to one or more of the following methods:
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·
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on any national securities exchange or quotation service on which the securities may be listed
or quoted at the time of sale;
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·
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in the over-the-counter market;
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·
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in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
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·
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through the writing or settlement of options, whether such options are listed on an options exchange
or otherwise;
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·
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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·
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block trades in which the broker-dealer will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
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·
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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·
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an exchange distribution in accordance with the rules of the applicable exchange;
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·
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privately negotiated transactions;
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·
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short sales made after the date the Registration Statement is declared effective by the SEC;
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·
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broker-dealers may agree with a selling security holder to sell a specified number of such shares
at a stipulated price per share;
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·
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a combination of any such methods of sale; and
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·
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any other method permitted pursuant to applicable law.
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The selling stockholders
may also sell shares of common stock under Rule 144 promulgated under the Securities Act of 1933, as amended, if available, rather
than under this prospectus. In addition, the selling stockholders may transfer the shares of common stock by other means not described
in this prospectus. If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters,
broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions
or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers
or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of
common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders
may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions
and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common
stock to broker-dealers that in turn may sell such shares.
The selling stockholders
may pledge or grant a security interest in some or all of the [notes, warrants or] shares of common stock owned by them and, if
they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of
common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act amending, if necessary, the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate
the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest
will be the selling beneficial owners for purposes of this prospectus.
To the extent required
by the Securities Act and the rules and regulations thereunder, the selling stockholders and any broker-dealer participating in
the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities
Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus
supplement, if required, will be distributed, which will set forth the aggregate amount of shares of common stock being offered
and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other
terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or re-allowed
or paid to broker-dealers.
Under the securities
laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers.
In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance
that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement,
of which this prospectus forms a part.
The selling stockholders
and any other person participating in such distribution will be subject to applicable provisions of the Securities Act of 1933,
as amended, and the Securities Exchange Act of 1934, as amended, and in each case together with the rules and regulations thereunder,
including, without limitation, to the extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases
and sales of any of the shares of common stock by the selling stockholders and any other participating person. To the extent applicable,
Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in
market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares
of common stock and the ability of any Person to engage in market-making activities with respect to the shares of common stock.
We will pay all expenses
of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be $[ ]
in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities
or “blue sky” laws; provided, however, a selling stockholder will pay all underwriting discounts and selling commissions,
if any. We will indemnify the selling stockholders against liabilities, including some liabilities under the Securities Act in
accordance with the registration rights agreements or the selling stockholders will be entitled to contribution. We may be indemnified
by the selling stockholders against civil liabilities, including liabilities under the Securities Act that may arise from any written
information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the related
registration rights agreements or we may be entitled to contribution.
Once sold under the
registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands
of persons other than our affiliates.
EXHIBIT D
ESCROW
AGREEMENT
ESCROW DEPOSIT AGREEMENT
This
ESCROW DEPOSIT
AGREEMENT
(this “Agreement”) dated as of this ____ day of February 2016, by and among
ATOMERA INCORPORATED
,
a Delaware corporation formerly known as Mears Technologies, Inc. (the “Company”), having an address at
750
University Avenue, Suite 280
, Los Gatos, California 95032;
NATIONAL SECURITIES CORPORATION
, a Washington corporation,
(the “
Placement Agent
”), having an address at having an address at 4551 Glencoe Avenue, Suite 150, Marina
del Rey, California 90292, and SIGNATURE BANK (the “
Escrow Agent
”), a New York State chartered bank, having
an office at 261 Madison Avenue, New York, NY 10016. All capitalized terms not herein defined shall have the meaning ascribed
to them in that certain Confidential Private Placement Memorandum, dated February ___, 2016, as amended or supplemented from
time-to-time, including all attachments, schedules and exhibits thereto (the “
Memorandum
”).
WITNESSETH
WHEREAS
, pursuant
to the terms of the Memorandum the Company desires to sell (the “
Offering
”) a minimum of $5,000,000 (the “
Minimum
Amount
”) and a maximum of $6,000,000 (the “
Maximum Amount
”) of Senior Secured Convertible Notes (the
“
Notes
”). Each Note is being sold for its face principal amount; and
WHEREAS
, unless
the Minimum Amount is sold by March 31, 2016 (the “
Termination Date
”), the Offering shall terminate and all
funds shall be returned to the subscribers in the Offering; and
WHEREAS
, the
Company and Placement Agent desire to establish an escrow account with the Escrow Agent into which the Company and Placement Agent
shall instruct subscribers introduced to the Company by Placement Agent (the “
Subscribers
”) to deposit checks
and other instruments for the payment of money made payable to the order of “Signature Bank as Escrow Agent for Atomera Incorporated,”
and Escrow Agent is willing to accept said checks and other instruments for the payment of money in accordance with the terms hereinafter
set forth; and
WHEREAS
, the
Company, as issuer, and Placement Agent, as an introducing broker-dealer, represent and warrant to the Escrow Agent that they will
comply with all of their respective obligations under applicable state and federal securities laws and regulations with respect
to sale of the Offering; and
WHEREAS
, the
Company and Placement Agent represent and warrant to the Escrow Agent that they have not stated to any individual or entity that
the Escrow Agent’s duties will include anything other than those duties stated in this Agreement; and
WHEREAS
, the
Company and Placement Agent warrant to the Escrow Agent that a copy of each document that has been delivered to Subscribers and
third parties that include Escrow Agent’s name and duties, has been attached hereto as
Schedule I
.
NOW, THEREFORE, IT IS AGREED
as
follows:
1.
Delivery
of Escrow Funds
.
(a) Placement
Agent and the Company shall instruct Subscribers to deliver to Escrow Agent checks made payable to the order of “Signature
Bank, as Escrow Agent for Atomera Incorporated,” or wire transfer to Signature Bank, 261 Madison Avenue, New York, New York
10016, ABA No. 026013576 for credit to Signature Bank, as Escrow Agent for Atomera Incorporated, Account No. ____________
in each case, with the name and address of the individual or entity making payment. In the event any Subscriber’s address
is not provided to Escrow Agent by the Subscriber, then the Company agrees to promptly provide Escrow Agent with such information
in writing. The checks or wire transfers shall be deposited into a non-interest-bearing account at Signature Bank entitled “Atomera
Incorporated, Signature Bank, as Escrow Agent for” (the “Escrow Account”).
(b) The
collected funds deposited into the Escrow Account are referred to as the “
Escrow Funds
.”
(c) The
Escrow Agent shall have no duty or responsibility to enforce the collection or demand payment of any funds deposited into the Escrow
Account. If, for any reason, any check deposited into the Escrow Account shall be returned unpaid to the Escrow Agent, the sole
duty of the Escrow Agent shall be to return the check to the Subscriber and advise the Company and Placement Agent promptly thereof.
2.
Release
of Escrow Funds
. The Escrow Funds shall be paid by the Escrow Agent in accordance with the following:
(a) In
the event that the Company and Placement Agent advise the Escrow Agent in writing that the Offering has been terminated (the “Termination
Notice”), the Escrow Agent shall promptly return the funds paid by each Subscriber to said Subscriber without interest or
offset.
(b) Provided
that the Escrow Agent does not receive the Termination Notice in accordance with section 2(a) and there is the Minimum Amount deposited
into the Escrow Account on or prior to the Termination Date, the Escrow Agent shall, upon receipt of written instructions, in the
form of Exhibit A, attached hereto and made a part hereof, or in a form and substance satisfactory to the Escrow Agent, received
from the Company and Placement Agent, pay the Escrow Funds in accordance with such written instructions, which instructions shall
be limited to the payment of the Placement Agent’s fee and other offering expenses and the payment of the balance to the
Company. Such payment or payments shall be made by wire transfer within one (1) Business Day of receipt of such written instructions,
which must be received by the Escrow Agent no later than 3:00 PM Eastern Time on a Business Day for the Escrow Agent to process
such instructions that Business Day.
(c) If
by 3:00 P.M. Eastern time on the Termination Date, the Escrow Agent has not received written instructions from the Company and
Placement Agent regarding the disbursement of the Escrow Funds and the total amount of the Escrow Funds is less than the Minimum
Amount, then the Escrow Agent shall promptly return the Escrow Funds to the Subscribers without interest or offset. The Escrow
Funds returned to each Subscriber shall be free and clear of any and all claims of the Escrow Agent.
(d) The
Escrow Agent shall not be required to pay any uncollected funds or any funds that are not available for withdrawal.
(e) If
the Termination Date or any date that is a deadline under this Agreement for giving the Escrow Agent notice or instructions or
for the Escrow Agent to take action is not a Business Day, then such date shall be the Business Day immediately preceding that
date. A Business Day is any day other than a Saturday, Sunday or a Bank holiday.
3.
Acceptance
by Escrow Agent
. The Escrow Agent hereby accepts and agrees to perform its obligations hereunder, provided that:
(a) The
Escrow Agent may act in reliance upon any signature believed by it to be genuine, and may assume that any person who has been designated
by Placement Agent or the Company to give any written instructions, notice or receipt, or make any statements in connection with
the provisions hereof has been duly authorized to do so. Escrow Agent shall have no duty to make inquiry as to the genuineness,
accuracy or validity of any statements or instructions or any signatures on statements or instructions. The names and true signatures
of each individual authorized to act singly on behalf of the Company and Placement Agent are stated in
Schedule II
, which
is attached hereto and made a part hereof. The Company and Placement Agent may each remove or add one or more of its authorized
signers stated on
Schedule II
by notifying the Escrow Agent of such change in accordance with this Agreement, which notice
shall include the true signature for any new authorized signatories.
(b) The
Escrow Agent may act relative hereto in reliance upon advice of counsel in reference to any matter connected herewith. The Escrow
Agent shall not be liable for any mistake of fact or error of judgment or law, or for any acts or omissions of any kind, unless
caused by its willful misconduct or gross negligence.
(c) The
Placement Agent and the Company agree to indemnify and bold the Escrow Agent harmless from and against any and all claims, losses,
costs, liabilities, damages, suits, demands, judgments or expenses (including but not limited to reasonable attorney’s fees)
claimed against or incurred by Escrow Agent arising out of or related, directly or indirectly, to this Escrow Agreement unless
caused by the Escrow Agent’s gross negligence or willful misconduct.
(d) In
the event that the Escrow Agent shall be uncertain as to its duties or rights hereunder, the Escrow Agent shall be entitled to
(i) refrain from taking any action other than to keep safely the Escrow Funds until it shall be directed otherwise by a court of
competent jurisdiction, or (ii) deliver the Escrow Funds to a court of competent jurisdiction.
(e) The Escrow Agent
shall have no duty, responsibility or obligation to interpret or enforce the terms of any agreement other than Escrow Agent’s
obligations hereunder, and the Escrow Agent shall not be required to make a request that any monies be delivered to the Escrow
Account, it being agreed that the sole duties and responsibilities of the Escrow Agent shall be to the extent not prohibited by
applicable law (i) to accept checks or other instruments for the payment of money and wire transfers delivered to the Escrow Agent
for the Escrow Account and deposit said checks and wire transfers into the non-interest bearing Escrow Account, and (ii) to disburse
or refrain from disbursing the Escrow Funds as stated above, provided that the checks received by the Escrow Agent have been collected
and are available for withdrawal.
4.
Escrow
Account Statements and Information
. The Escrow Agent agrees to send to the Company and/or the Placement Agent a copy of the
Escrow Account periodic statement, upon request in accordance with the Escrow Agent’s regular practices for providing account
statements to its non-escrow clients and to also provide the Company and/or Placement Agent, or their designee, upon request other
deposit account information, including Escrow Account balances, by telephone or by computer communication, to the extent practicable.
The Company and Placement Agent agree to complete and sign all forms or agreements required by the Escrow Agent for that purpose.
The Company and Placement Agent each consent to the Escrow Agent’s release of such Escrow Account information to any of the
individuals designated by Company or Placement Agent, which designation has been signed in accordance with section 3(a) by any
of the persons in Schedule II. Further, the Company and Placement Agent have an option to receive e-mail notification of incoming
and outgoing wire transfers. If this e-mail notification service is requested and subsequently approved by the Escrow Agent, the
Company and/or Placement Agent agrees to provide a valid e-mail address and other information necessary to set-up this service
and sign all forms and agreements required for such service. The Company and Placement Agent each consent to the Escrow Agent’s
release of wire transfer information to the designated e-mail address(es). The Escrow Agent’s liability for failure to comply
with this section shall not exceed the cost of providing such information.
5.
Resignation
and Termination of the Escrow Agent
. The Escrow Agent may resign at any time by giving thirty (30) days’ prior written
notice of such resignation to Placement Agent and the Company. Upon providing such notice, the Escrow Agent shall have no further
obligation hereunder except to hold as depositary the Escrow Funds that it receives until the end of such thirty (30)-day period.
In such event, the Escrow Agent shall not take any action, other than receiving and depositing Subscribers checks and wire transfers
in accordance with this Agreement, until the Company has designated a banking corporation, trust company, attorney or other person
as successor. Upon receipt of such written designation signed by Placement Agent and the Company, the Escrow Agent shall promptly
deliver the Escrow Funds to such successor and shall thereafter have no further obligations hereunder. If such instructions are
not received within 30 days following the effective date of such resignation, then the Escrow Agent may deposit the Escrow Funds
held by it pursuant to this Agreement with a clerk of a court of competent jurisdiction pending the appointment of a successor.
In either case provided for in this section, the Escrow Agent shall be relieved of all further obligations and released from all
liability thereafter arising with respect to the Escrow Funds.
6.
Termination
.
The Company and Placement Agent may terminate the appointment of the Escrow Agent hereunder upon written notice specifying the
date upon which such termination shall take effect, which date shall be at least 30 days from the date of such notice. In the event
of such termination, the Company and Placement Agent shall, within 30 days of such notice, appoint a successor escrow agent and
the Escrow Agent shall, upon receipt of written instructions signed by the Company and Placement Agent, turn over to such successor
escrow agent all of the Escrow Funds;
provided, however,
that if the Company and Placement Agent fail to appoint a successor
escrow agent within such 30-day period, such termination notice shall be null and void and the Escrow Agent shall continue to be
bound by all of the provisions hereof. Upon receipt of the Escrow Funds, the successor escrow agent shall become the escrow agent
hereunder and shall be bound by all of the provisions hereof and Escrow Agent shall be relieved of all further obligations and
released from all liability thereafter arising with respect to the Escrow Funds and under this Agreement.
7.
Investment
.
All funds received by the Escrow Agent shall be held only in non-interest bearing bank accounts at Escrow Agent.
8.
Compensation
.
The Escrow Agent shall be entitled, for the duties to be performed by it hereunder, to a fee of $4,000.00, which fee shall be paid
by the Company upon the signing of this Agreement. In addition, the Company shall be obligated to reimburse Escrow Agent for all
fees, costs and expenses incurred or that become due in connection with this Agreement or the Escrow Account, including reasonable
attorney’s fees. Neither the modification, cancellation, termination or rescission of this Agreement nor the resignation
or termination of the Escrow Agent shall affect the right of Escrow Agent to retain the amount of any fee which has been paid,
or to be reimbursed or paid any amount which has been incurred or becomes due, prior to the effective date of any such modification,
cancellation, termination, resignation or rescission. To the extent the Escrow Agent has incurred any such expenses, or any such
fee becomes due, prior to any closing, the Escrow Agent shall advise the Company and the Company shall direct all such amounts
to be paid directly at any such closing.
9.
Notices
.
All notices, requests, demands and other communications required or permitted to be given hereunder shall be in writing and shall
be deemed to have been duly given if sent by hand-delivery, by facsimile (followed by first-class mail), by nationally recognized
overnight courier service or by prepaid registered or certified mail, return receipt requested, to the addresses set forth below:
If to Placement Agent:
National Securities Corporation
4551 Glencoe Avenue, Suite 150
Marina del Rey, CA 90292
Attention: Daniel Landry
If to the Company:
Atomera Incorporated
750 University
Avenue, Suite 280
Los Gatos,
CA 95032
Attention:
Francis Laurencio
Email: flaurencio@atomera.com
If to Escrow Agent:
Signature Bank
261 Madison
Avenue
New York,
NY 10016
Attention:
Cliff Broder, Group Director & SVP
Fax: (646)
822-1359
10.
General
.
(a) This
Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to agreements
made and to be entirely performed within such State, without regard to choice of law principles and any action brought hereunder
shall be brought in the courts of the State of New York, located in the County of New York. Each party hereto irrevocably waives
any objection on the grounds of venue, forum nonconveniens or any similar grounds and irrevocably consents to service of process
by mail or in any manner permitted by applicable law and consents to the jurisdiction of said courts. Each of the parties hereto
hereby waives all right to trial by jury in any action, proceeding or counterclaim arising out of the transactions contemplated
by this Agreement.
(b) This
Agreement sets forth the entire agreement and understanding of the parties with respect to the matters contained herein and supersedes
all prior agreements, arrangements and understandings relating thereto.
(c) All
of the terms and conditions of this Agreement shall be binding upon, and inure to the benefit of and be enforceable by, the parties
hereto, as well as their respective successors and assigns.
(d) This
Agreement may be amended, modified, superseded or canceled, and any of the terms or conditions hereof may be waived, only by a
written instrument executed by each party hereto or, in the case of a waiver, by the party waiving compliance. The failure of any
party at any time or times to require performance of any provision hereof shall in no manner affect its right at a later time to
enforce the same. No waiver of any party of any condition, or of the breach of any term contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or construed as a further or continuing waiver of any
such condition or breach or a waiver of any other condition or of the breach of any other term of this Agreement. No party may
assign any rights, duties or obligations hereunder unless all other parties have given their prior written consent.
(e) If
any provision included in this Agreement proves to be invalid or unenforceable, it shall not affect the validity of the remaining
provisions.
(f) This
Agreement and any modification or amendment of this Agreement may be executed in several counterparts or by separate instruments
and all of such counterparts and instruments shall constitute one agreement, binding on all of the parties hereto.
11.
Form
of Signature
. The parties hereto agree to accept a facsimile transmission copy of their respective actual signatures as evidence
of their actual signatures to this Agreement and any modification or amendment of this Agreement;
provided, however,
that
each party who produces a facsimile signature agrees, by the express terms hereof, to place, promptly after transmission of his
or her signature by fax, a true and correct original copy of his or her signature in overnight mail to the address of the other
party.
12.
No
Third-Party Benefici
aries. This Agreement is solely for the benefit of the parties and their respective successors and permitted
assigns, and no other person has any right, benefit, priority or interest under or because of the existence of this Agreement.
IN WITNESS WHEREOF
,
the parties have duly executed this Agreement as of the date first set forth above.
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NATIONAL SECURITIES CORPORATION
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ATOMERA INCORPORATED
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By:
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By:
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Name:
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Francis Laurencio
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Title:
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Chief Financial Officer
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SIGNATURE BANK
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By:
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Name:
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Title:
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By:
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Name:
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Title:
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Schedule I
OFFERING DOCUMENTS
Schedule II
The Escrow Agent is authorized
to accept instructions signed or believed by the Escrow Agent to be signed by any one of the following on behalf of the Company
and Placement Agent.
ATOMERA INCORPORATED
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Name
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True Signature
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Scott Bibaud
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Francis Laurencio
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NATIONAL SECURITIES CORPORATION
Exhibit A
FORM OF ESCROW RELEASE NOTICE
Date:
Signature Bank
261 Madison Avenue
New York, NY 10016
Attn: Cliff Broder, Group Director & SVP
Dear Mr. Broder:
In accordance with the terms of section 2(b)
of an Escrow Deposit Agreement dated as of February ___, 2016 (the “
Escrow Agreement
”), by and between
Atomera Incorporated (the “
Company
”), Signature Bank (the “
Escrow Agent
”) and National Securities
Corporation (the “
Placement Agent
”), the Company and Placement Agent hereby notify the Escrow Agent that the
Company’s Senior Secured Convertible Note closing will be held on _________ ___, 2016 for gross proceeds of $___________.
PLEASE DISTRIBUTE FUNDS BY WIRE TRANSFER AS
FOLLOWS (wire instructions attached):
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Atomera Incorporated
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$___________________
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National Securities Corporation
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$___________________
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Very truly yours,
Atomera Incorporated
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By:
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Francis Laurencio
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Chief Financial Officer
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National Securities Corporation
EXHIBIT E
Security
AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT
This
AMENDED AND RESTATED
SECURITY AGREEMENT
(this “
Agreement
”), dated as of April 1, 2016, is made by and among Atomera Incorporated,
a Delaware corporation (the “
Grantor
”), Robert Clifford, as the Collateral Agent, and the secured parties listed
on Schedule A annexed hereto (collectively, the “
Secured Parties
” and each, individually, a “
Secured
Party
”).
RECITALS
WHEREAS
, pursuant
to that certain securities purchase agreement, dated March 17, 2015 (as amended, restated, supplemented, or otherwise modified
from time to time, including all schedules and exhibits thereto, collectively the “
2015 Purchase Agreement
”),
by and among the Grantor (f/k/a Mears Technologies, Inc.) and the investors listed on the Schedule of Buyers attached thereto (the
“
Existing Noteholders
”), the Grantor has sold, and each of the Existing Noteholders have purchased, severally
and not jointly, certain senior secured convertible notes in the aggregate original principal amount of up to $14,750,000 (the
“
2015 Offering Notes
”); and
WHEREAS
, in respect
of the 2015 Offering Notes, the Grantor has, pursuant to this security agreement, originally dated March 17, 2015 (the “
2015
Security Agreement
”), by and among Grantor and the Existing Noteholders, granted a continuing security interest in and
to the Collateral (as defined in the 2015 Security Agreement) in order to secure the prompt and complete payment, observance and
performance of the Secured Obligations (as defined in the 2015 Security Agreement); and
WHEREAS
, pursuant
to that certain securities purchase agreement, dated even date herewith (as may be amended, restated, supplemented, or otherwise
modified from time to time, including all schedules and exhibits thereto, collectively, the “
2016
Purchase Agreement
”),
by and among the Grantor and the investors listed on the Schedule of Buyers attached thereto (the “
New Noteholders
”),
the Grantor has agreed to sell, and each of the New Noteholders have agreed to purchase, severally and not jointly, certain senior
secured convertible notes in the aggregate original principal amount of up to $6,000,000 (the “
2016 Offering
Notes
”);
and
WHEREAS
, in order
to induce the New Noteholders to purchase, severally and not jointly, the 2016 Offering Notes as provided for in the 2016 Purchase
Agreement, the Grantor has agreed to grant a continuing security interest in and to the Collateral (as defined below) in order
to secure the prompt and complete payment, observance and performance of the Secured Obligations (as defined below); and
WHEREAS
, a majority
of the Existing Noteholders have consented to allow the 2016 Offering Notes to be, in all respects,
pari passu
with the
2015 Offering Notes in respect of this Agreement, and the Collateral Agent now wishes to amend and restate the 2015 Security Agreement
to allow each New Noteholder to become a party hereto. Accordingly, for purposes of this Agreement, the term “Secured Parties”
shall mean both the Existing Noteholders and the New Noteholders.
AGREEMENTS
NOW, THEREFORE
,
for and in consideration of the recitals made above and other good and valuable consideration, the receipt, sufficiency and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
1.
Defined
Terms
. All capitalized terms used herein (including in the preamble and recitals hereof) without definition shall have the
meanings ascribed thereto in the Notes. Any terms used in this Agreement that are defined in the Code shall be construed and defined
as set forth in the Code unless otherwise defined herein or in the Notes; provided, however, if the Code is used to define any
term used herein and if such term is defined differently in different Articles of the Code, the definition of such term contained
in Article 9 of the Code shall govern. In addition to those terms defined elsewhere in this Agreement, as used in this Agreement,
the following terms shall have the following meanings:
(a) “
Account
”
means an account (as that term is defined in the Code).
(b) “
Account
Debtor
” means an account debtor (as that term is defined in the Code).
(c) “
Bankruptcy
Code
” means title 11 of the United States Code, as in effect from time to time.
(d) “
Books
”
means books and records (including, without limitation, the Grantor’s Records) indicating, summarizing, or evidencing the
Grantor’s assets (including the Collateral) or liabilities, the Grantor’s Records relating to its business operations
(including, without limitation, stock ledgers) or financial condition, and the Grantor’s goods or General Intangibles related
to such information.
(e) “
Chattel
Paper
” means chattel paper (as that term is defined in the Code) and includes tangible chattel paper and electronic chattel
paper.
(f) “
Code
”
means the New York Uniform Commercial Code, as in effect from time to time; provided, however, in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to any Secured Party’s
Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State
of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.
(g) “
Collateral
”
has the meaning specified therefor in Section 2.
(h) “
Commercial
Tort Claims
” means commercial tort claims (as that term is defined in the Code), and includes those commercial tort claims
listed on
Schedule 1
attached hereto.
(i) “
Control
Agreement
” means a control agreement, in form and substance reasonably satisfactory to the Collateral Agent, executed
and delivered by Grantor, the Collateral Agent (on behalf of all Secured Parties), and the applicable securities intermediary (with
respect to a Securities Account) or bank (with respect to a Deposit Account), as may be amended, restated, supplemented, or otherwise
modified from time to time.
(j) “
Copyrights
”
means all copyrights and copyright registrations, and also includes (i) all reissues, continuations, extensions or renewals thereof,
(ii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments
under all licenses entered into in connection therewith and damages and payments for past or future infringements or dilutions
thereof, (iii) the right to sue for past, present and future infringements and dilutions thereof, (iv) the goodwill of Grantor’s
business symbolized by the foregoing or connected therewith, and (v) all of Grantor’s rights corresponding thereto throughout
the world.
(k) “
Deposit
Account
” means a deposit account (as that term is defined in the Code).
(l) “
Equipment
”
means all equipment (as that term is defined in the Code) in all of its forms of the Grantor, wherever located, and including,
without limitation, all machinery, apparatus, installation facilities and other tangible personal property, and all parts thereof
and all accessions, additions, attachments, improvements, substitutions, replacements and proceeds thereto and therefor.
(m) “
Event
of Default
” has the meaning specified therefor in the Notes.
(n) “
Foreign
Subsidiary
” means any Person in which the Company, directly or indirectly, owns the majority of the outstanding Stock
and that is a “controlled foreign corporation” under Section 957 of the Internal Revenue Code of 1986.
(o) “
GAAP
”
means United States generally accepted accounting principles, consistently applied.
(p) “
General
Intangibles
” means general intangibles (as that term is defined in the Code) and, in any event, includes payment intangibles,
contract rights, rights to payment, rights arising under common law, statutes, or regulations, choses or things in action, goodwill,
programming materials, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment
under any royalty or licensing agreements (including Intellectual Property Licenses), infringement claims, commercial computer
programs, information contained on computer disks or tapes, software, literature, reports, catalogs, pension plan refunds, pension
plan refund claims, insurance premium rebates, tax refunds, and tax refund claims, interests in a partnership or limited liability
company which do not constitute a security under Article 8 of the Code, and any other personal property other than Commercial Tort
Claims, money, Accounts, Chattel Paper, Deposit Accounts, goods, Investment Related Property, Negotiable Collateral, and oil, gas,
or other minerals before extraction.
(q) “
Governmental
Authority
” means any domestic or foreign federal, state, local, or other governmental or administrative body, instrumentality,
board, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar
dispute-resolving panel or body.
(r) “
Insolvency
Proceeding
” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under
any other state or federal bankruptcy or insolvency law or any equivalent laws in any other jurisdiction, assignments for the benefit
of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
(s) “
Intellectual
Property
” means Patents, Copyrights, Trademarks, the goodwill associated with such Trademarks, trade secrets and customer
lists, and Intellectual Property Licenses.
(t) “
Intellectual
Property Licenses
” means rights under or interests in any patent, trademark, copyright or other intellectual property,
including software license agreements with any other party, whether the Grantor is a licensee or licensor under any such license
agreement, as may be amended, restated, supplemented, or otherwise modified from time to time.
(u) “
Inventory
”
means all inventory (as that term is defined in the Code) in all of its forms of the Grantor, wherever located, including, without
limitation, (i) all goods in which the Grantor has an interest in mass or a joint or other interest or right of any kind (including
goods in which the Grantor has an interest or right as consignee), and (ii) all goods which are returned to or repossessed by the
Grantor, and all accessions thereto, products thereof and documents therefor.
(v) “
Investment
Related Property
” means (i) investment property (as that term is defined in the Code), and (ii) all of the following
(regardless of whether classified as investment property under the Code): all Pledged Interests, Pledged Operating Agreements,
and Pledged Partnership Agreements.
(w) “
Lien
”
means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or
charge on property of any kind.
(x) “
Negotiable
Collateral
” means letters of credit, letter-of-credit rights, instruments, promissory notes, drafts, and documents.
(y) “
New
Subsidiary
” has the meaning specified therefor in the Notes.
(z) “
Notes
”
means collectively the 2015 Offering Notes and the 2016 Offering Notes.
(aa) “
Patents
”
means all patents and patent applications, and also includes (i) all renewals thereof, (ii) all income, royalties, damages and
payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in
connection therewith and damages and payments for past or future infringements or dilutions thereof, (iii) the right to sue for
past, present and future infringements and dilutions thereof, and (iv) all of Grantor’s rights corresponding thereto throughout
the world.
(bb)
“
Permitted Liens
” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising
in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent or that is
being contested in good faith for which adequate reserves have been established in accordance with GAAP, (iii) any Lien created
by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary
course of business with respect to a liability that is not yet due or delinquent or that is being contested in good faith by appropriate
proceedings, (iv) Liens on Equipment having a fair market value of not more than $250,000 in the aggregate, but only if the lien
constitutes a purchase money security interest incurred in connection with the purchase of such Equipment, (v) Liens securing the
Company’s obligations under the Transaction Documents, and (vi) Liens granted to the Secured Parties pursuant to the terms
of this Agreement.
(cc) “
Permitted
Transfers
”
means (i) sales of Inventory in the ordinary course of business, (ii)
non-exclusive licenses in the ordinary course of business for the use of Intellectual Property (A) to manufacturers, distributors,
OEMs, strategic partners and value added re-sellers in connection with the manufacture and distribution of Grantor’s products,
(B) in connection with the embedding of Intellectual Property in the products of others, and (C) to end users; provided no such
license could result in a legal transfer of title of the licensed Intellectual Property, or (iii) dispositions of worn-out, obsolete
or surplus Equipment at fair market value in the ordinary course of business
.
(dd)
“
Person
” has the meaning specified therefor in the Securities Purchase Agreement.
(ee) “
Pledged
Companies
” means each Person all or a portion of whose Stock is acquired or otherwise owned by the Grantor after the
date hereof.
(ff) “
Pledged
Interests
” means all of Grantor’s right, title and interest in and to all of the Stock now or hereafter owned by
Grantor, regardless of class or designation, including all substitutions therefor and replacements thereof, all proceeds thereof
and all rights relating thereto, also including any certificates representing the Stock, the right to receive any certificates
representing any of the Stock, all warrants, options, share appreciation rights and other rights, contractual or otherwise, in
respect thereof, and the right to receive dividends, distributions of income, profits, surplus, or other compensation by way of
income or liquidating distributions, in cash or in kind, and cash, instruments, and other property from time to time received,
receivable, or otherwise distributed in respect of or in addition to, in substitution of, on account of, or in exchange for any
or all of the foregoing. Pledged Interests categorically excludes any authorized but unissued Stock of the Company which is not
being pledged under this Agreement.
(gg) “
Pledged
Operating Agreements
” means all of Grantor’s rights, powers, and remedies under the limited liability company operating
agreements of each of the Pledged Companies that are limited liability companies, as may be amended, restated, supplemented, or
otherwise modified from time to time.
(hh) “
Pledged
Partnership Agreements
” means all of Grantor’s rights, powers, and remedies under the partnership agreements of
each of the Pledged Companies that are partnerships, as may be amended, restated, supplemented, or otherwise modified from time
to time.
(ii) “
Proceeds
”
has the meaning specified therefor in Section 2.
(jj) “
Real
Property
” means any estates or interests in real property now owned or hereafter acquired by Grantor and the improvements
thereto.
(kk) “
Records
”
means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable
in perceivable form.
(ll) “
Registration
Rights Agreement
” means that certain amended and restated registration rights agreement, dated as of the date hereof,
by and among the Grantor and the Secured Parties, as may be amended from time to time
.
(mm) “
Secured
Obligations
” mean all of the present and future payment and performance obligations of the Grantor arising under this
Agreement, the Notes and the other Transaction Documents, including, without duplication, reasonable attorneys’ fees and
expenses and any interest, fees, or expenses that accrue after the filing of an Insolvency Proceeding, regardless of whether allowed
or allowable in whole or in part as a claim in any Insolvency Proceeding.
(nn) “
Securities
Account
” means a securities account (as that term is defined in the Code).
(oo) “
Securities
Purchase Agreement
” means collectively the 2015 Purchase Agreement and the 2016 Purchase Agreement.
(pp) “
Security
Documents
” means, collectively, this Agreement, each Control Agreement and each other security agreement, pledge agreement,
assignment, mortgage, security deed, deed of trust, and other agreement or document executed and delivered by the Grantor as security
for any of the Secured Obligations, as may be amended, restated, supplemented, or otherwise modified from time to time.
(qq) “
Security
Interest
” and “
Security Interests
” have the meanings specified therefor in Section 2.
(rr) “
Stock
”
means all shares, options, warrants, interests (including, without limitation, membership and partnership interests), participations,
or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred
stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations
promulgated by the United States Securities and Exchange Commission and any successor thereto under the Securities Exchange Act
of 1934, as in effect from time to time).
(ss) “
Supporting
Obligations
” means supporting obligations (as such term is defined in the Code).
(tt) “
Trademarks
”
means all trademarks, trade names, trademark applications, service marks, service mark applications, and also includes (i) all
renewals thereof, (ii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto,
including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements
or dilutions thereof, (iii) the right to sue for past, present and future infringements and dilutions thereof, (iv) the goodwill
of Grantor’s business symbolized by the foregoing or connected therewith, and (v) all of Grantor’s rights corresponding
thereto throughout the world.
(uu) “
Transaction
Documents
” mean, collectively, the Securities Purchase Agreement, the Notes, the Security Documents, the Registration
Rights Agreement and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection
with the consummation of the transactions contemplated hereby and thereby, as may be amended from time to time.
(vv) “
URL
”
means “uniform resource locator,” an internet web address.
2.
Grant
of Security
. The Grantor hereby unconditionally grants, assigns, and pledges to the Collateral Agent a continuing security
interest (each, a “
Security Interest
” and, collectively, the “
Security Interests
”) in all
personal property assets of the Grantor whether now owned or hereafter acquired or arising and wherever located (collectively,
the “
Collateral
”), including, without limitation, the Grantor’s right, title, and interest in and to the
following, whether now owned or hereafter acquired or arising and wherever located:
(a) all
of the Grantor’s Accounts;
(b) all
of the Grantor’s Books;
(c) all
of the Grantor’s Chattel Paper;
(d) all
of the Grantor’s Deposit Accounts;
(e) all
of the Grantor’s Equipment and fixtures;
(f) all
of the Grantor’s General Intangibles;
(g) all
of the Grantor’s Intellectual Property;
(h) all
of the Grantor’s Inventory;
(i) all
of the Grantor’s Investment Related Property;
(j) all
of the Grantor’s Negotiable Collateral;
(k) all
of the Grantor’s rights in respect of Supporting Obligations;
(l) all
of the Grantor’s Commercial Tort Claims;
(m) all
of the Grantor’s money, cash, cash equivalents, or other assets of the Grantor that now or hereafter come into the possession,
custody, or control of any Secured Party; and
all of the proceeds
and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance or Commercial Tort Claims
covering or relating to any or all of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit Accounts, Equipment,
General Intangibles, Intellectual Property, Inventory, Investment Related Property, Negotiable Collateral, Supporting Obligations,
money, or other tangible or intangible property resulting from the sale, lease, license, exchange, collection, or other disposition
of any of the foregoing, the proceeds of any award in condemnation with respect to any of the foregoing, any rebates or refunds,
whether for taxes or otherwise, and all proceeds of any such proceeds, or any portion thereof or interest therein, and the proceeds
thereof, and all proceeds of any loss of, damage to, or destruction of the above, whether insured or not insured, and, to the extent
not otherwise included, any indemnity, warranty, or guaranty payable by reason of loss or damage to, or otherwise with respect
to any of the foregoing (the “
Proceeds
”). Without limiting the generality of the foregoing, the term “Proceeds”
includes whatever is receivable or received when Investment Related Property or proceeds are sold, exchanged, collected, or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes proceeds of any indemnity or guaranty payable to
the Grantor or any Secured Party from time to time with respect to any of the Investment Related Property. Notwithstanding the
foregoing, the Collateral shall not include (i) the Stock of any first-tier Foreign Subsidiary in excess of 65% of the aggregate
outstanding voting Stock of such first-tier Foreign Subsidiary or (ii) any Stock of any Foreign Subsidiary that is not a first-tier
Foreign Subsidiary.
3.
Security
for Obligations
. This Agreement and the Security Interests created hereby secure the payment and performance of the Secured
Obligations, whether now existing or arising hereafter.
4.
Grantor
Remains Liable
. Anything herein to the contrary notwithstanding, (a) the Grantor shall remain liable under the contracts and
agreements included in the Collateral, including the Pledged Operating Agreements and the Pledged Partnership Agreements, to perform
all of the duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by
Secured Parties, or any of them, of any of the rights hereunder shall not release the Grantor from any of its duties or obligations
under such contracts and agreements included in the Collateral, and (c) no Secured Party shall have any obligation or liability
under such contracts and agreements included in the Collateral by reason of this Agreement, nor shall any Secured Party be obligated
to perform any of the obligations or duties of the Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder. Until an Event of Default shall occur and be continuing, except as otherwise provided in this Agreement
or any other Transaction Document, the Grantor shall have the right to possession and enjoyment of the Collateral for the purpose
of conducting the ordinary course of its businesses, subject to and upon the terms hereof and the other Transaction Documents.
Without limiting the generality of the foregoing, it is the intention of the parties hereto that record and beneficial ownership
of the Pledged Interests, including all voting, consensual, and dividend rights, shall remain in the Grantor until the occurrence
of an Event of Default and until the Collateral Agent (on behalf of all Secured Parties) shall notify the Grantor of its exercise
of voting, consensual, or dividend rights with respect to the Pledged Interests pursuant to Section 15 hereof.
5.
Representations
and Warranties
. The Grantor hereby represents and warrants as follows:
(a) The
exact legal name of the Grantor is set forth in the preamble this Agreement.
(b)
Schedule
2
attached hereto sets forth (i) all Real Property owned or leased by the Grantor, together with all other locations of
Collateral, as of the date hereof, and (ii) the chief executive office of the Grantor as of the date hereof.
(c) This
Agreement creates a valid security interest in all of the Collateral of the Grantor, to the extent a security interest therein
can be created under the Code, securing the payment of the Secured Obligations. Except to the extent a security interest in the
Collateral cannot be perfected by the filing of a financing statement under the Code, all filings and other actions necessary or
reasonably desirable to perfect and protect such security interest have been duly taken or will have been taken upon the filing
of financing statements listing the Grantor, as a debtor, and Secured Parties, as secured parties, in the jurisdictions listed
on
Schedule 3
attached hereto. Upon the making of such filings, the Secured Parties shall each have a first priority
perfected security interest in all of the Collateral of the Grantor to the extent such security interest can be perfected by the
filing of a financing statement (subject to Permitted Liens). Subject to Section 6(c), all action by the Grantor necessary to perfect
and reasonably necessary to protect such security interest on each item of Collateral has been duly taken.
(d) Except
for the Security Interests created hereby, no Collateral is subject to any Lien as of the date hereof, except for Permitted Liens.
(e) No
consent, approval, authorization, or other order or other action by, and no notice to or filing with, any Governmental Authority
or any other Person is required (i) for the grant of a Security Interest by the Grantor in and to the Collateral pursuant to this
Agreement or for the execution, delivery, or performance of this Agreement by the Grantor, or (ii) for the exercise by any Secured
Party of the voting or other rights provided in this Agreement with respect to Investment Related Property pledged hereunder or
the remedies in respect of the Collateral pursuant to this Agreement, except as may be required in connection with such disposition
of Investment Related Property by laws affecting the offering and sale of securities generally.
(f)
Schedule
4
contains a complete and accurate list of all of the Grantor’s Deposit Accounts and Securities Accounts, including,
without limitation, with respect to each bank or securities intermediary (a) the name and address of such Person and (b) the account
numbers of such accounts maintained with such Person.
6.
Covenants
.
The Grantor covenants and agrees with each Secured Party that from and after the date of this Agreement and until the date of termination
of this Agreement in accordance with Section 24 hereof:
(a)
Possession
of Collateral
. In the event that any Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral,
Investment Related Property, or Chattel Paper with a value in excess of $100,000 in the aggregate, and if and to the extent that
perfection or priority of Secured Parties’ respective Security Interests is dependent on or enhanced by possession, the Grantor,
immediately upon the request of the Collateral Agent (on behalf of all Secured Parties), shall execute such other documents and
instruments as shall be reasonably requested by the Collateral Agent or, if applicable, endorse and deliver physical possession
of such Negotiable Collateral, Investment Related Property, or Chattel Paper to the Collateral Agent (on behalf of all Secured
Parties), together with such undated powers endorsed in blank as shall be requested by the Collateral Agent.
(b)
Chattel
Paper
.
(i) The
Grantor shall take all steps reasonably necessary to grant the Collateral Agent (on behalf of all Secured Parties) control of all
Chattel Paper in accordance with the Code and all “transferable records” as that term is defined in Section 16 of the
Uniform Electronic Purchase Act and Section 201 of the federal Electronic Signatures in Global and National Commerce Act as in
effect in any relevant jurisdiction; and
(ii) If
the Grantor retains possession of any Chattel Paper or instruments (which retention of possession shall be subject to the extent
permitted hereby), promptly upon the request of the Collateral Agent (on behalf of all Secured Parties), such Chattel Paper and
instruments shall be marked with the following legend: “This writing and the obligations evidenced or secured hereby are
subject to the Security Interests of [names of Secured Parties].”
(c)
Control
Agreements
. The Grantor shall not establish or maintain any Deposit Account or Securities Account (or any other similar account)
other than a payroll account unless (i) the Grantor shall have provided each Secured Party with ten (10) days’ advance written
notice of each such account and (ii) if an Event of Default has occurred and is then continuing, the Collateral Agent on behalf
of the Secured Parties shall have received a Control Agreement in respect of such account concurrently with the opening thereof.
From and after the occurrence and during the continuance of any Event of Default, the Grantor shall ensure that all of its Account
Debtors forward payment of the amounts owed by them directly to a Deposit Account that is subject to a Control Agreement and deposit
or cause to be deposited promptly, and in any event no later than the first (1
st
) Business Day after the date of receipt
thereof, all of their collections (including those sent directly by their Account Debtors to the Grantor) into a Deposit Account
subject to a Control Agreement. Upon the request of the Collateral Agent (on behalf of all Secured Parties) from and after the
occurrence and during the continuance of any Event of Default, the Grantor shall promptly (but in no event later than ten (10)
Business Days after such request therefor) cause each of its Deposit Accounts and Securities Accounts to be subject to a Control
Agreement in favor of the Collateral Agent on behalf of the Secured Parties.
(d)
Letter-of-Credit
Rights
. In the event that the Grantor is or becomes the beneficiary of one or more letters of credit with a face amount of
greater than $25,000 individually or $100,000 in the aggregate, the Grantor shall promptly (and in any event within five (5) Business
Days after becoming a beneficiary) notify the Secured Parties thereof and, upon the request by the Collateral Agent (on behalf
of all Secured Parties), use commercially reasonable efforts to enter into an agreement with the Collateral Agent (on behalf of
all Secured Parties) and the issuing or confirming bank with respect to letter-of-credit rights assigning such letter-of-credit
rights to the Collateral Agent (on behalf of all Secured Parties) and directing all payments thereunder to the Collateral Agent
(on behalf of all Secured Parties) during the continuance of an Event of Default following notice from the Collateral Agent, all
in form and substance satisfactory to the Collateral Agent (on behalf of all Secured Parties).
(e)
Commercial
Tort Claims
. The Grantor shall promptly (and in any event within five (5) Business Days of receipt thereof) notify the Secured
Parties in writing upon incurring or otherwise obtaining a Commercial Tort Claim after the date hereof and, upon request of the
Collateral Agent (on behalf of all Secured Parties), promptly amend
Schedule 1
to this Agreement to describe such
after-acquired Commercial Tort Claim in a manner that reasonably identifies such Commercial Tort Claim, and hereby authorizes the
filing of additional financing statements or amendments to existing financing statements describing such Commercial Tort Claims,
and agrees to do such other acts or things deemed reasonably necessary or desirable by the Collateral Agent (on behalf of all Secured
Parties) to give the Collateral Agent on behalf of the Secured Parties a first priority, perfected security interest (subject to
Permitted Liens) in any such Commercial Tort Claim.
(f)
Government
Contracts
. If any Account or Chattel Paper arises out of a contract or contracts with the United States of America or any department,
agency, or instrumentality thereof, the Grantor shall promptly (and in any event within five (5) Business Days of the creation
thereof) notify the Secured Parties thereof in writing and use commercially reasonable efforts to execute any instruments or take
any steps reasonably required by the Collateral Agent (on behalf of all Secured Parties) in order that all moneys due or to become
due under such contract or contracts shall be assigned to the Collateral Agent (on behalf of all Secured Parties) during the continuance
of an Event of Default following notice from the Collateral Agent, and shall provide written notice thereof and use commercially
reasonable efforts to take all other appropriate actions under the Assignment of Claims Act or other applicable law to provide
the Collateral Agent on behalf of all Secured Parties a first-priority perfected security interest (subject to Permitted Liens)
in such contract.
(g)
Investment
Related Property
.
(i) If
the Grantor shall receive or become entitled to receive any Pledged Interests after the date hereof, it shall promptly (and in
any event within five (5) Business Days of receipt thereof) identify such Pledged Interests in a written notice to the Secured
Parties;
(ii) Upon
the request of the Collateral Agent during the continuance of an Event of Default, all sums of money and property paid or distributed
in respect of the Investment Related Property pledged hereunder which are received by the Grantor shall be held by the Grantor
in trust for the benefit of the Secured Parties segregated from the Grantor’s other property, and the Grantor shall deliver
it promptly to the Collateral Agent (on behalf of all Secured Parties) in the exact form received;
(iii) The
Grantor shall promptly deliver to the Secured Parties a copy of each material notice or other written communication received by
it in respect of any Pledged Interests;
(iv) The
Grantor shall not make or consent to any material amendment or other modification or waiver with respect to any Pledged Interests,
Pledged Operating Agreement, or Pledged Partnership Agreement or enter into any agreement or permit to exist any restriction with
respect to any Pledged Interests, in each case, that could reasonably be expected to materially adversely affect the Collateral
Agent or the Secured Parties;
(v) The
Grantor agrees that it will cooperate with the Secured Parties in obtaining all necessary approvals and making all necessary filings
under federal and state law, and, upon the request of the Collateral Agent during the continuance of an Event of Default, under
foreign law, in connection with the Security Interests on the Investment Related Property pledged hereunder or any sale or transfer
thereof; and
(vi) As
to all limited liability company or partnership interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement,
the Grantor hereby represents, warrants and covenants that the Pledged Interests issued pursuant to such agreement (A) shall not
be dealt in or traded on securities exchanges or in securities markets, (B) will not constitute investment company securities,
and (C) will not be held by the Grantor in a securities account. In addition, none of the Pledged Operating Agreements, the
Pledged Partnership Agreements, or any other agreements governing any of the Pledged Interests issued under any Pledged Operating
Agreement or Pledged Partnership Agreement, shall provide that such Pledged Interests are securities governed by Article 8 of the
Uniform Commercial Code as in effect in any relevant jurisdiction.
(h)
Transfers
and Other Liens
. The Grantor shall not (i) sell, lease, license, assign (by operation of law or otherwise), transfer or otherwise
dispose of, or grant any option with respect to, any of the Collateral, except for Permitted Transfers or as expressly permitted
by this Agreement and the other Transaction Documents, or (ii) except for Permitted Liens, create or permit to exist any Lien upon
or with respect to any of the Collateral without the consent of the Collateral Agent. The inclusion of Proceeds in the Collateral
shall not be deemed to constitute consent by any Secured Party to any sale or other disposition of any of the Collateral except
as expressly permitted in this Agreement or the other Transaction Documents. Notwithstanding anything contained in this Agreement
to the contrary, Permitted Liens (other than Permitted Liens granted to the Secured Parties) shall not be permitted with respect
to any Pledged Interests.
(i)
Preservation
of Existence
. The Grantor shall maintain and preserve its existence, rights and privileges, and become or remain
duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which
the transaction of its business makes such qualification necessary, except where failure to be so qualified could not reasonably
be expected to have a Material Adverse Effect (as defined in the Securities Purchase Agreement).
(j)
Maintenance
of Properties
. The Grantor shall maintain and preserve all of its properties which are reasonably necessary in the proper
conduct of its business in good working order and condition, ordinary wear and tear excepted.
(k)
Maintenance
of Insurance
. The Grantor shall maintain insurance with responsible and reputable insurance companies or associations
(including, without limitation, comprehensive general liability, property, hazard, rent and business interruption insurance) with
respect to all of its assets and properties (including, without limitation, all real properties leased or owned by it and any and
all Inventory and Equipment) and business, in such amounts and covering such risks as is required by any governmental authority
having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in
similar businesses similarly situated, in each case, reasonably acceptable to the Collateral Agent (on behalf of all Secured Parties).
(l)
Other
Actions as to Any and All Collateral
. The Grantor shall promptly (and in any event within five (5) Business Days of acquiring
or obtaining such Collateral) notify the Secured Parties in writing upon (i) acquiring or otherwise obtaining any Collateral after
the date hereof consisting of Investment Related Property, Chattel Paper (electronic, tangible or otherwise), documents (as defined
in Article 9 of the Code), promissory notes (as defined in the Code) or instruments (as defined in the Code) collectively having
an aggregate value in excess of $100,000 or (ii) any amount payable under or in connection with any of the Collateral being or
becoming evidenced after the date hereof by any Chattel Paper, documents, promissory notes, or instruments and, in each such case
upon the request of the Collateral Agent (on behalf of all Secured Parties), promptly execute such other documents, or if applicable,
deliver such Chattel Paper, other documents or certificates evidencing any Investment Related Property and do such other acts or
things deemed reasonably necessary or desirable by the Collateral Agent (on behalf of all Secured Parties) to protect the Secured
Parties’ respective Security Interests therein.
7.
Relation
to Other Transaction Documents
. In the event of any conflict between any provision in this Agreement and any provision in the
Securities Purchase Agreement or the Notes, such provision of the Securities Purchase Agreement or the Notes shall control, except
to the extent the applicable provision in this Agreement is more restrictive with respect to the rights of the Grantor or imposes
more burdensome or additional obligations on the Grantor, in which event the applicable provision in this Agreement shall control.
8.
Further
Assurances
.
(a) The
Grantor agrees that from time to time, at its own expense, it will promptly execute and deliver all further instruments and documents,
and take all further action, that may be reasonably necessary or that the Collateral Agent (on behalf of all Secured Parties) may
reasonably request, in order to perfect and protect the Security Interests granted or purported to be granted hereby or to enable
the Secured Parties to exercise and enforce their rights and remedies hereunder with respect to any of the Collateral.
(b) The
Grantor authorizes the filing by the Collateral Agent (on behalf of all Secured Parties) of financing or continuation statements,
or amendments thereto, including, but not limited to, the recordation of the security interests granted hereunder in Patents, Trademarks
and Copyrights in the United States Patent and Trademark Office and the United States Copyright Office, and Grantor will execute
and deliver to the Collateral Agent such other instruments or notices, as may be reasonably necessary or as the Collateral Agent
may reasonably request, in order to perfect and preserve the Security Interests granted or purported to be granted hereby. Upon
the Satisfaction in Full of the Secured Obligations, the Collateral Agent shall (at Grantor’ expense) file a termination
statement and/or other necessary documents terminating and releasing any and all financing statements or Liens on the Collateral
pursuant to Section 24 within five (5) Business Days following a written request therefor from Grantor.
(c) The
Grantor authorizes the Collateral Agent (on behalf of all Secured Parties) at any time and from time to time to file, transmit,
or communicate, as applicable, financing statements and amendments (i) describing the Collateral as “all assets of debtor”
or words of similar effect, (ii) describing the Collateral as being of equal or lesser scope or with greater detail, or (iii) that
contain any information required by part 5 of Article 9 of the Code for the sufficiency or filing office acceptance. The Grantor
also hereby ratifies any and all financing statements or amendments previously filed by the Collateral Agent in any jurisdiction.
(d) Subject
to Section 8(b), the Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination
statement with respect to any financing statement filed in connection with this Agreement without the prior written consent of
the Collateral Agent (on behalf of all Secured Parties), subject to the Grantor’s rights under Section 9-509(d)(2) of the
Code.
(e) Upon
five (5) Business Day’s advance notice, the Grantor shall permit each Secured Party (at such Secured Party’s expense)
or its employees, accountants, attorneys or agents, access to examine and inspect any Collateral or any other property of the Grantor
at any time during ordinary business hours, but no more than once per calendar year unless an Event of Default has occurred and
is continuing.
9.
Collateral
Agent’s Right to Perform Contracts, Exercise Rights, etc
. Upon the occurrence and during the continuance of an Event
of Default, the Collateral Agent (on behalf of all Secured Parties) (a) may proceed to perform any and all of the obligations of
the Grantor contained in any contract, lease, or other agreement and exercise any and all rights of the Grantor therein contained
as fully as the Grantor itself could, (b) shall have the right to use the Grantor’s rights under Intellectual Property Licenses
in connection with the enforcement of the Secured Parties’ rights hereunder, including the right to prepare for sale and
sell any and all Inventory and Equipment now or hereafter owned by the Grantor and now or hereafter covered by such licenses, and
(c) shall have the right to request that any Stock that is pledged hereunder be registered in the name of the Secured Parties or
any of their nominees.
10.
Collateral
Agent Appointed Attorney-in-Fact
. The Grantor, on behalf of itself and each New Subsidiary of the Grantor, hereby irrevocably
appoints the Collateral Agent (on behalf of all Secured Parties) as the attorney-in-fact of the Grantor and each such New Subsidiary
upon the occurrence and during the continuance of an Event of Default. In the event the Grantor or any New Subsidiary fails to
execute or deliver in a timely manner any Transaction Document or other agreement, document, certificate or instrument which the
Grantor or New Subsidiary now or at any time hereafter is required to execute or deliver pursuant to the terms of the Securities
Purchase Agreement or any other Transaction Document, upon the occurrence and during the continuance of an Event of Default, the
Collateral Agent (on behalf of all Secured Parties) shall have full authority in the place and stead of the Grantor or New Subsidiary,
and in the name of the Grantor, such New Subsidiary or otherwise, to execute and deliver each of the foregoing. Without limitation
of the foregoing, upon the occurrence and during the continuance of an Event of Default, the Collateral Agent (on behalf of all
Secured Parties) shall have full authority in the place and stead of the Grantor and each New Subsidiary, and in the name of any
the Grantor, any such New Subsidiary or otherwise, to take any action and to execute any instrument which the Collateral Agent
(on behalf of all Secured Parties) may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation:
(a) to
ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due
under or in connection with any Collateral of the Grantor or New Subsidiary;
(b) to
receive and open all mail addressed to the Grantor or New Subsidiary and to notify postal authorities to change the address for
the delivery of mail to the Grantor or New Subsidiary to that of an address approved by the Collateral Agent (on behalf of all
Secured Parties);
(c) to
receive, indorse, and collect any drafts or other instruments, documents, Negotiable Collateral or Chattel Paper;
(d) to
file any claims or take any action or institute any proceedings which the Collateral Agent (on behalf of all Secured Parties) may
deem reasonably necessary or desirable for the collection of any of the Collateral of the Grantor or New Subsidiary or otherwise
to enforce the rights of the Secured Parties with respect to any of the Collateral; and
(e) to
use any labels, Patents, Trademarks, trade names, URLs, domain names, industrial designs, Copyrights, customer lists, advertising
matter or other industrial or intellectual property rights, in advertising for the exclusive purpose of sale and selling Inventory
and other Collateral and to collect any amounts due under Accounts, contracts or Negotiable Collateral of the Grantor or New Subsidiary.
To the extent permitted by law, the Grantor
hereby ratifies, for itself and each New Subsidiary, all that such attorney-in-fact shall lawfully do or cause to be done by virtue
hereof. Such power-of-attorney granted pursuant to this Section 10 is coupled with an interest and shall be irrevocable until this
Agreement is terminated.
11.
Collateral
Agent May Perform
. If the Grantor fails to perform any agreement contained herein, upon the occurrence and during the continuance
of an Event of Default, the Collateral Agent (on behalf of all Secured Parties) may perform, or cause performance of, such agreement,
and the reasonable expenses of the Collateral Agent incurred in connection therewith shall be payable by the Grantor.
12.
Collateral
Agent’s Duties; Bailee for Perfection
. The powers conferred on the Collateral Agent hereunder are solely to protect the
Secured Parties’ respective interests in the Collateral and shall not impose any duty upon the Collateral Agent in favor
of the Grantor or any other Secured Party to exercise any such powers. Except for the safe custody of any Collateral in its actual
possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall not have any duty to the
Grantor or any other Secured Party as to any Collateral or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. The Collateral Agent shall be deemed to have exercised reasonable care
in the custody and preservation of any Collateral in its actual possession if such Collateral is accorded treatment substantially
equal to that which is accorded to its own property. The Collateral Agent agrees that, with respect to any Collateral at any time
or times in its possession and in which any other Secured Party has a Lien, the Collateral Agent shall be the bailee of each other
Secured Party solely for purposes of perfecting (to the extent not otherwise perfected) each other Secured Party’s Lien in
such Collateral, provided that the Collateral Agent shall not be obligated to obtain or retain possession of any such Collateral.
13.
Collection
of Accounts, General Intangibles and Negotiable Collateral
. At any time upon the occurrence and during the continuation of
an Event of Default, the Collateral Agent (on behalf of all Secured Parties) may (a) notify Account Debtors of the Grantor that
the Accounts, General Intangibles, Chattel Paper or Negotiable Collateral have been assigned to the Collateral Agent (on behalf
of all Secured Parties) or that the Collateral Agent (on behalf of all Secured Parties) has a security interest therein, and (b)
collect the Accounts, General Intangibles and Negotiable Collateral directly, and any collection costs and expenses shall constitute
part of the Secured Obligations.
14.
Disposition
of Pledged Interests by Secured Parties
. None of the Pledged Interests hereafter acquired on the date of acquisition thereof
will be registered or qualified under the various federal, state or other securities laws of the United States or any other jurisdiction,
and disposition thereof after an Event of Default may be restricted to one or more private (instead of public) sales in view of
the lack of such registration. The Grantor understands that in connection with such disposition, the Collateral Agent (on behalf
of all Secured Parties) may approach only a restricted number of potential purchasers and further understands that a sale under
such circumstances may yield a lower price for the Pledged Interests than if the Pledged Interests were registered and qualified
pursuant to federal, state and other securities laws and sold on the open market. The Grantor, therefore, agrees that: (a) if the
Collateral Agent (on behalf of all Secured Parties) shall, pursuant to the terms of this Agreement, sell or cause the Pledged Interests
or any portion thereof to be sold at a private sale, the Collateral Agent (on behalf of all Secured Parties) shall have the right
to rely upon the advice and opinion of any nationally recognized brokerage or investment firm (but shall not be obligated to seek
such advice and the failure to do so shall not be considered in determining the commercial reasonableness of such action) as to
the best manner in which to offer the Pledged Interest or any portion thereof for sale and as to the best price reasonably obtainable
at the private sale thereof; and (b) such reliance shall be conclusive evidence that the Collateral Agent has handled the disposition
in a commercially reasonable manner.
15.
Voting
Rights
.
(a) Upon
the occurrence and during the continuation of an Event of Default, (i) the Collateral Agent (on behalf of all Secured Parties)
may, at its option, and with two (2) Business Days prior notice to the Grantor, and in addition to all rights and remedies available
to the Secured Parties under any other agreement, at law, in equity, or otherwise, exercise all voting rights, and all other ownership
or consensual rights in respect of the Pledged Interests, but under no circumstances is the Collateral Agent obligated by the terms
of this Agreement to exercise such rights, and (ii) if the Collateral Agent (on behalf of all Secured Parties) duly exercises its
right to vote any of such Pledged Interests, the Grantor hereby appoints the Collateral Agent (on behalf of all Secured Parties)
as the Grantor’s true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote such Pledged Interests in any manner that
the Collateral Agent (on behalf of all Secured Parties) deem advisable for or against all matters submitted or which may be submitted
to a vote of shareholders, partners or members, as the case may be. Such power-of-attorney granted pursuant to this Section 15
is coupled with an interest and shall be irrevocable until this Agreement is terminated.
(b) For
so long as the Grantor shall have the right to vote the Pledged Interests, it covenants and agrees that it will not, without the
prior written consent of the Collateral Agent (on behalf of all Secured Parties), vote or take any consensual action with respect
to such Pledged Interests which would materially or adversely affect the rights of the Secured Parties exercising the voting rights
owned by the Grantor or the value of the Pledged Interests.
16.
Remedies
.
Upon the occurrence and during the continuance of an Event of Default:
(a) The
Collateral Agent (on behalf of all Secured Parties) may exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein, in the other Transaction Documents, or otherwise available to it, all the rights and remedies of
a secured party on default under the Code or any other applicable law. Without limiting the generality of the foregoing, the Grantor
expressly agrees that, in any such event, the Collateral Agent (on behalf of all Secured Parties) without any demand, advertisement,
or notice of any kind (except a notice specified below of time and place of public or private sale) to or upon the Grantor or any
other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum extent permitted
by the Code or by any other applicable law), may take immediate possession of all or any portion of the Collateral and (i) require
the Grantor to, and the Grantor hereby agrees that it will at its own expense and upon request of the Collateral Agent (on behalf
of all Secured Parties) promptly, assemble all or part of the Collateral as directed by the Collateral Agent (on behalf of all
Secured Parties) and make it available to the Collateral Agent (on behalf of all Secured Parties) at one or more locations where
the Grantor regularly maintains Inventory, and (ii) without notice except as specified below, sell the Collateral or any part thereof
in one or more parcels at public or private sale, at the Collateral Agent’s offices or elsewhere, for cash, on credit, and
upon such other terms as the Collateral Agent (on behalf of all Secured Parties) may deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at least 10 Business Days’ notice of the time and place
of any public sale or the time after which any private sale is to be made shall constitute reasonable notification and specifically
such notice shall constitute a reasonable “authenticated notification of disposition” within the meaning of Section
9-611 of the Code. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having
been given. The Collateral Agent (on behalf of all Secured Parties) may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to
which it was so adjourned.
(b) The
Collateral Agent (on behalf of all Secured Parties) is hereby granted a non-exclusive license or other right to use, without liability
for royalties or any other charge, the Grantor’s labels, Patents, Copyrights, rights of use of any name, trade secrets, trade
names, Trademarks, service marks and advertising matter, URLs, domain names, industrial designs, other industrial or intellectual
property or any property of a similar nature, whether owned by the Grantor or with respect to which the Grantor has rights under
license, sublicense, or other agreements (but only to the extent (i) such license, sublicense or agreement does not prohibit such
use by the Collateral Agent (on behalf of all Secured Parties), and (ii) the Grantor will not be in default under such license,
sublicense, or other agreement as a result of such use by the Collateral Agent (on behalf of all Secured Parties)), as it pertains
to the Collateral, for the exclusive purpose of preparing for sale, advertising for sale and effectuating the sale of any Collateral,
and the Grantor’s rights under all licenses and all franchise agreements shall inure to the benefit of the Collateral Agent
(on behalf of all Secured Parties).
(c) Any
cash held by the Collateral Agent as Collateral and all proceeds received by the Collateral Agent in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral shall be applied against the Secured Obligations in the order
set forth in Section 17 hereof. In the event the proceeds of Collateral are insufficient for the Satisfaction in Full of the Secured
Obligations (as defined below), the Grantor shall remain liable for any such deficiency.
(d) The
Grantor hereby acknowledges that the Secured Obligations arose out of a commercial transaction, and agrees that if an Event of
Default shall occur and be continuing the Collateral Agent (on behalf of all Secured Parties) shall have the right to an immediate
writ of possession without notice of a hearing. The Collateral Agent (on behalf of all Secured Parties) shall have the right to
the appointment of a receiver for the properties and assets of the Grantor, and the Grantor hereby consents to such rights and
such appointment and hereby waives any objection it may have thereto or the right to have a bond or other security posted by the
Collateral Agent (on behalf of all Secured Parties).
(e) The
Collateral Agent (on behalf of all Secured Parties) may, in addition to other rights and remedies provided for herein, in the other
Transaction Documents, or otherwise available to it under applicable law and without the requirement of notice to or upon the Grantor
or any other Person (which notice is hereby expressly waived to the maximum extent permitted by the Code or any other applicable
law), (i) with respect to the Grantor’s Deposit Accounts in which any Secured Party’s Liens are perfected by control
under Section 9-104 of the Code, instruct the bank maintaining such Deposit Account for the Grantor to pay the balance of such
Deposit Account to or for the benefit of the Collateral Agent (on behalf of all Secured Parties), and (ii) with respect to
the Grantor’s Securities Accounts in which any Secured Party’s Liens are perfected by control under Section 9-106 of
the Code, instruct the securities intermediary maintaining such Securities Account for the Grantor to (A) transfer any cash in
such Securities Account to or for the benefit of the Collateral Agent (on behalf of all Secured Parties), or (B) liquidate any
financial assets in such Securities Account that are customarily sold on a recognized market and transfer the cash proceeds thereof
to or for the benefit of the Collateral Agent (on behalf of all Secured Parties).
17.
Priority
of Liens; Application of Proceeds of Collateral.
Each Secured Party hereby acknowledges and agrees that, notwithstanding the
time or order of the filing of any financing statement or other registration or document with respect to the Collateral and the
Security Interests, or any provision of this Agreement, any other Security Document, the Code or other applicable law, solely as
amongst the Secured Parties, the separate Security Interests of the Secured Parties shall have the same rank and priority; provided,
that, the foregoing shall not apply to any Security Interest of a Secured Party that is void or voidable as a matter of law. In
furtherance thereof, all proceeds of Collateral received by the Collateral Agent shall be applied as follows:
(a)
first
,
ratably to pay any expenses due to the Collateral Agent (including, without limitation, the reasonable costs and expenses paid
or incurred to correct any default under or enforce any provision of the Transaction Documents, or after the occurrence and during
the continuance of any Event of Default in gaining possession of, maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated);
(b)
second
,
to pay any indemnities then due to any of the Secured Parties under the Transaction Documents, until paid in full;
(c)
third
,
ratably to pay any fees or premiums then due to any of the Secured Parties under the Transaction Documents, until paid in full;
(d)
fourth
,
ratably to pay interest due in respect of the Secured Obligations then due to any of the Secured Parties, until paid in full;
(e)
fifth
,
ratably to pay the principal amount of all Secured Obligations then due to any of the Secured Parties, until paid in full;
(f)
sixth
,
ratably to pay any other Secured Obligations then due to any of the Secured Parties; and
(g)
seventh
,
to Grantor or such other Person entitled thereto under applicable law.
18.
Remedies
Cumulative
. Each right, power, and remedy of any Secured Party as provided for in this Agreement or in any other Transaction
Document or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall
be in addition to every other right, power, or remedy provided for in this Agreement or in the other Transaction Documents or now
or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by any Secured
Party, of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by such Secured
Party of any or all such other rights, powers, or remedies.
19.
Marshaling
.
No Secured Party shall be required to marshal any present or future collateral security (including but not limited to the Collateral)
for, or other assurances of payment of, the Secured Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such collateral security
and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising.
To the extent that it lawfully may, the Grantor hereby agrees that it will not invoke any law relating to the marshaling of collateral
which might cause delay in or impede the enforcement of any Secured Party’s rights and remedies under this Agreement or under
any other instrument creating or evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding
or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully
may, the Grantor hereby irrevocably waives the benefits of all such laws.
20.
Appointment
of Collateral Agent; Acknowledgment.
(a) The
Secured Parties hereby appoint Robert Clifford to act as the initial collateral agent on behalf of all Secured Parties (the “
Collateral
Agent
”). Notwithstanding anything in this Agreement to the contrary, one or more Secured Parties (other than the then
Collateral Agent) holding a majority of the then aggregate outstanding principal balance of the Notes (excluding any Notes held
by the then acting Collateral Agent) may remove the then-acting Collateral Agent and appoint any other Secured Party to act as
the Collateral Agent under this Agreement. Upon such appointment such Secured Party shall act as Collateral Agent pursuant to the
terms of this Agreement.
(b) No
Secured Party (which term, as used in this sentence, shall include reference to each Secured Party’s officers, directors,
employees, attorneys, agents and affiliates and to the officers, directors, employees, attorneys and agents of such Secured Party’s
affiliates) shall: (i) have any duties or responsibilities except those expressly set forth in this Agreement and the other
Security Documents or (ii) be required to take, initiate or conduct any enforcement action (including any litigation, foreclosure
or collection proceedings hereunder or under any of the other Security Documents). Without limiting the foregoing, no Secured Party
shall have any right of action whatsoever against any other Secured Party as a result of such Secured Party acting or refraining
from acting hereunder or under any of the Security Documents except as a result and to the extent of losses caused by such Secured
Party’s actual gross negligence or willful misconduct. No Secured Party assumes any responsibility for any failure or
delay in performance or breach by the Grantor or any other Secured Party of its obligations under this Agreement or any other Transaction
Document. No Secured Party makes to any other Secured Party any express or implied warranty, representation or guarantee with
respect to any Secured Obligations, Collateral, Transaction Document or the Grantor. No Secured Party nor any of its officers,
directors, employees, attorneys or agents shall be responsible to any other Secured Party or any of its officers, directors, employees,
attorneys or agents for: (i) any recitals, statements, information, representations or warranties contained in any of the
Transaction Documents or in any certificate or other document furnished pursuant to the terms hereof; (ii) the execution,
validity, genuineness, effectiveness or enforceability of any of the Transaction Documents; (iii) the validity, genuineness,
enforceability, collectability, value, sufficiency or existence of any Collateral, or the attachment, perfection or priority of
any Lien therein; or (iv) the assets, liabilities, financial condition, results of operations, business, creditworthiness
or legal status of the Grantor or any Account Debtor. No Secured Party nor any of its officers, directors, employees, attorneys
or agents shall have any obligation to any other Secured Party to ascertain or inquire into the existence of any default or Event
of Default, the observance or performance by the Grantor of any of its duties or agreements under any of the Transaction Documents
or the satisfaction of any conditions precedent contained in any of the Transaction Documents.
(d) Each
Secured Party hereby acknowledges and represents that it has, independently and without reliance upon any other Secured Party,
and based upon such documents, information and analyses as it has deemed appropriate, made its own credit analysis of the Grantor
and its own decision to enter into the Transaction Documents and to purchase the Notes, and each Secured Party has made such
inquiries concerning the Transaction Documents, the Collateral and the Grantor as such Secured Party feels necessary and appropriate,
and has taken such care on its own behalf as would have been the case had it entered into the Transaction Documents without any
other Secured Party. Each Secured Party hereby further acknowledges and represents that the other Secured Parties have not made
any representations or warranties to it concerning the Grantor, any of the Collateral or the legality, validity, sufficiency or
enforceability of any of the Transaction Documents. Each Secured Party also hereby acknowledges that it will, independently and
without reliance upon the other Secured Parties, and based upon such financial statements, documents and information as it deems
appropriate at the time, continue to make and rely upon its own credit decisions in taking or refraining to take any other
action under this Agreement or the Transaction Documents. No Secured Party shall have any duty or responsibility to provide any
other Secured Party with any notices, reports or certificates furnished to such Secured Party by the Grantor or any credit or other
information concerning the affairs, financial condition, business or assets of the Grantor (or any of its affiliates) which may
come into possession of such Secured Party.
21.
Indemnity
and Expenses
.
(a) Without
limiting any obligations of the Grantor under the Securities Purchase Agreement, the Grantor agrees to indemnify all Secured Parties
from and against all claims, lawsuits and liabilities (including reasonable attorneys’ fees) arising out of or resulting
from this Agreement (including enforcement of this Agreement), except claims, losses or liabilities resulting from the gross negligence
or willful misconduct of the Secured Party seeking indemnification as determined by a final non-appealable order of a court of
competent jurisdiction. This provision shall survive the termination of this Agreement and the Transaction Documents and the Satisfaction
in Full of the Secured Obligations.
(b) The
Grantor shall, upon demand, pay to the Collateral Agent all of the reasonable costs and expenses which the Collateral Agent may
incur in connection with the custody, preservation, use or operation of, or, upon an Event of Default, the sale of, collection
from, or other realization upon, any of the Collateral in accordance with this Agreement and the other Transaction Documents. The
Grantor shall, upon demand, pay to each Secured Party all of the reasonable costs and expenses which such Secured Party may incur
in connection with (i) the exercise or enforcement of any of the rights of such Secured Party hereunder or (ii) the failure by
the Grantor to perform or observe any of the provisions hereof.
22.
Merger,
Amendments; Etc.
THIS AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES SOLELY WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES. No provision of this Agreement
may be amended other than by an instrument in writing signed by the Grantor and the Collateral Agent, and any amendment to any
provision of this Agreement made in conformity with the provisions of this Section 22 shall be binding on all Secured Parties,
provided that no such amendment shall be effective to the extent that it (a) applies to less than all of the Secured Parties or
(b) imposes any obligation or liability on any Secured Party without such Secured Party’s prior written consent (which may
be granted or withheld in such Secured Party’s sole discretion). No waiver shall be effective unless it is in writing and
signed by an authorized representative of the waiving party, provided that the Collateral Agent may waive any provision of this
Agreement, and any waiver of any provision of this Agreement made in conformity with the provisions of this Section 22 shall be
binding on all Secured Parties, provided that no such waiver shall be effective to the extent that it (i) applies to less than
all the Secured Parties (unless a party gives a waiver as to itself only) or (ii) imposes any obligation or liability on any Secured
Party without such Secured Party’s prior written consent (which may be granted or withheld in such Secured Party’s
sole discretion).
23.
Addresses
for Notices
. All notices and other communications provided for hereunder (a) shall be given in the form and manner set forth
in the Securities Purchase Agreement and (b) shall be delivered, (i) in the case of notice to the Grantor, by delivery of such
notice to the Grantor’s address specified in the Securities Purchase Agreement or at such other address as shall be designated
by the Grantor in a written notice to each of the Secured Parties in accordance with the provisions thereof, and (ii) in the case
of notice to any Secured Party, by delivery of such notice to such Secured Party at its address specified in the Securities Purchase
Agreement or at such other address as shall be designated by such Secured Party in a written notice to the Grantor and each other
Secured Party in accordance with the provisions thereof.
24.
Separate,
Continuing Security Interests; Assignments under Transaction Documents.
This Agreement shall create a continuing security interest
in the Collateral in favor of the Collateral Agent on behalf of each Secured Party and shall (a) remain in full force and effect
until Satisfaction in Full of the Secured Obligations, (b) be binding upon the Grantor, and its permitted successors and permitted
assigns, and (c) inure to the benefit of, and be enforceable by, the Secured Parties and their respective successors, transferees
and assigns. Without limiting the generality of the foregoing clause (c), any Secured Party may, in accordance with the provisions
of the Transaction Documents, assign or otherwise transfer all or any portion of its rights and obligations under the Transaction
Documents to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted
to such Secured Party herein or otherwise. Upon Satisfaction in Full of the Secured Obligations, the Security Interests granted
hereby shall terminate and all rights to the Collateral shall revert to the Grantor or any other Person entitled thereto. At such
time, the Collateral Agent and each Secured Party will authorize the filing of appropriate termination statements to terminate
such Security Interests. No transfer or renewal, extension, assignment, or termination of this Agreement or any other Transaction
Document, or any other instrument or document executed and delivered by the Grantor to any Secured Party nor any additional loans
made by any Secured Party to the Grantor, nor the taking of further security, nor the retaking or re-delivery of the Collateral
to the Grantor, or any of them, by any Secured Party, nor any other act of the Secured Parties, or any of them, shall release the
Grantor from any obligation, except a release or discharge executed in writing by all Secured Parties. No Secured Party shall by
any act, delay, omission or otherwise, be deemed to have waived any of its rights or remedies hereunder, unless such waiver is
in writing and signed by such Secured Party and then only to the extent therein set forth. A waiver by any Secured Party of any
right or remedy on any occasion shall not be construed as a bar to the exercise of any such right or remedy which such Secured
Party would otherwise have had on any other occasion.
25.
Governing
Law; Jurisdiction; Service of Process; Jury Trial
. All questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is
improper;
provided
,
however
, any suit seeking enforcement against any Collateral or other property may be brought,
at any Secured Party’s option, in the courts of any jurisdiction where such Secured Party elects to bring such action or
where such Collateral or other property may be found. Each party hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
26.
Miscellaneous
.
(a) This
Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is
delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature
page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such signature page were an original thereof. Any party delivering an executed
counterpart of this Agreement by facsimile or other electronic method of transmission also shall deliver an original executed counterpart
of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement. The foregoing shall apply to each other Security Document
mutatis mutandis
.
(b) Any
provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision
in any other jurisdiction.
(c) Headings
used in this Agreement are for convenience only and shall not be used in connection with the interpretation of any provision hereof.
(d) The
pronouns used herein shall include, when appropriate, either gender and both singular and plural, and the grammatical construction
of sentences shall conform thereto.
(e) The
language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. For clarification purposes, the Recitals are part of this Agreement.
(f) Unless
the context of this Agreement or any other Transaction Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the terms “includes” and “including” are not limiting,
and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.”
The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this
Agreement or any other Transaction Document refer to this Agreement or such other Transaction Document, as the case may be, as
a whole and not to any particular provision of this Agreement or such other Transaction Document, as the case may be. Section,
subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in
this Agreement or in any other Transaction Document to any agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable
(subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). “
Satisfaction in Full of the Secured Obligations
” shall mean the
indefeasible payment in full in cash and discharge, or other satisfaction in accordance with the terms of the Transaction Documents
(including, without limitation, conversion of the Notes into equity of the Company) and discharge, of all Secured Obligations in
full. Any reference herein to any Person shall be construed to include such Person’s permitted successors and permitted assigns.
Any requirement of a writing contained herein or in any other Transaction Document shall be satisfied by the transmission of a
Record and any Record so transmitted shall constitute a representation and warranty as to the accuracy and completeness of the
information contained therein.
(g) All
dollar amounts referred to in this Agreement and the other Transaction Documents are in United States Dollars (“
U.S. Dollars
”),
and all amounts owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated
in other currencies shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date
of calculation. “
Exchange Rate
”
means, in relation to any amount of currency to be converted into U.S.
Dollars pursuant to this Agreement, the U.S. Dollar exchange rate as published in The Wall Street Journal on the relevant date
of calculation.
(h) For
the avoidance of doubt, this Agreement hereby amends and restates the 2015 Security Agreement in its entirety.
[
signature pages follow
]
IN WITNESS WHEREOF,
the undersigned parties hereto have executed this Agreement by and through their duly authorized officers, as of the day and year
first above written.
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GRANTOR:
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ATOMERA INCORPORATED,
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a Delaware corporation
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By:
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Scott A. Bibaud,
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Chief Executive Officer
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Collateral Agent
:
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Robert Clifford
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[Signature Page to Amended
and Restated Security Agreement]
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SECURED PARTIES:
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For Entity Investors:
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For Individual Investors:
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Print Name:
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Print Name:
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Signature:
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Signature:
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Name of Signatory:
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If Joint Investment, 2
nd
investor should complete:
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Title:
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Print Name:
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Signature:
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[Signature Page to Amended and Restated
Security Agreement]
SCHEDULE 1
COMMERCIAL TORT CLAIMS
None.
SCHEDULE 2
REAL PROPERTY
Owned Real Property
None.
Leased Real Property
Facilities located at 20 Walnut Street, Suite
8, Wellesley Hills, MA 02481
Facilities located at 750 University Avenue,
Suite 280, Los Gatos, CA 95032
Chief Executive Office
750 University Avenue, Suite 280, Los Gatos,
CA 95032
SCHEDULE 3
LIST OF UNIFORM COMMERCIAL CODE FILING JURISDICTIONS
Delaware
SCHEDULE 4
DEPOSIT ACCOUNTS AND SECURITIES ACCOUNTS
Deposit Accounts
Securities Accounts
None.
EXHIBIT F
Consent
and modification AGREEMENT
CONSENT
AND AMENDMENT AGREEMENT
This
CONSENT
AND AMENDMENT AGREEMENT
(this “
Agreement
”), dated as of April 1, 2016, is by and among Atomera Incorporated
(f/k/a Mears Technologies, Inc.), a Delaware corporation (the “
Company
”), and the other Persons party hereto.
Capitalized terms used, but not defined, herein shall have the same meaning ascribed to such terms in the 2015 Convertible Notes
(as defined below).
RECITALS
A. On
March 17, 2015, the Company issued senior secured convertible notes having an aggregate principal amount of $14,750,000 (the “
2015
Convertible Notes
”) and, in connection therewith, the Company entered into a Securities Purchase Agreement, Security
Agreement and Registration Rights Agreement with the holders of the 2015 Convertible Notes (the “
Existing Noteholders
”).
B. On
the date hereof, the Company proposes to issued senior secured convertible notes having an aggregate principal amount of up to
$6,000,000 (the “
2016 Convertible Notes
”) and, in connection therewith, the Company will enter into a securities
purchase agreement and a form of senior secured convertible note, on terms substantially similar to the Securities Purchase Agreement
and the 2015 Convertible
Note, with the holders of the 2016 Convertible Notes. In addition, the Company proposes to amend
and restate the Security Agreement and Registration Rights Agreement and enter into the amended and restated Security Agreement
and Registration Rights Agreement with the holders of the 2016 Convertible Notes.
C. This
Agreement, including the amended and restated the Security Agreement and Registration Rights Agreement, is a condition precedent
to the issuance of the 2016 Convertible Notes and the consummation of the transactions contemplated thereby (the “
2016
Note Offering
”) and as creditors of the Company the Existing Noteholders will derive substantial benefit from the consummation
of the 2016 Note Offering.
D. The
Existing Noteholders wish to (i) consent to the issuance of the 2016
Convertible Notes and allow the 2016 Convertible Notes to be
pari passu
in all respects with the 2015 Convertible Notes,
(ii) amend and restate the Security Agreement and Registration Rights Agreement and (iii) make certain amendments to the 2015 Convertible
Notes and Securities Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Consent
to Issuance of 2016 Convertible Notes
.
(a) The
Existing Noteholders hereby consent to the issuance of the 2016 Convertible Notes and waive any breach or default such issuance
may cause under the Securities Purchase Agreement, including, but not limited to, under Sections 4(k) or 4(m) of the Securities
Purchase Agreement.
(b) The
Existing Noteholders hereby acknowledge and agree that the 2016 Convertible Notes shall be
pari passu
in all respects, including
in terms of payment, security and registration rights, with the 2015 Convertible Notes
(c) The
Existing Noteholders hereby acknowledge and agree that the terms “Other Notes” and “Notes” as used in the
2016 Convertible Notes shall for all purposes include the 2015 Convertible Notes.
2. Amendments
to the 2015 Convertible Notes.
(a)
Notes
.
The term “Notes” as defined in opening paragraph of the 2015 Convertible Notes and used throughout therein shall mean,
collectively, the Other Notes, the 2015 Convertible Notes and the 2016 Convertible Notes.
(b)
Maturity
Date
. The date “May 31, 2016” as set forth in the definition of “Maturity Date” in Section 23(j) of
the 2015 Convertible Notes shall be removed and replaced with the date “May 31, 2017”.
(c)
IPO
Outside Date
. The date “February 14, 2016” as set forth in the definition of “IPO Outside Date” in
Section 23(h) of the 2015 Convertible Notes shall be removed and replaced with the date “December 31, 2016”.
3. Security
Agreement
.
(a) The
Existing Noteholders hereby consent to the granting of the Security Interest in the Collateral (as that term are defined in the
Security Agreement) by the Company to the holders of the 2016 Convertible Notes to secure the Secured Obligations (as that term
is defined in the Security Agreement).
(b) The
Existing Noteholders hereby acknowledge and agree that that for all purposes of the Security Agreement, the Collateral Agent appointed
by the Existing Noteholders pursuant to Section 20 of the Security Agreement (the “
Collateral Agent
”) shall
be the same Collateral Agent as appointed by the holders of the 2016 Convertible Notes.
(c) The
Existing Noteholders hereby acknowledge and agree that, in the event of a distribution of proceeds of Collateral by the Collateral
Agent pursuant to Section 17 of the Security Agreement, all such proceeds of Collateral shall be applied by the Collateral Agent
pari passu
among the Existing Noteholders and the holders of the 2016 Convertible Notes.
(d) The
Existing Noteholders hereby acknowledge and agree that the Collateral Agent shall, on behalf of the Existing Noteholders, enter
into an amended and restated Security Agreement, in the form presented to them, with the Company and the holders of the 2016 Convertible
Notes for purposes of carrying out the grants and terms of (a) through (c) above and otherwise making the holders of the 2016 Convertible
Notes parties to the Security Agreement, as amended and restated.
4. Registration
Rights Agreement
.
(a) The
Existing Noteholders hereby acknowledge and agree that the term “Registrable Securities” as used in the Registration
Rights Agreement shall for all purposes include the shares of common stock issued upon conversion of the 2016 Convertible Notes.
(b) The
Existing Noteholders hereby acknowledge and agree that for purposes of exercising and implementing the Piggyback Registration Rights
granted under Section 1 of the Registration Rights Agreement, the terms “Holder” and “Holders” shall also
include the holders of the 2016 Convertible Notes and their assignees or successors in interest.
(c) The
Existing Noteholders hereby acknowledge and agree that for purposes of exercising and implementing the Demand Registration Rights
granted under Section 2 of the Registration Rights Agreement, the terms “Holder” and “Holders” shall also
include the holders of the 2016 Convertible Notes and their assignees or successors in interest.
(d) The
Existing Noteholders hereby agree to the form of amended and restated Registration Rights Agreement, in the form presented to them,
for purposes of carrying out the terms of (a) through (c) above and otherwise making the holders of the 2016 Convertible Notes
parties to the Registration Rights Agreement, as amended and restated, and that the execution and delivery of this Agreement by
each Existing Noteholder shall constitute their execution and delivery of the amended and restated Registration Rights Agreement
without their need to separately sign the amended and restated Registration Rights Agreement.
5. Amendments
to Securities Purchase Agreement
.
Section 4(w) of the Securities Purchase Agreement is hereby deleted in its entirety
and replaced with the following: “
IPO Commitment
. The Company shall use its best efforts to file with the SEC a registration
statement on Form S-1 (or any successor form thereto) to register and sell Common Stock in an IPO (the “
IPO Registration
Statement
”) by no later than December 31, 2016. In the event that the Company has not filed the IPO Registration Statement
with the SEC within five (5) months of the Closing Date, then the Company shall not file the IPO Registration Statement with the
SEC until at least six (6) months and one (1) day after the Closing Date.” In addition, the last sentence of Section 9(e)
of the Securities Purchase Agreement is hereby deleted in its entirety and replaced with the following: “‘Required
Buyers” means Buyers holding Notes and the parties holding the 2016 Convertible Notes (as such term is defined in that Consent
and Amendment Agreement dated April 1, 2016 between the Company and the other Persons who are parties thereto) having an aggregate
outstanding principal amount that represents a majority of the aggregate principal amount of all Notes and 2016 Convertible Notes.”
6. Miscellaneous.
(a)
Governing
Law; Jurisdiction; Jury Trial
. All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b)
Severability
.
If any provision(s) of this Agreement shall be determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof, and any such illegal or unenforceable provisions shall be
performed by mutual consent of the parties to reflect the intended purpose of such provision.
(c)
Notices
.
Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must
be in writing and will be deemed to have been delivered: (i) upon receipt, if delivered personally; (ii) when sent, if sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party);
(iii) when sent, if sent by e-mail (provided that such sent e-mail is kept on file (whether electronically or otherwise) by the
sending party and the sending party does not receive an automatically generated message from the recipient’s e-mail server
that such e-mail could not be delivered to such recipient) and (iv) if sent by overnight courier service, one (1) Business Day
after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party
to receive the same. The addresses, facsimile numbers and e-mail addresses for such communications shall be:
If to the Company:
Atomera Incorporated
750 University Avenue, Suite 280
Los Gatos, CA 95032
E-mail: sbibaud@atomera.com
Attn: Chief Executive Officer
with a copy (for informational
purposes only) to:
Greenberg Traurig, LLP
3161 Michelson Drive, Suite 1000
Irvine, CA 92612
Facsimile: (949) 732-6501
E-mail:
DonahueD@gtlaw.com
Attn: Daniel K. Donahue, Esq.
If to an Existing Noteholder, to its address,
facsimile number or e-mail address set forth on such Existing Noteholder’s signature page to the Securities Purchase Agreement,
with a copy before July 1, 2016
(for informational purposes only) to:
Golenbock Eiseman Assor Bell &
Peskoe LLP
437 Madison Avenue, 40th Floor
New York, NY 10022
Facsimile: (212) 754-0330
E-mail:
ahudders@golenbock.com
cvandemark@golenbock.com
Attention: Andrew D. Hudders, Esq.
Carl Van Demark,
Esq.
and with a copy on or after July
1, 2016 (for informational purposes only) to:
Golenbock Eiseman Assor Bell &
Peskoe LLP
711 Third Avenue
New York, NY 10017
Facsimile: (212) 754-0330
E-mail:
ahudders@golenbock.com
cvandemark@golenbock.com
Attention: Andrew D. Hudders, Esq.
Carl Van Demark,
Esq.
or to such other address, facsimile number
or e-mail address and/or to the attention of such other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient
of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile
machine containing the time, date and recipient facsimile number or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i),
(ii) or (iv) above, respectively. A copy of the e-mail transmission containing the time, date and recipient e-mail address shall
be rebuttable evidence of receipt by e-mail in accordance with clause (iii) above.
(d)
Binding
Effect
. This Agreement shall be binding upon and shall insure to the benefit of the parties hereto, their respective successors,
assigns, legal representative, estates, executors, administrators and heirs.
(e)
Counterparts
.
This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that
any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an
executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such signature page were an original thereof.
[
Signature pages follow
]
IN WITNESS WHEREOF,
the undersigned have caused their respective signature page to this Agreement to be duly executed as of the date first written
above.
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COMPANY:
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ATOMERA INCORPORATED,
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a Delaware corporation
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By:
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Scott A. Bibaud,
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President and Chief Executive Officer
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[Signature Page to Consent and Amendment
Agreement]
IN WITNESS WHEREOF,
the undersigned have caused their respective signature page to this Agreement to be duly executed as of the date first written
above.
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For Entity Investors:
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For Individual Investors:
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Print Name:
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Print Name:
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Signature:
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Signature:
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Name of Signatory:
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If Joint Investment, 2
nd
investor should complete:
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Title:
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Print Name:
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Signature:
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[Signature
Page to Consent and Amendment Agreement]
Exhibit 10.25
AMENDED AND RESTATED REGISTRATION RIGHTS
AGREEMENT
THIS AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
(this “
Agreement
”) is made as of April 1, 2016 by and among Atomera Incorporated,
a Delaware corporation (the “
Company
”), and the persons listed on Schedule A hereto, referred to individually
as the “
Holder
” and collectively as the “
Holders
”.
A. Pursuant to that
certain securities purchase agreement, dated March 17, 2015 (as amended, restated, supplemented, or otherwise modified from time
to time, including all schedules and exhibits thereto, collectively the “
2015 Purchase Agreement
”), by and among
the Company (f/k/a Mears Technologies, Inc.) and the investors listed on the Schedule of Buyers attached thereto (the “
Existing
Noteholders
”), the Company has sold, and each of the Existing Noteholders have purchased, severally and not jointly,
certain senior secured convertible notes in the aggregate original principal amount of up to $14,750,000 (the “
2015 Offering
Notes
”).
B. In respect of the
2015 Offering Notes, the Company, pursuant to this registration rights agreement, originally dated March 17, 2015 (the “
2015
Registration Rights Agreement
”), by and among the Company and the Existing Noteholders, provided to the Existing Noteholders,
and their assignees or successors in interest, certain rights to provide for the registration for resale of their Conversion Shares
by means of a Registration Statement under the Securities Act (as those terms are defined in the 2015 Registration Rights Agreement).
C. Pursuant to that
certain securities purchase agreement, dated even date herewith (as may be amended, restated, supplemented, or otherwise modified
from time to time, including all schedules and exhibits thereto, collectively, the “
2016 Purchase Agreement
”),
by and among the Company and the investors listed on the Schedule of Buyers attached thereto (the “
New Noteholders
”),
the Company has agreed to sell, and each of the New Noteholders have agreed to purchase, severally and not jointly, certain senior
secured convertible notes in the aggregate original principal amount of up to $6,000,000 (the “
2016 Offering Notes
”).
D. To induce the New
Noteholders to purchase, severally and not jointly, the 2016 Offering Notes as provided for in the 2016 Purchase Agreement, the
Company has agreed to provide to the New Noteholders, and their assignees or successors in interest, certain rights to provide
for the registration for resale of their Conversion Shares by means of a Registration Statement under the Securities Act (as those
terms are defined below).
E. The Existing Noteholders
have consented to allow the 2016 Offering Notes to be, in all respects,
pari passu
with the 2015 Offering Notes in respect
of this Agreement, and the Existing Noteholders now wish to amend and restate the 2015 Registration Rights Agreement to allow each
New Noteholder to become a party hereto. Accordingly, for purposes of this Agreement, the term “Holders” shall mean
both the Existing Noteholders and the New Noteholders.
F. Unless otherwise
provided in this Agreement, capitalized terms used herein shall have the respective meanings set forth in Section 13 hereof.
NOW, THEREFORE
,
in consideration of the above premises and the mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and Holder hereby agree as follows:
1.
Registration
.
(a)
Piggyback Registrations
Rights
. If, at any time after the Company shall become subject to the periodic reporting obligations (a “
Reporting
Company
”) under the Securities Exchange Act through the date that is five years after the date the Company becomes a
Reporting Company, there is not an effective Registration Statement covering the Registrable Securities and the Company shall determine
to prepare and file with the Commission a Registration Statement relating to an offering for its own account or the account of
others under the Securities Act of any of its equity securities (other than on Form S-4 or Form S-8, each as promulgated under
the Securities Act, or their then equivalent relating to equity securities to be issued solely in connection with any acquisition
of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans), then
the Company shall send to the Holders a written notice of such determination at least twenty (20) days prior to the filing of any
such Registration Statement and shall include in such Registration Statement all Registrable Securities requested by any Holder
hereunder to be included in the registration within ten (10) days after the Company sends such notice to the Holders (the “
Piggyback
Shares
”) for resale and offer on a continuous basis pursuant to Rule 415; provided, that (i) if, at any time after giving
written notice of its intention to register any securities and prior to the effective date of the Registration Statement filed
in connection with such registration, the Company determines for any reason not to proceed with or terminate such registration,
the Company will be relieved of its obligation to register any Registrable Securities in connection with such registration, (ii)
in case of a determination by the Company to delay registration of its securities, the Company will be permitted to delay the registration
of Registrable Securities for the same period as the delay in registering such other securities, (iii) each Holder is subject to
confidentiality obligations and shall not use or disclose any information gained in this process or any other material non-public
information he, she or it obtains, (iv) each Holder or assignee or successor in interest shall comply with all applicable laws
relating to insider trading or similar restrictions; and (v) if all of the Registrable Securities of the Holders cannot be so included
due to Commission Comments, Commission Guidance or Underwriter Cutbacks, then the Company may reduce, in accordance with the provisions
of Section 1(c) hereof, the number of Piggyback Shares included in such Registration Statement required to comply with such Commission
Comments, Commission Guidance or Underwriter Cutbacks.
(b)
Initial Registration
Statement
. At the election of each Holder, the Company shall be required to include up to all Piggyback Shares held by such
Holder for resale and offer on a continuous basis pursuant to Rule 415 in the first Registration Statement filed after the date
that it becomes a Reporting Company (the “
Initial Registration Statement
”);
provided, however,
that if
all of the Piggyback Shares of the Holders cannot be so included due to Commission Comments, Commission Guidance or Underwriter
Cutbacks, then the Company may reduce, in accordance with the provisions of Section 1(c) hereof, the number of Piggyback Shares
included in such Registration Statement required to comply with such Commission Comments, Commission Guidance or Underwriter Cutbacks.
(c)
Cutback Provisions
.
In the event all of the Registrable Securities cannot be or are not included in a Registration Statement due to Commission Comments,
Commission Guidance or Underwriter Cutbacks, the Company and the Holders agree that securities shall be removed from such Registration
Statement in the following order until no further removal is required by Commission Comments, Commission Guidance or Underwriter
Cutbacks:
(i) First, any
securities held by any former employee, consultant or affiliate of the Company shall be removed, pro rata based on the number of
securities being registered for such former employees, consultants or affiliates held by all of the former employees of the Company
and any of their affiliates and successors in interest, whether pursuant to agreement or otherwise and any other person with any
registration rights outstanding on the date hereof;
(ii) Second,
the securities held by National Securities Corporation (“
National Securities
”) and its members and affiliates,
if any, obtained solely by reason of providing services to the Company, which are being registered pursuant to any registration
rights agreement or otherwise (for clarity, any securities held by National Securities or its members or affiliates which were
acquired upon payment of a purchase price in cash or property will not be subject to this provision (c)(ii)); and
(iii) Third,
the Registrable Securities held by the Holders that are requested to be included in the Registration Statement shall be removed,
pro rata based on the number of Registrable Shares held by each Holder in comparison to the number of Registrable Securities held
by all Holders who have requested to include any Registrable Securities in the Registration Statement.
(d)
Filing; Content
.
The Company will use its commercially reasonable efforts to cause each Registration Statement pursuant to which any Registrable
Securities are included, including the Initial Registration Statement, to contain the Plan of Distribution substantially similar
to that attached hereto as
Schedule B
. The Company shall use its commercially reasonable efforts to cause any Registration
Statement filed under this Section 1, including the Initial Registration Statement, to be declared effective under the Securities
Act as promptly as practicable after the filing thereof and shall keep such Registration Statement continuously effective under
the Securities Act until the earlier of (i) one year after its Effective Date (provided, however, the one year period shall be
extended for any Grace Period), (ii) such time as all of the Registrable Securities covered by such Registration Statement have
been publicly sold by the Holders, or (iii) such time as all of the Registrable Securities covered by such Registration Statement
may be sold by the Holders pursuant to Rule 144 without regard to both the volume limitations for sales as provided in Rule 144
and the limitations for such sales provided in Rule 144(i), if applicable, as determined by the counsel to the Company pursuant
to a written opinion letter to such effect, addressed and acceptable to the Company's transfer agent and the affected Holder (“
Effectiveness
Period
”). By 5:00 p.m. (New York City time) on the business day immediately following the Effective Date of a Registration
Statement, the Company shall file with the Commission in accordance with Rule 424 under the Securities Act the final Prospectus
to be used in connection with sales pursuant to such Registration Statement (whether or not such filing is technically required
under such Rule). Notwithstanding the foregoing portion of this Section 1(e), the Company shall have the right in its sole discretion
to withdraw any Registration Statement filed under this Section 1 prior to its effectiveness.
(e)
Termination of
Piggyback Registration Rights
. The registration rights afforded to each Holder under this Section 1 shall terminate on the
earliest date when all Registrable Securities of the Holder either: (i) have been publicly sold by the Holder pursuant to a Registration
Statement, (ii) have been covered by an effective Registration Statement which has been effective for an aggregate period of sixteen
(16) months (whether or not consecutive), provided, however, the time period shall be calculated so as to exclude any Grace Period,
or (iii) may be sold by the Holder pursuant to Rule 144 without regard to both the volume limitations for sales as provided in
Rule 144 and the limitations for such sales provided in Rule 144(i), if applicable, as determined by the counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected
Holder in its reasonable discretion.
2.
Demand Registration
Rights
.
(a)
Demand Right
.
Commencing on the date that is one hundred eighty (180) days after the Company becomes a Reporting Company, the Holders as a group
representing at least 50% of the Registrable Securities (a “
Requesting Group
”) shall have a separate one-time
right, by written notice to the Company, signed by such Holders (the “
Demand Notice
”), to request the Company
to register for resale all Registrable Securities included by the Requesting Group in the Demand Notice (the “
Demand Shares
”)
under and in accordance with the provisions of the Securities Act by filing with the Commission a Registration Statement covering
the resale of such Demand Shares (the “
Demand Registration Statement
”). A copy of the Demand Notice also shall
be provided by the Company to each of the other Holders who will have fifteen (15) days to notify the Company in writing to include
their Registrable Securities as part of the Demand Shares, the failure of which, however, shall not in any way affect the rights
of the Requesting Group pursuant to this Section 2(a). The Demand Registration Statement required hereunder shall be on any form
of registration statement then available for the registration of the Registrable Securities, as selected by the Company in accordance
with applicable law and regulation. The Company will use its commercially reasonable efforts to file the Demand Registration Statement
within forty-five (45) days of the receipt of the Demand Notice, provided if the Demand Notice is given within the forty-five (45)
days after the prior fiscal year end, then the Company will use its reasonably commercial efforts to file the Demand Registration
Statement within ninety (90) days of the fiscal year end of the Company. The Company shall use its commercially reasonable efforts
to cause the Demand Registration Statement to be declared effective under the Securities Act as promptly as practicable after the
filing thereof and to keep the Demand Registration Statement continuously effective under the Securities Act during the Effectiveness
Period.
(b)
Inclusion of Other
Registrable Shares and Cutback Provisions
. If as a result of Commission Comments or Commission Guidance, not all shares are
included that are desired to be included in a Registration Statement for the Demand Shares, the provisions of Section 1(c) shall
apply, subject to the Demand Priority (as defined below) of the Requesting Group. Pursuant to the piggyback registration rights
granted under this Agreement, the Company may include the Registrable Shares of the other Holders which will be subject to the
provision of Section 1(c) hereof, except that under Section 1(c)(iii), there will be no cutback of the Registrable Securities of
the Requesting Group until the Holders of Piggyback Shares and the shares of any other person exercising piggyback rights under
any other registration rights agreement (except for National Securities and their current and former affiliates, which shall have
the priority established in Section 1(c)) have been removed, and thereafter if any further Registrable Securities have to be removed
then those of the Requesting Group will be removed pro rata (the “
Demand Priority
”). Notwithstanding the foregoing,
if any other securities of any person other than the Holders or the Requesting Group or National Securities and their current and
former affiliates are included on the Demand Registration Statement, such securities will be removed, if required pursuant to Commission
Comments, after removal of the securities indicated in Section 1(c)(i) and before the securities indicated in Section 1(c)(ii),
as such persons decide among themselves, and if there is no agreement at to such removal provided to the Company within a reasonable
time, time being of the essence, then all the such securities will be removed.
(c)
Termination of
Demand Registration Rights
. The registration rights afforded to each Holder under this Section 2 shall terminate on the earliest
date when all Registrable Securities of the Holder either: (i) have been publicly sold by the Holder pursuant to a Registration
Statement, (ii) have been covered by an effective Registration Statement which has been effective for an aggregate period of sixteen
(16) months (whether or not consecutive),
provided
,
however
, the time period shall be calculated so as to exclude
any Grace Period, or (iii) may be sold by the Holder pursuant to Rule 144 without regard to both the volume limitations for sales
as provided in Rule 144 and the limitations for such sales provided in Rule 144(i), if applicable, as determined by the counsel
to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent
and the affected Holder in its reasonable discretion.
3.
Registration Procedures
.
Whenever any Registrable Securities are to be registered pursuant to this Agreement, the Company shall use its commercially reasonable
efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method of disposition
thereof, and pursuant thereto the Company shall have the following obligations:
(a) The Company shall
prepare and file with the Commission a Registration Statement with respect to such Registrable Securities and use its commercially
reasonable efforts to cause such Registration Statement to become effective.
(b) The Company shall
prepare and file with the Commission such amendments (including post-effective amendments) and supplements to a Registration Statement
and the Prospectus used in connection with such Registration Statement, which Prospectus is to be filed pursuant to Rule 424 promulgated
under the Securities Act, as may be necessary to keep such Registration Statement effective at all times during the Effectiveness
Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable
Securities of the Company covered by such Registration Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement by reason of the Company filing a report on Forms 10-K, 10-Q or Current
Report on Form 8-K, or any analogous report under the Securities Exchange Act, the Company shall have incorporated such report
by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the Commission
on the same day on which the Securities Exchange Act report is filed which created the requirement for the Company to amend or
supplement such Registration Statement.
(c) The Company shall
furnish to each Holder of Registrable Securities in any Registration Statement, without charge, (i) promptly after the same is
prepared and filed with the Commission at least one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by reference, if requested by such seller, all exhibits
and each preliminary Prospectus, (ii) unless such Holder is exempt from the prospectus delivery requirements pursuant to Rule 172
of the Securities Act, upon the effectiveness of any Registration Statement, ten (10) copies of the Prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other number of copies as such seller may reasonably
request), and (iii) such other documents, including copies of any preliminary or final Prospectus, as such seller may reasonably
request from time to time in order to facilitate the disposition of the Registrable Securities owned by such seller.
(d) The Company shall
use its commercially reasonable efforts to (i) register and qualify, unless an exemption from registration and qualification applies,
the resale by any seller of the Registrable Securities covered by a Registration Statement under such other securities or “blue
sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions, such amendments
(including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain
the effectiveness thereof during the Effectiveness Period, (iii) take such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Effectiveness Period, and (iv) take all other actions reasonably necessary
or advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided
,
however
, that the Company
shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where
it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction.
(e) The Company shall
use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration
Statement, or the suspension of the qualification of any of Registrable Securities for sale in any jurisdiction and, if such an
order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest practicable time and to notify
the Holder of any Registrable Securities included in the offering under such Registration Statement of such order and the resolution
thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
(f) The Company shall
notify the Holder in writing of the happening of any event, as promptly as practicable after becoming aware of such event, as a
result of which the Prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material
fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material,
nonpublic information), and, subject to Section 3(r), promptly prepare a supplement or amendment to such Registration Statement
to correct such untrue statement or omission, and, unless such Holder is exempt from the prospectus delivery requirements pursuant
to Rule 172 of the Securities Act, deliver ten (10) copies of such supplement or amendment to the Holder (or such other number
of copies as the Holder may reasonably request).
(g) The Company shall
promptly notify the Holder in writing (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed,
and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall
be delivered to the Holder by email or facsimile on the same day of such effectiveness or by overnight delivery), (ii) of any request
by the Commission for amendments or supplements to a Registration Statement or related Prospectus or related information, and (iii)
of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.
(h) If the Holder is required
under applicable Commission Guidance to be described in a Registration Statement as an underwriter, at the reasonable request of
such Holder, the Company shall use its best efforts to furnish to such Holder, on the date of the effectiveness of such Registration
Statement and thereafter from time to time on such dates as the Holder may reasonably request (i) a letter, dated such date, from
the Company’s independent certified public accountants in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed to the Holder, and (ii) an opinion, dated as of
such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the Holder.
(i) If the Holder is required
under applicable Commission Guidance to be described in a Registration Statement as an underwriter, then at the request of such
Holder in connection with such Holder’s due diligence requirements, the Company shall make available for inspection by (i)
the Holder, (ii) the Holder’s legal counsel, and (iii) one firm of accountants or other agents retained by the Holder (collectively,
the “
Inspectors
”), all pertinent financial and other records, and pertinent corporate documents and properties
of the Company (collectively, the “
Records
”), as shall be reasonably deemed necessary by each Inspector, and
cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request;
provided
,
however
, that each Inspector shall agree to hold in strict confidence and shall not make any disclosure
(except to the Holder) or use of any Record or other information which the Company determines in good faith to be confidential,
and of which determination the Inspectors are so notified, unless (a) the release of such Records is ordered pursuant to a final,
non-appealable subpoena or order from a court or government body of competent jurisdiction, or (b) the information in such Records
has been made generally available to the public other than by disclosure in violation of this or any other agreement of which the
Inspector has knowledge. Each Holder agrees that it shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company,
at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between the Company and the Holder) shall be deemed to
limit the Holder’s ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws
and regulations. Notwithstanding the foregoing, each Holder acknowledges that the Records may contain material non-public information
and agrees that it shall strictly comply with the insider trading rules prohibiting the purchasing, selling or the Company’s
securities while in the possession of any such material non-public information.
(j) The Company shall
hold in confidence and not make any disclosure of information concerning the Holder provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary
to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by disclosure in violation of this Agreement or any other
agreement, or (v) the Holder provides information to the Company intended for inclusion in a Registration Statement. The Company
agrees that it shall, upon learning that disclosure of such information concerning the Holder is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written notice to the Holder if permitted by applicable law
or regulation and allow the Holder, at the Holder’s expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.
(k) The Company shall
(i) if applicable, use its best efforts to cause all of the Registrable Securities covered by a Registration Statement to be listed
on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of such exchange, or (ii) otherwise, use its commercially
reasonable efforts to secure designation and quotation of all of the Registrable Securities covered by a Registration Statement
on any one of the different levels of The NASDAQ Stock Market, or (iii) if, despite the Company’s best efforts or commercially
reasonable efforts, as applicable, to satisfy, the preceding clauses (i) and (ii) the Company is unsuccessful in satisfying the
preceding clauses (i) and (ii), to instead secure the inclusion for quotation on the Over-the-Counter Bulletin Board for such Registrable
Securities and, without limiting the generality of the foregoing, to use its commercially reasonable efforts to encourage at least
two market makers to register with the Financial Industry Regulatory Authority, Inc. (“
FINRA
”) as such with
respect to such Registrable Securities. For the avoidance of doubt, subject to and in accordance with Section 5, the Company shall
pay all fees and expenses of the Company in connection with satisfying its obligation under this Section 3(k).
(l) If requested by the
Holder, and permissible under Commission Guidance, the Company shall (i) as soon as practicable incorporate in a Prospectus supplement
or post-effective amendment such information as the Holder reasonably requests to be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation, information with respect to the Registrable Securities being
offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be
sold in such offering; (ii) as soon as practicable make all required filings of such Prospectus supplement or post-effective amendment
after being notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; and (iii) as
soon as practicable, supplement or make amendments to any Registration Statement if reasonably requested by the Holder holding
any Registrable Securities.
(m) The Company shall
cooperate with each Holder who holds Registrable Securities being offered and, to the extent applicable, facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as
the Holder may reasonably request and registered in such names as the Holder may request.
(n) The Company shall
use its commercially reasonable efforts to cause the Registrable Securities covered by a Registration Statement to be registered
with or approved by such other U.S. governmental agencies or authorities, but only in matters not contemplated Section 3(d) by
or reasonably related to such matters (which matters are to be governed exclusively by Section 3(d)), as may be strictly necessary
to consummate the disposition of such Registrable Securities by the Holder strictly in accordance with the Plan of Distribution
included in the Registration Statement (as such Plan of Distribution may be modified from time to time in any filing with the Commission).
(o) The Company shall
make generally available to its security holders as soon as practicable, but not later than ninety (90) days after the close of
the period covered thereby (or, if different, within the period permitted for the filing of reports on Forms 10-K or 10-Q), an
earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the Securities Act)
covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the
Effective Date of a Registration Statement.
(p) The Company shall
otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission in connection
with any registration hereunder.
(q) Within two (2) business
days after a Registration Statement which covers Registrable Securities is ordered effective by the Commission, the Company shall
deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Holder whose Registrable Securities are included in such Registration Statement) confirmation that such Registration
Statement has been declared effective by the Commission in the form attached hereto as
Exhibit A
and the Irrevocable Transfer
Agent Instructions in the form attached hereto as
Exhibit B
.
(r) Notwithstanding anything
to the contrary herein, at any time after the Effective Date of a Registration Statement, the Company may delay the disclosure
of material, non-public information concerning the Company the disclosure of which at the time is not, in the good faith opinion
of the Board of Directors of the Company, in the best interest of the Company and not, after consultation with legal counsel, otherwise
required (a “
Grace Period
”); provided, that the Company shall promptly (i) notify the Holder in writing of the
existence of material, non-public information giving rise to a Grace Period (provided that in each notice the Company will not
disclose the content of such material, non-public information to the Holder) and the date on which the Grace Period will begin,
and (ii) notify the Holder in writing of the date on which the Grace Period ends; and, provided further, that no Grace Period shall
exceed sixty (60) consecutive days and during any three hundred sixty-five (365) day period such Grace Periods shall not exceed
an aggregate of one hundred twenty (120) days (each, an “
Allowable Grace Period
”). For purposes of determining
the length of a Grace Period above, the Grace Period shall begin on and include the date the Holder receives the notice referred
to in clause (i) and shall end on and include the later of the date the Holder receives the notice referred to in clause (ii) and
the date referred to in such notice. The provisions of Section 3(f) hereof shall not be applicable during the period of any Allowable
Grace Period. Upon expiration of the Grace Period, the Company shall again be bound by Section 3(f) with respect to the information
giving rise thereto unless such material, non-public information is no longer applicable. Notwithstanding anything to the contrary,
the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of the Holder in connection
with any sale of Registrable Securities with respect to which the Holder has entered into a contract for sale, and delivered a
copy of the Prospectus included as part of the applicable Registration Statement (unless an exemption from such Prospectus delivery
requirements exists), prior to the Holder’s receipt of the notice of a Grace Period or, if earlier, Holders knowledge of
the material, non-public information concerning the Company that gave rise to the Grace Period, and for which the Holder has not
yet settled.
4.
Obligations of
the Holders
.
(a) At least five (5)
business days prior to the first anticipated filing date of a Registration Statement, the Company shall notify the Holders in writing
of the information the Company requires from each Holder if the Holder’s Registrable Securities are to be included in such
Registration Statement. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant
to this Agreement with respect to any Registrable Securities of the Holder that the Holder shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held
by it as shall be reasonably required to effect the effectiveness of the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may reasonably request.
(b) The Holder, by the
Holder’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company
in connection with the preparation and filing of any Registration Statement hereunder, unless the Holder has notified the Company
in writing of the Holder's election to exclude all of the Holder’s Registrable Securities from such Registration Statement.
(c) The Holder agrees
that, upon receipt of any notice from the Company of the happening of any event of the kind described in Sections 3(e) or 3(f)
or of a Grace Period under Section 3(r), the Holder will immediately discontinue disposition of Registrable Securities pursuant
to any Registration Statement(s) covering such Registrable Securities until the Holder’s receipt of the copies of the supplemented
or amended Prospectus contemplated by Sections 3(e) or 3(f) or receipt of notice that no supplement or amendment is required. Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee
of the Holder in connection with any sale of Registrable Securities with respect to which the Holder has entered into a contract
for sale prior to the Holder’s receipt of a notice from the Company of the happening of any event of the kind described in
Sections 3(e) or 3(f) or of any Grace Period, or, if earlier, Holders knowledge of the material, non-public information concerning
the Company or the facts or circumstances that gave rise to the Grace Period or of the Section 3(e) or 3(f) event, and for which
the Holder has not yet settled.
(d) The Holder covenants
and agrees that it will comply with the Prospectus delivery requirements of the Securities Act as applicable to it or an exemption
therefrom in connection with sales of Registrable Securities pursuant to a Registration Statement.
5.
Registration Expenses
.
All expenses incident to the Company’s performance of or compliance with this Agreement, including without limitation all
registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and
delivery expenses, fees and disbursements of custodians, and fees and disbursements of counsel for the Company and all independent
certified public accountants, underwriters retained by the Company (excluding discounts, commissions and placement agent fees)
and other Persons retained by the Company (all such expenses being herein called “
Registration Expenses
”), shall
be borne by the Company. Further, the Company shall pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review,
the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities
exchange on which similar securities issued by the Company are then listed.
6.
Indemnification
.
In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To the fullest extent
permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Holder, the directors, officers, members,
partners, employees, agents, representatives of, and each Person, if any, who controls the Holder within the meaning of the Securities
Act or the Securities Exchange Act (each, an “
Indemnified Person
”), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or
several, (collectively, “
Claims
”) incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or
other regulatory agency, body or the Commission, whether pending or threatened, whether or not an indemnified party is or may be
a party thereto (“
Indemnified Damages
”), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement
or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction
in which Registrable Securities are offered, or the omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary Prospectus if used prior to the effective date of such Registration Statement, or contained
in the final Prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the
Commission) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein,
in the light of the circumstances under which the statements therein were made, not misleading, (iii) any violation or alleged
violation by the Company of the Securities Act or the Securities Exchange Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant
to a Registration Statement or (iv) any violation of this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, “
Violations
”). Subject to Section 6(c), the Company shall reimburse the Indemnified Persons, promptly
as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection
with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon
a Violation which occurs based on a Holder’s material breach of its covenants or agreements in Section 4(c) or (d) or in
reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person or by a Related
Information Provider expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof
or supplement thereto and (ii) shall not be available to the extent such Claim is based on a failure of the Holder to deliver or
to cause to be delivered the Prospectus made available by the Company, including a corrected Prospectus, if such Prospectus or
corrected Prospectus was timely made available by the Company pursuant to Section 3(c); and (iii) shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made
by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Holder pursuant to
Section 10. “
Related Information Provider
” means, in respect of any Indemnified Person, the Holder to which
such Indemnified Person is related or another Indemnified Person that is related to the Holder to which such Indemnified Person
is related.
(b) To the fullest extent
permitted by law, in connection with any Registration Statement in which a Holder’s Registrable Securities are included or
in which a Holder is otherwise participating, such Holder will severally and not jointly indemnify and hold harmless the Company,
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, any underwriter, any other Holder or other Person selling securities in such Registration
Statement and any controlling person of any such underwriter or other Holder or other Person (each an “
Other Indemnified
Person
”), against any Claims or Indemnified Damages to which any of them may become subject, under the Securities Act,
the Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each
case to the extent, and only to the extent, that such Violation occurs based on a Holder’s material breach of its covenants
or agreements in Section 4(c) or (d) or in reliance upon and in conformity with written information furnished by such Holder or
by a Related Information Provider expressly for use in connection with such Registration Statement; and each such Holder will pay,
as incurred, any legal or other expenses reasonably incurred by any Other Indemnified Person intended to be indemnified pursuant
to this Section 6(b), in connection with investigating or defending any such Claim;
provided
,
however
, that the indemnity
agreement contained in this Section 6(b) shall not apply to amounts paid in settlement of any such Claim if such settlement is
effected without the prior written consent of the Holder, which consent shall not be unreasonably withheld;
provided
,
further
,
however
, that the Holder shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages
as does not exceed the net proceeds to the Holder as a result of the sale of Registrable Securities pursuant to such Registration
Statement, except in the case of fraud by such Holder. Such indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Other Indemnified Person and shall survive the transfer of the Registrable Securities by the Holder
pursuant to Section 10.
(c) Promptly after receipt
by an Indemnified Person or Other Indemnified Person under this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such Indemnified Person or Other Indemnified Person shall,
if a claim for indemnification in respect thereof is to be made against any indemnifying party under this Section 6, deliver to
the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the indemnifying party and reasonably satisfactory to the
Indemnified Person or the Other Indemnified Person, as the case may be;
provided
,
however
, that an Indemnified Person
or Other Indemnified Person shall have the right to retain its own counsel with the fees and expenses of not more than one counsel
for all such Indemnified Persons or all such Other Indemnified Persons to be paid by the indemnifying party, if, in the reasonable
opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Other Indemnified
Person and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified
Person or Other Indemnified Person and any other party represented by such counsel in such proceeding. The Other Indemnified Person
or Indemnified Person, as applicable, shall cooperate fully with the indemnifying party in connection with any negotiation or defense
of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available
to such Other Indemnified Person or such Indemnified Person which relates to such action or Claim. The indemnifying party shall
keep the Other Indemnified Person or Indemnified Person, as applicable, reasonably apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action,
claim or proceeding effected without its prior written consent;
provided
,
however
, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the
Other Indemnified Person or Indemnified Person, as applicable, consent to entry of any judgment or enter into any settlement or
other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Other
Indemnified Person or such Indemnified Person of a release from all liability in respect to the Claim at issue, and such settlement
shall not include any admission as to fault on the part of such Other Indemnified Person or such Indemnified Person. Following
indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Other Indemnified Person
or Indemnified Person, as applicable, with respect to all third parties, firms or corporations relating to the matter for which
indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Other Indemnified
Person, as applicable, under this Section 6, except to the extent that the indemnifying party is materially prejudiced in its ability
to defend such action.
(d) The indemnification
required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense,
as and when bills are received or Indemnified Damages are incurred, subject to an undertaking by the Indemnified Person or the
Other Indemnified Person, as applicable, to return such payments to the extent a court of competent jurisdiction or other competent
authority determines that such payments were unlawful or were not required under this Agreement.
(e) Without any duplication
or multiplication of damages, the indemnity agreements contained herein shall be in addition to (i) any cause of action or similar
right of the Other Indemnified Person or Indemnified Person against the indemnifying party or others, and (ii) any liabilities
the indemnifying party may be subject to pursuant to the law.
(f) Unless suspended by
the underwriting agreement applicable to any registration, the obligations of the Company and Holders under this Section 6 shall
survive the completion of any offering of Registrable Securities in a Registration Statement under this Agreement, or otherwise.
7.
Contribution
.
To the extent any indemnification by an indemnifying party is prohibited or limited by law, such indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent
permitted by law;
provided
,
however
, that: (i) no Person involved in the sale of Registrable Securities which Person
is guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the Securities Act) in connection with such sale
shall be entitled to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities pursuant to such Registration Statement.
8.
No Delay of Registration
.
No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration as the result
of any controversy that might arise with respect to the interpretation or implementation of this Agreement.
9.
Reports under
Securities Exchange Act
. With a view to making available to the Holder the benefits of Rule 144 promulgated under the Securities
Act or any other similar rule or regulation of the Commission that may at any time permit the Holder to sell securities of the
Company to the public without registration, once the Company becomes a Reporting Company, the Company agrees to use its commercially
reasonable efforts to continue to be a Reporting Company for five years and further during such time it is a Reporting Company
the Company agrees to use its best efforts to:
(a) make and keep public
information available, as those terms are understood and defined in Rule 144;
(b) file with the Commission
in a timely manner all reports and other documents required of the Company under the Securities Act and the Securities Exchange
Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required
for the applicable provisions of Rule 144; and
(c) furnish to the Holder
so long as the Holder owns Registrable Securities, promptly upon request, (i) a written statement by the Company, if true, that
it has complied with the reporting requirements of Rule 144, the Securities Act and the Securities Exchange Act, (ii) unless available
on the Commission’s EDGAR website, 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 to permit the Holder to
sell such securities pursuant to Rule 144 without registration.
10.
Assignment of
Registration Rights
. The rights under this Agreement shall be automatically assignable by the Holder to any transferee of all
or any portion of the Holder’s Registrable Securities if: (i) the Holder agrees in writing with the transferee or assignee
to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment;
(ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name
and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred
or assigned; (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee
or assignee is or might be restricted under the Securities Act and applicable state securities laws; and (iv) at or before the
time the Company receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein.
11.
Subsequent Registration
Rights
. The Company agrees that after the date hereof and excluding any registration rights agreement with National Securities
or its members and affiliates, it will not grant to any person any registration right or proceed to register any securities of
any person unless it provides in such agreement or registration that any securities being registered under such agreement or registration
will be subject to the cutback provisions of this Agreement as provided in Section 1(c) and Section 2(b).
12.
Amendment of
Registration Rights
. Provisions of this Agreement may be amended and the observance thereof may be waived (either generally
or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders
of at least a majority of the then outstanding Registrable Securities. Any amendment so effected will be binding upon all Holders,
whether or not such Holder consents thereto.
13.
Definitions
.
(a) “
Commission
”
means the Securities and Exchange Commission.
(b) “
Commission
Comments
” means written comments pertaining solely to Rule 415 or other comments to the extent they relate to Rule 415
which are received by the Company from the Commission, and a copy of which shall have been provided by the Company to the Holder,
to a filed Registration Statement which limit the amount of shares which may be included therein to a number of shares which is
less than such amount sought to be included thereon as filed with the Commission.
(c) “
Commission
Guidance
” means (i) any guidance, comments, requirements or requests of the Commission staff that is publicly available
in oral or written form and any comments or guidance provided by the Commission staff directly to the Company in written form,
(ii) the Securities Act and the rules and regulations promulgated thereunder or (iii) the Securities Exchange Act and the rules
and regulations promulgated thereunder.
(d) “
Common Stock
”
means the common stock, $0.001 par value per share, of the Company.
(e) “
Conversion
Shares
” means shares of Common Stock issuable upon conversion of the Notes.
(f) “
Effective
Date
” means, as to a Registration Statement, the date on which such Registration Statement is first declared effective
by the Commission.
(g) “
Notes
”
means, collectively, the 2015 Offering Notes and the 2016 Offering Notes.
(h) “
Person
”
means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
(i) “
Prospectus
”
means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference
in such Prospectus
(j) “
Registrable
Securities
” means (i) the Conversion Shares issued or issuable to the holder or its assignees or successor in interest
pursuant to conversion of the Notes and (ii) any other shares of Common Stock or any other securities issued or issuable with respect
to the securities referred to in clause (i) by way of a stock dividend or stock split or in connection with an exchange or combination
of shares, recapitalization, merger, consolidation or other reorganization.
(k) “
Registration
Statement
” means any registration statement (including, without limitation, the Initial Registration Statement or the
Follow-up Registration Statement) required to be filed hereunder (which, at the Company’s option, may be an existing registration
statement of the Company previously filed with the Commission, but not declared effective), including (in each case) the Prospectus,
amendments and supplements to the Registration Statement or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated by reference in the Registration Statement.
(l) “
Reporting
Company
” means a company that is obligated to file periodic reports under Sections 13 or 15(d) of the Securities Exchange
Act.
(m) “
Rule 144
”
means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission that may at any time permit the Holder to sell securities of
the Company to the public without registration.
(n) “
Rule 415
”
means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
(o) “
Rule 424
”
means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
(p) “
Securities
Act
” means the Securities Act of 1933, as amended from time to time together with the regulations promulgated thereunder.
(q) “
Securities
Exchange Act
” means the Securities Exchange Act of 1934, as amended from time to time, together with the regulations
promulgated thereunder.
(r) “
Underwriter
Cutbacks
” means any reduction in the number of shares suggested by any managing underwriter to be included in a registration
under a Registration Statement based upon the guidance in this Section 13(p). In connection with any offering involving an underwriting
of shares of the Company’s capital stock, the Company shall not be required under Section 1 to include any of the Holders’
securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters,
and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering
by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in
such offering exceeds the amount of securities to be sold other than by the Company that the underwriters determine in their sole
discretion 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 determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling shareholders according
to the total amount of securities entitled to be included therein owned by each selling shareholder or in such other proportions
as shall mutually be agreed to by such selling shareholders); provided, that any such cutback will be effected in accordance with
the priorities established by Section 1(c); provided further that in no event shall the amount of securities of the selling Holders
included in an offering pursuant to Section 1 be reduced below 30% of the total amount of securities included in such offering.
14.
Market Stand-Off
.
Each Holder agrees that prior to the Company’s IPO (as that term is defined in the Securities Purchase Agreement) it will
not transfer securities of the Company unless each transferee agrees in writing to be bound by all of the provisions of Section
4(v) of the Securities Purchase Agreement.
Each Holder agrees that a legend reading substantially as follows shall be placed on all certificates representing all Registrable
Securities of each Holder issued before the Company’s IPO (and the shares or securities of every other person subject to
the restriction contained in Section 4(v) of the Securities Purchase Agreement):
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD FOLLOWING THE EFFECTIVE DATE OF THE ISSUER’S IPO REGISTRATION STATEMENT FILED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE
SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE ISSUER’S PRINCIPAL OFFICE. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES
OF THESE SHARES.
After the Company’s IPO and expiration
of any lock-up period, upon request of any Holder who is a holder of record of the shares represented by any stock certificate(s)
bearing such legend and the surrender of such certificate(s) in connection with such request, the Company shall cause its transfer
agent to promptly issue replacement certificate(s) not bearing such legend representing the shares represented by such surrendered
stock certificate(s).
15.
Miscellaneous
.
(a) A Person is deemed
to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or election received from such record owner of such Registrable
Securities.
(b) Any notices, consents,
waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will
be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile or email
(provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii)
one business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
Atomera Incorporated
750 University Avenue, Suite 280
Los Gatos, CA 95032
Attn: Chief Executive Officer
With a copy (for informational purposes
only) to:
Greenberg Traurig, LLP
3161 Michelson Drive, Suite 1000
Irvine, CA 92612
Facsimile: (949) 732-6501
E-mail: DonahueD@gtlaw.com
Attn: Daniel K. Donahue, Esq.
and
If to any Holder, at the address for
such Holder on the records of the Company, which may include the information on Schedule A hereto.
or to such other address and/or facsimile number
and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five
(5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine or
email service containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C)
provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt
from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
(c) Failure of any party
to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall
not operate as a waiver thereof.
(d) All questions concerning
the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York
or other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of New York,
for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that
the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address
for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted
by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability
of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(e) This Agreement and
the instruments referenced herein and therein constitute the entire agreement among the parties hereto with respect to the subject
matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred
to herein and therein. This Agreement and the instruments referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
(f) Subject to the requirements
of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of
the parties hereto.
(g) The headings in this
Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(h) This Agreement may
be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission
or other electronic transmission (such as but not limited to an email attachment in PDF format) of a copy of this Agreement bearing
the signature of the party so delivering this Agreement. This Agreement may also be executed by electronic signature of such Person.
(i) Each party shall do
and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(j) All consents and other
determinations required to be made by the Holder pursuant to this Agreement shall be made, unless otherwise specified in this Agreement,
by the Holder.
(k) The language used
in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict
construction will be applied against any party.
(l) This Agreement is
intended for the benefit of, and shall be binding upon, the parties hereto and their respective successors and permitted assigns,
and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
(m) The obligations of
each Holder hereunder are several and not joint with the obligations of any other Holder, and no provision of this Agreement is
intended to confer any obligations on a Holder vis-à-vis any other Holder. Nothing contained herein, and no action taken
by any Holder pursuant hereto, shall be deemed to constitute the Holder as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Holder are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated herein.
(n)
Currency
. As
used herein, “Dollar”, “US Dollar” and “$” each mean the lawful money of the United States.
(o) For the avoidance
of doubt, this Agreement hereby amends and restates the 2015 Registration Rights Agreement in its entirety.
[Signature pages follow immediately]
IN WITNESS WHEREOF
,
the parties have executed this Registration Rights Agreement as of the date first written above.
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COMPANY:
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ATOMERA INCORPORATED
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By:
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/s/ Scott A. Bibaud
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Scott A. Bibaud,
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President and Chief Executive Officer
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HOLDERS:
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For Entity Investors:
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For Individual Investors:
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Print Name:
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Print Name:
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Signature:
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Signature:
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Name of Signatory:
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If Joint Investment, 2
nd
investor should complete:
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Title:
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Print Name:
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Signature:
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[Signature Page to Amended and Restated Registration
Rights Agreement]
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Transfer Agent]
[Address]
Attention:
Re:
Atomera Incorporated
Ladies and Gentlemen:
[We are][I am] counsel to
Atomera Incorporated, a Delaware corporation (the “Company”), and have represented the Company in connection with that
certain Amended and Restated Registration Rights Agreement with _____________ (the “Holder”) (the “Registration
Rights Agreement”) pursuant to which the Company agreed, among other things, to register certain of the Registrable Securities
(as defined in the Registration Rights Agreement) held by the Holder, under the Securities Act of 1933, as amended (the “1933
Act”). In connection with the Company's obligations under the Registration Rights Agreement, on ____________ ___, 20__, the
Company filed a registration statement on Form S-[1] (File No. 333-_____________) (the “Registration Statement”) with
the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names the Holder as
a selling stockholder thereunder.
In connection with the foregoing,
[we][I] advise you that a member of the SEC’s staff has advised [us][me] by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we][I]
have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness
has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities
are available for resale under the 1933 Act pursuant to the Registration Statement.
If applicable, you may receive
notices from the Company pursuant to the Company’s rights or obligations under the Registration Rights Agreement in connection
with stop orders or other restrictions on transfer of the shares included in such Registration Statement, but [we][I] [are][am]
not obligated to update this letter or otherwise inform you of any such stop order or restriction.
[Other applicable disclosure
to be inserted here, if appropriate.]
Very truly yours,
EXHIBIT B
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
_______________, 201[_]
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[Addressed to Transfer Agent]
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Attention:
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[________________________]
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Ladies and Gentlemen:
Reference is made to that
certain Amended and Restated Registration Rights Agreement, dated as of April 1, 20116 (the “
Agreement
”), by
and among Atomera Incorporated, a Delaware corporation (the “
Company
”), _________________________ (the “
Holder
”)
and certain other securityholders of the Company, pursuant to which the Company is obligated to register certain shares held by
the Holder (the “
Holder Shares
”) of Common Stock of the Company, par value $0.001 per share (the “
Common
Stock
”).
This letter shall serve as
our irrevocable authorization and direction to you (provided that you are the transfer agent of the Company at such time) to issue
shares of Common Stock upon transfer or resale of the Holder Shares, unless we have otherwise informed you of the termination of
effectiveness of the registration statement in which the Holder Shares are included, a stop order or another transfer restriction.
We may also later inform you that after the termination of effectiveness of such registration statement that a registration statement
in which the Holder’s Shares are included, or that such stop order has been lifted or that such transfer restriction is not
applicable, in which case this authorization and direction shall be reinstated and be effective.
You acknowledge and agree
that so long as you have previously received (a) written confirmation from the Company's legal counsel that either (i) a registration
statement covering resales of the Holder Shares has been declared and remains effective by the Securities and Exchange Commission
(the “
SEC
”) under the Securities Act of 1933, as amended (the “
1933 Act
”), or (ii) sales
of the Holder Shares may be made in conformity with Rule 144 under the 1933 Act (“
Rule 144
”), (b) if applicable,
a copy of such registration statement, and (c) notice from legal counsel to the Company or any Holder that a transfer of Holder
Shares has been effected either pursuant to the registration statement (and a prospectus delivered to the transferee) or pursuant
to Rule 144
,
then as promptly as practicable
,
you shall issue the certificates representing the Holder Shares registered
in the names of such transferees, and such certificates shall not bear any legend restricting transfer of the Common Stock evidenced
thereby and should not be subject to any stop-transfer restriction; provided, however, that if such shares of Common Stock and
are not registered for resale under the 1933 Act or able to be sold under Rule 144, then the certificates for such Common Shares
shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
A form of written confirmation
from the Company’s outside legal counsel that a registration statement covering resales of the Holder Shares has been declared
effective by the SEC under the 1933 Act is attached hereto. We will inform you of any stop orders or other transfer restrictions.
Please execute this letter
in the space indicated to acknowledge your agreement to act in accordance with these instructions. Should you have any questions
concerning this matter, please contact me at ____________.
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Very truly yours,
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Atomera Incorporated
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THE FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED AND AGREED TO
this ___ day of ________________, 201[_]
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[TRANSFER AGENT]
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By:
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Name:
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Title:
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Enclosures
Copy: Holder
SCHEDULE A
LIST OF HOLDERS
SCHEDULE B
SELLING STOCKHOLDERS
The shares of common stock being offered by
the selling stockholders are those issuable to the selling stockholders upon [conversion of the notes and exercise of the warrants].
For additional information regarding the issuance of the [notes and the warrants], see “Private Placement of Notes”
above. We are registering the shares of common stock in order to permit the selling stockholders to offer the shares for resale
[from time to time]. Except for the ownership of [the notes issued pursuant to and in connection with the Securities Purchase Agreement,
and the warrants issued pursuant to and the agreements governing our engagement of National Securities Corporation as a placement
agent for the private placement of the notes and the engagement of National Securities Corporation as an underwriter for a public
offering of common stock by the Company] the selling stockholders have not had any material relationship with us within the past
three years.
The table below lists the selling stockholders
and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder) of the shares of common stock held by each of the selling stockholders. The
second column lists the number of shares of common stock beneficially owned by the selling stockholders, based on their respective
ownership of shares of common stock [, notes and warrants,] as of ________, 20__, [assuming conversion of the notes and exercise
of the warrants held by each such selling stockholder on that date but taking account of any limitations on conversion and exercise
set forth therein].
The third column lists
the shares of common stock being offered by this prospectus by the selling stockholders [and does not take into account any limitations
on (i) conversion of the notes set forth therein or (ii) exercise of the warrants set forth therein].
In accordance with the terms of a registration
rights agreement with the holders of the notes and the warrants, this prospectus generally covers the resale of [(i) the shares
of common stock issued upon conversion of the notes and (ii) the maximum number of shares of common stock issuable upon exercise
of the warrants, in each case, determined as if the outstanding notes and warrants were converted or exercised (as the case may
be) in full (without regard to any limitations on conversion or exercise contained therein) as of the trading day immediately preceding
the date this registration statement was initially filed with the SEC]. Because the conversion price of the notes and the exercise
price of the warrants may be adjusted, the number of shares that will actually be issued may be more or less than the number of
shares being offered by this prospectus. The fourth column assumes the sale of all of the shares offered by the selling stockholders
pursuant to this prospectus.
See “Plan of Distribution.”
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Name of Selling Stockholder
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Number of Shares of
Common Stock
Owned Prior to the
Offering
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Maximum Number of
Shares of Common
Stock to be Sold
Pursuant to this
Prospectus
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Number of Shares of
Common
Stock
Owned After the
Offering
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[Notes (1) . . .]
PLAN OF DISTRIBUTION
We are registering the
shares of common stock issued upon [conversion of the notes and issuable on exercise of the warrants] to permit the resale of these
shares of common stock by the holders of [the notes and warrants] [from time to time] after the date of this prospectus. We will
not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all fees
and expenses incident to our obligation to register the shares of common stock.
The selling stockholders
may sell all or a portion of the shares of common stock held by them and offered hereby [from time to time] [directly or] through
one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers,
the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares
of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at
varying prices determined at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve
crosses or block transactions, pursuant to one or more of the following methods:
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on any national securities exchange or quotation service on which the securities may be listed
or quoted at the time of sale;
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in the over-the-counter market;
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·
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in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
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through the writing or settlement of options, whether such options are listed on an options exchange
or otherwise;
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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block trades in which the broker-dealer will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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an exchange distribution in accordance with the rules of the applicable exchange;
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privately negotiated transactions;
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short sales made after the date the Registration Statement is declared effective by the SEC;
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broker-dealers may agree with a selling security holder to sell a specified number of such shares
at a stipulated price per share;
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a combination of any such methods of sale; and
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·
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any other method permitted pursuant to applicable law.
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The selling stockholders
may also sell shares of common stock under Rule 144 promulgated under the Securities Act of 1933, as amended, if available, rather
than under this prospectus. In addition, the selling stockholders may transfer the shares of common stock by other means not described
in this prospectus. If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters,
broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions
or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers
or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of
common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders
may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions
and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common
stock to broker-dealers that in turn may sell such shares.
The selling stockholders
may pledge or grant a security interest in some or all of the [notes, warrants or] shares of common stock owned by them and, if
they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of
common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act amending, if necessary, the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate
the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest
will be the selling beneficial owners for purposes of this prospectus.
To the extent required
by the Securities Act and the rules and regulations thereunder, the selling stockholders and any broker-dealer participating in
the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities
Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus
supplement, if required, will be distributed, which will set forth the aggregate amount of shares of common stock being offered
and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other
terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or re-allowed
or paid to broker-dealers.
Under the securities laws
of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In
addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale
in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance
that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement,
of which this prospectus forms a part.
The selling stockholders
and any other person participating in such distribution will be subject to applicable provisions of the Securities Act of 1933,
as amended, and the Securities Exchange Act of 1934, as amended, and in each case together with the rules and regulations thereunder,
including, without limitation, to the extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases
and sales of any of the shares of common stock by the selling stockholders and any other participating person. To the extent applicable,
Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in
market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares
of common stock and the ability of any Person to engage in market-making activities with respect to the shares of common stock.
We will pay all expenses
of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be $[ ]
in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities
or “blue sky” laws; provided, however, a selling stockholder will pay all underwriting discounts and selling commissions,
if any. We will indemnify the selling stockholders against liabilities, including some liabilities under the Securities Act in
accordance with the registration rights agreements or the selling stockholders will be entitled to contribution. We may be indemnified
by the selling stockholders against civil liabilities, including liabilities under the Securities Act that may arise from any written
information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the related
registration rights agreements or we may be entitled to contribution.
Once sold under the registration statement,
of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our
affiliates.
Exhibit 10.26
AMENDED AND RESTATED SECURITY
AGREEMENT
This
AMENDED AND RESTATED
SECURITY AGREEMENT
(this “
Agreement
”), dated as of April 1, 2016, is made by and among Atomera Incorporated,
a Delaware corporation (the “
Grantor
”), Robert Clifford, as the Collateral Agent, and the secured parties listed
on Schedule A annexed hereto (collectively, the “
Secured Parties
” and each, individually, a “
Secured
Party
”).
RECITALS
WHEREAS
, pursuant
to that certain securities purchase agreement, dated March 17, 2015 (as amended, restated, supplemented, or otherwise modified
from time to time, including all schedules and exhibits thereto, collectively the “
2015 Purchase Agreement
”),
by and among the Grantor (f/k/a Mears Technologies, Inc.) and the investors listed on the Schedule of Buyers attached thereto (the
“
Existing Noteholders
”), the Grantor has sold, and each of the Existing Noteholders have purchased, severally
and not jointly, certain senior secured convertible notes in the aggregate original principal amount of up to $14,750,000 (the
“
2015 Offering Notes
”); and
WHEREAS
, in respect
of the 2015 Offering Notes, the Grantor has, pursuant to this security agreement, originally dated March 17, 2015 (the “
2015
Security Agreement
”), by and among Grantor and the Existing Noteholders, granted a continuing security interest in and
to the Collateral (as defined in the 2015 Security Agreement) in order to secure the prompt and complete payment, observance and
performance of the Secured Obligations (as defined in the 2015 Security Agreement); and
WHEREAS
, pursuant
to that certain securities purchase agreement, dated even date herewith (as may be amended, restated, supplemented, or otherwise
modified from time to time, including all schedules and exhibits thereto, collectively, the “
2016
Purchase Agreement
”),
by and among the Grantor and the investors listed on the Schedule of Buyers attached thereto (the “
New Noteholders
”),
the Grantor has agreed to sell, and each of the New Noteholders have agreed to purchase, severally and not jointly, certain senior
secured convertible notes in the aggregate original principal amount of up to $6,000,000 (the “
2016 Offering
Notes
”);
and
WHEREAS
, in order
to induce the New Noteholders to purchase, severally and not jointly, the 2016 Offering Notes as provided for in the 2016 Purchase
Agreement, the Grantor has agreed to grant a continuing security interest in and to the Collateral (as defined below) in order
to secure the prompt and complete payment, observance and performance of the Secured Obligations (as defined below); and
WHEREAS
, a majority
of the Existing Noteholders have consented to allow the 2016 Offering Notes to be, in all respects,
pari passu
with the
2015 Offering Notes in respect of this Agreement, and the Collateral Agent now wishes to amend and restate the 2015 Security Agreement
to allow each New Noteholder to become a party hereto. Accordingly, for purposes of this Agreement, the term “Secured Parties”
shall mean both the Existing Noteholders and the New Noteholders.
AGREEMENTS
NOW, THEREFORE
,
for and in consideration of the recitals made above and other good and valuable consideration, the receipt, sufficiency and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
1.
Defined
Terms
. All capitalized terms used herein (including in the preamble and recitals hereof) without definition shall have the
meanings ascribed thereto in the Notes. Any terms used in this Agreement that are defined in the Code shall be construed and defined
as set forth in the Code unless otherwise defined herein or in the Notes; provided, however, if the Code is used to define any
term used herein and if such term is defined differently in different Articles of the Code, the definition of such term contained
in Article 9 of the Code shall govern. In addition to those terms defined elsewhere in this Agreement, as used in this Agreement,
the following terms shall have the following meanings:
(a) “
Account
”
means an account (as that term is defined in the Code).
(b) “
Account
Debtor
” means an account debtor (as that term is defined in the Code).
(c) “
Bankruptcy
Code
” means title 11 of the United States Code, as in effect from time to time.
(d) “
Books
”
means books and records (including, without limitation, the Grantor’s Records) indicating, summarizing, or evidencing the
Grantor’s assets (including the Collateral) or liabilities, the Grantor’s Records relating to its business operations
(including, without limitation, stock ledgers) or financial condition, and the Grantor’s goods or General Intangibles related
to such information.
(e) “
Chattel
Paper
” means chattel paper (as that term is defined in the Code) and includes tangible chattel paper and electronic chattel
paper.
(f) “
Code
”
means the New York Uniform Commercial Code, as in effect from time to time; provided, however, in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to any Secured Party’s
Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State
of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.
(g) “
Collateral
”
has the meaning specified therefor in Section 2.
(h) “
Commercial
Tort Claims
” means commercial tort claims (as that term is defined in the Code), and includes those commercial tort claims
listed on
Schedule 1
attached hereto.
(i) “
Control
Agreement
” means a control agreement, in form and substance reasonably satisfactory to the Collateral Agent, executed
and delivered by Grantor, the Collateral Agent (on behalf of all Secured Parties), and the applicable securities intermediary (with
respect to a Securities Account) or bank (with respect to a Deposit Account), as may be amended, restated, supplemented, or otherwise
modified from time to time.
(j) “
Copyrights
”
means all copyrights and copyright registrations, and also includes (i) all reissues, continuations, extensions or renewals thereof,
(ii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments
under all licenses entered into in connection therewith and damages and payments for past or future infringements or dilutions
thereof, (iii) the right to sue for past, present and future infringements and dilutions thereof, (iv) the goodwill of Grantor’s
business symbolized by the foregoing or connected therewith, and (v) all of Grantor’s rights corresponding thereto throughout
the world.
(k) “
Deposit
Account
” means a deposit account (as that term is defined in the Code).
(l) “
Equipment
”
means all equipment (as that term is defined in the Code) in all of its forms of the Grantor, wherever located, and including,
without limitation, all machinery, apparatus, installation facilities and other tangible personal property, and all parts thereof
and all accessions, additions, attachments, improvements, substitutions, replacements and proceeds thereto and therefor.
(m) “
Event
of Default
” has the meaning specified therefor in the Notes.
(n) “
Foreign
Subsidiary
” means any Person in which the Company, directly or indirectly, owns the majority of the outstanding Stock
and that is a “controlled foreign corporation” under Section 957 of the Internal Revenue Code of 1986.
(o) “
GAAP
”
means United States generally accepted accounting principles, consistently applied.
(p) “
General
Intangibles
” means general intangibles (as that term is defined in the Code) and, in any event, includes payment intangibles,
contract rights, rights to payment, rights arising under common law, statutes, or regulations, choses or things in action, goodwill,
programming materials, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment
under any royalty or licensing agreements (including Intellectual Property Licenses), infringement claims, commercial computer
programs, information contained on computer disks or tapes, software, literature, reports, catalogs, pension plan refunds, pension
plan refund claims, insurance premium rebates, tax refunds, and tax refund claims, interests in a partnership or limited liability
company which do not constitute a security under Article 8 of the Code, and any other personal property other than Commercial Tort
Claims, money, Accounts, Chattel Paper, Deposit Accounts, goods, Investment Related Property, Negotiable Collateral, and oil, gas,
or other minerals before extraction.
(q) “
Governmental
Authority
” means any domestic or foreign federal, state, local, or other governmental or administrative body, instrumentality,
board, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar
dispute-resolving panel or body.
(r) “
Insolvency
Proceeding
” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under
any other state or federal bankruptcy or insolvency law or any equivalent laws in any other jurisdiction, assignments for the benefit
of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
(s) “
Intellectual
Property
” means Patents, Copyrights, Trademarks, the goodwill associated with such Trademarks, trade secrets and customer
lists, and Intellectual Property Licenses.
(t) “
Intellectual
Property Licenses
” means rights under or interests in any patent, trademark, copyright or other intellectual property,
including software license agreements with any other party, whether the Grantor is a licensee or licensor under any such license
agreement, as may be amended, restated, supplemented, or otherwise modified from time to time.
(u) “
Inventory
”
means all inventory (as that term is defined in the Code) in all of its forms of the Grantor, wherever located, including, without
limitation, (i) all goods in which the Grantor has an interest in mass or a joint or other interest or right of any kind (including
goods in which the Grantor has an interest or right as consignee), and (ii) all goods which are returned to or repossessed by the
Grantor, and all accessions thereto, products thereof and documents therefor.
(v) “
Investment
Related Property
” means (i) investment property (as that term is defined in the Code), and (ii) all of the following
(regardless of whether classified as investment property under the Code): all Pledged Interests, Pledged Operating Agreements,
and Pledged Partnership Agreements.
(w) “
Lien
”
means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or
charge on property of any kind.
(x) “
Negotiable
Collateral
” means letters of credit, letter-of-credit rights, instruments, promissory notes, drafts, and documents.
(y) “
New
Subsidiary
” has the meaning specified therefor in the Notes.
(z) “
Notes
”
means collectively the 2015 Offering Notes and the 2016 Offering Notes.
(aa) “
Patents
”
means all patents and patent applications, and also includes (i) all renewals thereof, (ii) all income, royalties, damages and
payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in
connection therewith and damages and payments for past or future infringements or dilutions thereof, (iii) the right to sue for
past, present and future infringements and dilutions thereof, and (iv) all of Grantor’s rights corresponding thereto throughout
the world.
(bb)
“
Permitted Liens
” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising
in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent or that is
being contested in good faith for which adequate reserves have been established in accordance with GAAP, (iii) any Lien created
by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary
course of business with respect to a liability that is not yet due or delinquent or that is being contested in good faith by appropriate
proceedings, (iv) Liens on Equipment having a fair market value of not more than $250,000 in the aggregate, but only if the lien
constitutes a purchase money security interest incurred in connection with the purchase of such Equipment, (v) Liens securing the
Company’s obligations under the Transaction Documents, and (vi) Liens granted to the Secured Parties pursuant to the terms
of this Agreement.
(cc) “
Permitted
Transfers
” means (i) sales of Inventory in the ordinary course of business, (ii) non-exclusive licenses in the ordinary
course of business for the use of Intellectual Property (A) to manufacturers, distributors, OEMs, strategic partners and value
added re-sellers in connection with the manufacture and distribution of Grantor’s products, (B) in connection with the embedding
of Intellectual Property in the products of others, and (C) to end users; provided no such license could result in a legal transfer
of title of the licensed Intellectual Property, or (iii) dispositions of worn-out, obsolete or surplus Equipment at fair market
value in the ordinary course of business.
(dd)
“
Person
” has the meaning specified therefor in the Securities Purchase Agreement.
(ee) “
Pledged
Companies
” means each Person all or a portion of whose Stock is acquired or otherwise owned by the Grantor after the
date hereof.
(ff) “
Pledged
Interests
” means all of Grantor’s right, title and interest in and to all of the Stock now or hereafter owned by
Grantor, regardless of class or designation, including all substitutions therefor and replacements thereof, all proceeds thereof
and all rights relating thereto, also including any certificates representing the Stock, the right to receive any certificates
representing any of the Stock, all warrants, options, share appreciation rights and other rights, contractual or otherwise, in
respect thereof, and the right to receive dividends, distributions of income, profits, surplus, or other compensation by way of
income or liquidating distributions, in cash or in kind, and cash, instruments, and other property from time to time received,
receivable, or otherwise distributed in respect of or in addition to, in substitution of, on account of, or in exchange for any
or all of the foregoing. Pledged Interests categorically excludes any authorized but unissued Stock of the Company which is not
being pledged under this Agreement.
(gg) “
Pledged
Operating Agreements
” means all of Grantor’s rights, powers, and remedies under the limited liability company operating
agreements of each of the Pledged Companies that are limited liability companies, as may be amended, restated, supplemented, or
otherwise modified from time to time.
(hh) “
Pledged
Partnership Agreements
” means all of Grantor’s rights, powers, and remedies under the partnership agreements of
each of the Pledged Companies that are partnerships, as may be amended, restated, supplemented, or otherwise modified from time
to time.
(ii) “
Proceeds
”
has the meaning specified therefor in Section 2.
(jj) “
Real
Property
” means any estates or interests in real property now owned or hereafter acquired by Grantor and the improvements
thereto.
(kk) “
Records
”
means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable
in perceivable form.
(ll) “
Registration
Rights Agreement
” means that certain amended and restated registration rights agreement, dated as of the date hereof,
by and among the Grantor and the Secured Parties, as may be amended from time to time
.
(mm) “
Secured
Obligations
” mean all of the present and future payment and performance obligations of the Grantor arising under this
Agreement, the Notes and the other Transaction Documents, including, without duplication, reasonable attorneys’ fees and
expenses and any interest, fees, or expenses that accrue after the filing of an Insolvency Proceeding, regardless of whether allowed
or allowable in whole or in part as a claim in any Insolvency Proceeding.
(nn) “
Securities
Account
” means a securities account (as that term is defined in the Code).
(oo) “
Securities
Purchase Agreement
” means collectively the 2015 Purchase Agreement and the 2016 Purchase Agreement.
(pp) “
Security
Documents
” means, collectively, this Agreement, each Control Agreement and each other security agreement, pledge agreement,
assignment, mortgage, security deed, deed of trust, and other agreement or document executed and delivered by the Grantor as security
for any of the Secured Obligations, as may be amended, restated, supplemented, or otherwise modified from time to time.
(qq) “
Security
Interest
” and “
Security Interests
” have the meanings specified therefor in Section 2.
(rr) “
Stock
”
means all shares, options, warrants, interests (including, without limitation, membership and partnership interests), participations,
or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred
stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations
promulgated by the United States Securities and Exchange Commission and any successor thereto under the Securities Exchange Act
of 1934, as in effect from time to time).
(ss) “
Supporting
Obligations
” means supporting obligations (as such term is defined in the Code).
(tt) “
Trademarks
”
means all trademarks, trade names, trademark applications, service marks, service mark applications, and also includes (i) all
renewals thereof, (ii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto,
including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements
or dilutions thereof, (iii) the right to sue for past, present and future infringements and dilutions thereof, (iv) the goodwill
of Grantor’s business symbolized by the foregoing or connected therewith, and (v) all of Grantor’s rights corresponding
thereto throughout the world.
(uu) “
Transaction
Documents
” mean, collectively, the Securities Purchase Agreement, the Notes, the Security Documents, the Registration
Rights Agreement and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection
with the consummation of the transactions contemplated hereby and thereby, as may be amended from time to time.
(vv) “
URL
”
means “uniform resource locator,” an internet web address.
2.
Grant
of Security
. The Grantor hereby unconditionally grants, assigns, and pledges to the Collateral Agent a continuing security
interest (each, a “
Security Interest
” and, collectively, the “
Security Interests
”) in all
personal property assets of the Grantor whether now owned or hereafter acquired or arising and wherever located (collectively,
the “
Collateral
”), including, without limitation, the Grantor’s right, title, and interest in and to the
following, whether now owned or hereafter acquired or arising and wherever located:
(a) all
of the Grantor’s Accounts;
(b) all
of the Grantor’s Books;
(c) all
of the Grantor’s Chattel Paper;
(d) all
of the Grantor’s Deposit Accounts;
(e) all
of the Grantor’s Equipment and fixtures;
(f) all
of the Grantor’s General Intangibles;
(g) all
of the Grantor’s Intellectual Property;
(h) all
of the Grantor’s Inventory;
(i) all
of the Grantor’s Investment Related Property;
(j) all
of the Grantor’s Negotiable Collateral;
(k) all
of the Grantor’s rights in respect of Supporting Obligations;
(l) all
of the Grantor’s Commercial Tort Claims;
(m) all
of the Grantor’s money, cash, cash equivalents, or other assets of the Grantor that now or hereafter come into the possession,
custody, or control of any Secured Party; and
all of the proceeds
and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance or Commercial Tort Claims
covering or relating to any or all of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit Accounts, Equipment,
General Intangibles, Intellectual Property, Inventory, Investment Related Property, Negotiable Collateral, Supporting Obligations,
money, or other tangible or intangible property resulting from the sale, lease, license, exchange, collection, or other disposition
of any of the foregoing, the proceeds of any award in condemnation with respect to any of the foregoing, any rebates or refunds,
whether for taxes or otherwise, and all proceeds of any such proceeds, or any portion thereof or interest therein, and the proceeds
thereof, and all proceeds of any loss of, damage to, or destruction of the above, whether insured or not insured, and, to the extent
not otherwise included, any indemnity, warranty, or guaranty payable by reason of loss or damage to, or otherwise with respect
to any of the foregoing (the “
Proceeds
”). Without limiting the generality of the foregoing, the term “Proceeds”
includes whatever is receivable or received when Investment Related Property or proceeds are sold, exchanged, collected, or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes proceeds of any indemnity or guaranty payable to
the Grantor or any Secured Party from time to time with respect to any of the Investment Related Property. Notwithstanding the
foregoing, the Collateral shall not include (i) the Stock of any first-tier Foreign Subsidiary in excess of 65% of the aggregate
outstanding voting Stock of such first-tier Foreign Subsidiary or (ii) any Stock of any Foreign Subsidiary that is not a first-tier
Foreign Subsidiary.
3.
Security
for Obligations
. This Agreement and the Security Interests created hereby secure the payment and performance of the Secured
Obligations, whether now existing or arising hereafter.
4.
Grantor
Remains Liable
. Anything herein to the contrary notwithstanding, (a) the Grantor shall remain liable under the contracts and
agreements included in the Collateral, including the Pledged Operating Agreements and the Pledged Partnership Agreements, to perform
all of the duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by
Secured Parties, or any of them, of any of the rights hereunder shall not release the Grantor from any of its duties or obligations
under such contracts and agreements included in the Collateral, and (c) no Secured Party shall have any obligation or liability
under such contracts and agreements included in the Collateral by reason of this Agreement, nor shall any Secured Party be obligated
to perform any of the obligations or duties of the Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder. Until an Event of Default shall occur and be continuing, except as otherwise provided in this Agreement
or any other Transaction Document, the Grantor shall have the right to possession and enjoyment of the Collateral for the purpose
of conducting the ordinary course of its businesses, subject to and upon the terms hereof and the other Transaction Documents.
Without limiting the generality of the foregoing, it is the intention of the parties hereto that record and beneficial ownership
of the Pledged Interests, including all voting, consensual, and dividend rights, shall remain in the Grantor until the occurrence
of an Event of Default and until the Collateral Agent (on behalf of all Secured Parties) shall notify the Grantor of its exercise
of voting, consensual, or dividend rights with respect to the Pledged Interests pursuant to Section 15 hereof.
5.
Representations
and Warranties
. The Grantor hereby represents and warrants as follows:
(a) The
exact legal name of the Grantor is set forth in the preamble this Agreement.
(b)
Schedule
2
attached hereto sets forth (i) all Real Property owned or leased by the Grantor, together with all other locations of
Collateral, as of the date hereof, and (ii) the chief executive office of the Grantor as of the date hereof.
(c) This
Agreement creates a valid security interest in all of the Collateral of the Grantor, to the extent a security interest therein
can be created under the Code, securing the payment of the Secured Obligations. Except to the extent a security interest in the
Collateral cannot be perfected by the filing of a financing statement under the Code, all filings and other actions necessary or
reasonably desirable to perfect and protect such security interest have been duly taken or will have been taken upon the filing
of financing statements listing the Grantor, as a debtor, and Secured Parties, as secured parties, in the jurisdictions listed
on
Schedule 3
attached hereto. Upon the making of such filings, the Secured Parties shall each have a first priority
perfected security interest in all of the Collateral of the Grantor to the extent such security interest can be perfected by the
filing of a financing statement (subject to Permitted Liens). Subject to Section 6(c), all action by the Grantor necessary to perfect
and reasonably necessary to protect such security interest on each item of Collateral has been duly taken.
(d) Except
for the Security Interests created hereby, no Collateral is subject to any Lien as of the date hereof, except for Permitted Liens.
(e) No
consent, approval, authorization, or other order or other action by, and no notice to or filing with, any Governmental Authority
or any other Person is required (i) for the grant of a Security Interest by the Grantor in and to the Collateral pursuant to this
Agreement or for the execution, delivery, or performance of this Agreement by the Grantor, or (ii) for the exercise by any Secured
Party of the voting or other rights provided in this Agreement with respect to Investment Related Property pledged hereunder or
the remedies in respect of the Collateral pursuant to this Agreement, except as may be required in connection with such disposition
of Investment Related Property by laws affecting the offering and sale of securities generally.
(f)
Schedule
4
contains a complete and accurate list of all of the Grantor’s Deposit Accounts and Securities Accounts, including,
without limitation, with respect to each bank or securities intermediary (a) the name and address of such Person and (b) the account
numbers of such accounts maintained with such Person.
6.
Covenants
.
The Grantor covenants and agrees with each Secured Party that from and after the date of this Agreement and until the date of termination
of this Agreement in accordance with Section 24 hereof:
(a)
Possession
of Collateral
. In the event that any Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral,
Investment Related Property, or Chattel Paper with a value in excess of $100,000 in the aggregate, and if and to the extent that
perfection or priority of Secured Parties’ respective Security Interests is dependent on or enhanced by possession, the Grantor,
immediately upon the request of the Collateral Agent (on behalf of all Secured Parties), shall execute such other documents and
instruments as shall be reasonably requested by the Collateral Agent or, if applicable, endorse and deliver physical possession
of such Negotiable Collateral, Investment Related Property, or Chattel Paper to the Collateral Agent (on behalf of all Secured
Parties), together with such undated powers endorsed in blank as shall be requested by the Collateral Agent.
(b)
Chattel
Paper
.
(i) The
Grantor shall take all steps reasonably necessary to grant the Collateral Agent (on behalf of all Secured Parties) control of all
Chattel Paper in accordance with the Code and all “transferable records” as that term is defined in Section 16 of the
Uniform Electronic Purchase Act and Section 201 of the federal Electronic Signatures in Global and National Commerce Act as in
effect in any relevant jurisdiction; and
(ii) If
the Grantor retains possession of any Chattel Paper or instruments (which retention of possession shall be subject to the extent
permitted hereby), promptly upon the request of the Collateral Agent (on behalf of all Secured Parties), such Chattel Paper and
instruments shall be marked with the following legend: “This writing and the obligations evidenced or secured hereby are
subject to the Security Interests of [names of Secured Parties].”
(c)
Control
Agreements
. The Grantor shall not establish or maintain any Deposit Account or Securities Account (or any other similar account)
other than a payroll account unless (i) the Grantor shall have provided each Secured Party with ten (10) days’ advance written
notice of each such account and (ii) if an Event of Default has occurred and is then continuing, the Collateral Agent on behalf
of the Secured Parties shall have received a Control Agreement in respect of such account concurrently with the opening thereof.
From and after the occurrence and during the continuance of any Event of Default, the Grantor shall ensure that all of its Account
Debtors forward payment of the amounts owed by them directly to a Deposit Account that is subject to a Control Agreement and deposit
or cause to be deposited promptly, and in any event no later than the first (1
st
) Business Day after the date of receipt
thereof, all of their collections (including those sent directly by their Account Debtors to the Grantor) into a Deposit Account
subject to a Control Agreement. Upon the request of the Collateral Agent (on behalf of all Secured Parties) from and after the
occurrence and during the continuance of any Event of Default, the Grantor shall promptly (but in no event later than ten (10)
Business Days after such request therefor) cause each of its Deposit Accounts and Securities Accounts to be subject to a Control
Agreement in favor of the Collateral Agent on behalf of the Secured Parties.
(d)
Letter-of-Credit
Rights
. In the event that the Grantor is or becomes the beneficiary of one or more letters of credit with a face amount of
greater than $25,000 individually or $100,000 in the aggregate, the Grantor shall promptly (and in any event within five (5) Business
Days after becoming a beneficiary) notify the Secured Parties thereof and, upon the request by the Collateral Agent (on behalf
of all Secured Parties), use commercially reasonable efforts to enter into an agreement with the Collateral Agent (on behalf of
all Secured Parties) and the issuing or confirming bank with respect to letter-of-credit rights assigning such letter-of-credit
rights to the Collateral Agent (on behalf of all Secured Parties) and directing all payments thereunder to the Collateral Agent
(on behalf of all Secured Parties) during the continuance of an Event of Default following notice from the Collateral Agent, all
in form and substance satisfactory to the Collateral Agent (on behalf of all Secured Parties).
(e)
Commercial
Tort Claims
. The Grantor shall promptly (and in any event within five (5) Business Days of receipt thereof) notify the Secured
Parties in writing upon incurring or otherwise obtaining a Commercial Tort Claim after the date hereof and, upon request of the
Collateral Agent (on behalf of all Secured Parties), promptly amend
Schedule 1
to this Agreement to describe such
after-acquired Commercial Tort Claim in a manner that reasonably identifies such Commercial Tort Claim, and hereby authorizes the
filing of additional financing statements or amendments to existing financing statements describing such Commercial Tort Claims,
and agrees to do such other acts or things deemed reasonably necessary or desirable by the Collateral Agent (on behalf of all Secured
Parties) to give the Collateral Agent on behalf of the Secured Parties a first priority, perfected security interest (subject to
Permitted Liens) in any such Commercial Tort Claim.
(f)
Government
Contracts
. If any Account or Chattel Paper arises out of a contract or contracts with the United States of America or any department,
agency, or instrumentality thereof, the Grantor shall promptly (and in any event within five (5) Business Days of the creation
thereof) notify the Secured Parties thereof in writing and use commercially reasonable efforts to execute any instruments or take
any steps reasonably required by the Collateral Agent (on behalf of all Secured Parties) in order that all moneys due or to become
due under such contract or contracts shall be assigned to the Collateral Agent (on behalf of all Secured Parties) during the continuance
of an Event of Default following notice from the Collateral Agent, and shall provide written notice thereof and use commercially
reasonable efforts to take all other appropriate actions under the Assignment of Claims Act or other applicable law to provide
the Collateral Agent on behalf of all Secured Parties a first-priority perfected security interest (subject to Permitted Liens)
in such contract.
(g)
Investment
Related Property
.
(i) If
the Grantor shall receive or become entitled to receive any Pledged Interests after the date hereof, it shall promptly (and in
any event within five (5) Business Days of receipt thereof) identify such Pledged Interests in a written notice to the Secured
Parties;
(ii) Upon
the request of the Collateral Agent during the continuance of an Event of Default, all sums of money and property paid or distributed
in respect of the Investment Related Property pledged hereunder which are received by the Grantor shall be held by the Grantor
in trust for the benefit of the Secured Parties segregated from the Grantor’s other property, and the Grantor shall deliver
it promptly to the Collateral Agent (on behalf of all Secured Parties) in the exact form received;
(iii) The
Grantor shall promptly deliver to the Secured Parties a copy of each material notice or other written communication received by
it in respect of any Pledged Interests;
(iv) The
Grantor shall not make or consent to any material amendment or other modification or waiver with respect to any Pledged Interests,
Pledged Operating Agreement, or Pledged Partnership Agreement or enter into any agreement or permit to exist any restriction with
respect to any Pledged Interests, in each case, that could reasonably be expected to materially adversely affect the Collateral
Agent or the Secured Parties;
(v) The
Grantor agrees that it will cooperate with the Secured Parties in obtaining all necessary approvals and making all necessary filings
under federal and state law, and, upon the request of the Collateral Agent during the continuance of an Event of Default, under
foreign law, in connection with the Security Interests on the Investment Related Property pledged hereunder or any sale or transfer
thereof; and
(vi) As
to all limited liability company or partnership interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement,
the Grantor hereby represents, warrants and covenants that the Pledged Interests issued pursuant to such agreement (A) shall not
be dealt in or traded on securities exchanges or in securities markets, (B) will not constitute investment company securities,
and (C) will not be held by the Grantor in a securities account. In addition, none of the Pledged Operating Agreements, the
Pledged Partnership Agreements, or any other agreements governing any of the Pledged Interests issued under any Pledged Operating
Agreement or Pledged Partnership Agreement, shall provide that such Pledged Interests are securities governed by Article 8 of the
Uniform Commercial Code as in effect in any relevant jurisdiction.
(h)
Transfers
and Other Liens
. The Grantor shall not (i) sell, lease, license, assign (by operation of law or otherwise), transfer or otherwise
dispose of, or grant any option with respect to, any of the Collateral, except for Permitted Transfers or as expressly permitted
by this Agreement and the other Transaction Documents, or (ii) except for Permitted Liens, create or permit to exist any Lien upon
or with respect to any of the Collateral without the consent of the Collateral Agent. The inclusion of Proceeds in the Collateral
shall not be deemed to constitute consent by any Secured Party to any sale or other disposition of any of the Collateral except
as expressly permitted in this Agreement or the other Transaction Documents. Notwithstanding anything contained in this Agreement
to the contrary, Permitted Liens (other than Permitted Liens granted to the Secured Parties) shall not be permitted with respect
to any Pledged Interests.
(i)
Preservation
of Existence
. The Grantor shall maintain and preserve its existence, rights and privileges, and become or remain
duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which
the transaction of its business makes such qualification necessary, except where failure to be so qualified could not reasonably
be expected to have a Material Adverse Effect (as defined in the Securities Purchase Agreement).
(j)
Maintenance
of Properties
. The Grantor shall maintain and preserve all of its properties which are reasonably necessary in the proper
conduct of its business in good working order and condition, ordinary wear and tear excepted.
(k)
Maintenance
of Insurance
. The Grantor shall maintain insurance with responsible and reputable insurance companies or associations
(including, without limitation, comprehensive general liability, property, hazard, rent and business interruption insurance) with
respect to all of its assets and properties (including, without limitation, all real properties leased or owned by it and any and
all Inventory and Equipment) and business, in such amounts and covering such risks as is required by any governmental authority
having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in
similar businesses similarly situated, in each case, reasonably acceptable to the Collateral Agent (on behalf of all Secured Parties).
(l)
Other
Actions as to Any and All Collateral
. The Grantor shall promptly (and in any event within five (5) Business Days of acquiring
or obtaining such Collateral) notify the Secured Parties in writing upon (i) acquiring or otherwise obtaining any Collateral after
the date hereof consisting of Investment Related Property, Chattel Paper (electronic, tangible or otherwise), documents (as defined
in Article 9 of the Code), promissory notes (as defined in the Code) or instruments (as defined in the Code) collectively having
an aggregate value in excess of $100,000 or (ii) any amount payable under or in connection with any of the Collateral being or
becoming evidenced after the date hereof by any Chattel Paper, documents, promissory notes, or instruments and, in each such case
upon the request of the Collateral Agent (on behalf of all Secured Parties), promptly execute such other documents, or if applicable,
deliver such Chattel Paper, other documents or certificates evidencing any Investment Related Property and do such other acts or
things deemed reasonably necessary or desirable by the Collateral Agent (on behalf of all Secured Parties) to protect the Secured
Parties’ respective Security Interests therein.
7.
Relation
to Other Transaction Documents
. In the event of any conflict between any provision in this Agreement and any provision in the
Securities Purchase Agreement or the Notes, such provision of the Securities Purchase Agreement or the Notes shall control, except
to the extent the applicable provision in this Agreement is more restrictive with respect to the rights of the Grantor or imposes
more burdensome or additional obligations on the Grantor, in which event the applicable provision in this Agreement shall control.
8.
Further
Assurances
.
(a) The
Grantor agrees that from time to time, at its own expense, it will promptly execute and deliver all further instruments and documents,
and take all further action, that may be reasonably necessary or that the Collateral Agent (on behalf of all Secured Parties) may
reasonably request, in order to perfect and protect the Security Interests granted or purported to be granted hereby or to enable
the Secured Parties to exercise and enforce their rights and remedies hereunder with respect to any of the Collateral.
(b) The
Grantor authorizes the filing by the Collateral Agent (on behalf of all Secured Parties) of financing or continuation statements,
or amendments thereto, including, but not limited to, the recordation of the security interests granted hereunder in Patents, Trademarks
and Copyrights in the United States Patent and Trademark Office and the United States Copyright Office, and Grantor will execute
and deliver to the Collateral Agent such other instruments or notices, as may be reasonably necessary or as the Collateral Agent
may reasonably request, in order to perfect and preserve the Security Interests granted or purported to be granted hereby. Upon
the Satisfaction in Full of the Secured Obligations, the Collateral Agent shall (at Grantor’ expense) file a termination
statement and/or other necessary documents terminating and releasing any and all financing statements or Liens on the Collateral
pursuant to Section 24 within five (5) Business Days following a written request therefor from Grantor.
(c) The
Grantor authorizes the Collateral Agent (on behalf of all Secured Parties) at any time and from time to time to file, transmit,
or communicate, as applicable, financing statements and amendments (i) describing the Collateral as “all assets of debtor”
or words of similar effect, (ii) describing the Collateral as being of equal or lesser scope or with greater detail, or (iii) that
contain any information required by part 5 of Article 9 of the Code for the sufficiency or filing office acceptance. The Grantor
also hereby ratifies any and all financing statements or amendments previously filed by the Collateral Agent in any jurisdiction.
(d) Subject
to Section 8(b), the Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination
statement with respect to any financing statement filed in connection with this Agreement without the prior written consent of
the Collateral Agent (on behalf of all Secured Parties), subject to the Grantor’s rights under Section 9-509(d)(2) of the
Code.
(e) Upon
five (5) Business Day’s advance notice, the Grantor shall permit each Secured Party (at such Secured Party’s expense)
or its employees, accountants, attorneys or agents, access to examine and inspect any Collateral or any other property of the Grantor
at any time during ordinary business hours, but no more than once per calendar year unless an Event of Default has occurred and
is continuing.
9.
Collateral
Agent’s Right to Perform Contracts, Exercise Rights, etc
. Upon the occurrence and during the continuance of an Event
of Default, the Collateral Agent (on behalf of all Secured Parties) (a) may proceed to perform any and all of the obligations of
the Grantor contained in any contract, lease, or other agreement and exercise any and all rights of the Grantor therein contained
as fully as the Grantor itself could, (b) shall have the right to use the Grantor’s rights under Intellectual Property Licenses
in connection with the enforcement of the Secured Parties’ rights hereunder, including the right to prepare for sale and
sell any and all Inventory and Equipment now or hereafter owned by the Grantor and now or hereafter covered by such licenses, and
(c) shall have the right to request that any Stock that is pledged hereunder be registered in the name of the Secured Parties or
any of their nominees.
10.
Collateral
Agent Appointed Attorney-in-Fact
. The Grantor, on behalf of itself and each New Subsidiary of the Grantor, hereby irrevocably
appoints the Collateral Agent (on behalf of all Secured Parties) as the attorney-in-fact of the Grantor and each such New Subsidiary
upon the occurrence and during the continuance of an Event of Default. In the event the Grantor or any New Subsidiary fails to
execute or deliver in a timely manner any Transaction Document or other agreement, document, certificate or instrument which the
Grantor or New Subsidiary now or at any time hereafter is required to execute or deliver pursuant to the terms of the Securities
Purchase Agreement or any other Transaction Document, upon the occurrence and during the continuance of an Event of Default, the
Collateral Agent (on behalf of all Secured Parties) shall have full authority in the place and stead of the Grantor or New Subsidiary,
and in the name of the Grantor, such New Subsidiary or otherwise, to execute and deliver each of the foregoing. Without limitation
of the foregoing, upon the occurrence and during the continuance of an Event of Default, the Collateral Agent (on behalf of all
Secured Parties) shall have full authority in the place and stead of the Grantor and each New Subsidiary, and in the name of any
the Grantor, any such New Subsidiary or otherwise, to take any action and to execute any instrument which the Collateral Agent
(on behalf of all Secured Parties) may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation:
(a) to
ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due
under or in connection with any Collateral of the Grantor or New Subsidiary;
(b) to
receive and open all mail addressed to the Grantor or New Subsidiary and to notify postal authorities to change the address for
the delivery of mail to the Grantor or New Subsidiary to that of an address approved by the Collateral Agent (on behalf of all
Secured Parties);
(c) to
receive, indorse, and collect any drafts or other instruments, documents, Negotiable Collateral or Chattel Paper;
(d) to
file any claims or take any action or institute any proceedings which the Collateral Agent (on behalf of all Secured Parties) may
deem reasonably necessary or desirable for the collection of any of the Collateral of the Grantor or New Subsidiary or otherwise
to enforce the rights of the Secured Parties with respect to any of the Collateral; and
(e) to
use any labels, Patents, Trademarks, trade names, URLs, domain names, industrial designs, Copyrights, customer lists, advertising
matter or other industrial or intellectual property rights, in advertising for the exclusive purpose of sale and selling Inventory
and other Collateral and to collect any amounts due under Accounts, contracts or Negotiable Collateral of the Grantor or New Subsidiary.
To the extent permitted by
law, the Grantor hereby ratifies, for itself and each New Subsidiary, all that such attorney-in-fact shall lawfully do or cause
to be done by virtue hereof. Such power-of-attorney granted pursuant to this Section 10 is coupled with an interest and shall be
irrevocable until this Agreement is terminated.
11.
Collateral
Agent May Perform
. If the Grantor fails to perform any agreement contained herein, upon the occurrence and during the continuance
of an Event of Default, the Collateral Agent (on behalf of all Secured Parties) may perform, or cause performance of, such agreement,
and the reasonable expenses of the Collateral Agent incurred in connection therewith shall be payable by the Grantor.
12.
Collateral
Agent’s Duties; Bailee for Perfection
. The powers conferred on the Collateral Agent hereunder are solely to protect the
Secured Parties’ respective interests in the Collateral and shall not impose any duty upon the Collateral Agent in favor
of the Grantor or any other Secured Party to exercise any such powers. Except for the safe custody of any Collateral in its actual
possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall not have any duty to the
Grantor or any other Secured Party as to any Collateral or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. The Collateral Agent shall be deemed to have exercised reasonable care
in the custody and preservation of any Collateral in its actual possession if such Collateral is accorded treatment substantially
equal to that which is accorded to its own property. The Collateral Agent agrees that, with respect to any Collateral at any time
or times in its possession and in which any other Secured Party has a Lien, the Collateral Agent shall be the bailee of each other
Secured Party solely for purposes of perfecting (to the extent not otherwise perfected) each other Secured Party’s Lien in
such Collateral, provided that the Collateral Agent shall not be obligated to obtain or retain possession of any such Collateral.
13.
Collection
of Accounts, General Intangibles and Negotiable Collateral
. At any time upon the occurrence and during the continuation of
an Event of Default, the Collateral Agent (on behalf of all Secured Parties) may (a) notify Account Debtors of the Grantor that
the Accounts, General Intangibles, Chattel Paper or Negotiable Collateral have been assigned to the Collateral Agent (on behalf
of all Secured Parties) or that the Collateral Agent (on behalf of all Secured Parties) has a security interest therein, and (b)
collect the Accounts, General Intangibles and Negotiable Collateral directly, and any collection costs and expenses shall constitute
part of the Secured Obligations.
14.
Disposition
of Pledged Interests by Secured Parties
. None of the Pledged Interests hereafter acquired on the date of acquisition thereof
will be registered or qualified under the various federal, state or other securities laws of the United States or any other jurisdiction,
and disposition thereof after an Event of Default may be restricted to one or more private (instead of public) sales in view of
the lack of such registration. The Grantor understands that in connection with such disposition, the Collateral Agent (on behalf
of all Secured Parties) may approach only a restricted number of potential purchasers and further understands that a sale under
such circumstances may yield a lower price for the Pledged Interests than if the Pledged Interests were registered and qualified
pursuant to federal, state and other securities laws and sold on the open market. The Grantor, therefore, agrees that: (a) if the
Collateral Agent (on behalf of all Secured Parties) shall, pursuant to the terms of this Agreement, sell or cause the Pledged Interests
or any portion thereof to be sold at a private sale, the Collateral Agent (on behalf of all Secured Parties) shall have the right
to rely upon the advice and opinion of any nationally recognized brokerage or investment firm (but shall not be obligated to seek
such advice and the failure to do so shall not be considered in determining the commercial reasonableness of such action) as to
the best manner in which to offer the Pledged Interest or any portion thereof for sale and as to the best price reasonably obtainable
at the private sale thereof; and (b) such reliance shall be conclusive evidence that the Collateral Agent has handled the disposition
in a commercially reasonable manner.
15.
Voting
Rights
.
(a) Upon
the occurrence and during the continuation of an Event of Default, (i) the Collateral Agent (on behalf of all Secured Parties)
may, at its option, and with two (2) Business Days prior notice to the Grantor, and in addition to all rights and remedies available
to the Secured Parties under any other agreement, at law, in equity, or otherwise, exercise all voting rights, and all other ownership
or consensual rights in respect of the Pledged Interests, but under no circumstances is the Collateral Agent obligated by the terms
of this Agreement to exercise such rights, and (ii) if the Collateral Agent (on behalf of all Secured Parties) duly exercises its
right to vote any of such Pledged Interests, the Grantor hereby appoints the Collateral Agent (on behalf of all Secured Parties)
as the Grantor’s true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote such Pledged Interests in any manner that
the Collateral Agent (on behalf of all Secured Parties) deem advisable for or against all matters submitted or which may be submitted
to a vote of shareholders, partners or members, as the case may be. Such power-of-attorney granted pursuant to this Section 15
is coupled with an interest and shall be irrevocable until this Agreement is terminated.
(b) For
so long as the Grantor shall have the right to vote the Pledged Interests, it covenants and agrees that it will not, without the
prior written consent of the Collateral Agent (on behalf of all Secured Parties), vote or take any consensual action with respect
to such Pledged Interests which would materially or adversely affect the rights of the Secured Parties exercising the voting rights
owned by the Grantor or the value of the Pledged Interests.
16.
Remedies
.
Upon the occurrence and during the continuance of an Event of Default:
(a) The
Collateral Agent (on behalf of all Secured Parties) may exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein, in the other Transaction Documents, or otherwise available to it, all the rights and remedies of
a secured party on default under the Code or any other applicable law. Without limiting the generality of the foregoing, the Grantor
expressly agrees that, in any such event, the Collateral Agent (on behalf of all Secured Parties) without any demand, advertisement,
or notice of any kind (except a notice specified below of time and place of public or private sale) to or upon the Grantor or any
other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum extent permitted
by the Code or by any other applicable law), may take immediate possession of all or any portion of the Collateral and (i) require
the Grantor to, and the Grantor hereby agrees that it will at its own expense and upon request of the Collateral Agent (on behalf
of all Secured Parties) promptly, assemble all or part of the Collateral as directed by the Collateral Agent (on behalf of all
Secured Parties) and make it available to the Collateral Agent (on behalf of all Secured Parties) at one or more locations where
the Grantor regularly maintains Inventory, and (ii) without notice except as specified below, sell the Collateral or any part thereof
in one or more parcels at public or private sale, at the Collateral Agent’s offices or elsewhere, for cash, on credit, and
upon such other terms as the Collateral Agent (on behalf of all Secured Parties) may deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at least 10 Business Days’ notice of the time and place
of any public sale or the time after which any private sale is to be made shall constitute reasonable notification and specifically
such notice shall constitute a reasonable “authenticated notification of disposition” within the meaning of Section
9-611 of the Code. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having
been given. The Collateral Agent (on behalf of all Secured Parties) may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to
which it was so adjourned.
(b) The
Collateral Agent (on behalf of all Secured Parties) is hereby granted a non-exclusive license or other right to use, without liability
for royalties or any other charge, the Grantor’s labels, Patents, Copyrights, rights of use of any name, trade secrets, trade
names, Trademarks, service marks and advertising matter, URLs, domain names, industrial designs, other industrial or intellectual
property or any property of a similar nature, whether owned by the Grantor or with respect to which the Grantor has rights under
license, sublicense, or other agreements (but only to the extent (i) such license, sublicense or agreement does not prohibit such
use by the Collateral Agent (on behalf of all Secured Parties), and (ii) the Grantor will not be in default under such license,
sublicense, or other agreement as a result of such use by the Collateral Agent (on behalf of all Secured Parties)), as it pertains
to the Collateral, for the exclusive purpose of preparing for sale, advertising for sale and effectuating the sale of any Collateral,
and the Grantor’s rights under all licenses and all franchise agreements shall inure to the benefit of the Collateral Agent
(on behalf of all Secured Parties).
(c) Any
cash held by the Collateral Agent as Collateral and all proceeds received by the Collateral Agent in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral shall be applied against the Secured Obligations in the order
set forth in Section 17 hereof. In the event the proceeds of Collateral are insufficient for the Satisfaction in Full of the Secured
Obligations (as defined below), the Grantor shall remain liable for any such deficiency.
(d) The
Grantor hereby acknowledges that the Secured Obligations arose out of a commercial transaction, and agrees that if an Event of
Default shall occur and be continuing the Collateral Agent (on behalf of all Secured Parties) shall have the right to an immediate
writ of possession without notice of a hearing. The Collateral Agent (on behalf of all Secured Parties) shall have the right to
the appointment of a receiver for the properties and assets of the Grantor, and the Grantor hereby consents to such rights and
such appointment and hereby waives any objection it may have thereto or the right to have a bond or other security posted by the
Collateral Agent (on behalf of all Secured Parties).
(e) The
Collateral Agent (on behalf of all Secured Parties) may, in addition to other rights and remedies provided for herein, in the other
Transaction Documents, or otherwise available to it under applicable law and without the requirement of notice to or upon the Grantor
or any other Person (which notice is hereby expressly waived to the maximum extent permitted by the Code or any other applicable
law), (i) with respect to the Grantor’s Deposit Accounts in which any Secured Party’s Liens are perfected by control
under Section 9-104 of the Code, instruct the bank maintaining such Deposit Account for the Grantor to pay the balance of such
Deposit Account to or for the benefit of the Collateral Agent (on behalf of all Secured Parties), and (ii) with respect to
the Grantor’s Securities Accounts in which any Secured Party’s Liens are perfected by control under Section 9-106 of
the Code, instruct the securities intermediary maintaining such Securities Account for the Grantor to (A) transfer any cash in
such Securities Account to or for the benefit of the Collateral Agent (on behalf of all Secured Parties), or (B) liquidate any
financial assets in such Securities Account that are customarily sold on a recognized market and transfer the cash proceeds thereof
to or for the benefit of the Collateral Agent (on behalf of all Secured Parties).
17.
Priority
of Liens; Application of Proceeds of Collateral.
Each Secured Party hereby acknowledges and agrees that, notwithstanding the
time or order of the filing of any financing statement or other registration or document with respect to the Collateral and the
Security Interests, or any provision of this Agreement, any other Security Document, the Code or other applicable law, solely as
amongst the Secured Parties, the separate Security Interests of the Secured Parties shall have the same rank and priority; provided,
that, the foregoing shall not apply to any Security Interest of a Secured Party that is void or voidable as a matter of law. In
furtherance thereof, all proceeds of Collateral received by the Collateral Agent shall be applied as follows:
(a)
first
,
ratably to pay any expenses due to the Collateral Agent (including, without limitation, the reasonable costs and expenses paid
or incurred to correct any default under or enforce any provision of the Transaction Documents, or after the occurrence and during
the continuance of any Event of Default in gaining possession of, maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated);
(b)
second
,
to pay any indemnities then due to any of the Secured Parties under the Transaction Documents, until paid in full;
(c)
third
,
ratably to pay any fees or premiums then due to any of the Secured Parties under the Transaction Documents, until paid in full;
(d)
fourth
,
ratably to pay interest due in respect of the Secured Obligations then due to any of the Secured Parties, until paid in full;
(e)
fifth
,
ratably to pay the principal amount of all Secured Obligations then due to any of the Secured Parties, until paid in full;
(f)
sixth
,
ratably to pay any other Secured Obligations then due to any of the Secured Parties; and
(g)
seventh
,
to Grantor or such other Person entitled thereto under applicable law.
18.
Remedies
Cumulative
. Each right, power, and remedy of any Secured Party as provided for in this Agreement or in any other Transaction
Document or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall
be in addition to every other right, power, or remedy provided for in this Agreement or in the other Transaction Documents or now
or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by any Secured
Party, of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by such Secured
Party of any or all such other rights, powers, or remedies.
19.
Marshaling
.
No Secured Party shall be required to marshal any present or future collateral security (including but not limited to the Collateral)
for, or other assurances of payment of, the Secured Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such collateral security
and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising.
To the extent that it lawfully may, the Grantor hereby agrees that it will not invoke any law relating to the marshaling of collateral
which might cause delay in or impede the enforcement of any Secured Party’s rights and remedies under this Agreement or under
any other instrument creating or evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding
or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully
may, the Grantor hereby irrevocably waives the benefits of all such laws.
20.
Appointment
of Collateral Agent; Acknowledgment.
(a) The
Secured Parties hereby appoint Robert Clifford to act as the initial collateral agent on behalf of all Secured Parties (the “
Collateral
Agent
”). Notwithstanding anything in this Agreement to the contrary, one or more Secured Parties (other than the then
Collateral Agent) holding a majority of the then aggregate outstanding principal balance of the Notes (excluding any Notes held
by the then acting Collateral Agent) may remove the then-acting Collateral Agent and appoint any other Secured Party to act as
the Collateral Agent under this Agreement. Upon such appointment such Secured Party shall act as Collateral Agent pursuant to the
terms of this Agreement.
(b) No
Secured Party (which term, as used in this sentence, shall include reference to each Secured Party’s officers, directors,
employees, attorneys, agents and affiliates and to the officers, directors, employees, attorneys and agents of such Secured Party’s
affiliates) shall: (i) have any duties or responsibilities except those expressly set forth in this Agreement and the other
Security Documents or (ii) be required to take, initiate or conduct any enforcement action (including any litigation, foreclosure
or collection proceedings hereunder or under any of the other Security Documents). Without limiting the foregoing, no Secured Party
shall have any right of action whatsoever against any other Secured Party as a result of such Secured Party acting or refraining
from acting hereunder or under any of the Security Documents except as a result and to the extent of losses caused by such Secured
Party’s actual gross negligence or willful misconduct. No Secured Party assumes any responsibility for any failure or
delay in performance or breach by the Grantor or any other Secured Party of its obligations under this Agreement or any other Transaction
Document. No Secured Party makes to any other Secured Party any express or implied warranty, representation or guarantee with
respect to any Secured Obligations, Collateral, Transaction Document or the Grantor. No Secured Party nor any of its officers,
directors, employees, attorneys or agents shall be responsible to any other Secured Party or any of its officers, directors, employees,
attorneys or agents for: (i) any recitals, statements, information, representations or warranties contained in any of the
Transaction Documents or in any certificate or other document furnished pursuant to the terms hereof; (ii) the execution,
validity, genuineness, effectiveness or enforceability of any of the Transaction Documents; (iii) the validity, genuineness,
enforceability, collectability, value, sufficiency or existence of any Collateral, or the attachment, perfection or priority of
any Lien therein; or (iv) the assets, liabilities, financial condition, results of operations, business, creditworthiness
or legal status of the Grantor or any Account Debtor. No Secured Party nor any of its officers, directors, employees, attorneys
or agents shall have any obligation to any other Secured Party to ascertain or inquire into the existence of any default or Event
of Default, the observance or performance by the Grantor of any of its duties or agreements under any of the Transaction Documents
or the satisfaction of any conditions precedent contained in any of the Transaction Documents.
(d) Each
Secured Party hereby acknowledges and represents that it has, independently and without reliance upon any other Secured Party,
and based upon such documents, information and analyses as it has deemed appropriate, made its own credit analysis of the Grantor
and its own decision to enter into the Transaction Documents and to purchase the Notes, and each Secured Party has made such
inquiries concerning the Transaction Documents, the Collateral and the Grantor as such Secured Party feels necessary and appropriate,
and has taken such care on its own behalf as would have been the case had it entered into the Transaction Documents without any
other Secured Party. Each Secured Party hereby further acknowledges and represents that the other Secured Parties have not made
any representations or warranties to it concerning the Grantor, any of the Collateral or the legality, validity, sufficiency or
enforceability of any of the Transaction Documents. Each Secured Party also hereby acknowledges that it will, independently and
without reliance upon the other Secured Parties, and based upon such financial statements, documents and information as it deems
appropriate at the time, continue to make and rely upon its own credit decisions in taking or refraining to take any other
action under this Agreement or the Transaction Documents. No Secured Party shall have any duty or responsibility to provide any
other Secured Party with any notices, reports or certificates furnished to such Secured Party by the Grantor or any credit or other
information concerning the affairs, financial condition, business or assets of the Grantor (or any of its affiliates) which may
come into possession of such Secured Party.
21.
Indemnity
and Expenses
.
(a) Without
limiting any obligations of the Grantor under the Securities Purchase Agreement, the Grantor agrees to indemnify all Secured Parties
from and against all claims, lawsuits and liabilities (including reasonable attorneys’ fees) arising out of or resulting
from this Agreement (including enforcement of this Agreement), except claims, losses or liabilities resulting from the gross negligence
or willful misconduct of the Secured Party seeking indemnification as determined by a final non-appealable order of a court of
competent jurisdiction. This provision shall survive the termination of this Agreement and the Transaction Documents and the Satisfaction
in Full of the Secured Obligations.
(b) The
Grantor shall, upon demand, pay to the Collateral Agent all of the reasonable costs and expenses which the Collateral Agent may
incur in connection with the custody, preservation, use or operation of, or, upon an Event of Default, the sale of, collection
from, or other realization upon, any of the Collateral in accordance with this Agreement and the other Transaction Documents. The
Grantor shall, upon demand, pay to each Secured Party all of the reasonable costs and expenses which such Secured Party may incur
in connection with (i) the exercise or enforcement of any of the rights of such Secured Party hereunder or (ii) the failure by
the Grantor to perform or observe any of the provisions hereof.
22.
Merger,
Amendments; Etc.
THIS AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES SOLELY WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES. No provision of this Agreement
may be amended other than by an instrument in writing signed by the Grantor and the Collateral Agent, and any amendment to any
provision of this Agreement made in conformity with the provisions of this Section 22 shall be binding on all Secured Parties,
provided that no such amendment shall be effective to the extent that it (a) applies to less than all of the Secured Parties or
(b) imposes any obligation or liability on any Secured Party without such Secured Party’s prior written consent (which may
be granted or withheld in such Secured Party’s sole discretion). No waiver shall be effective unless it is in writing and
signed by an authorized representative of the waiving party, provided that the Collateral Agent may waive any provision of this
Agreement, and any waiver of any provision of this Agreement made in conformity with the provisions of this Section 22 shall be
binding on all Secured Parties, provided that no such waiver shall be effective to the extent that it (i) applies to less than
all the Secured Parties (unless a party gives a waiver as to itself only) or (ii) imposes any obligation or liability on any Secured
Party without such Secured Party’s prior written consent (which may be granted or withheld in such Secured Party’s
sole discretion).
23.
Addresses
for Notices
. All notices and other communications provided for hereunder (a) shall be given in the form and manner set forth
in the Securities Purchase Agreement and (b) shall be delivered, (i) in the case of notice to the Grantor, by delivery of such
notice to the Grantor’s address specified in the Securities Purchase Agreement or at such other address as shall be designated
by the Grantor in a written notice to each of the Secured Parties in accordance with the provisions thereof, and (ii) in the case
of notice to any Secured Party, by delivery of such notice to such Secured Party at its address specified in the Securities Purchase
Agreement or at such other address as shall be designated by such Secured Party in a written notice to the Grantor and each other
Secured Party in accordance with the provisions thereof.
24.
Separate,
Continuing Security Interests; Assignments under Transaction Documents.
This Agreement shall create a continuing security interest
in the Collateral in favor of the Collateral Agent on behalf of each Secured Party and shall (a) remain in full force and effect
until Satisfaction in Full of the Secured Obligations, (b) be binding upon the Grantor, and its permitted successors and permitted
assigns, and (c) inure to the benefit of, and be enforceable by, the Secured Parties and their respective successors, transferees
and assigns. Without limiting the generality of the foregoing clause (c), any Secured Party may, in accordance with the provisions
of the Transaction Documents, assign or otherwise transfer all or any portion of its rights and obligations under the Transaction
Documents to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted
to such Secured Party herein or otherwise. Upon Satisfaction in Full of the Secured Obligations, the Security Interests granted
hereby shall terminate and all rights to the Collateral shall revert to the Grantor or any other Person entitled thereto. At such
time, the Collateral Agent and each Secured Party will authorize the filing of appropriate termination statements to terminate
such Security Interests. No transfer or renewal, extension, assignment, or termination of this Agreement or any other Transaction
Document, or any other instrument or document executed and delivered by the Grantor to any Secured Party nor any additional loans
made by any Secured Party to the Grantor, nor the taking of further security, nor the retaking or re-delivery of the Collateral
to the Grantor, or any of them, by any Secured Party, nor any other act of the Secured Parties, or any of them, shall release the
Grantor from any obligation, except a release or discharge executed in writing by all Secured Parties. No Secured Party shall by
any act, delay, omission or otherwise, be deemed to have waived any of its rights or remedies hereunder, unless such waiver is
in writing and signed by such Secured Party and then only to the extent therein set forth. A waiver by any Secured Party of any
right or remedy on any occasion shall not be construed as a bar to the exercise of any such right or remedy which such Secured
Party would otherwise have had on any other occasion.
25.
Governing
Law; Jurisdiction; Service of Process; Jury Trial
. All questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is
improper;
provided
,
however
, any suit seeking enforcement against any Collateral or other property may be brought,
at any Secured Party’s option, in the courts of any jurisdiction where such Secured Party elects to bring such action or
where such Collateral or other property may be found. Each party hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
26.
Miscellaneous
.
(a) This
Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is
delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature
page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such signature page were an original thereof. Any party delivering an executed
counterpart of this Agreement by facsimile or other electronic method of transmission also shall deliver an original executed counterpart
of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement. The foregoing shall apply to each other Security Document
mutatis mutandis
.
(b) Any
provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision
in any other jurisdiction.
(c) Headings
used in this Agreement are for convenience only and shall not be used in connection with the interpretation of any provision hereof.
(d) The
pronouns used herein shall include, when appropriate, either gender and both singular and plural, and the grammatical construction
of sentences shall conform thereto.
(e) The
language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. For clarification purposes, the Recitals are part of this Agreement.
(f) Unless
the context of this Agreement or any other Transaction Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the terms “includes” and “including” are not limiting,
and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.”
The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this
Agreement or any other Transaction Document refer to this Agreement or such other Transaction Document, as the case may be, as
a whole and not to any particular provision of this Agreement or such other Transaction Document, as the case may be. Section,
subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in
this Agreement or in any other Transaction Document to any agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable
(subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). “
Satisfaction in Full of the Secured Obligations
” shall mean the
indefeasible payment in full in cash and discharge, or other satisfaction in accordance with the terms of the Transaction Documents
(including, without limitation, conversion of the Notes into equity of the Company) and discharge, of all Secured Obligations in
full. Any reference herein to any Person shall be construed to include such Person’s permitted successors and permitted assigns.
Any requirement of a writing contained herein or in any other Transaction Document shall be satisfied by the transmission of a
Record and any Record so transmitted shall constitute a representation and warranty as to the accuracy and completeness of the
information contained therein.
(g) All
dollar amounts referred to in this Agreement and the other Transaction Documents are in United States Dollars (“
U.S. Dollars
”),
and all amounts owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated
in other currencies shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date
of calculation. “
Exchange Rate
”
means, in relation to any amount of currency to be converted into U.S.
Dollars pursuant to this Agreement, the U.S. Dollar exchange rate as published in The Wall Street Journal on the relevant date
of calculation.
(h) For
the avoidance of doubt, this Agreement hereby amends and restates the 2015 Security Agreement in its entirety.
[
signature pages follow
]
IN WITNESS WHEREOF, the
undersigned parties hereto have executed this Agreement by and through their duly authorized officers, as of the day and year first
above written.
|
GRANTOR:
|
ATOMERA INCORPORATED,
|
|
|
a Delaware corporation
|
|
|
|
|
|
By:
|
/s/ Scott A. Bibaud
|
|
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|
Scott A. Bibaud,
|
|
|
|
Chief Executive Officer
|
|
Collateral Agent
:
|
/s/ Robert Clifford
|
|
|
Robert Clifford
|
[Signature Page to Amended
and Restated Security Agreement]
SECURED PARTIES:
|
For Entity Investors:
|
For Individual Investors:
|
|
Print Name:
|
|
|
Print Name:
|
|
|
|
|
|
|
|
|
Signature:
|
|
|
Signature:
|
|
|
Name of Signatory:
|
|
|
If Joint Investment, 2
nd
investor should complete:
|
|
Title:
|
|
|
Print Name:
|
|
|
|
|
|
|
|
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Signature:
|
|
[Signature Page to Amended
and Restated Security Agreement]
SCHEDULE 1
COMMERCIAL TORT CLAIMS
None.
SCHEDULE 2
REAL PROPERTY
Owned Real Property
None.
Leased Real Property
Facilities located at 20 Walnut Street, Suite
8, Wellesley Hills, MA 02481
Facilities located at 750 University Avenue, Suite
280, Los Gatos, CA 95032
Chief Executive Office
750 University Avenue, Suite
280, Los Gatos, CA 95032
SCHEDULE 3
LIST OF UNIFORM COMMERCIAL
CODE FILING JURISDICTIONS
Delaware
SCHEDULE 4
DEPOSIT ACCOUNTS AND SECURITIES
ACCOUNTS
Deposit Accounts
|
Bank
|
|
Account Name
|
|
Account Number
|
Securities Accounts
None.
Exhibit 21.1
Mears
Technologies, Inc., a Delaware corporation, has no subsidiaries
Exhibit
23.1
Independent
Registered Public Accounting Firm’s Consent
We
consent to the inclusion in this Registration Statement of Atomera Incorporated (f/k/a Mears Technologies, Inc.) on Form S-1 of
our report dated June 17, 2016 with respect to our audits of the financial statements of Atomera Incorporated as of December 31,
2015 and 2014 and for the years then ended, which report appears in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to our Firm under the heading “Experts” in such Prospectus.
/s/
Marcum
llp
Marcum
llp
New
York, NY
June
30, 2016