UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event
reported):
March
11, 2019
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BRIDGELINE DIGITAL, INC.
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(Exact
Name of Registrant as
Specified
in Its Charter)
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Delaware
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(State
or Other Jurisdiction of
Incorporation)
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001-33567
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52-2263942
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(Commission
File Number)
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(IRS
Employer Identification No.)
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100 Summit Drive, Burlington, MA
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01803
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(781) 376-5555
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(Registrant’s
Telephone Number,
Including
Area Code)
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(Former
Name or Former Address, if Changed Since Last Report)
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Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the Registrant
under any of the following provisions:
☐
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
☐
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a -12)
☐
Pre
-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d -2(b))
☐
Pre
-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 or
Rule 12b-2 of the Securities Exchange Act of 1934.
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
☐
Item 1.01. Entry into a Material Definitive
Agreement.
See
Item 3.02.
Item 3.02. Unregistered Sales of Equity Securities.
On March 12, 2019 (the “
Closing
Date
”), Bridgeline
Digital, Inc. (the “
Company
”) entered into Securities Purchase
Agreements (the “
SPAs
”), in substantially the form attached
hereto as Exhibit 10.1, with certain accredited investors (each,
a
Purchaser
”), pursuant to which the Company offered
and sold to the Purchasers an aggregate of 10,227.5 units
(“
Units
”) for $1,000 per Unit, with such Units
consisting of (i) an aggregate of 10,227.5 shares of the
Company’s newly designated Series C Convertible Preferred
Stock, par value $0.001 per share (“
Series C
Preferred
”); (ii)
warrants to purchase an aggregate of 56,819,473 shares of Company
common stock, par value $0.001 per share
(“
Common
Stock
”), subject to
adjustment (as set forth below), with a term of 5.5 years
(“
Series A
Warrants
”); (iii)
warrants to purchase an aggregate of 56,819,473 shares of Common
Stock, subject to adjustment (as set forth below), with a term of
24 months (“
Series B
Warrants
”); and (iv)
warrants with a term of 5.5 years (“
Series C
Warrants
,” and together
with the Series A Warrants and Series B Warrants, the
“
Warrants
”) (the “
Private
Placement
”). Forms of the
Series A Warrants, Series B Warrants and Series C Warrants are
attached hereto as Exhibits 4.1, 4.2 and 4.3,
respectively.
The Series A Warrants and Series B Warrants have
an initial exercise price of $0.18 per share;
provided,
however
, that the exercise
price of the Series A Warrants and Series B Warrants may be reset
up to three times (each, a “
Reset Date
”), as more specifically set forth in the
Series C Warrants, to a price equal to the greater of (i) 80% of
the average of the two lowest VWAP days out of the 20 consecutive
trading days immediately preceding the Reset Date, and (ii) $0.08
(the “
Floor
”) (the “
Reset Price
”). Upon each applicable Reset Date, if
ever, the number of shares of Common Stock issuable pursuant to the
Series A Warrants and Series B Warrants shall also be adjusted, as
more specifically set forth in the Series C Warrants. The Series C
Warrants, none of which are initially exercisable, have an exercise
price of $0.001 per share. In the event that the Reset Price is
lower than $0.18 on any applicable Reset Date, if ever, the Series
C Warrants shall become exercisable for that number of shares of
Common Stock such that when combined with the number of shares
issuable upon conversion of the Series C Preferred into Common
Stock (“
Conversion
Shares
”), the combined
average cost of all such shares shall equal the applicable Reset
Price. Assuming that the Warrants are reset down to the Floor, the
number of shares of Common Stock issuable upon exercise of the
Series A Warrants shall be 127,843,750 shares, Series B Warrants
shall be 127,843,750 shares, and Series C Warrants shall be
71,024,277 shares.
No shares of Series C Preferred may be converted
into Conversion Shares and no Warrants may be exercised for shares
of Common Stock (“
Warrant
Shares
”), unless and
until such time that the Company has obtained approval from its
stockholders, at an annual or special meeting or via written
consent, to (i) issue the Conversion Shares and Warrant Shares upon
the conversion and exercise of the Series C Preferred and Warrants,
respectively, which number of shares in the aggregate exceeds 20%
of the Company’s shares of Common Stock issued and
outstanding immediately prior to the Closing Date, as required by
Nasdaq Marketplace Rule 5635(d) (the “
Issuance
Approval
”), and (ii)
amend its Amended and Restated Certificate of Incorporation, as
amended (“
Charter
”) to increase the number of shares of
Common Stock available for issuance thereunder (or effect a reverse
stock split of its issued and outstanding shares of Common Stock so
as to effectively increase the number of shares of Common Stock
available for issuance) by a sufficient amount to permit the
conversion of all outstanding Series C Preferred into Conversion
Shares and all Warrants into Warrant Shares (the
“
Authorized Share
Approval
,” and together
with the Issuance Approval, the “
Stockholder
Approvals
”). In addition,
the Company may not effect, and a Purchaser will not be entitled
to, convert the Series C Preferred Stock or exercise any Warrant,
which, upon giving effect to such conversion or exercise, would
cause (i) the aggregate number of shares of Common Stock
beneficially owned by the Purchaser (together with its affiliates)
to exceed 4.99% (or, at the election of the holder, 9.99%) of the
number of shares of Common Stock outstanding immediately after
giving effect to the exercise.
As additional consideration for the securities
purchased in the Private Placement, the Company also entered into
Warrant Exchange Agreements, in substantially the form attached
hereto as Exhibit 10.2, with each Purchaser that previously
purchased warrants from the Company in a public offering
consummated in October 2018 (the “
2018
Warrants
”), pursuant to
which the Company agreed to exchange, at the Purchaser’s
option, the 2018 Warrants for new warrants (the
“
Exchange
Warrants
”), in
substantially the form attached hereto as Exhibit 4.4, which
Exchange Warrants shall have identical terms to the 2018 Warrants
other than the exercise price, which shall be lowered to $0.18, and
the inclusion of the same exercise price reset provisions as the
Series A Warrants and Series B Warrants.
As
a condition to consummating the Private Placement, the Company
obtained Voting Agreements, in substantially the form attached
hereto as Exhibit 10.3, from holders of approximately 30% of its
current voting securities, pursuant to which such holders agreed to
vote (i) in favor of the Issuance Approval, (ii) in favor of the
Authorized Share Approval, and (iii) against any proposal or other
corporate action or agreement that could result in any condition of
the Company’s obligations under the SPA not being
fulfilled.
In connection with the Private Placement, the
Company also entered into Registration Rights Agreements (the
“
Registration Rights
Agreements
”), a form of
which is attached hereto as Exhibit 10.4, with each of the
Purchasers, pursuant to which the Company agreed to file a
registration statement with the Securities and Exchange Commission
no later than 30 days after the Closing Date in order to register,
on behalf of the Purchasers, the Conversion Shares and Warrant
Shares.
ThinkEquity, a division of Fordham Management,
Inc. and Taglich Brothers, Inc. (together, the
“
Placement
Agents
”) served as joint
placement agents for the Private Placement, pursuant to a Placement
Agency Agreement, the form of which is attached hereto as Exhibit
10.5. As consideration for their services, the Company (i) paid the
Placement Agents an aggregate cash fee of $818,200, an amount equal
to 8.0% of the gross proceeds received by the Company as a result
of the Private Placement, (ii) reimbursed the Placement Agents for
an aggregate of $90,000 for out-of-pocket expenses, and (iii)
issued the Placement Agents warrants (“
Placement Agent
Warrants”), in substantially the
form attached hereto as Exhibit 4.5, to purchase an aggregate of
2,840,974 shares of Common Stock, an amount equal to 5% of the
Conversion Shares issuable upon conversion of the shares of Series
C Preferred sold and issued to Purchasers in the Private
Placement.
Michael
Taglich, a member of the Company’s Board of Directors, is the
President and Chairman of Taglich Brothers, Inc. Mr. Taglich also
purchased Units in the amount of approximately $350,000 in the
Private Placement, which purchase is also subject to stockholder
approval pursuant to Nasdaq Marketplace Rule 5635(c).
The net proceeds to the Company from the Private
Placement, after deducting the Placement Agents’ fees and
expenses, and excluding the proceeds, if any, from the exercise of
the Warrants, were approximately $9.0 m
illion. The Company intends to utilize
approximately $4.5 million of the proceeds to purchase certain
assets from Stantive Technologies, Inc., as previously disclosed in
the Company’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on February 19, 2019,
$2.7
million to repay certain
indebtedness, and the remaining net proceeds for general working
capital.
The
Series C Preferred, Warrants, Exchange Warrants and Placement Agent
Warrants offered, issued and sold in connection with the Private
Placement were issued without registration and are subject to
restrictions under the Securities Act of 1933, as amended, and
the securities laws of certain states, in reliance on the private
offering exemptions contained in Section 3(a)(9) and Section
4(a)(2) of the Securities Act of 1933 and on Regulation D
promulgated thereunder, and in reliance on similar exemptions under
applicable state laws as a transaction not involving a public
offering.
The
foregoing descriptions of the SPA, Series A Warrants, Series B
Warrants, Series C Warrants, Warrant Exchange Agreement, Exchange
Warrants, Voting Agreements, Registration Rights Agreements,
Placement Agency Agreement and Placement Agent Warrants do not
purport to be complete, and are qualified in their entirety by
reference to the same, attached hereto as Exhibits 10.1, 4.1,
4.2, 4.3, 10.2, 4.4, 10.3, 10.4, 10.5 and 4.5, respectively, each
of which are incorporated by reference herein.
Item 5.03. Amendments to Articles of Incorporation or Bylaws;
Change in Fiscal Year.
On
March 11, 2019, in connection with the Private
Placement, the Company filed the Certificate of Designations,
Preferences and Rights of the Series C Convertible Preferred Stock
(the “
Certificate of
Designation
”), with the
Secretary of State of the State of Delaware – Division of
Corporations, designating 11,000 shares of the Company’s
preferred stock as Series C Preferred, each share of Series C
Preferred with a Stated Value of $1,000 per share. The Series C
Preferred rank senior to all of the Company’s outstanding
securities, including the Company’s Series A Convertible
Preferred Stock (“
Series A
Preferred
”). In
connection with the designation of the Series C Preferred, the
holders of Series A Preferred executed a consent, approval and
waiver to, among other things, designate the Series C Preferred,
issue the Series C Preferred in connection with the Private
Placement, and subordinate the rights afforded to the holders of
Series A Preferred to the rights of the holders of Series C
Preferred.
Each share of Series C Preferred is convertible
into that number of Conversion Shares equal to the Stated Value
plus all accrued but unpaid dividends and Late Charges (as defined
in the Certificate of Designations), divided by $0.18, which
conversion rate is subject to adjustment in accordance with the
terms of the Certificate of Designation;
provided,
however
, that holders of the
Series C Preferred may not convert any of their Series C Preferred
into Conversion Shares unless and until the Company has obtained
both of the Stockholder Approvals. In addition, holders of Series C
Preferred are prohibited from converting Series C Preferred into
Conversion Shares if, as a result of such conversion, the holder,
together with its affiliates, would own more than 4.99% (or 9.99%
upon the election of the holder prior to the issuance of the Series
C Preferred) of the total number of shares of Common Stock then
issued and outstanding.
Effective upon the Company’s receipt of the
Issuance Approval, each holder of the Series C Preferred shall be
entitled to the whole number of votes equal to the number of shares
of Common Stock equal to the Conversion Amount (as defined in the
Certificate of Designations) of the Series C Preferred then held by
such holder divided by $0.24;
provided,
however
, that the number of
votes that any holder, together with its affiliates, may exercise
in connection with all of the Company securities held by such
holder shall not exceed 9.99% of the voting power of the Company.
Subject to the foregoing conditions, holders of the Series C
Preferred shall vote alongside holders of the Company’s
Common Stock on any matter presented to the Company’s
stockholders for their action or consideration. In addition,
pursuant to the Certificate of Designation, the Company shall not
take the following actions without obtaining the prior consent of
at least a majority of the holders of the outstanding Series C
preferred, voting separately as a single class: (i) amend or
repeal any provision of the Company’s Charter or bylaws, or
file any certificate of designations or articles of amendment to
any series of preferred stock, if such alteration would adversely
affect the rights of the holders of the Series C Preferred; (ii)
increase or decrease the number of shares of Series C Preferred
authorized for issuance; (iii) create or authorize any new class or
series of stock that ranks senior or pari passu to the Series C
Preferred; (iv) purchase, repurchase or redeem any shares of
Company securities ranking junior to the Series C Preferred; (v)
pay dividends or make any other distribution on shares of any
Company securities ranking junior to the Series C Preferred;
provided,
however
, that the Company may
continue to accrue those dividends payable to holders of the Series
A Preferred, and upon obtaining the Stockholder Approvals, the
Company may pay holders of the Series A Preferred all dividends
that have accrued since the Closing Date and may re-commence paying
dividends pursuant to those terms set forth in the Certificate of
Designations, Preferences and Rights of the Series A Preferred;
(vi) issue any shares of Series C Preferred other than as
contemplated by the Certificate of Designation; or (vii) circumvent
any right of the Series C Preferred.
In the event that the Company has not amended its
Charter to effect the Authorized Share Increase on or before six
months after the Closing Date, then each holder of the Series C
Preferred shall have the right, at the holder’s election, to
require the Company to redeem all or a portion of such
holder’s outstanding Series C Preferred pursuant to the terms
set forth in the Certificate of Designation. Upon the occurrence of
a Bankruptcy Event (as defined in the Certificate of Designations),
the Company shall be required to redeem, in cash, all outstanding
shares of Series C Preferred at a price equal to the Conversion
Amount;
provided,
however
, that holders of the
Series C Preferred shall have the right to waive, in whole or in
part, such right to receive payment upon the occurrence of a
Bankruptcy Event.
Shares
of the Series C Preferred are not entitled to receive any
dividends, unless and until specifically declared by the
Company’s Board of Directors.
The
foregoing description of the Series C Preferred is qualified, in
its entirety, by the full text of the Certificate of Designation, a
copy of which is attached to this Current Report on Form 8-K as
Exhibit 3.1, and is incorporated by reference
herein.
Item 8.01. Other Events.
On
March 13, 2019, the Company issued a press release announcing the
Private Placement, a copy of which is attached hereto as Exhibit
99.1, and is incorporated by reference herein.
Item 9.01. Financial Statements and Exhibits
See
Exhibit Index.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly
authorized.
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BRIDGELINE DIGITAL, INC.
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(Registrant)
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By:
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/s/ Carole
A. Tyner
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Carole
A. Tyner
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Chief
Financial Officer
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Date:
March 13, 2019
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Exhibit Index
Exhibit
Number
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Description
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Certificate
of Designations, Preferences and Rights of the Series C Convertible
Preferred, dated March 11, 2019.
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Form of
Series A Warrant, dated March 12, 2019.
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Form of
Series B Warrant, dated March 12, 2019.
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Form of
Series C Warrant, dated March 12, 2019.
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Form of
Exchange Warrant, dated March 12, 2019.
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Form of
Placement Agent Warrant, dated March 12, 2019.
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Form of
Securities Purchase Agreement, dated March 12, 2019.
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Form of
Warrant Exchange Agreement, dated March 12, 2019.
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Form of
Voting Agreement, dated March 12, 2019.
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Form of
Registration Rights Agreement, dated March 12, 2019.
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Form of
Placement Agent Agreement, dated March 12, 2019.
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Press
Release, dated March 13, 2019.
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Exhibit 3.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
THE
SERIES C CONVERTIBLE PREFERRED STOCK
OF
BRIDGELINE DIGITAL, INC.
I, Roger Kahn, hereby certify that I am the Chief
Executive Officer of Bridgeline Digital, Inc. (the
“
Corporation
”), a corporation incorporated and existing
under the Delaware General Corporation Law (the
“
DGCL
”) and further do hereby
certify:
That pursuant to the authority expressly conferred
upon the Board of Directors of the Corporation (the
“
Board
”) by the Corporation’s Certificate of
Incorporation, as amended and restated (the
“
Certificate of
Incorporation
”), and
Section 151(g) of the DGCL, the Board on March 9, 2019 adopted
the following resolution determining it desirable and in the best
interests of the Corporation and its stockholders for the
Corporation to create a series of shares of preferred stock
designated as “
Series C Convertible Preferred
Stock
”, none of which
shares have been issued:
RESOLVED,
that pursuant to the authority vested in the Board, in accordance
with the provisions of the Certificate of Incorporation, a series
of preferred stock, par value $0.001 per share, of the Corporation
be and hereby is created, and that the designation and number of
shares thereof and the voting and other powers, preferences and
relative, participating, optional or other rights of the shares of
such series and the qualifications, limitations and restrictions
thereof are as follows:
TERMS OF SERIES C CONVERTIBLE PREFERRED STOCK
1.
Designation and Number
of Shares
. There shall hereby
be created and established a series of preferred stock of the
Corporation designated as “Series C Convertible Preferred
Stock” (the “
Preferred
Shares
”). The authorized
number of Preferred Shares shall be 11,000 shares. Each Preferred
Share shall have a par value of $0.001. Capitalized terms not
defined herein shall have the meaning as set forth in
Section 29 below.
2.
Ranking
.
Except to the extent that the holders of at least a majority of the
outstanding Preferred Shares (the “
Required
Holders
”) expressly
consent to the creation of Parity Stock (as defined below) or
Senior Preferred Stock (as defined below) in accordance with
Section 14, all shares of capital stock of the Corporation
shall be junior in rank to all Preferred Shares with respect to the
preferences as to dividends, distributions and payments upon the
liquidation, dissolution and winding up of the Corporation (such
junior stock is referred to herein collectively as
“
Junior Stock
”). The rights of all such shares of capital
stock of the Corporation shall be subject to the rights, powers,
preferences and privileges of the Preferred Shares. Without
limiting any other provision of this Certificate of Designations,
without the prior express consent of the Required Holders, voting
separate as a single class, the Corporation shall not hereafter
authorize or issue any additional or other shares of capital stock
that is (i) of senior rank to the Preferred Shares in respect
of the preferences as to dividends, distributions and payments upon
the liquidation, dissolution and winding up of the Corporation
(collectively, the “
Senior Preferred
Stock
”), or (ii) of
pari passu rank to the Preferred Shares in respect of the
preferences as to dividends, distributions and payments upon the
liquidation, dissolution and winding up of the Corporation
(collectively, the “
Parity Stock
”). In the event of the merger or
consolidation of the Corporation with or into another corporation,
the Preferred Shares shall maintain their relative rights, powers,
designations, privileges and preferences provided for herein and no
such merger or consolidation shall result inconsistent
therewith.
3.
Dividends
.
From and after the first date of issuance of any Preferred Shares
(the “
Initial Issuance
Date
”), no holder of a
Preferred Share (each, a “
Holder
” and collectively, the
“
Holders
”) shall be entitled to receive any
dividends (“
Dividends
”) except in accordance with Section 6
or Section 13 below or, otherwise, to the extent, if any, as
may be declared by the Board on the Preferred Shares, from time to
time, in its sole and absolute discretion, which Dividends, if any,
shall be paid by the Corporation out of funds legally available
therefor, payable, subject to the conditions and other terms
hereof, in cash on the Stated Value of such Preferred
Share.
4.
Conversion
.
At any time after
the
later to occur of the date that (i)
the Company (A) obtains
the approval of its stockholders, as may be required by the
applicable rules of the Nasdaq Stock Market LLC (or any successor
entity), for the issuances of Common Stock, as defined below, upon
conversion of the Preferred Shares (the “
Stockholder Approval
”), or (B)
obtains a waiver from the Nasdaq Stock Market LLC (or any successor
entity) of all applicable listing rules requiring such Stockholder
Approval
; and (ii) the Corporation
shall have amended its Certificate of Incorporation to increase the
number of shares of Common Stock authorized for issuance thereunder
or effect a reverse stock split of the outstanding shares of Common
Stock by a sufficient amount to permit the conversion of all
Preferred Shares into shares of Common Stock
(“
Authorized Share
Approval
”) (such later
date, the “
Initial Convertibility
Date
”), each Preferred
Share shall be convertible into validly issued, fully paid and
non-assessable shares of Common Stock on the terms and conditions
set forth in this Section 4.
(a)
Holder’s
Conversion Right
. Subject to
the provisions of Sections 4(d), at any time or times on or
after the Initial Convertibility Date, each Holder shall be
entitled to convert any portion of the outstanding Preferred Shares
held by such Holder (including any fractional Preferred Shares)
into validly issued, fully paid and non-assessable shares of Common
Stock in accordance with Section 4(c) at the Conversion Rate
(as defined below). The Corporation 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 Corporation shall round such fraction of a share of Common
Stock up to the nearest whole share. The Corporation shall pay any
and all transfer, stamp, issuance and similar taxes, costs and
expenses (including, without limitation, fees and expenses of the
Transfer Agent (as defined below)) that may be payable with respect
to the issuance and delivery of Common Stock upon conversion of any
Preferred Shares.
(b)
Conversion
Rate
. The number of shares of
Common Stock issuable upon conversion of any Preferred Share
pursuant to Section 4(a) shall be determined by dividing
(x) the Conversion Amount of such Preferred Share by
(y) the Conversion Price (the “
Conversion
Rate
”):
(i) “
Conversion
Amount
” means, with
respect to each Preferred Share, as of the applicable date of
determination, the sum of (1) the Stated Value thereof plus
(2) any accrued and unpaid Dividends and Late Charges (as defined
below in Section 22(c)), if any, with respect to such Stated
Value and any accrued and unpaid Dividends, if any, as of such date
of determination.
(ii) “
Conversion
Price
” means, with
respect to each Preferred Share, as of any Conversion Date or other
date of determination, $0.18, subject to adjustment as provided
herein.
(c)
Mechanics of
Conversion
. The conversion of
each Preferred Share shall be conducted in the following
manner:
(i)
Optional
Conversion
. To convert a
Preferred Share into shares of Common Stock on any date (a
“
Conversion
Date
”), a Holder shall
deliver (via facsimile, electronic mail or otherwise), on or prior
to 11:59 p.m., New York time, on such date, a copy of an executed
notice of conversion of the share(s) of Preferred Shares subject to
such conversion in the form attached hereto
as
Exhibit
I
(the
“
Conversion
Notice
”) to the
Corporation. If required by Section 4(c)(iii), within five
(5) Trading Days following a conversion of any such Preferred
Shares as aforesaid, such Holder shall surrender to a nationally
recognized overnight delivery service for delivery to the
Corporation the original certificates, if any, representing the
Preferred Shares (the “
Preferred Share
Certificates
”) so
converted as aforesaid (or an indemnification undertaking with
respect to the Preferred Shares in the case of its loss, theft or
destruction as contemplated by Section 16(b)). On or before
the first (1
st
) Trading Day following the date of delivery
of a Conversion Notice, the Corporation shall transmit by facsimile
or electronic mail an acknowledgment of confirmation, in the form
attached hereto as
Exhibit
II
, of receipt of such
Conversion Notice to such Holder and the Corporation’s
transfer agent (the “
Transfer
Agent
”), which
confirmation shall constitute an instruction to the Transfer Agent
to process such Conversion Notice in accordance with the terms
herein. On or before the second (2nd) Trading Day following
the date of delivery of a Conversion Notice (or such earlier date
as required pursuant to the 1934 Act or other applicable law, rule
or regulation for the settlement of a trade initiated on the
applicable Conversion Date of such shares of Common Stock issuable
pursuant to such Conversion Notice) (the “
Share Delivery
Deadline
”), the
Corporation shall (1) provided that the Transfer Agent is
participating in The Depository Trust Company’s
(“
DTC
”) Fast Automated Securities Transfer
Program, credit such aggregate number of shares of Common Stock to
which such Holder shall be entitled to such Holder’s or its
designee’s balance account with DTC through its
Deposit/Withdrawal at Custodian system, or (2) if the Transfer
Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver (via reputable overnight
courier) to the address as specified in such Conversion Notice, a
certificate, registered in the name of such Holder or its designee,
for the number of shares of Common Stock to which such Holder shall
be entitled. If the number of Preferred Shares represented by the
Preferred Share Certificate(s) submitted for conversion pursuant to
Section 4(c)(iii) is greater than the number of Preferred
Shares being converted, then the Corporation shall, as soon as
practicable and in no event later than three (3) Trading Days
after receipt of the Preferred Share Certificate(s) and at its own
expense, issue and deliver to such Holder (or its designee) a new
Preferred Share Certificate (in accordance with Section 16(d))
representing the number of Preferred Shares not converted. The
Person or Persons entitled to receive the shares of Common Stock
issuable upon a conversion of Preferred Shares shall be treated for
all purposes as the record holder or holders of such shares of
Common Stock on the Conversion Date.
(ii)
Corporation’s
Failure to Timely Convert
. If
the Corporation shall fail, for any reason or for no reason, on or
prior to the applicable Share Delivery Deadline, to issue to such
Holder a certificate for the number of shares of Common Stock to
which such Holder is entitled and register such shares of Common
Stock on the Corporation’s share register or to credit such
Holder’s or its designee’s balance account with DTC for
such number of shares of Common Stock to which such Holder is
entitled upon such Holder’s conversion of any Conversion
Amount (as the case may be) (a “
Conversion
Failure
”), and if on or
after such Share Delivery Deadline such Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Holder 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, issuable upon such conversion
that such Holder so anticipated receiving from the Corporation,
then, in addition to all other remedies available to such Holder,
the Corporation shall, within three (3) Business Days after
delivery of such Holder’s request and in such Holder’s
discretion, either: (I) pay cash to such Holder in an amount
equal to such Holder’s total purchase price (including
brokerage commissions and other out-of-pocket expenses, if any) for
the shares of Common Stock so purchased (including, without
limitation, by any other Person in respect, or on behalf, of such
Holder) (the “
Buy-In Price
”), at which point the Corporation’s
obligation to so issue and deliver such certificate or credit such
Holder’s balance account with DTC for the number of shares of
Common Stock to which such Holder is entitled upon such
Holder’s conversion hereunder (as the case may be) (and to
issue such shares of Common Stock) shall terminate, or (II)
promptly honor its obligation to so issue and deliver to such
Holder a certificate or certificates representing such shares of
Common Stock or credit such Holder’s balance account with DTC
for the number of shares of Common Stock to which such Holder is
entitled upon such Holder’s conversion hereunder (as the case
may be) and pay cash to such Holder in an amount equal to the
excess (if any) of the Buy-In Price over the product of
(x) such number of shares of Common Stock multiplied by
(y) the lowest Closing Sale Price of the Common Stock on any
Trading Day during the period commencing on the date of the
applicable Conversion Notice and ending on the date of such
issuance and payment under this clause (II). If the Corporation
fails to deliver to a Holder such shares of Common Stock pursuant
to Section 4(c)(i) by the Share Delivery Deadline applicable to
such conversion, the Corporation shall pay to such Holder, in cash,
as liquidated damages and not as a penalty, for each $5,000 of
Stated Value of Preferred Stock being converted, $50 per Trading
Day (increasing to $100 per Trading Day on the third Trading Day
and increasing to $200 per Trading Day on the sixth Trading Day
after such damages begin to accrue) for each Trading Day after the
Share Delivery Deadline until such shares of Common Stock are
delivered or Holder rescinds such conversion. Nothing herein shall
limit a Holder’s right to pursue actual damages for the
Corporation’s failure to deliver shares of Common Stock
within the period specified herein and such Holder shall have the
right to pursue all remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such
rights shall not prohibit a Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable
law.
(iii)
Registration;
Book-Entry
. At the time of
issuance of any Preferred Shares hereunder, the applicable Holder
may, by written request (including by electronic-mail) to the
Corporation, elect to receive such Preferred Shares in the form of
one or more Preferred Share Certificates or in Book-Entry form. The
Corporation (or the Transfer Agent, as custodian for the Preferred
Shares) shall maintain a register (the “
Register
”) for the recordation of the names and
addresses of the Holders of each Preferred Share and the Stated
Value of the Preferred Shares and whether the Preferred Shares are
held by such Holder in Preferred Share Certificates or in
Book-Entry form (the “
Registered Preferred
Shares
”). The entries in
the Register shall be conclusive and binding for all purposes
absent manifest error. The Corporation and each Holder of the
Preferred Shares shall treat each Person whose name is recorded in
the Register as the owner of a Preferred Share for all purposes
(including, without limitation, the right to receive payments and
Dividends hereunder) notwithstanding notice to the contrary. A
Registered Preferred Share may be assigned, transferred or sold
only by registration of such assignment or sale on the Register.
Upon its receipt of a written request to assign, transfer or sell
one or more Registered Preferred Shares by such Holder thereof, the
Corporation shall record the information contained therein in the
Register and issue one or more new Registered Preferred Shares in
the same aggregate Stated Value as the Stated Value of the
surrendered Registered Preferred Shares to the designated assignee
or transferee pursuant to Section 16, provided that if the
Corporation does not so record an assignment, transfer or sale (as
the case may be) of such Registered Preferred Shares within two
(2) Business Days of such a request, then the Register shall
be automatically deemed updated to reflect such assignment,
transfer or sale (as the case may be). Notwithstanding anything to
the contrary set forth in this Section 4, following conversion
of any Preferred Shares in accordance with the terms hereof, the
applicable Holder shall not be required to physically surrender
such Preferred Shares held in the form of a Preferred Share
Certificate to the Corporation unless (A) the full or
remaining number of Preferred Shares represented by the applicable
Preferred Share Certificate are being converted (in which event
such certificate(s) shall be delivered to the Corporation as
contemplated by this Section 4(c)(iii)) or (B) such
Holder has provided the Corporation with prior written notice
(which notice may be included in a Conversion Notice) requesting
reissuance of Preferred Shares upon physical surrender of the
applicable Preferred Share Certificate. Each Holder and the
Corporation shall maintain records showing the Stated Value,
Dividends and Late Charges converted and/or paid (as the case may
be) and the dates of such conversions and/or payments (as the case
may be) or shall use such other method, reasonably satisfactory to
such Holder and the Corporation, so as not to require physical
surrender of a Preferred Share Certificate upon conversion. If the
Corporation does not update the Register to record such Stated
Value, Dividends and Late Charges converted and/or paid (as the
case may be) and the dates of such conversions and/or payments (as
the case may be) within two (2) Business Days of such
occurrence, then the Register shall be automatically deemed updated
to reflect such occurrence. In the event of any dispute or
discrepancy, such records of the Corporation establishing the
number of Preferred Shares to which the record holder is entitled
shall be controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, if the number of Preferred
Shares set forth on the face of a Preferred Share Certificate is
greater than the number of Preferred Shares then outstanding under
such Preferred Share Certificate, the applicable Holder may not
transfer such Preferred Share Certificate into the name of any
other Person (other than an Affiliate of such Holder) unless such
Holder first physically surrenders such Preferred Share Certificate
to the Corporation pursuant to Section 16 below (or delivers a
lost certificate affidavit to the Corporation, if applicable,
pursuant to Section 16(b) below), whereupon the Corporation
will forthwith issue and deliver to such Holder (or to such other
Person as designated by such Holder to the Corporation in writing)
a new Preferred Share Certificate of like tenor, representing, in
the aggregate, the remaining number of Preferred Shares outstanding
under such Preferred Share Certificate. A Holder and any transferee
or assignee, by acceptance of a certificate, acknowledge and agree
that, by reason of the provisions of this paragraph, following
conversion of any Preferred Shares, the number of Preferred Shares
represented by such certificate may be less than the number of
Preferred Shares stated on the face thereof. Each Preferred Share
Certificate shall bear the following legend:
ANY
TRANSFEREE OR ASSIGNEE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW
THE TERMS OF THE CORPORATION’S CERTIFICATE OF DESIGNATIONS
RELATING TO THE SHARES OF SERIES C PREFERRED STOCK REPRESENTED BY
THIS CERTIFICATE, INCLUDING SECTION 4(c)(iii) THEREOF. THE NUMBER
OF SHARES OF SERIES C PREFERRED STOCK REPRESENTED BY THIS
CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES C
PREFERRED STOCK STATED ON THE FACE HEREOF PURSUANT TO SECTION
4(c)(iii) OF THE CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES
OF SERIES C PREFERRED STOCK REPRESENTED BY THIS
CERTIFICATE.
(iv)
Pro Rata Conversion;
Disputes
. In the event that the
Corporation receives a Conversion Notice from more than one Holder
for the same Conversion Date and the Corporation can convert some,
but not all, of such Preferred Shares submitted for conversion, the
Corporation shall convert from each Holder electing to have
Preferred Shares converted on such date a pro rata amount of such
Holder’s Preferred Shares submitted for conversion on such
date based on the number of Preferred Shares submitted for
conversion on such date by such Holder relative to the aggregate
number of Preferred Shares submitted for conversion on such date.
In the event of a dispute as to the number of shares of Common
Stock issuable to a Holder in connection with a conversion of
Preferred Shares, the Corporation shall issue to such Holder the
number of shares of Common Stock not in dispute and resolve such
dispute in accordance with Section 21.
(d)
Limitation on
Beneficial Ownership
. The
Corporation shall not effect the conversion of any of the Preferred
Shares held by a Holder, and such Holder shall not have the right
to convert any of the Preferred Shares held by such Holder pursuant
to the terms and conditions of this Certificate of Designations and
any such conversion shall be null and void and treated as if never
made, to the extent that after giving effect to such conversion,
such Holder together with the other Attribution Parties
collectively would beneficially own in excess of 4.99% (or upon the
election by a Holder prior to the issuance of any Preferred Shares,
9.99%) (the “
Maximum
Percentage
”) of the
shares of Common Stock outstanding immediately after giving effect
to such conversion. For purposes of the foregoing sentence, the
aggregate number of shares of Common Stock beneficially owned by
such Holder and the other Attribution Parties shall include the
number of shares of Common Stock held by such Holder and all other
Attribution Parties plus the number of shares of Common Stock
issuable upon conversion of the Preferred Shares 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) conversion of the remaining, nonconverted Preferred Shares
beneficially owned by such Holder or any of the other Attribution
Parties and (B) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Corporation
(including, without limitation, any convertible notes, convertible
preferred stock or warrants) beneficially owned by such Holder or
any other Attribution Party subject to a limitation on conversion
or exercise analogous to the limitation contained in this
Section 4(d). For purposes of this Section 4(d),
beneficial ownership shall be calculated in accordance with
Section 13(d) of the 1934 Act. For purposes of determining the
number of outstanding shares of Common Stock a Holder may acquire
upon the conversion of such Preferred Shares without exceeding the
Maximum Percentage, such Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the
Corporation’s most recent Annual Report on Form 10-K,
Quarterly Report on Form 10-Q, Current Report on Form 8-K or other
public filing with the SEC, as the case may be, (y) a more
recent public announcement by the Corporation or (z) any other
written notice by the Corporation or the Transfer Agent, if any,
setting forth the number of shares of Common Stock outstanding (the
“
Reported Outstanding Share
Number
”). If the
Corporation receives a Conversion Notice from a Holder at a time
when the actual number of outstanding shares of Common Stock is
less than the Reported Outstanding Share Number, the Corporation
shall notify such Holder in writing of the number of shares of
Common Stock then outstanding and, to the extent that such
Conversion Notice would otherwise cause such Holder’s
beneficial ownership, as determined pursuant to this
Section 4(d), to exceed the Maximum Percentage, such Holder
must notify the Corporation of a reduced number of shares of Common
Stock to be purchased pursuant to such Conversion Notice. For any
reason at any time, upon the written or oral request of any Holder,
the Corporation shall within one (1) Business Day confirm
orally and in writing or by electronic mail to such 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 Corporation, including such Preferred Shares, by such Holder
and any other Attribution Party since the date as of which the
Reported Outstanding Share Number was reported. In the event that
the issuance of shares of Common Stock to a Holder upon conversion
of such Preferred Shares results in such Holder and the other
Attribution Parties being deemed to beneficially own, in the
aggregate, more than the Maximum Percentage of the number of
outstanding shares of Common Stock (as determined under
Section 13(d) of the 1934 Act), the number of shares so issued
by which such Holder’s and the other Attribution
Parties’ aggregate beneficial ownership exceeds the Maximum
Percentage (the “
Excess
Shares
”) shall be deemed
null and void and shall be cancelled ab initio, and such Holder
shall not have the power to vote or to transfer the Excess Shares.
Upon delivery of a written notice to the Corporation, any Holder
may from time to time increase (with such increase not effective
until the sixty-first (61
st
) day after delivery of such notice) or
decrease the Maximum Percentage of such Holder to any other
percentage not in excess of 9.99% as specified in such notice;
provided that (i) any such increase in the Maximum Percentage
will not be effective until the sixty-first (61
st
) day after such notice is delivered to the
Corporation and (ii) any such increase or decrease will apply
only to such Holder and the other Attribution Parties and not to
any other Holder. For purposes of clarity, the shares of Common
Stock issuable to a Holder pursuant to the terms of this
Certificate of Designations in excess of the Maximum Percentage
shall not be deemed to be beneficially owned by such Holder for any
purpose including for purposes of Section 13(d) or Rule
16a-1(a)(1) of the 1934 Act. No prior inability to convert such
Preferred Shares pursuant to this paragraph shall have any effect
on the applicability of the provisions of this paragraph with
respect to any subsequent determination of convertibility. The
provisions of this paragraph shall be construed and implemented in
a manner otherwise than in strict conformity with the terms of this
Section 4(d) to the extent necessary to correct this paragraph
(or any portion of this paragraph) which may be defective or
inconsistent with the intended beneficial ownership limitation
contained in this Section 4(d) or to make changes or
supplements necessary or desirable to properly give effect to such
limitation. The limitation contained in this paragraph may not be
waived and shall apply to a successor holder of such Preferred
Shares.
5.
Rights Upon
Fundamental Transactions
. The
Corporation shall not enter into or be party to a Fundamental
Transaction unless the Successor Entity assumes in writing all of
the obligations of the Corporation under this Certificate of
Designations and the other Transaction Documents in accordance with
the provisions of this Section 5 pursuant to written
agreements in form and substance reasonably satisfactory to the
Required Holders and approved by the Required Holders prior to such
Fundamental Transaction, including agreements to deliver to each
holder of Preferred Shares in exchange for such Preferred Shares a
security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Certificate of
Designations, including, without limitation, having a stated value
and dividend rate equal to the stated value and dividend rate of
the Preferred Shares held by the Holders and having similar ranking
to the Preferred Shares, and satisfactory to the Required Holders.
Upon the occurrence of any Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Certificate of Designations and the other Transaction
Documents referring to the “Corporation” shall refer
instead to the Successor Entity), and may exercise every right and
power of the Corporation and shall assume all of the obligations of
the Corporation under this Certificate of Designations and the
other Transaction Documents with the same effect as if such
Successor Entity had been named as the Corporation herein and
therein. In addition to the foregoing, upon consummation of a
Fundamental Transaction, the Successor Entity shall deliver to each
Holder confirmation that there shall be issued upon conversion or
redemption of the Preferred Shares at any time after the
consummation of such Fundamental Transaction, in lieu of the shares
of Common Stock (or other securities, cash, assets or other
property (except such items still issuable under Sections 6(a) and
13, which shall continue to be receivable thereafter)) issuable
upon the conversion or redemption of the Preferred Shares prior to
such Fundamental Transaction, such shares of the publicly traded
common stock (or their equivalent) of the Successor Entity
(including its Parent Entity) which each Holder would have been
entitled to receive upon the happening of such Fundamental
Transaction had all the Preferred Shares held by each Holder been
converted immediately prior to such Fundamental Transaction
(without regard to any limitations on the conversion of the
Preferred Shares contained in this Certificate of Designations), as
adjusted in accordance with the provisions of this Certificate of
Designations. Notwithstanding the foregoing, such Holder may elect,
at its sole option, by delivery of written notice to the
Corporation to waive this Section 5 to permit the Fundamental
Transaction without the assumption of the Preferred Shares. The
provisions of this Section 5 shall apply similarly and equally
to successive Fundamental Transactions and shall be applied without
regard to any limitations on the conversion or redemption of the
Preferred Shares.
6.
Rights Upon Issuance
of Purchase Rights and Other Corporate Events
.
(a)
Purchase
Rights
. In addition to any
adjustments pursuant to Section 7 below, if at any time the
Corporation grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or
other property pro rata to all or substantially all of the record
holders of any class of Common Stock (the
“
Purchase
Rights
”), then each
Holder will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such
Holder could have acquired if such Holder had held the number of
shares of Common Stock acquirable upon complete conversion of all
the Preferred Shares (without taking into account any limitations
or restrictions on the convertibility of the Preferred Shares) held
by such Holder immediately prior to the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or,
if no such record is taken, the date as of which the record holders
of shares of Common Stock are to be determined for the grant, issue
or sale of such Purchase Rights (provided, however, to the extent
that such Holder’s right to participate in any such Purchase
Right would result in such Holder and the other Attribution Parties
exceeding the Maximum Percentage, then such Holder shall not be
entitled to participate in such Purchase Right to such extent (and
shall not be entitled to beneficial ownership of such shares of
Common Stock as a result of such Purchase Right (and beneficial
ownership) to such extent) and such Purchase Right to such extent
shall be held in abeyance for such Holder until such time or times,
if ever, as its right thereto would not result in such Holder and
the other Attribution Parties exceeding the Maximum Percentage), at
which time or times such Holder shall be granted such right (and
any Purchase Right granted, issued or sold on such initial Purchase
Right or on any subsequent Purchase Right to be held similarly in
abeyance) to the same extent as if there had been no such
limitation.
(b)
Other Corporate
Events
. In addition to and not
in substitution for any other rights hereunder, prior to the
consummation of any Fundamental Transaction pursuant to which
holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for
shares of Common Stock (a “
Corporate
Event
”), the Corporation
shall make appropriate provision to insure that each Holder will
thereafter have the right to receive upon a conversion of all the
Preferred Shares held by such Holder (i) in addition to the
shares of Common Stock receivable upon such conversion, such
securities or other assets to which such Holder would have been
entitled with respect to such shares of Common Stock had such
shares of Common Stock been held by such Holder upon the
consummation of such Corporate Event (without taking into account
any limitations or restrictions on the convertibility of the
Preferred Shares contained in this Certificate of Designations) or
(ii) in lieu of the shares of Common Stock otherwise
receivable upon such conversion, such securities or other assets
received by the holders of shares of Common Stock in connection
with the consummation of such Corporate Event in such amounts as
such Holder would have been entitled to receive had the Preferred
Shares held by such Holder initially been issued with conversion
rights for the form of such consideration (as opposed to shares of
Common Stock) at a conversion rate for such consideration
commensurate with the Conversion Rate. Provision made pursuant the
proceeding sentence shall be in a form and substance satisfactory
to the Holder. The provisions of this Section 6 shall apply
similarly and equally to successive Corporate Events and shall be
applied without regard to any limitations on the conversion or
redemption of the Preferred Shares contained in this Certificate of
Designations.
7.
Rights Upon Issuance
of Other Securities
.
(a)
Adjustment of
Conversion Price upon Subdivision or Combination of Common
Stock
. Without limiting any
provision of Section 6 or Section 13, if the Corporation
at any time on or after the Subscription Date subdivides (by any
stock split, stock dividend, stock combination, recapitalization or
other similar transaction) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision
will be proportionately reduced. Without limiting any provision of
Section 6 or Section 13, if the Corporation at any time
on or after the Subscription Date combines (by any stock split,
stock dividend, stock combination, recapitalization or other
similar transaction) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Conversion
Price in effect immediately prior to such combination will be
proportionately increased. Any adjustment pursuant to this
Section 7(a) shall become effective immediately after the
effective date of such subdivision or combination. If any event
requiring an adjustment under this Section 7(a) occurs during
the period that a Conversion Price is calculated hereunder, then
the calculation of such Conversion Price shall be adjusted
appropriately to reflect such event.
(b)
Calculations
.
All calculations under this Section 7 shall be made by
rounding 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 Corporation, and the disposition
of any such shares shall be considered an issue or sale of Common
Stock.
8.
Redemptions
.
(a)
Holder Mandatory
Redemption
. In the event
following the six (6) months from the Initial Issuance Date the
Corporation has not amended its Certificate of Incorporation to
give effect to the Authorized Share Approval, then each Holder
shall have the right (the “
Mandatory
Redemption
Right
”), at such
Holder’s option, upon delivery of a written notice to the
Corporation (a “
Mandatory Redemption
Notice
”), to require the
Corporation to redeem all or any portion of such Holder’s
Preferred Shares at a price equal to the greater of (i) Conversion
Amount being redeemed as of the Mandatory Redemption Date, as
defined below, and (ii) the product of the number of shares of
Common Stock into which the Preferred Shares would be convertible
(without regard to any limitations on the number of shares of
Common Stock issuable upon conversion hereunder and without regard
to whether or not the Initial Convertibility Date has occurred) on
the Mandatory Redemption Date multiplied by the greater of (i) last
closing price of a share of Corporation Common Stock at the time of
submission and (ii) greatest intraday price on the date of
submission of a Mandatory Redemption Notice (such price, the
“
Mandatory
Redemption
Price
”) on a date which
is three (3) Business Days from the date of delivery to the
Corporation of the Mandatory Redemption Notice
(“
Mandatory Redemption
Date
”). If a Holder has
submitted a Mandatory Redemption Notice, the Corporation shall
deliver the applicable Mandatory Redemption Price to such Holder in
cash on the applicable Mandatory Redemption Date. In the event that
the Corporation does not pay the applicable Mandatory Redemption
Price to a Holder within the time period required for any reason
(including, without limitation, to the extent such payment is
prohibited pursuant to the DGCL), at any time thereafter and until
the Corporation pays such unpaid Mandatory Redemption Price in
full, such Holder shall have the option, in lieu of redemption, to
require the Corporation to promptly return to such Holder all or
any of the Preferred Shares that were submitted for redemption and
for which the applicable Mandatory Redemption Price (together with
any Late Charges thereon) has not been paid. Upon the
Corporation’s receipt of such notice, (x) the applicable
Mandatory Redemption Notice shall be null and void with respect to
such Preferred Shares, (y) the Corporation shall immediately
return the applicable Preferred Share Certificate, or issue a new
Preferred Share Certificate (in accordance with
Section 16(d)), to such Holder (unless the Preferred Shares
are held in Book-Entry form, in which case the Corporation shall
deliver evidence to such Holder that a Book-Entry for such
Preferred Shares then exists). A Holder’s delivery of a
notice voiding a Mandatory Redemption Notice and exercise of its
rights following such notice shall not affect the
Corporation’s obligations to make any payments of Late
Charges which have accrued prior to the date of such notice with
respect to the Preferred Shares subject to such
notice.
(b)
Mandatory Redemption
upon Bankruptcy Event
.
Notwithstanding anything to the contrary herein, and
notwithstanding any conversion that is then required or in process,
upon any Bankruptcy Event (a “
Bankruptcy Redemption
Date
”), the Corporation
shall immediately redeem, in cash, each of the Preferred Shares
then outstanding at a redemption price equal to the Conversion
Amount of such Preferred Shares (each, a “
Bankruptcy Redemption
Price
”), without the
requirement for any notice or demand or other action by any Holder
or any other person or entity, provided that a Holder may, in its
sole discretion, waive such right to receive payment upon a
Bankruptcy Event, in whole or in part, and any such waiver shall
not affect any other rights of such Holder or any other Holder
hereunder, including any other rights in respect of such Bankruptcy
Event, any right to conversion, and any right to payment of such
Bankruptcy Redemption Price or any other Redemption Price, as
applicable.
(c)
Mandatory Redemption
by Multiple Holders
. Upon the
Corporation’s receipt of a Mandatory Redemption Notice from
any Holder, the Corporation shall immediately, but no later than
one (1) Business Day of its receipt thereof, forward to each
other Holder by facsimile or electronic mail a copy of such notice.
If the Corporation receives one or more Mandatory Redemption
Notices, during the seven (7) Business Day period beginning on
and including the date which is three (3) Business Days prior
to the Corporation’s receipt of the initial Mandatory
Redemption Notice and ending on and including the date which is
three (3) Business Days after the Corporation’s receipt
of the initial Mandatory Redemption Notice and the Corporation is
unable to redeem all amounts designated in such initial Mandatory
Redemption Notice and such other Mandatory Redemption Notices
received during such seven (7) Business Day period, then the
Corporation shall redeem a pro rata amount from each Holder based
on the number of Preferred Shares submitted for redemption pursuant
to such Mandatory Redemption Notices received by the Corporation
during such seven (7) Business Day period.
9.
Noncircumvention
.
The Corporation hereby covenants and agrees that the Corporation
will not, by amendment of its Certificate of Incorporation (as
defined in the March 2019 SPA), Bylaws (as defined in the March
2019 SPA) 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
Certificate of Designations, and will at all times in good faith
carry out all the provisions of this Certificate of Designations
and take all action as may be required to protect the rights of the
Holders hereunder. Without limiting the generality of the foregoing
or any other provision of this Certificate of Designations or the
other Transaction Documents, the Corporation (a) shall not
increase the par value of any shares of Common Stock receivable
upon the conversion of any Preferred Shares above the Conversion
Price then in effect, (b) shall take all such actions as may
be necessary or appropriate in order that the Corporation may
validly and legally issue fully paid and non-assessable shares of
Common Stock upon the conversion of Preferred Shares and
(c) shall, so long as any Preferred Shares are outstanding,
take all action necessary to reserve and keep available out of its
authorized and unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares, the
maximum number of shares of Common Stock as shall from time to time
be necessary to effect the conversion of the Preferred Shares then
outstanding (without regard to any limitations on conversion
contained herein).
10.
Authorized
Shares
.
(a)
Reservation
.
So long as any Preferred Shares
remain outstanding, from and after the date of the
Authorized Share Approval, the Corporation shall at all times
reserve at least 125% of the number of shares of Common Stock as
shall from time to time be necessary to effect the conversion of
all of the Preferred Shares then outstanding (without regard to any
limitations on conversions) (the “
Required Reserve
Amount
”). The Required
Reserve Amount (including, without limitation, each increase in the
number of shares so reserved) shall be allocated pro rata among the
Holders based on the number of the Preferred Shares held by each
Holder on the Initial Issuance Date or increase in the number of
reserved shares, as the case may be (the “
Authorized Share
Allocation
”). In the
event that a Holder shall sell or otherwise transfer any of such
Holder’s Preferred Shares, each transferee shall be allocated
a pro rata portion of such Holder’s Authorized Share
Allocation. Any shares of Common Stock reserved and allocated to
any Person which ceases to hold any Preferred Shares shall be
allocated to the remaining Holders of Preferred Shares, pro rata
based on the number of the Preferred Shares then held by the
Holders.
(b)
Insufficient
Authorized Shares
. If,
notwithstanding Section 10(a) and not in limitation thereof,
after the date of the Authorized Share Approval, while any of the
Preferred Shares remain outstanding, the Corporation does not have
a sufficient number of authorized and unreserved shares of Common
Stock to satisfy its obligation to reserve for issuance upon
conversion of the Preferred Shares at least a number of shares of
Common Stock equal to the Required Reserve Amount (an
“
Authorized Share
Failure
”), then the
Corporation shall immediately take all action necessary to increase
the Corporation’s authorized shares of Common Stock to an
amount sufficient to allow the Corporation to reserve the Required
Reserve Amount for the Preferred Shares then outstanding. Without
limiting the generality of the foregoing sentence, as soon as
practicable after the date of the occurrence of an Authorized Share
Failure, but in no event later than sixty (60) days after the
occurrence of such Authorized Share Failure, the Corporation 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 such meeting, the Corporation shall provide each stockholder
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. In
the event that the Corporation is prohibited from issuing shares of
Common Stock to a Holder upon any conversion due to the failure by
the Corporation to have sufficient shares of Common Stock available
out of the authorized but unissued shares of Common Stock (such
unavailable number of shares of Common Stock, the
“
Authorized Failure
Shares
”), in lieu of
delivering such Authorized Failure Shares to such Holder, the
Corporation shall pay cash in exchange for the redemption of such
portion of the Conversion Amount convertible into such Authorized
Failure Shares at a price equal to the sum of (i) the product
of (x) such number of Authorized Failure Shares and
(y) the greatest Closing Sale Price of the Common Stock on any
Trading Day during the period commencing on the date such Holder
delivers the applicable Conversion Notice with respect to such
Authorized Failure Shares to the Corporation and ending on the date
of such issuance and payment under this Section 10(b); and
(ii) to the extent such Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Holder of Authorized Failure Shares,
any brokerage commissions and other out-of-pocket expenses, if any,
of such Holder incurred in connection therewith. Nothing contained
in Section 10(a) or this Section 10(b) shall limit any
obligations of the Corporation under any provision of the March
2019 SPA.
11.
Voting
Rights
.
(a)
Effective upon Stockholder Approval, each Holder, as such, shall be
entitled to the whole number of votes equal to the number of shares
of Common Stock equal to the Conversion Amount of the Preferred
Shares then held by such Holder, divided by $0.24, provided however
that the amount of votes held through any voting securities of the
Corporation, including the Series C Preferred Stock, by any Holder,
together with such Holder’s Attribution Parties, shall not
exceed 9.99% of the voting power of the Corporation.
(b)
Each Holder shall be entitled to receive the same prior notice of
any stockholders’ meeting as is provided to the holders of
Common Stock as well as prior notice of all stockholder actions to
be taken by legally available means in lieu of a meeting (and
copies of proxy materials, consent solicitation statements and
other information sent to stockholders in connection therewith),
all in accordance with the Bylaws and the DGCL, and shall be
entitled to vote or, if applicable, provide consent, together with
the holders of Common Stock as if they were a single class of
securities upon any matter submitted to a vote of stockholders,
except as otherwise expressly required by law and except as
required by the terms hereof to be submitted to a series vote of
the applicable Holders, in which case each Holder only shall vote
as a separate series.
12.
Liquidation,
Dissolution, Winding-Up
. In the
event of a Liquidation Event, the Holders shall be entitled to
receive in cash out of the assets of the Corporation, whether from
capital or from earnings available for distribution to its
stockholders (the “
Liquidation
Funds
”), before any
amount shall be paid to the holders of any of shares of Junior
Stock, but pari passu with any Parity Stock then outstanding, an
amount per Preferred Share equal to the Conversion Amount thereof
on the date of such payment, provided that if the Liquidation Funds
are insufficient to pay the full amount due to the Holders and
holders of shares of Parity Stock, then each Holder and each holder
of Parity Stock shall receive a percentage of the Liquidation Funds
equal to the full amount of Liquidation Funds payable to such
Holder and such holder of Parity Stock as a liquidation preference,
in accordance with their respective certificate of designations (or
equivalent), as a percentage of the full amount of Liquidation
Funds payable to all holders of Preferred Shares and all holders of
shares of Parity Stock. To the extent necessary, the Corporation
shall cause such actions to be taken by each of its Subsidiaries so
as to enable, to the maximum extent permitted by law, the proceeds
of a Liquidation Event to be distributed to the Holders in
accordance with this Section 12. All the preferential amounts
to be paid to the Holders under this Section 12 shall be paid
or set apart for payment before the payment or setting apart for
payment of any amount for, or the distribution of any Liquidation
Funds of the Corporation to the holders of shares of Junior Stock
in connection with a Liquidation Event as to which this
Section 12 applies.
13.
Distribution of
Assets
. In addition to any
adjustments pursuant to Section 7, if the Corporation shall
declare or make any dividend or other distributions of its assets
(or rights to acquire its assets) to any or all holders of shares
of Common Stock, by way of return of capital or otherwise
(including without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin
off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (the
“
Distributions
”),
then each Holder, as holders of Preferred Shares, will be entitled
to such Distributions as if such Holder had held the number of
shares of Common Stock acquirable upon complete conversion of the
Preferred Shares (without taking into account any limitations or
restrictions on the convertibility of the Preferred Shares)
immediately prior to the date on which a record is taken for such
Distribution or, if no such record is taken, the date as of which
the record holders of Common Stock are to be determined for such
Distributions (
provided
,
however
,
that to the extent that such Holder’s right to participate in
any such Distribution would result in such Holder and the other
Attribution Parties exceeding the Maximum Percentage, then such
Holder shall not be entitled to participate in such Distribution to
the extent of the Maximum Percentage (and shall not be entitled to
beneficial ownership of such shares of Common Stock as a result of
such Distribution (and beneficial ownership) to the extent of any
such excess) and the portion of such Distribution shall be held in
abeyance for such Holder until such time or times as its right
thereto would not result in such Holder and the other Attribution
Parties exceeding the Maximum Percentage, at which time or times,
if any, such Holder shall be granted such rights (and any rights
under this Section 13 on such initial rights or on any
subsequent such rights to be held similarly in abeyance) to the
same extent as if there had been no such
limitation).
14.
Vote to Change the
Terms of or Issue Preferred Shares
. In addition to any other rights provided by law,
except where the vote or written consent of the holders of a
greater number of shares is required by law or by another provision
of the Certificate of Incorporation, without first obtaining the
affirmative vote at a meeting duly called for such purpose or the
written consent without a meeting of the Required Holders, voting
together as a single class, the Corporation shall not:
(a) amend or repeal any provision of, or add any provision to,
its Certificate of Incorporation or bylaws, or file any certificate
of designations or articles of amendment of any series of shares of
preferred stock, if such action would adversely alter or change in
any respect the preferences, rights, privileges or powers, or
restrictions provided for the benefit of the Preferred Shares
hereunder, regardless of whether any such action shall be by means
of amendment to the Certificate of Incorporation or by merger,
consolidation or otherwise; (b) increase or decrease (other
than by conversion) the authorized number of Preferred Shares;
(c) without limiting any provision of Section 2, create
or authorize (by reclassification or otherwise) any new class or
series of Senior Preferred Stock or Parity Stock;
(d) purchase, repurchase or redeem any shares of Junior Stock
(other than pursuant to the terms of the Corporation’s equity
incentive plans and options and other equity awards granted under
such plans (that have in good faith been approved by the Board));
(e) without limiting any provision of Section 2, pay
dividends or make any other distribution on any shares of any
Junior Stock or Parity Stock;
provided,
however
, that the Corporation
may continue to accrue those dividends payable to holders of its
Series A Convertible Preferred Stock (“
Series A
Preferred
”), and upon
obtaining (i) the Authorized Share Approval and (ii) the approval
of the Corporation’s stockholders as required by the
applicable rules of the Nasdaq Stock Market LLC, for the issuances
of Common Stock in excess of
19.99% of the number of shares
of Common Stock outstanding on the Trading Day immediately
preceding the date of this Certificate of Designation
, or a waiver from the Nasdaq Stock Market LLC of
all applicable listing rules requiring such stockholder approval,
the Corporation may pay holders of Series A Preferred all dividends
that have accrued to such date and re-commence paying dividends to
holder of the Series A Preferred pursuant to those terms set forth
in the Certificate of Designations, Preferences and Rights of the
Series A Preferred; (f) issue any Preferred Shares other than
as contemplated hereby or pursuant to the March 2019 SPA; or
(g) without limiting any provision of Section 8(e),
whether or not prohibited by the terms of the Preferred Shares,
circumvent a right of the Preferred Shares
hereunder.
15.
Transfer of Preferred
Shares
. A Holder may transfer
some or all of its Preferred Shares without the consent of the
Corporation.
16.
Reissuance of
Preferred Share Certificates and Book Entries
.
(a)
Transfer
.
If any Preferred Shares are to be transferred, the applicable
Holder shall surrender the applicable Preferred Share Certificate
to the Corporation (or, if the Preferred Shares are held in
Book-Entry form, a written instruction letter to the Corporation),
whereupon the Corporation will forthwith issue and deliver upon the
order of such Holder a new Preferred Share Certificate (in
accordance with Section 16(d)) (or evidence of the transfer of
such Book-Entry), registered as such Holder may request,
representing the outstanding number of Preferred Shares being
transferred by such Holder and, if less than the entire outstanding
number of Preferred Shares is being transferred, a new Preferred
Share Certificate (in accordance with Section 16(d)) to such
Holder representing the outstanding number of Preferred Shares not
being transferred (or evidence of such remaining Preferred Shares
in a Book-Entry for such Holder). Such Holder and any assignee, by
acceptance of the Preferred Share Certificate or evidence of
Book-Entry issuance, as applicable, acknowledge and agree that, by
reason of the provisions of Section 4(c)(i) following
conversion or redemption of any of the Preferred Shares, the
outstanding number of Preferred Shares represented by the Preferred
Shares may be less than the number of Preferred Shares stated on
the face of the Preferred Shares.
(b)
Lost, Stolen or
Mutilated Preferred Share Certificate
. Upon receipt by the Corporation of evidence
reasonably satisfactory to the Corporation of the loss, theft,
destruction or mutilation of a Preferred Share Certificate (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
applicable Holder to the Corporation in customary and reasonable
form and, in the case of mutilation, upon surrender and
cancellation of such Preferred Share Certificate, the Corporation
shall execute and deliver to such Holder a new Preferred Share
Certificate (in accordance with Section 16(d)) representing
the applicable outstanding number of Preferred
Shares.
(c)
Preferred Share
Certificate and Book-Entries Exchangeable for Different
Denominations and Forms
. Each
Preferred Share Certificate is exchangeable, upon the surrender
hereof by the applicable Holder at the principal office of the
Corporation, for a new Preferred Share Certificate or Preferred
Share Certificate(s) or new Book-Entry (in accordance with
Section 16(d)) representing, in the aggregate, the outstanding
number of the Preferred Shares in the original Preferred Share
Certificate, and each such new Preferred Share Certificate and/or
new Book-Entry, as applicable, will represent such portion of such
outstanding number of Preferred Shares from the original Preferred
Share Certificate as is designated in writing by such Holder at the
time of such surrender. Each Book-Entry may be exchanged into one
or more new Preferred Share Certificates or split by the applicable
Holder by delivery of a written notice to the Corporation into two
or more new Book-Entries (in accordance with Section 16(d))
representing, in the aggregate, the outstanding number of the
Preferred Shares in the original Book-Entry, and each such new
Book-Entry and/or new Preferred Share Certificate, as applicable,
will represent such portion of such outstanding number of Preferred
Shares from the original Book-Entry as is designated in writing by
such Holder at the time of such surrender.
(d)
Issuance of New
Preferred Share Certificate or Book-Entry
. Whenever the Corporation is required to issue a
new Preferred Share Certificate or a new Book-Entry pursuant to the
terms of this Certificate of Designations, such new Preferred Share
Certificate or new Book-Entry (i) shall represent, as
indicated on the face of such Preferred Share Certificate or in
such Book-Entry, as applicable, the number of Preferred Shares
remaining outstanding (or in the case of a new Preferred Share
Certificate or new Book-Entry being issued pursuant to
Section 16(a) or Section 16(c), the number of Preferred
Shares designated by such Holder) which, when added to the number
of Preferred Shares represented by the other new Preferred Share
Certificates or other new Book-Entry, as applicable, issued in
connection with such issuance, does not exceed the number of
Preferred Shares remaining outstanding under the original Preferred
Share Certificate or original Book-Entry, as applicable,
immediately prior to such issuance of new Preferred Share
Certificate or new Book-Entry, as applicable, and (ii) shall
have an issuance date, as indicated on the face of such new
Preferred Share Certificate or in such new Book-Entry, as
applicable, which is the same as the issuance date of the original
Preferred Share Certificate or in such original Book-Entry, as
applicable.
17.
Remedies,
Characterizations, Other Obligations, Breaches and Injunctive
Relief
. The remedies
provided in this Certificate of Designations shall be cumulative
and in addition to all other remedies available under this
Certificate of Designations and any of the other Transaction
Documents, at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein
shall limit any Holder’s right to pursue actual and
consequential damages for any failure by the Corporation to comply
with the terms of this Certificate of Designations. The Corporation
covenants to each 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 a Holder and shall not, except as
expressly provided herein, be subject to any other obligation of
the Corporation (or the performance thereof). The Corporation
acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Holders and that the remedy at law
for any such breach may be inadequate. The Corporation therefore
agrees that, in the event of any such breach or threatened breach,
each Holder shall be entitled, in addition to all other available
remedies, to 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. The Corporation shall provide all information and
documentation to a Holder that is requested by such Holder to
enable such Holder to confirm the Corporation’s compliance
with the terms and conditions of this Certificate of
Designations.
18.
Payment of Collection,
Enforcement and Other Costs
. If
(a) any Preferred Shares are placed in the hands of an
attorney for collection or enforcement or are collected or enforced
through any legal proceeding or a Holder otherwise takes action to
collect amounts due under this Certificate of Designations with
respect to the Preferred Shares or to enforce the provisions of
this Certificate of Designations or (b) there occurs any
bankruptcy, reorganization, receivership of the Corporation or
other proceedings affecting Corporation creditors’ rights and
involving a claim under this Certificate of Designations, then the
Corporation shall pay the costs incurred by such Holder for such
collection, enforcement or action or in connection with such
bankruptcy, reorganization, receivership or other proceeding,
including, without limitation, attorneys’ fees and
disbursements.
19.
Construction;
Headings
. This Certificate of
Designations shall be deemed to be jointly drafted by the
Corporation and the Holders and shall not be construed against any
such Person as the drafter hereof. The headings of this Certificate
of Designations are for convenience of reference and shall not form
part of, or affect the interpretation of, this Certificate of
Designations. 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 Certificate of Designations instead of
just the provision in which they are found. Unless expressly
indicated otherwise, all section references are to sections of this
Certificate of Designations. Terms used in this Certificate of
Designations and not otherwise defined herein, but defined in the
other Transaction Documents, shall have the meanings ascribed to
such terms on the Initial Issuance Date in such other Transaction
Documents unless otherwise consented to in writing by the Required
Holders.
20.
Failure or Indulgence
Not Waiver
. No failure or delay
on the part of a 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. This Certificate of Designations shall be
deemed to be jointly drafted by the Corporation and all Holders and
shall not be construed against any Person as the drafter hereof.
Notwithstanding the foregoing, nothing contained in this
Section 20 shall permit any waiver of any provision of
Section 4(d).
21.
Dispute
Resolution
.
(a)
Submission to Dispute
Resolution
.
(i) In the case of a dispute relating to a Closing
Bid Price, a Closing Sale Price, a Conversion Price, a VWAP or a
fair market value or the arithmetic calculation of a Conversion
Rate, or the applicable Redemption Price (as the case may be)
(including, without limitation, a dispute relating to the
determination of any of the foregoing), the Corporation or the
applicable Holder (as the case may be) shall submit the dispute to
the other party via facsimile or electronic mail (A) if by the
Corporation, within two (2) Business Days after the occurrence
of the circumstances giving rise to such dispute or (B) if by
such Holder at any time after such Holder learned of the
circumstances giving rise to such dispute. If such Holder and the
Corporation are unable to promptly resolve such dispute relating to
such Closing Bid Price, such Closing Sale Price, such Conversion
Price, such VWAP or such fair market value, or the arithmetic
calculation of such Conversion Rate or such applicable Redemption
Price (as the case may be), at any time after the second
(2
nd
) Business Day following such initial notice
by the Corporation or such Holder (as the case may be) of such
dispute to the Corporation or such Holder (as the case may be),
then such Holder and the Corporation may jointly select an
independent, reputable investment bank to resolve such
dispute.
(ii) Such Holder and the Corporation shall each
deliver to such investment bank (A) a copy of the initial
dispute submission so delivered in accordance with the first
sentence of this Section 21 and (B) written documentation
supporting its position with respect to such dispute, in each case,
no later than 5:00 p.m. (New York time) by the fifth
(5
th
) Business Day immediately following the date
on which such Holder selected such investment bank
(the
“Dispute
Submission
Deadline
”) (the documents referred to in the
immediately preceding clauses (A) and (B) are
collectively referred to herein as the “
Required Dispute
Documentation
”) (it being
understood and agreed that if either such Holder or the Corporation
fails to so deliver all of the Required Dispute Documentation by
the Dispute Submission Deadline, then the party who fails to so
submit all of the Required Dispute Documentation shall no longer be
entitled to (and hereby waives its right to) deliver or submit any
written documentation or other support to such investment bank with
respect to such dispute and such investment bank shall resolve such
dispute based solely on the Required Dispute Documentation that was
delivered to such investment bank prior to the Dispute Submission
Deadline). Unless otherwise agreed to in writing by both the
Corporation and such Holder or otherwise requested by such
investment bank, neither the Corporation nor such Holder shall be
entitled to deliver or submit any written documentation or other
support to such investment bank in connection with such dispute
(other than the Required Dispute
Documentation).
(iii)
The Corporation and such Holder shall cause such investment bank to
determine the resolution of such dispute and notify the Corporation
and such Holder of such resolution no later than ten
(10) Business Days immediately following the Dispute
Submission Deadline. The fees and expenses of such investment bank
shall be borne solely by the Corporation, and such investment
bank’s resolution of such dispute shall be final and binding
upon all parties absent manifest error.
(b)
Miscellaneous
.
The Corporation and each Holder each, severally and not jointly,
expressly acknowledges and agrees that (i) this
Section 21 constitutes an agreement to arbitrate between the
Corporation and such Holder (and constitutes an arbitration
agreement) under § 7501, et seq. of the New York Civil
Practice Law and Rules (“
CPLR
”) and that any Holder is authorized to
apply for an order to compel arbitration pursuant to CPLR §
7503(a) in order to compel compliance with this Section 21,
(ii) the terms of this Certificate of Designations and each
other applicable Transaction Document shall serve as the basis for
the selected investment bank’s resolution of the applicable
dispute, such investment bank shall be entitled (and is hereby
expressly authorized) to make all findings, determinations and the
like that such investment bank determines are required to be made
by such investment bank in connection with its resolution of such
dispute and in resolving such dispute such investment bank shall
apply such findings, determinations and the like to the terms of
this Certificate of Designations and any other applicable
Transaction Documents, (iii) the Corporation and such
applicable Holder (but only such Holder with respect to disputes
solely relating to such Holder) shall each have the right to submit
any dispute described in this Section 21 to any state or
federal court sitting in The City of New York, Borough of Manhattan
in lieu of utilizing the procedures set forth in this
Section 21 and (iv) nothing in this Section 21 shall
limit such Holder from obtaining any injunctive relief or other
equitable remedies (including, without limitation, with respect to
any matters described in this Section 21).
22.
Notices; Currency;
Payments
.
(a)
Notices
.
The Corporation shall provide each Holder of Preferred Shares with
prompt written notice of all actions taken pursuant to the terms of
this Certificate of Designations, including in reasonable detail a
description of such action and the reason therefor. Any notices,
consents, waivers or other communications required or permitted to
be given under the terms hereof must be in writing and will be
deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon delivery, when sent by
facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party) or
by electronic mail (provided that a automatically generated notice
indicating a delivery failure has not been sent to the sending
party); or (iii) one Business Day after deposit with an
overnight courier service, in each case properly addressed to the
party to receive the same as determined in accordance with the
March 2019 SPA. 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 e-mail containing the time,
date, recipient facsimile number and an image of the first page of
such transmission 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 (iii) above,
respectively. The Corporation shall provide each Holder with prompt
written notice of all actions taken pursuant to this Certificate of
Designations, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of
the foregoing, the Corporation shall give written notice to each
Holder (i) immediately upon any adjustment of the Conversion
Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least fifteen
(15) days prior to the date on which the Corporation closes
its books or takes a record (A) with respect to any dividend
or distribution upon the Common Stock, (B) with respect to any
grant, issuances or sales of any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property to
holders of shares of Common Stock, or (C) for determining rights to
vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such
notice being provided to such Holder.
(b)
Currency
.
All dollar amounts referred to in this Certificate of Designations
are in United States Dollars (“
U.S. Dollars
”), and all amounts owing under this
Certificate of Designations 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 Certificate of Designations, the U.S. Dollar
exchange rate as published in the Wall Street Journal on the
relevant date of calculation (it being understood and agreed that
where an amount is calculated with reference to, or over, a period
of time, the date of calculation shall be the final date of such
period of time).
(c)
Payments
.
Whenever any payment of cash is to be made by the Corporation to
any Person pursuant to this Certificate of Designations, unless
otherwise expressly set forth herein, such payment shall be made in
lawful money of the United States of America by a certified check
drawn on the account of the Corporation and sent via overnight
courier service to such Person at such address as previously
provided to the Corporation in writing (which address, in the case
of each of the Buyers (as defined in the March 2019 SPA, shall
initially be as set forth on the Schedule of Buyers attached to the
March 2019 SPA), provided that such Holder may elect to receive a
payment of cash via wire transfer of immediately available funds by
providing the Corporation with prior written notice setting out
such request and such Holder’s wire transfer instructions.
Whenever any amount expressed to be due by the terms of this
Certificate of Designations 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. Any amount due under the Transaction
Documents which is not paid when due shall result in a late charge
being incurred and payable by the Corporation in an amount equal to
interest on such amount at the rate of fifteen percent
(15%) per annum from the date such amount was due until the
same is paid in full (“
Late Charge
”).
23.
Waiver of
Notice
. To the extent permitted
by law, the Corporation 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 Certificate of Designations and the March 2019
SPA.
24.
Governing
Law
. This Certificate of
Designations shall be construed and enforced in accordance with,
and all questions concerning the construction, validity,
interpretation and performance of this Certificate of Designations
shall be governed by, the internal laws of the State of Delaware,
without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or any other
jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Delaware. Except as otherwise
required by Section 21 above, the Corporation 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. 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 (i) shall be deemed or operate to preclude any Holder
from bringing suit or taking other legal action against the
Corporation in any other jurisdiction to collect on the
Corporation’s obligations to such 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 such Holder or
(ii) shall limit, or shall be deemed or construed to limit,
any provision of Section 21.
THE CORPORATION 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 CERTIFICATE OF
DESIGNATIONS OR ANY TRANSACTION CONTEMPLATED
HEREBY.
25.
Judgment
Currency
.
(a) If for the purpose of obtaining or enforcing
judgment against the Corporation in any court in any jurisdiction
it becomes necessary to convert into any other currency (such other
currency being hereinafter in this Section 25 referred to as
the “
Judgment
Currency
”) an amount due
in U.S. dollars under this Certificate of Designations, the
conversion shall be made at the Exchange Rate prevailing on the
Trading Day immediately preceding:
(i)
the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other
jurisdiction that will give effect to such conversion being made on
such date: or
(ii) the date on which the foreign court
determines, in the case of any proceeding in the courts of any
other jurisdiction (the date as of which such conversion is made
pursuant to this Section 25(a)(ii) being hereinafter referred
to as the “
Judgment Conversion
Date
”).
(b)
If in the case of any proceeding in the court of any jurisdiction
referred to in Section 25(a) above, there is a change in the
Exchange Rate prevailing between the Judgment Conversion Date and
the date of actual payment of the amount due, the applicable party
shall pay such adjusted amount as may be necessary to ensure that
the amount paid in the Judgment Currency, when converted at the
Exchange Rate prevailing on the date of payment, will produce the
amount of US dollars which could have been purchased with the
amount of Judgment Currency stipulated in the judgment or judicial
order at the Exchange Rate prevailing on the Judgment Conversion
Date.
(c)
Any amount due from the Corporation under this provision shall be
due as a separate debt and shall not be affected by judgment being
obtained for any other amounts due under or in respect of this
Certificate of Designations.
26.
Severability
.
If any provision of this Certificate of Designations 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 Certificate of Designations so long as this Certificate of
Designations 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).
27.
Maximum
Payments
. Nothing contained
herein 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 hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall
be credited against amounts owed by the Corporation to the
applicable Holder and thus refunded to the
Corporation.
28.
Stockholder Matters;
Amendment
.
(a)
Stockholder
Matters
. Any stockholder
action, approval or consent required, desired or otherwise sought
by the Corporation pursuant to the DGCL, the Certificate of
Incorporation, this Certificate of Designations or otherwise with
respect to the issuance of Preferred Shares may be effected by
written consent of the Corporation’s stockholders or at a
duly called meeting of the Corporation’s stockholders, all in
accordance with the applicable rules and regulations of the DGCL.
This provision is intended to comply with the applicable sections
of the DGCL permitting stockholder action, approval and consent
affected by written consent in lieu of a
meeting.
(b)
Amendment
.
This Certificate of Designations or any provision hereof may be
amended by obtaining the affirmative vote at a meeting duly called
for such purpose, or written consent without a meeting in
accordance with the DGCL, of the Required Holders, voting separate
as a single class, and with such other stockholder approval, if
any, as may then be required pursuant to the DGCL and the
Certificate of Incorporation.
29.
Certain Defined
Terms
. For purposes of this
Certificate of Designations, the following terms shall have the
following meanings:
(a) “
1933 Act
” means the Securities Act of 1933, as
amended, and the rules and regulations
thereunder.
(b) “
1934 Act
” means the Securities Exchange Act of 1934,
as amended, and the rules and regulations
thereunder.
(c)
Intentionally omitted.
(d) “
Affiliate
” or “
Affiliated
” means, with respect to any Person, any
other Person that directly or indirectly controls, is controlled
by, or is under common control with, such Person, it being
understood for purposes of this definition that
“control” of a Person means the power directly or
indirectly either to vote 10% or more of the stock having ordinary
voting power for the election of directors of such Person or direct
or cause the direction of the management and policies of such
Person whether by contract or otherwise.
(e) “
Attribution
Parties
” means,
collectively, the following Persons and entities: (i) any
investment vehicle, including, any funds, feeder funds or managed
accounts, currently, or from time to time after the Initial
Issuance Date, directly or indirectly managed or advised by a
Holder’s investment manager or any of its Affiliates or
principals, (ii) any direct or indirect Affiliates of such
Holder or any of the foregoing, (iii) any Person acting or who
could be deemed to be acting as a Group together with such Holder
or any of the foregoing and (iv) any other Persons whose
beneficial ownership of the Corporation’s Common Stock would
or could be aggregated with such Holder’s and the other
Attribution Parties for purposes of Section 13(d) of the 1934
Act. For clarity, the purpose of the foregoing is to subject
collectively such Holder and all other Attribution Parties to the
Maximum Percentage.
(f)
“
Bankruptcy
Event
” means any of the following events: (a) the
Corporation commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction relating to the Corporation, (b) there is
commenced against the Corporation any such case or proceeding that
is not dismissed within 60 days after commencement, (c) the
Corporation is adjudicated insolvent or bankrupt or any order of
relief or other order approving any such case or proceeding is
entered, (d) the Corporation suffers any appointment of any
custodian or the like for it or any substantial part of its
property that is not discharged or stayed within 60 calendar days
after such appointment, (e) the Corporation makes a general
assignment for the benefit of creditors, (f) the Corporation calls
a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts, (g) the Corporation
admits in writing that it is generally unable to pay its debts as
they become due, (h) the Corporation, by any act or failure to act,
expressly indicates its consent to, approval of or acquiescence in
any of the foregoing or takes any corporate or other action for the
purpose of effecting any of the foregoing.
(g) “
Bloomberg
” means Bloomberg, L.P.
(h) “
Book-Entry
” means each entry on the Register
evidencing one or more Preferred Shares held by a Holder in lieu of
a Preferred Share Certificate issuable
hereunder.
(i) “
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.
(j) “
Closing Bid
Price
” and
“
Closing Sale
Price
” means, for any
security as of any date, the last closing bid price and last
closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal
Market begins to operate on an extended hours basis and does not
designate the closing bid price or the closing trade price (as the
case may be) then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if the Principal Market is not
the principal securities exchange or trading market for such
security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price or last trade price, respectively, of such
security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing
bid price or last trade price, respectively, is reported for such
security by Bloomberg, 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 OTC Markets Group Inc.
(formerly Pink Sheets LLC). If the Closing Bid Price or the Closing
Sale Price cannot be calculated for a security on a particular date
on any of the foregoing bases, the Closing Bid Price or the Closing
Sale Price (as the case may be) of such security on such date shall
be the fair market value as mutually determined by the Corporation
and the Required Holder. If the Corporation and the Required
Holders are unable to agree upon the fair market value of such
security, then such dispute shall be resolved in accordance with
the procedures in Section 21. All such determinations shall be
appropriately adjusted for any stock splits, stock dividends, stock
combinations, recapitalizations or other similar transactions
during such period.
(k) “
Common Stock
” means (i) the Corporation’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.
(l) “
Convertible
Securities
” means any
stock or other security (other than Options) that is at any time
and under any circumstances, directly or indirectly, convertible
into, exercisable or exchangeable for, or which otherwise entitles
the holder thereof to acquire, any shares of Common
Stock.
(m) “
Current
Subsidiary
” means any
Person in which the Corporation on the Subscription Date, directly
or indirectly, (i) owns 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, “
Current
Subsidiaries
”.
(n) “
Eligible
Market
” means The New
York Stock Exchange, the NYSE American, the Nasdaq Global Select
Market, the Nasdaq Global Market or the Principal
Market.
(p)
“
Fundamental
Transaction
” means
(A) that the Corporation shall, directly or indirectly,
including through subsidiaries, Affiliates or otherwise, in one or
more related transactions, (i) consolidate or merge with or
into (whether or not the Corporation is the surviving corporation)
another Subject Entity, or (ii) sell, assign, transfer, convey
or otherwise dispose of all or substantially all of the properties
or assets of the Corporation or any of its “significant
subsidiaries “ (as defined in Rule 1-02 of Regulation S-X) to
one or more Subject Entities, or (iii) make, or allow one or
more Subject Entities to make, or allow the Corporation to be
subject to or have its Common Stock be subject to or party to one
or more Subject Entities making, a purchase, tender or exchange
offer that is accepted by the holders of at least either
(x) 50% of the outstanding shares of Common Stock,
(y) 50% of the outstanding shares of Common Stock calculated
as if any shares of Common Stock held by all Subject Entities
making or party to, or Affiliated with any Subject Entities making
or party to, such purchase, tender or exchange offer were not
outstanding; or (z) such number of shares of Common Stock such
that all Subject Entities making or party to, or Affiliated with
any Subject Entity making or party to, such purchase, tender or
exchange offer, become collectively the beneficial owners (as
defined in Rule 13d-3 under the 1934 Act) of at least 50% of the
outstanding shares of Common Stock, or (iv) consummate a stock
or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with one or more Subject
Entities whereby all such Subject Entities, individually or in the
aggregate, acquire, either (x) at least 50% of the outstanding
shares of Common Stock, (y) at least 50% of the outstanding
shares of Common Stock calculated as if any shares of Common Stock
held by all the Subject Entities making or party to, or Affiliated
with any Subject Entity making or party to, such stock purchase
agreement or other business combination were not outstanding; or
(z) such number of shares of Common Stock such that the
Subject Entities become collectively the beneficial owners (as
defined in Rule 13d-3 under the 1934 Act) of at least 50% of the
outstanding shares of Common Stock, or (v) reorganize,
recapitalize or reclassify its Common Stock, (B) that the
Corporation shall, directly or indirectly, including through
subsidiaries, Affiliates or otherwise, in one or more related
transactions, allow any Subject Entity individually or the Subject
Entities in the aggregate to be or become the “beneficial
owner” (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, whether through acquisition, purchase,
assignment, conveyance, tender, tender offer, exchange, reduction
in outstanding shares of Common Stock, merger, consolidation,
business combination, reorganization, recapitalization, spin-off,
scheme of arrangement, reorganization, recapitalization or
reclassification or otherwise in any manner whatsoever, of either
(x) at least 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock, (y) at
least 50% of the aggregate ordinary voting power represented by
issued and outstanding Common Stock not held by all such Subject
Entities as of the date of this Certificate of Designations
calculated as if any shares of Common Stock held by all such
Subject Entities were not outstanding, or (z) a percentage of
the aggregate ordinary voting power represented by issued and
outstanding shares of Common Stock or other equity securities of
the Corporation sufficient to allow such Subject Entities to effect
a statutory short form merger or other transaction requiring other
stockholders of the Corporation to surrender their shares of Common
Stock without approval of the stockholders of the Corporation or
(C) directly or indirectly, including through subsidiaries,
Affiliates or otherwise, in one or more related transactions, the
issuance of or the entering into any other instrument or
transaction structured in a manner to circumvent, or that
circumvents, the intent of this definition in which case this
definition shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this definition to the
extent necessary to correct this definition or any portion of this
definition which may be defective or inconsistent with the intended
treatment of such instrument or transaction.
(q) “
GAAP
” means United States generally accepted
accounting principles, consistently applied.
(r) “
Group
” means a “group” as that term
is used in Section 13(d) of the 1934 Act and as defined in
Rule 13d-5 thereunder.
(s) “
Holder
” shall have the meaning set forth in
Section 2.
(t) “
Holder Pro Rata
Amount
” means, with
respect to any Holder, a fraction (i) the numerator of which
is the number of Preferred Shares issued to such Holder on the
Initial Issuance Date and (ii) the denominator of which is the
number of Preferred Shares issued to all Holders on the Initial
Issuance Date.
(u) “
Liquidation
Event
” means, whether in
a single transaction or series of transactions, the voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation or such Subsidiaries the assets of which constitute all
or substantially all of the assets of the business of the
Corporation and its Subsidiaries, taken as a
whole.
(v) “
March 2019
Investors
” means those
investors signatory to the March 2019 SPA.
(w) “
March 2019
SPA
” means that certain
Securities Purchase Agreement, dated as of March __, 2019, between
the Corporation and the March 2019 Investors.
(x) “
New
Subsidiary
” means, as of
any date of determination, any Person in which the Corporation
after the Subscription 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
.”
(y) “
Options
” means any rights, warrants or options to
subscribe for or purchase shares of Common Stock or Convertible
Securities.
(z) “
Parent
Entity
” of a Person means
an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is
quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with
the largest public market capitalization as of the date of
consummation of the Fundamental Transaction.
(aa) “
Person
” means an individual, a limited liability
Corporation, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity or a
government or any department or agency thereof.
(bb) “
Principal
Market
” means the Nasdaq
Capital Market.
(cc) “
SEC
” means the Securities and Exchange
Commission or the successor thereto.
(dd) “
Stated Value
” shall mean $1,000 per share, subject to
adjustment for stock splits, stock dividends, recapitalizations,
reorganizations, reclassifications, combinations, subdivisions or
other similar events occurring after the Initial Issuance Date with
respect to the Preferred Shares.
(ee) “
Subscription
Date
” means March __,
2019.
(ff)
“Subject
Entity
” means any Person,
Persons or Group or any Affiliate or associate of any such Person,
Persons or Group.
(gg) “
Subsidiaries
” means, as of any date of determination,
collectively, all Current Subsidiaries and all New Subsidiaries,
and each of the foregoing, individually, a
“
Subsidiary
.”
(hh) “
Successor
Entity
” means the Person
(or, if so elected by the Required Holders, the Parent Entity)
formed by, resulting from or surviving any Fundamental Transaction
or the Person (or, if so elected by the Required Holders, the
Parent Entity) with which such Fundamental Transaction shall have
been entered into.
(ii) “
Trading Day
” means, as applicable, (x) with
respect to all price or trading volume determinations relating to
the Common Stock, any day on which the Common Stock is traded on
the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the
Common Stock is then traded, provided that “Trading
Day” shall not include any day on which the Common Stock is
scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading
during the final hour of trading on such exchange or market (or if
such exchange or market does not designate in advance the closing
time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York time) unless such day is otherwise
designated as a Trading Day in writing by the Holder or
(y) with respect to all determinations other than price
determinations relating to the Common Stock, any day on which The
New York Stock Exchange (or any successor thereto) is open for
trading of securities.
(jj) “
Transaction
Documents
” means this
Certificate of Designations, the March 2019 SPA and each of the
other agreements and instruments entered into or delivered by the
Corporation or any of the Holders in connection with the
transactions contemplated by the March 2019 SPA, all as may be
amended from time to time in accordance with the terms
thereof.
(kk) “
VWAP
” means, for any security as of any date,
the dollar volume-weighted average price for such security on the
Principal Market (or, if the Principal Market is not the principal
trading market for such security, then on the principal securities
exchange or securities market on which such security is then
traded) during the period beginning at 9:30:01 a.m., New York time,
and ending at 4:00:00 p.m., New York time, as reported by Bloomberg
through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price
of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at
9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if no dollar volume-weighted
average price is reported for such security by Bloomberg for such
hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as
reported in the “pink sheets” by OTC Markets Group Inc.
(formerly Pink Sheets LLC). If the VWAP cannot be calculated for
such security on such date on any of the foregoing bases, the VWAP
of such security on such date shall be the fair market value as
mutually determined by the Corporation and the Required Holders. If
the Corporation and the Required Holders are unable to agree upon
the fair market value of such security, then such dispute shall be
resolved in accordance with the procedures in Section 21. All
such determinations shall be appropriately adjusted for any stock
dividend, stock split, stock combination, recapitalization or other
similar transaction during such period.
(ll) “
Warrants
”
means, collectively, the Common
Stock purchase warrants delivered to the Holders in accordance with
the terms of the
March 2019
SPA.
30.
Disclosure
.
Upon receipt or delivery by the Corporation of any notice in
accordance with the terms of this Certificate of Designations,
unless the Corporation has in good faith determined that the
matters relating to such notice do not constitute material,
non-public information relating to the Corporation or any of its
Subsidiaries, the Corporation shall within one (1) Business
Day after any such receipt or delivery publicly disclose such
material, non-public information on a Current Report on Form 8-K or
otherwise. In the event that the Corporation believes that a notice
contains material, non-public information relating to the
Corporation or any of its Subsidiaries, the Corporation so shall
indicate to such Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, such Holder
shall be allowed to presume that all matters relating to such
notice do not constitute material, non-public information relating
to the Corporation or any of its Subsidiaries. If the Corporation
or any of its Subsidiaries provides material non-public information
to a Holder that is not simultaneously filed in a Current Report on
Form 8-K and such Holder has not agreed to receive such material
non-public information, the Corporation hereby covenants and agrees
that such Holder shall not have any duty of confidentiality to the
Corporation, any of its Subsidiaries or any of their respective
officers, directors, employees, affiliates or agents with respect
to, or a duty to any of the foregoing not to trade on the basis of,
such material non-public information. Nothing contained in this
Section 30 shall limit any obligations of the Corporation, or
any rights of any Holder, under the March 2019
SPA.
* * * *
*
IN WITNESS WHEREOF, the Corporation has caused
this Certificate of Designations of Series C Convertible Preferred
Stock to be signed by its Chief Executive Officer on this
11
th
day
of March, 2019.
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BRIDGELINE
DIGITAL, INC.
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By:
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/s/ Roger
Kahn
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Name:
Roger Kahn
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Title:
Chief Executive Officer
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EXHIBIT I
BRIDGELINE DIGITAL, INC.
CONVERSION NOTICE
Reference is made to the Certificate of
Designations, Preferences and Rights of the Series C Convertible
Preferred Stock of Bridgeline Digital, Inc. (the
“
Certificate of
Designations
”). In
accordance with and pursuant to the Certificate of Designations,
the undersigned hereby elects to convert the number of shares of
Series C Convertible Preferred Stock, $0.001 par value per share
(the “
Preferred
Shares
”), of Bridgeline
Digital, Inc., a Delaware corporation (the
“
Corporation
”), indicated below into shares of common
stock, $0.001 value per share (the “
Common Stock
”), of the Corporation, as of the date
specified below.
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Aggregate number of
Preferred Shares to be converted
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Aggregate Stated
Value of such Preferred Shares to be converted:
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Aggregate accrued
and unpaid Dividends and accrued and unpaid Late Charges with
respect to such Preferred Shares and such Aggregate Dividends to be
converted:
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AGGREGATE
CONVERSION AMOUNT TO BE CONVERTED:
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Please
confirm the following information:
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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 applicable Preferred Shares
are being converted to Holder, or for its benefit, as
follows:
☐
Check
here if requesting delivery as a certificate to the following name
and to the following address:
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☐
Check
here if requesting delivery by Deposit/Withdrawal at Custodian as
follows:
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DTC Participant:
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DTC
Number:
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Account
Number:
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Date: ,
Name of
Registered Holder
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By:
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Name:
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Title:
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Tax ID:
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Facsimile:
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E-mail
Address:
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EXHIBIT II
ACKNOWLEDGMENT
The
Corporation hereby acknowledges this Conversion Notice and hereby
directs
to
issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated
,
20 from
the Corporation and acknowledged and agreed to by
.
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BRIDGELINE
DIGITAL, INC.
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By:
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Name:
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Title:
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Exhibit 4.1
SERIES A WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE 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 SELECTED BY THE HOLDER, 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.
BRIDGELINE DIGITAL, INC.
SERIES A WARRANT TO PURCHASE COMMON STOCK
Warrant No.:
__________________
Number
of Shares of Common Stock: ___________________
Date of
Issuance: March , 2019 (“
Issuance Date
”)
Bridgeline Digital,
Inc., a Delaware corporation (the “
Company
”), hereby certifies that,
for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, [ ], the registered holder hereof or
its permitted assigns (the “
Holder
”), is entitled, subject to
the terms set forth below, to purchase from the Company, at the
Exercise Price (as defined below) then in effect, at any time or
times on or after the earlier of (i) the date of the Authorized
Share Approval and (ii) six months following the Subscription Date,
but not after 11:59 p.m., New York time, on the Expiration Date,
(as defined below), ______________ (_____________)
1
fully paid nonassessable shares of
Common Stock, all subject to adjustment as provided
herein
(the
“
Warrant
Shares
”). Except as otherwise defined herein,
capitalized terms in this Warrant to Purchase Common Stock
(including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, this “
Warrant
”), shall have the meanings
set forth in Section 17. This Warrant is one of the Series
A
Warrants to purchase
Common Stock (the “
SPA
Warrants
”) issued pursuant to Section 1 of that
certain Securities Purchase Agreement, dated as of March __, 2019
(the “
Subscription
Date
”), by and among the Company and the investors
(the “
Buyers
”)
referred to therein (the “
Securities Purchase Agreement
”).
Capitalized terms used herein and not otherwise defined shall have
the definitions ascribed to such terms in the Securities Purchase
Agreement.
1.
EXERCISE
OF WARRANT.
(a)
Mechanics of Exercise
. Subject
to the terms and conditions hereof (including, without limitation,
the limitations set forth in Section 1(f) and 1(h)), this Warrant
may be exercised by the Holder at any time or times on or after the
Issuance Date, in whole or in part, by (i) delivery of a
written notice, in the form attached hereto as
Exhibit A
(the
“
Exercise
Notice
”), of the Holder's election to exercise this
Warrant and (ii) (A) payment to the Company of an amount equal
to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the
“
Aggregate Exercise
Price
”) in cash by wire transfer of immediately
available funds or (B) if the provisions of Section 1(d) are
applicable, by notifying the Company that this Warrant is being
exercised pursuant to a Cashless Exercise (as defined in Section
1(d)). 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 with respect to less than all of
the Warrant Shares 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. On or
before the first (1
st
) Trading Day
following the date on which the Company has received the Exercise
Notice, the Company shall transmit by electronic mail an
acknowledgment of confirmation of receipt of the Exercise Notice to
the Holder and the Company's transfer agent (the
“
Transfer
Agent
”). On or before the earlier of (i) the second
(2
nd
)
Trading Day and (ii) the number of Trading Days comprising the
Standard Settlement Period, in each case, following the date on
which the Holder delivers the Exercise Notice to the Company, so
long as the Holder delivers the Aggregate Exercise Price (or notice
of a Cashless Exercise) on or prior to the second (2
nd
) Trading Day
following the date on which the Company has received the Exercise
Notice (the “
Share Delivery
Date
”) (provided that if the Aggregate Exercise Price
has not been delivered by such date, the Share Delivery Date shall
be two (2) Trading Days after the Aggregate Exercise Price (or
notice of a Cashless Exercise) is delivered), the Company shall (X)
provided that the Transfer Agent is participating in The Depository
Trust Company (“
DTC
”) Fast Automated Securities
Transfer Program and (A) the Warrant Shares are subject to an
effective resale registration statement in favor of the Holder or
(B) if exercised via Cashless Exercise, at a time when Rule 144
would be available for immediate resale of the Warrant Shares by
the Holder, credit such aggregate number of Warrant Shares to which
the Holder is entitled pursuant to such exercise to the Holder's or
its designee's balance account with DTC through its Deposit /
Withdrawal At Custodian system, or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program
or (A) the Warrant Shares are not subject to an effective resale
registration statement in favor of the Holder and (B) if exercised
via Cashless Exercise, at a time when Rule 144 would not be
available for immediate resale of the Warrant Shares by the Holder,
issue and dispatch by overnight courier to the address as specified
in the Exercise Notice, a certificate, registered in the Company's
share register in the name of the Holder or its designee, for the
number of Warrant Shares to which the Holder is entitled pursuant
to such exercise. The Company shall be responsible for all fees and
expenses of the Transfer Agent and all fees and expenses with
respect to the issuance of Warrant Shares via DTC, if any. Upon
delivery of the Exercise Notice, the Holder shall be deemed for all
corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date such Warrant Shares are
credited to the Holder's DTC account or the date of delivery of the
certificates evidencing such Warrant Shares, as the case may be. If
this Warrant is submitted in connection with any exercise pursuant
to this Section 1(a) and the number of Warrant Shares represented
by this Warrant submitted for exercise is greater than the number
of Warrant Shares being acquired upon an exercise, then the Company
shall as soon as practicable and in no event later than three (3)
Trading Days after any exercise and at its own expense, issue a new
Warrant (in accordance with Section 7(d)) representing the right to
purchase the number of Warrant Shares issuable immediately prior to
such exercise under this Warrant, less the number of Warrant Shares
with respect to which this Warrant is exercised. No fractional
Warrant Shares are to be issued upon the exercise of this Warrant,
but rather the number of Warrant Shares to be issued shall be
rounded up to the nearest whole number. The Company shall pay any
and all taxes which may be payable with respect to the issuance and
delivery of Warrant Shares upon exercise of this Warrant. The
Company's obligations to issue and deliver Warrant Shares in
accordance with the terms and subject to the conditions hereof are
absolute and unconditional, irrespective of any action or inaction
by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any
setoff, counterclaim, recoupment, limitation or
termination.
(b)
Exercise Price
. For purposes of
this Warrant, “
Exercise
Price
” means $0.18 per share, subject to adjustment as
provided herein.
(c)
Company's Failure to Timely Deliver
Securities
. If the Company shall fail for any reason or for
no reason to issue to the Holder on or prior to the Share Delivery
Date either (I) if the Transfer Agent is not participating in the
DTC Fast Automated Securities Transfer Program, a certificate for
the number of shares of Common Stock to which the Holder is
entitled and register such shares of Common Stock on the Company's
share register or if the Transfer Agent is participating in the DTC
Fast Automated Securities Transfer Program, to credit the Holder's
balance account with DTC, for such number of shares of Common Stock
to which the Holder is entitled upon the Holder's exercise of this
Warrant or (II) if the Registration Statement covering the resale
of the Warrant Shares that are the subject of the Exercise Notice
(the “
Unavailable Warrant
Shares
”) is not available for the resale of such
Unavailable Warrant Shares and the Company fails to promptly, but
in no event later than as is required pursuant to the Registration
Rights Agreement (x) so notify the Holder and (y) deliver the
Warrant Shares electronically without any restrictive legend by
crediting such aggregate number of Warrant Shares to which the
Holder is entitled pursuant to such exercise to the Holder's or its
designee's balance account with DTC through its Deposit /
Withdrawal At Custodian system (the event described in the
immediately foregoing clause (II) is hereinafter referred as a
“
Notice Failure
”
and together with the event described in clause (I) above, an
“
Exercise
Failure
”), then, in addition to all other remedies
available to the Holder, (X) the Company shall pay in cash to the
Holder on each day after the Share Delivery Date and during such
Exercise Failure an amount equal to 1.0% of the product of (A) the
sum of the number of shares of Common Stock not issued to the
Holder on or prior to the Share Delivery Date and to which the
Holder is entitled, and (B) any trading price of the Common Stock
selected by the Holder in writing as in effect at any time during
the period beginning on the applicable date of delivery of an
Exercise Notice and ending on the applicable Share Delivery Date,
and (Y) the Holder, upon written notice to the Company, may void
its Exercise Notice with respect to, and retain or have returned,
as the case may be, any portion of this Warrant that has not been
exercised pursuant to such Exercise Notice; provided that the
voiding of an Exercise Notice shall not affect the Company's
obligations to make any payments which have accrued prior to the
date of such notice pursuant to this Section 1(c) or otherwise. In
addition to the foregoing, if on or prior to the Share Delivery
Date either (I) if the Transfer Agent is not participating in the
DTC Fast Automated Securities Transfer Program, the Company shall
fail to issue and deliver a certificate to the Holder and register
such shares of Common Stock on the Company's share register or, if
the Transfer Agent is participating in the DTC Fast Automated
Securities Transfer Program, credit the Holder's balance account
with DTC for the number of shares of Common Stock to which the
Holder is entitled upon the Holder's exercise hereunder or pursuant
to the Company's obligation pursuant to clause (ii) below or (II) a
Notice Failure occurs, and if on or after such Trading Day the
Holder purchases (in an open market transaction or otherwise)
shares of Common Stock relating to the applicable Exercise Failure
(a “
Buy-In
”),
then the Company shall, within five (5) Trading Days after the
Holder's request and in the Holder's discretion, either (i) pay
cash to the Holder in an amount equal to the Holder's total
purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so
purchased (the “
Buy-In
Price
”), at which point the Company's obligation to
deliver such certificate (and to issue such shares of Common Stock)
or credit the Holder's balance account with DTC for such shares of
Common Stock shall terminate, or (ii) promptly honor its obligation
to deliver to the Holder a certificate or certificates representing
such shares of Common Stock or credit the Holder's balance account
with DTC, as applicable, and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product
of (A) such number of shares of Common Stock, times (B) any trading
price of the Common Stock selected by the Holder in writing as in
effect at any time during the period beginning on the applicable
date of delivery of an Exercise Notice and ending on the applicable
Share Delivery Date. Nothing herein shall limit the Holder's right
to pursue any other remedies available to it hereunder, at law or
in equity, including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of
Common Stock (or to electronically deliver such shares of Common
Stock) upon the exercise of this Warrant as required pursuant to
the terms hereof.
(d)
Cashless Exercise
.
Notwithstanding anything contained
herein to the contrary, if the Registration Statement covering the
resale of the Unavailable Warrant Shares is not available for the
resale of such Unavailable Warrant Shares, the Holder may, in its
sole discretion, exercise this Warrant in whole or in part and, in
lieu of making the cash payment otherwise contemplated to be made
to the Company upon such exercise in payment of the Aggregate
Exercise Price, elect instead to receive upon such exercise the
“Net Number” of shares of Common Stock determined
according to the following formula (a “
Cashless Exercise
”):
Net
Number =
(A x B) - (A x
C)
B
For
purposes of the foregoing formula:
A= the
total number of shares with respect to which this Warrant is then
being exercised.
B= as
applicable: (i) the Weighted Average Price of the Common Stock on
the Trading Day immediately preceding the date of the applicable
Exercise Notice if such Exercise Notice is (1) both executed and
delivered pursuant to Section 1(a) hereof on a day that is not a
Trading Day or (2) both executed and delivered pursuant to Section
1(a) hereof on a Trading Day prior to the opening of “regular
trading hours” (as defined in Rule 600(b)(64) of Regulation
NMS promulgated under the federal securities laws) on such Trading
Day, (ii) at the option of the Holder, either (y) the Weighted
Average Price of the Common Stock on the Trading Day immediately
preceding the date of the applicable Exercise Notice or (z) the bid
price of the Common Stock on the principal Trading Market as
reported by Bloomberg as of the time of the Holder's execution of
the applicable Exercise Notice if such Exercise Notice is executed
during “regular trading hours” on a Trading Day and is
delivered within two (2) hours thereafter (including until two (2)
hours after the close of “regular trading hours” on a
Trading Day) pursuant to Section 1(a) hereof or (iii) the Weighted
Average Price of the Common Stock on the date of the applicable
Exercise Notice if the date of such Exercise Notice is a Trading
Day and such Exercise Notice is both executed and delivered
pursuant to Section 1(a) hereof after the close of “regular
trading hours” on such Trading Day;
C= the
Exercise Price then in effect for the applicable Warrant Shares at
the time of such exercise.
If
shares of Common Stock are issued pursuant to this Section 1(d),
the Company hereby acknowledges and agrees that the Warrant Shares
issued in a Cashless Exercise 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 Securities Purchase Agreement.
The Company agrees not to take any position contrary to this
Section 1(d).
(e)
Disputes
. In the case of a
dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section
12.
(f)
Beneficial Ownership Limitations on
Exercises
.
Notwithstanding
anything to the contrary contained herein, the Company shall not
effect the exercise of any portion of this Warrant, and the Holder
shall not have the right to exercise any portion of this Warrant,
pursuant to the terms and conditions of this Warrant and any such
exercise shall be null and void and treated as if never made, to
the extent that after giving effect to such exercise, the Holder
together with the other Attribution Parties collectively would
beneficially own in excess of 4.99% (the “
Maximum
Percentage
”) of the
number of
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 the Holder and the other
Attribution Parties shall include the number of
shares of
Common Stock
held by the Holder and
all other Attribution Parties plus 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 the number of
shares of Common Stock
which would be
issuable upon (A) exercise of the remaining, unexercised portion of
this Warrant beneficially owned by the Holder or any of the other
Attribution Parties and (B) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company (including, without limitation, any convertible notes or
convertible preferred stock or warrants, including
the
Series B
Warrants, Series C Warrants and
Preferred Shares (as defined in the Securities Purchase Agreement))
beneficially owned by the Holder or any other Attribution Party
subject to a limitation on conversion or exercise analogous to the
limitation contained in this Section 1(f). For purposes of this
Section 1(f), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the “
1934 Act
”). For purposes of this Warrant, in
determining the number of outstanding
shares of Common Stock
the Holder may acquire upon the
exercise of this Warrant without exceeding the Maximum Percentage,
the Holder may rely on the number of outstanding
shares of
Common Stock
as reflected in (x) the
Company's most recent Annual Report on Form 10-K, Quarterly Report
on Form 10-Q, Current Report on Form 8-K or other public filing
with the Securities and
Exchange Commission (the
“
SEC
”), as the
case may be, (y) a more recent public announcement by the Company
or (3) any other written
notice by the
Company or the Transfer Agent setting forth the number of
shares of Common Stock
outstanding
(the “
Reported Outstanding Share
Number
”). If the Company
receives an Exercise Notice from the Holder at a time when the
actual number of outstanding
shares of Common Stock
is less than the Reported Outstanding
Share Number, the Company shall (i) notify the Holder in writing of
the number of
shares of Common Stock
then outstanding and, to the extent that such
Exercise Notice would otherwise cause the Holder's beneficial
ownership, as determined pursuant to this Section 1(f), to exceed
the Maximum Percentage, the Holder must notify the Company of a
reduced number of Warrant Shares to be purchased pursuant to such
Exercise Notice
(the number of
shares by which such purchase is reduced, the
“
Reduction
Shares
”) and (ii) as soon
as reasonably practicable, the Company shall return to the Holder
any exercise price paid by the Holder for the Reduction
Shares.
For any reason at any time, upon the written or oral
request of the Holder,
the Company
shall within one (1) Trading Day confirm orally and in writing or
by electronic mail 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 any other Attribution
Party since the date as of which the Reported Outstanding Share
Number was reported. In the event that the issuance of
shares of Common Stock
to the Holder
upon exercise of this Warrant results in the Holder and the other
Attribution Parties being deemed to beneficially own, in the
aggregate, more than the Maximum Percentage of the number of
outstanding
shares of Common Stock
(as determined under Section 13(d) of the 1934
Act), the number of shares so issued by which the Holder's and the
other Attribution Parties' aggregate beneficial ownership exceeds
the Maximum Percentage (the “
Excess
Shares
”) shall be deemed
null and void and shall be cancelled ab initio, and the Holder
shall not have the power to vote or to transfer the Excess Shares.
As soon as reasonably practicable after the issuance of the Excess
Shares has been deemed null and void, the Company shall return to
the Holder the exercise price paid by the Holder for the Excess
Shares.
Upon delivery of a written notice to the Company,
the Holder may from time to time increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% as
specified in such notice; provided that (i) any such increase in
the Maximum Percentage will not be effective until the sixty-first
(61
st
) day
after such notice is delivered to the Company and (ii) any such
increase or decrease will apply only to the Holder and the other
Attribution Parties and not to any other holder of SPA Warrants
that is not an Attribution Party of the Holder. For purposes of
clarity, the shares of Common Stock issuable pursuant to the terms
of this Warrant in excess of the Maximum Percentage shall not be
deemed to be beneficially owned by the Holder for any purpose
including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the
1934 Act.
No
prior
inability to exercise this Warrant pursuant to this paragraph shall
have any effect on the applicability of the provisions of this
paragraph with respect to any subsequent determination of
exercisability.
The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 1(f) to
the extent necessary to correct this paragraph or any portion of
this paragraph which may be defective or inconsistent with the
intended beneficial ownership limitation contained in this Section
1(f) or to make changes or
supplements
necessary or desirable to properly give effect to
such limitation. The limitation contained in this paragraph may not
be waived and shall apply to a successor holder of this
Warrant.
(g)
Insufficient Authorized Shares
.
If at any time after the Company obtains Stockholder Approval, the
Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon exercise of this Warrant at least a
number of shares of Common Stock equal to 100% of the number of
shares of Common Stock as shall from time to time be necessary to
effect the exercise of all of this Warrant then outstanding without
regard to any limitation on exercise included herein (the
“
Required Reserve
Amount
” and the failure to have such sufficient number
of authorized and unreserved shares of Common Stock, an
“
Authorized Share
Failure
”), then the Company shall immediately take all
action 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 this Warrant then
outstanding either through an increase in the authorized number of
shares of Common Stock or a reverse stock split of the outstanding
shares of Common Stock. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the
occurrence of an Authorized Share Failure, but in no event later
than sixty (60) 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 or a reverse stock split of the outstanding shares of
Common Stock. In connection with such meeting, the Company shall
provide each stockholder with a proxy statement and shall use its
best efforts to solicit its stockholders' approval of such increase
in authorized shares of Common Stock or a reverse stock split of
the outstanding shares of Common Stock and to cause its board of
directors to recommend to the stockholders that they approve such
proposal. Notwithstanding the foregoing, if any such time of an
Authorized Share Failure, the Company is able to obtain the written
consent of a majority of the shares of its issued and outstanding
shares of Common Stock to approve the increase in the number of
authorized shares of Common Stock or a reverse stock split of the
outstanding shares of Common Stock, the Company may satisfy this
obligation by obtaining such consent and submitting for filing with
the SEC an Information Statement on Schedule 14C. In the event that
upon any exercise of this Warrant following six (6) months
following the Subscription Date, the Company does not have
sufficient authorized shares to deliver in satisfaction of such
exercise, then unless the Holder elects to void such attempted
exercise, in lieu of issuing shares of Common Stock hereunder, the
Company shall pay to the Holder within three (3) Trading Days of
the applicable exercise, cash in an amount equal to the product of
(i) the number of Warrant Shares that the Company is unable to
deliver pursuant to this Section 1(g) and (ii) as applicable, (A)
the Weighted Average Price of the Common Stock on the Trading Day
immediately preceding the date of the applicable Exercise Notice if
such Exercise Notice is (x) both executed and delivered pursuant to
Section 1(a) hereof on a day that is not a Trading Day or (y) both
executed and delivered pursuant to Section 1(a) hereof on a Trading
Day prior to the opening of “regular trading hours” (as
defined in Rule 600(b)(64) of Regulation NMS promulgated under the
federal securities laws) on such Trading Day, (B) at the option of
the Holder, either (x) the Weighted Average Price of the Common
Stock on the Trading Day immediately preceding the date of the
applicable Exercise Notice or (y) the bid price of the Common Stock
on the principal Trading Market as reported by Bloomberg as of the
time of the Holder's execution of the applicable Exercise Notice if
such Exercise Notice is executed during “regular trading
hours” on a Trading Day and is delivered within two (2) hours
thereafter (including until two (2) hours after the close of
“regular trading hours” on a Trading Day) pursuant to
Section 1(a) hereof or (C) the Weighted Average Price of the Common
Stock on the date of the applicable Exercise Notice if the date of
such Exercise Notice is a Trading Day and such Exercise Notice is
both executed and delivered pursuant to Section 1(a) hereof after
the close of “regular trading hours” on such Trading
Day.
(h)
Issuance Restrictions
. The
Company may not issue any shares of Common Stock upon exercise of
this Warrant unless and until such date that the Company has
obtained Stockholder Approval.
2.
ADJUSTMENT OF EXERCISE PRICE AND
NUMBER OF WARRANT SHARES
. The Exercise Price and the number
of Warrant Shares shall be adjusted from time to time as
follows:
(a)
Adjustment Upon
Subdivision or Combination of Common Stock
. If the Company
at any time on or after the Subscription Date 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 Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the
number of Warrant Shares will be proportionately increased. If the
Company at any time on or after the Subscription Date 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 Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of
Warrant Shares will be proportionately decreased. Any adjustment
under this Section 2(c) shall become effective at the close of
business on the date the subdivision or combination becomes
effective.
(b)
Reset
. On the First
Reset Date, the Second Reset Date, if any, and the Third Reset
Date, if any (as such terms are defined in the Series C Warrants),
the Exercise Price shall be adjusted to equal the lower of (i) the
Exercise Price then in effect and (ii) 100% of the applicable Reset
Price determined as of the applicable date of determination. Upon
each such reset of the Exercise Price pursuant to this Section
2(d), the number of Warrant Shares issuable immediately prior to
such reset shall be adjusted to the number of shares of Common
Stock determined by multiplying the Exercise Price then in effect
immediately prior to such reset by the number of Warrant Shares
acquirable upon exercise of this Warrant immediately prior to such
reset and dividing the product thereof by the Exercise Price
resulting from such reset.
(c)
Other Events
. If
any event occurs of the type contemplated by the provisions of this
Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate
adjustment in the Exercise Price and the number of Warrant Shares,
as mutually determined by the Company's Board of Directors and the
Required Holders, so as to protect the rights of the Holder;
provided
that no
such adjustment pursuant to this Section 2(e) will increase the
Exercise Price or decrease the number of Warrant Shares as
otherwise determined pursuant to this Section 2.
(d)
Voluntary Adjustment By
Company
. The Company may at any time during the term of this
Warrant, with the prior written consent of the Required Holders,
reduce the then current Exercise Price to any amount and for any
period of time deemed appropriate by the Board of Directors of the
Company.
3.
RIGHTS UPON DISTRIBUTION OF
ASSETS
. If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property, options, evidence of
indebtedness or any other assets by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a “
Distribution
”), at any time after
the issuance of this Warrant, then, in each such case, the Holder
shall be entitled to participate in such Distribution to the same
extent that the Holder would have participated therein if the
Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations or restrictions on exercise of this Warrant, including
without limitation, the Maximum Percentage) immediately before the
date of which a record is taken for such Distribution, or, if no
such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the participation
in such Distribution (
provided
,
however
, that to the extent
that the Holder's right to participate in any such Distribution
would result in the Holder and the other Attribution Parties
exceeding the Maximum Percentage, then the Holder shall not be
entitled to participate in such Distribution to such extent (and
shall not be entitled to beneficial ownership of such shares of
Common Stock as a result of such Distribution (and beneficial
ownership) to such extent) and the portion of such Distribution
shall be held in abeyance for the benefit of the Holder until such
time or times as its right thereto would not result in the Holder
and the other Attribution Parties exceeding the Maximum Percentage,
at which time or times the Holder shall be granted such
Distribution (and any Distributions declared or made on such
initial Distribution or on any subsequent Distribution held
similarly in abeyance) to the same extent as if there had been no
such limitation).
4.
PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS
.
(i)
Purchase Rights
. In addition to
any adjustments pursuant to Section 2 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities
or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Stock (the
“
Purchase
Rights
”), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any
limitations or restrictions on exercise of this Warrant, including
without limitation, the Maximum Percentage) immediately before the
date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights
(
provided
,
however
, that to
the extent that the Holder's right to participate in any such
Purchase Right would result in the Holder and the other Attribution
Parties exceeding the Maximum Percentage, then the Holder shall not
be entitled to participate in such Purchase Right to such extent
(and shall not be entitled to beneficial ownership of such shares
of Common Stock as a result of such Purchase Right (and beneficial
ownership) to such extent) and such Purchase Right to such extent
shall be held in abeyance for the benefit of the Holder
until such time or times as its right
thereto would not result in the Holder and
the other
Attribution Parties
exceeding the
Maximum Percentage, at which time or times the Holder shall be
granted such right
(and any Purchase Right granted, issued
or sold on such initial Purchase Right or on any subsequent
Purchase Right held similarly in abeyance)
to the same extent as if there had been no such
limitation)
.
(b)
Fundamental Transactions
. The
Company shall not enter into or be party to a Fundamental
Transaction unless the Successor Entity assumes in writing all of
the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this
Section 4(b) pursuant to written agreements in form and substance
satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements
, if so requested by the Holder, to deliver to each holder of the
SPA Warrants in exchange for such SPA Warrants a security of the
Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Warrant, including, without
limitation, an adjusted exercise price equal to the value for the
shares of Common Stock reflected by the terms of such Fundamental
Transaction, and exercisable for a corresponding number of shares
of capital stock equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) prior to
such Fundamental Transaction, and satisfactory to the Required
Holders, and with an exercise price which applies the exercise
price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant
to such Fundamental Transaction and the value of such shares of
capital stock, such adjustments to the number of shares of capital
stock and such exercise price being for the purpose of protecting
the economic value of this Warrant immediately prior to the
occurrence or consummation of such Fundamental Transaction). Any
security issuable or potentially issuable to the Holder pursuant to
the terms of this Warrant on the consummation of a Fundamental
Transaction shall be registered and freely tradable by the Holder
without any restriction or limitation or the requirement to be
subject to any holding period pursuant to any applicable securities
laws.
No later than (i)
thirty (30) days prior to the occurrence or consummation of any
Fundamental Transaction or (ii) if later, the first Trading Day
following the date the Company first becomes aware of the
occurrence or potential occurrence of a Fundamental Transaction,
the Company shall deliver written notice thereof via facsimile or
electronic mail and overnight courier to the Holder.
Upon
the occurrence or consummation of any Fundamental Transaction, and
it shall be a required condition to the occurrence or consummation
of any Fundamental Transaction that, the Company and the Successor
Entity or Successor Entities, jointly and severally, shall succeed
to, and the Company shall cause any Successor Entity or Successor
Entities to jointly and severally succeed to, and be added to the
term “Company” under this Warrant (so that from and
after the date of such Fundamental Transaction, each and every
provision of this Warrant referring to the “Company”
shall refer instead to each of the Company and the Successor Entity
or Successor Entities, jointly and severally), and the Company and
the Successor Entity or Successor Entities, jointly and severally,
may exercise every right and power of the Company prior thereto and
shall assume all of the obligations of the Company prior thereto
under this Warrant with the same effect as if the Company and such
Successor Entity or Successor Entities, jointly and severally, had
been named as the Company in this Warrant, and, solely at the
request of the Holder, if the Successor Entity and/or Successor
Entities is a publicly traded corporation whose common stock is
quoted on or listed for trading on an Eligible Market, shall
deliver (in addition to and without limiting any right under this
Warrant) to the Holder in exchange for this Warrant a security of
the Successor Entity and/or Successor Entities evidenced by a
written instrument substantially similar in form and substance to
this Warrant and exercisable for a corresponding number of shares
of capital stock of the Successor Entity and/or Successor Entities
(the “
Successor Capital
Stock
”) equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) prior to
such Fundamental Transaction (such corresponding number of shares
of Successor Capital Stock to be delivered to the Holder shall be
equal to the greater of (A) the quotient of (i) the aggregate
dollar value of all consideration (including cash consideration and
any consideration other than cash (“
Non-Cash Consideration
”), in such
Fundamental Transaction, as such values are set forth in any
definitive agreement for the Fundamental Transaction that has been
executed at the time of the first public announcement of the
Fundamental Transaction or, if no such value is determinable from
such definitive agreement, as determined in accordance with Section
12
with the term “Non-Cash
Consideration” being substituted for the term “Exercise
Price”)
that the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction or the
record, eligibility or other determination date for the event
resulting in such Fundamental Transaction, had this Warrant been
exercised immediately prior to such Fundamental Transaction or the
record, eligibility or other determination date for the event
resulting in such Fundamental Transaction (without regard to any
limitations on the exercise of this Warrant) (the
“
Aggregate
Consideration
”) divided by (ii) the per share Closing
Sale Price of such Successor Capital Stock on the Trading Day
immediately prior to the consummation or occurrence of the
Fundamental Transaction and (B) the product of (i) the quotient
obtained by dividing (x) the Aggregate Consideration, by (y) the
Closing Sale Price of the Common Stock on the Trading Day
immediately prior to the consummation or occurrence of the
Fundamental Transaction and (ii) the highest exchange ratio
pursuant to which any stockholder of the Company may exchange
shares of Common Stock for Successor Capital Stock) (
provided
,
however
, to the extent that the
Holder's right to receive any such shares of publicly traded common
stock (or their equivalent) of the Successor Entity would result in
the Holder and its other Attribution Parties exceeding the Maximum
Percentage, if applicable, then the Holder shall not be entitled to
receive such shares to such extent (and shall not be entitled to
beneficial ownership of such shares of publicly traded common stock
(or their equivalent) of the Successor Entity as a result of such
consideration to such extent) and the portion of such shares shall
be held in abeyance for the Holder until such time or times, as its
right thereto would not result in the Holder and its other
Attribution Parties exceeding the Maximum Percentage, at which time
or times the Holder shall be delivered such shares to the extent as
if there had been no such limitation), and such security shall be
satisfactory to the Holder, and with an identical exercise price to
the Exercise Price hereunder (such adjustments to the number of
shares of capital stock and such exercise price being for the
purpose of protecting after the consummation or occurrence of such
Fundamental Transaction the economic value of this Warrant that was
in effect immediately prior to the consummation or occurrence of
such Fundamental Transaction, as elected by the Holder solely at
its option). Upon occurrence or consummation of the Fundamental
Transaction, and it shall be a required condition to the occurrence
or consummation of such Fundamental Transaction that, the Company
and the Successor Entity or Successor Entities shall deliver to the
Holder confirmation that there shall be issued upon exercise of
this Warrant at any time after the occurrence or consummation of
the Fundamental Transaction, as elected by the Holder solely at its
option, shares of Common Stock, Successor Capital Stock or, in lieu
of the shares of Common Stock or Successor Capital Stock (or other
securities, cash, assets or other property purchasable upon the
exercise of this Warrant prior to such Fundamental Transaction),
such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or
subscription rights), which for purposes of clarification may
continue to be shares of Common Stock, if any, that the Holder
would have been entitled to receive upon the happening of such
Fundamental Transaction or the record, eligibility or other
determination date for the event resulting in such Fundamental
Transaction, had this Warrant been exercised immediately prior to
such Fundamental Transaction or the record, eligibility or other
determination date for the event resulting in such Fundamental
Transaction (without regard to any limitations on the exercise of
this Warrant), as adjusted in accordance with the provisions of
this Warrant. In addition to and not in substitution for any other
rights hereunder, prior to the occurrence or consummation of any
Fundamental Transaction pursuant to which holders of shares of
Common Stock are entitled to receive securities, cash, assets or
other property with respect to or in exchange for shares of Common
Stock (a “
Corporate
Event
”), the Company shall make appropriate provision
to ensure that, and any applicable Successor Entity or Successor
Entities shall ensure that, and it shall be a required condition to
the occurrence or consummation of such Corporate Event that, the
Holder will thereafter have the right to receive upon exercise of
this Warrant at any time after the occurrence or consummation of
the Corporate Event, shares of Common Stock or Successor Capital
Stock or, if so elected by the Holder, in lieu of the shares of
Common Stock (or other securities, cash, assets or other property)
purchasable upon the exercise of this Warrant prior to such
Corporate Event (but not in lieu of such items still issuable under
Sections 3 and 4(a), which shall continue to be receivable on the
shares of Common Stock or on the such shares of stock, securities,
cash, assets or any other property otherwise receivable with
respect to or in exchange for shares of Common Stock), such shares
of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights and
any shares of Common Stock) which the Holder would have been
entitled to receive upon the occurrence or consummation of such
Corporate Event or the record, eligibility or other determination
date for the event resulting in such Corporate Event, had this
Warrant been exercised immediately prior to such Corporate Event or
the record, eligibility or other determination date for the event
resulting in such Corporate Event (without regard to any
limitations on exercise of this Warrant). Provision made pursuant
to the preceding sentence shall be in a form and substance
reasonably satisfactory to the Holder. The provisions of this
Section 4(b) shall apply similarly and equally to successive
Fundamental Transactions and Corporate Events.
(c)
Notwithstanding the
foregoing, in the event of Fundamental Transaction, at the request
of the Holder delivered before the ninetieth (90
th
) day after the
occurrence or consummation of such Fundamental Transaction,
the Company (or the Successor Entity)
shall purchase this Warrant from the Holder by paying to the
Holder, within five (5) Business Days after such request (or, if
later, on the effective date of the Fundamental
Transaction)
, cash in an amount equal to the Black Scholes
Value of the remaining unexercised portion of this Warrant on the
date of such Fundamental Transaction;
provided
,
however
, that, if such
Fundamental Transaction is not within the Company's control,
including not approved by the Company's Board of Directors, the
Holder shall only be entitled to receive from the Company or any
Successor Entity, as of the date of consummation of such
Fundamental Transaction, the same type or form of consideration
(and in the same proportion), at the Black Scholes Value of the
unexercised portion of this Warrant, that is being offered and paid
to the holders of Common Stock of the Company in connection with
such Fundamental Transaction, whether that consideration be in the
form of cash, stock or any combination thereof, or whether the
holders of Common Stock are given the choice to receive from among
alternative forms of consideration in connection with such
Fundamental Transaction.
5.
NONCIRCUMVENTION
. The Company
hereby covenants and agrees that the Company will not, by amendment
of its Articles 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 Warrant, and will at all
times in good faith carry out all of the provisions of this Warrant
and take all action as may be required to protect the rights of the
Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect, (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 nonassessable
shares of Common Stock upon the exercise of this Warrant, and (iii)
shall, so long as any of the SPA Warrants are outstanding, take all
action necessary to reserve and keep available out of its
authorized and unissued shares of Common Stock, solely for the
purpose of effecting the exercise of the SPA Warrants, 100% of the
number of shares of Common Stock as shall from time to time be
necessary to effect the exercise of all Warrants issued pursuant to
the Securities Purchase Agreement then outstanding (without regard
to any limitations on exercise and assuming that the Maximum
Eligibility Number is being determined based on a Reset Price equal
to $0.08 (as adjusted for stock splits, stock dividends,
recapitalizations, reorganizations, reclassification, combinations,
reverse stock splits or other similar events occurring after the
Subscription Date)).
6.
WARRANT HOLDER NOT DEEMED A
STOCKHOLDER
. Except as otherwise specifically provided
herein, 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, 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 6, the
Company shall provide the Holder with copies of the same notices
and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the
stockholders.
7.
REISSUANCE OF
WARRANTS
.
(a)
Transfer of Warrant
. If this
Warrant is to be transferred, the Holder shall surrender this
Warrant to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)), registered as the Holder may
request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less than the total
number of Warrant Shares then underlying this Warrant is being
transferred, a new Warrant (in accordance with Section 7(d)) to the
Holder representing the right to purchase the number of Warrant
Shares not being transferred.
(b)
Lost, Stolen or Mutilated
Warrant
. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to
the Company in customary form and, in the case of mutilation, upon
surrender and cancellation of this Warrant, the Company shall
execute and deliver to the Holder a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the Warrant Shares
then underlying this Warrant.
(c)
Exchangeable for Multiple
Warrants
. This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a
new Warrant or Warrants (in accordance with Section 7(d))
representing in the aggregate the right to purchase the number of
Warrant Shares then underlying this Warrant, and each such new
Warrant will represent the right to purchase such portion of such
Warrant Shares as is designated by the Holder at the time of such
surrender;
provided
,
however
, that no SPA Warrants
for fractional Warrant Shares shall be given.
(d)
Issuance of New Warrants
.
Whenever the Company is required to issue a new Warrant pursuant to
the terms of this Warrant, such new Warrant (i) shall be of like
tenor with this Warrant, (ii) shall represent, as indicated on the
face of such new Warrant, the right to purchase the Warrant Shares
then underlying this Warrant (or in the case of a new Warrant being
issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares
designated by the Holder which, when added to the number of shares
of Common Stock underlying the other new Warrants issued in
connection with such issuance, does not exceed the number of
Warrant Shares then underlying this Warrant), (iii) shall have an
issuance date, as indicated on the face of such new Warrant which
is the same as the Issuance Date, and (iv) shall have the same
rights and conditions as this Warrant.
8.
NOTICES
. Whenever notice is
required to be given under this Warrant, 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 Warrant, 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) immediately upon any adjustment of the Exercise Price, setting
forth in reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least fifteen (15) days prior to the date on
which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any
Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of shares of
Common Stock or (C) for determining rights to vote with respect to
any Fundamental Transaction, dissolution or liquidation;
provided
in each
case that such information shall be made known to the public prior
to or in conjunction with such notice being provided to the Holder.
It is expressly understood and agreed that the time of exercise
specified by the Holder in each Exercise Notice shall be definitive
and may not be disputed or challenged by the Company.
9.
AMENDMENT AND WAIVER
. Except as
otherwise provided herein, the provisions of this Warrant may be
amended or waived and the Company may take any action herein
prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written
consent of the Holder.
10.
GOVERNING LAW; JURISDICTION; JURY
TRIAL
. This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the
construction, validity, interpretation and performance of this
Warrant 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. The
Company 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 the Company at the address
set forth in Section 9(f) of the Securities Purchase 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 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.
THE COMPANY
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 WITH OR ARISING OUT OF THIS WARRANT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
11.
CONSTRUCTION; HEADINGS
. This
Warrant shall be deemed to be jointly drafted by the Company and
all the Buyers and shall not be construed against any Person as the
drafter hereof. The headings of this Warrant are for convenience of
reference and shall not form part of, or affect the interpretation
of, this Warrant.
12.
DISPUTE RESOLUTION
. In the case
of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall
submit the disputed determinations or arithmetic calculations via
facsimile or electronic mail within two (2) Business Days of
receipt of the Exercise Notice giving rise to such dispute, as the
case may be, to the Holder. If the Holder and the Company are
unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three (3) Business Days
of such disputed determination or arithmetic calculation being
submitted to the Holder, then the Company shall, within two (2)
Business Days submit via facsimile or electronic mail (a) the
disputed determination of the 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 (10) 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.
13.
REMEDIES, OTHER OBLIGATIONS, BREACHES
AND INJUNCTIVE RELIEF
. The remedies provided in this Warrant
shall be cumulative and in addition to all other remedies available
under this Warrant and the other Transaction Documents, at law or
in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the
Holder to pursue actual damages for any failure by the Company to
comply with the terms of this Warrant. 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 of
this Warrant shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other
security being required.
14.
TRANSFER
. This Warrant and the
Warrant Shares may be offered for sale, sold, transferred, pledged
or assigned without the consent of the Company, except as may
otherwise be required by Section 2(f) of the Securities
Purchase Agreement.
15.
SEVERABILITY
. If any provision
of this Warrant 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 Warrant so long as this Warrant
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).
16.
DISCLOSURE
. Upon receipt or
delivery by the Company of any notice in accordance with the terms
of this Warrant, unless the Company has in good faith determined
that the matters relating to such notice do not constitute
material, nonpublic information relating to the Company or its
Subsidiaries (as defined in the Securities Purchase Agreement), the
Company shall contemporaneously with any such receipt or delivery
publicly disclose such material, nonpublic information on a Current
Report on Form 8-K or otherwise. In the event that the Company
believes that a notice contains material, nonpublic information
relating to the Company or its Subsidiaries, the Company so shall
indicate to the Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, the Holder shall
be allowed to presume that all matters relating to such notice do
not constitute material, nonpublic information relating to the
Company or its Subsidiaries.
17.
CERTAIN DEFINITIONS
. For
purposes of this Warrant, the following terms shall have the
following meanings:
(a)
“
1933 Act
” means the Securities Act
of 1933, as amended.
(b)
“
Affiliate
” shall have the meaning
ascribed to such term in Rule 405 of the 1933 Act.
(c)
“
Approved Stock Plan
” means any
employee benefit plan which has been approved by the Board of
Directors of the Company, pursuant to which the Company's
securities may be issued to any employee, officer or director for
services provided to the Company.
(d)
“
Attribution Parties
” means,
collectively, the following Persons and entities: (i) any
investment vehicle, including, any funds, feeder funds or managed
accounts, currently, or from time to time after the Issuance Date,
directly or indirectly managed or advised by the Holder's
investment manager or any of its Affiliates or principals, (ii) any
direct or indirect Affiliates of the Holder or any of the
foregoing, (iii) any Person acting or who could be deemed to be
acting as a Group together with the Holder or any of the foregoing
and (iv) any other Persons whose beneficial ownership of the Common
Stock would or could be aggregated with the Holder's and the other
Attribution Parties for purposes of Section 13(d) of the 1934 Act.
For clarity, the purpose of the foregoing is to subject
collectively the Holder and all other Attribution Parties to the
Maximum Percentage.
(e)
“
Black Scholes Value
” means the
value of this Warrant calculated using the Black-Scholes Option
Pricing Model obtained from the “OV” function on
Bloomberg determined as of the day immediately following the public
announcement of the applicable Fundamental Transaction, or, if the
Fundamental Transaction is not publicly announced, the date the
Fundamental Transaction is consummated, for pricing purposes and
reflecting (i) a risk-free interest rate corresponding to the U.S.
Treasury rate for a period equal to the remaining term of this
Warrant as of such date of request, (ii) an expected volatility
equal to the greater of 100% and the 100 day volatility obtained
from the HVT function on Bloomberg as of the Trading Day
immediately following the public announcement of the applicable
Fundamental Transaction, or, if the Fundamental Transaction is not
publicly announced, the date the Fundamental Transaction is
consummated, (iii) the underlying price per share used in such
calculation shall be the greater of (x) the highest Weighted
Average Price of the Common Stock during the period beginning on
the Trading Day prior to the execution of definitive documentation
relating to the applicable Fundamental Transaction and ending on
(A) the Trading Day immediately following the public announcement
of such Fundamental Transaction, if the applicable Fundamental
Transaction is publicly announced or (B) the Trading Day
immediately following the consummation of the applicable
Fundamental Transaction if the applicable Fundamental Transaction
is not publicly announced and (y) the sum of the price per share
being offered in cash, if any, plus the value of any non-cash
consideration, if any, being offered in the Fundamental
Transaction, (iv) a zero cost of borrow and (v) a 360 day
annualization factor.
(f)
“
Bloomberg
” means Bloomberg
Financial Markets.
(g)
“
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.
(h)
“
Closing Bid Price
” and
“
Closing Sale
Price
” means, for any security as of any date, the
last closing bid price and last closing trade price, respectively,
for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price
or the closing trade price, as the case may be, then the last bid
price or the last trade price, respectively, of such security prior
to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if
the Principal Market is not the principal securities exchange or
trading market for such security, the last closing bid price or
last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed
or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price or last trade price,
respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any
market makers for such security as reported in the OTC Link or
“pink sheets” by OTC Markets Group Inc. (formerly Pink
OTC Markets Inc.). If the Closing Bid Price or the Closing Sale
Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Closing Bid Price or the Closing
Sale Price, as the case may be, 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 such dispute shall be
resolved pursuant to Section 12. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock
combination, reclassification or other similar transaction during
the applicable calculation period.
(i)
“
Common Stock
” means (i) the
Company's shares of common stock, par value $0.001 per share, and
(ii) any stock capital into which such Common Stock shall have
been changed or any stock capital resulting from a
reclassification, reorganization or reclassification of such Common
Stock.
(j)
“
Convertible Securities
” means any
stock or securities (other than Options) directly or indirectly
convertible into or exercisable or exchangeable for shares of
Common Stock.
(k)
“
Designee
” means Empery Asset
Management, LP.
(l)
“
Eligible Market
” means the
Principal Market, the NYSE American, The Nasdaq Global Select
Market, The Nasdaq Global Market, The Nasdaq Capital Market, The
New York Stock Exchange, Inc. or the OTC QX.
(m)
“
Excluded Securities
” means any
Common Stock issued or issuable or deemed to be issued in
accordance with Section 2(a) hereof by the Company: (i) under any
Approved Stock Plan, (ii) upon exercise of any SPA, Series A
Warrants, any Series B Warrants and any Series C Warrants, in each
case issued pursuant to the Securities Purchase Agreement;
provided
, that the
terms of such SPA Warrants Series B Warrants and Series C Warrants
are not amended, modified or changed on or after the Subscription
Date, or (iii) upon conversion, exercise or exchange of any Options
or Convertible Securities which are outstanding on the day
immediately preceding the Subscription Date;
provided
, that such issuance of
Common Stock upon exercise of such Options or Convertible
Securities is made pursuant to the terms of such Options or
Convertible Securities in effect on the date immediately preceding
the Subscription Date and such Options or Convertible Securities
are not amended, modified or changed on or after the Subscription
Date.
(n)
“
Expiration Date
” means the date
that is sixty-six(66) months after the Issuance Date or if such
date falls on a day other than a Business Day or on which trading
does not take place on the Principal Market (a “
Holiday
”), the next day that is
not a Holiday.
(o)
Intentionally
omitted.
(p)
“
Fundamental Transaction
” means (A)
that the Company shall, directly or indirectly, including through
Subsidiaries, Affiliates or otherwise, in one or more related
transactions, (i) consolidate or merge with or into (whether or not
the Company is the surviving corporation) another Subject Entity,
or (ii) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of the Company or
any of its “significant subsidiaries” (as defined in
Rule 1-02 of Regulation S-X) to one or more Subject Entities, or
(iii) make, or allow one or more Subject Entities to make, or allow
the Company to be subject to or have its Common Stock be subject to
or party to one or more Subject Entities making, a purchase, tender
or exchange offer that is accepted by the holders of at least
either (x) 50% of the outstanding shares of Common Stock, (y) 50%
of the outstanding shares of Common Stock calculated as if any
shares of Common Stock held by all Subject Entities making or party
to, or Affiliated with any Subject Entities making or party to,
such purchase, tender or exchange offer were not outstanding; or
(z) such number of shares of Common Stock such that all Subject
Entities making or party to, or Affiliated with any Subject Entity
making or party to, such purchase, tender or exchange offer, become
collectively the beneficial owners (as defined in Rule 13d-3 under
the 1934 Act) of at least 50% of the outstanding shares of Common
Stock, or (iv) consummate a stock purchase agreement or other
business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with one or more Subject Entities whereby all such
Subject Entities, individually or in the aggregate, acquire, either
(x) at least 50% of the outstanding shares of Common Stock, (y) at
least 50% of the outstanding shares of Common Stock calculated as
if any shares of Common Stock held by all the Subject Entities
making or party to, or Affiliated with any Subject Entity making or
party to, such stock purchase agreement or other business
combination were not outstanding; or (z) such number of shares of
Common Stock such that the Subject Entities become collectively the
beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of
at least 50% of the outstanding shares of Common Stock, or (v)
reorganize, recapitalize or reclassify its Common Stock, (B) that
the Company shall, directly or indirectly, including through
Subsidiaries, Affiliates or otherwise, in one or more related
transactions, allow any Subject Entity individually or the Subject
Entities in the aggregate to be or become the “beneficial
owner” (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, whether through acquisition, purchase,
assignment, conveyance, tender, tender offer, exchange, reduction
in outstanding shares of Common Stock, merger, consolidation,
business combination, reorganization, recapitalization, spin-off,
scheme of arrangement, reorganization, recapitalization or
reclassification or otherwise in any manner whatsoever, of either
(x) at least 50% of the aggregate ordinary voting power represented
by issued and outstanding shares of Common Stock, (y) at least 50%
of the aggregate ordinary voting power represented by issued and
outstanding shares of Common Stock not held by all such Subject
Entities as of the Subscription Date calculated as if any shares of
Common Stock held by all such Subject Entities were not
outstanding, or (z) a percentage of the aggregate ordinary voting
power represented by issued and outstanding shares of Common Stock
or other equity securities of the Company sufficient to allow such
Subject Entities to effect a statutory short form merger or other
transaction requiring other stockholders of the Company to
surrender their shares of Common Stock without approval of the
stockholders of the Company or (C) directly or indirectly,
including through Subsidiaries, Affiliates or otherwise, in one or
more related transactions, the issuance of or the entering into any
other instrument or transaction structured in a manner to
circumvent, or that circumvents, the intent of this definition in
which case this definition shall be construed and implemented in a
manner otherwise than in strict conformity with the terms of this
definition to the extent necessary to correct this definition or
any portion of this definition which may be defective or
inconsistent with the intended treatment of such instrument or
transaction.
(q)
“
Group
” means a “group”
as that term is used in Section 13(d) of the 1934 Act and as
defined in Rule 13d-5 thereunder.
(r)
“
Maximum Eligibility Number
” shall
have the meaning ascribed to such term in the Series C
Warrants.
(s)
“
Option Value
” means the value of
an Option calculated using the Black-Scholes Option Pricing Model
obtained from the “OV” function on Bloomberg determined
as of (A) the Trading Day prior to the public announcement of the
issuance of the applicable Option, if the issuance of such Option
is publicly announced or (B) the Trading Day immediately following
the issuance of the applicable Option if the issuance of such
Option is not publicly announced, for pricing purposes and
reflecting (i) a risk-free interest rate corresponding to the U.S.
Treasury rate for a period equal to the remaining term of the
applicable Option as of the applicable date of determination, (ii)
an expected volatility equal to the greater of 100% and the 100 day
volatility obtained from the HVT function on Bloomberg as of (A)
the Trading Day immediately following the public announcement of
the applicable Option if the issuance of such Option is publicly
announced or (B) the Trading Day immediately following the issuance
of the applicable Option if the issuance of such Option is not
publicly announced, (iii) the underlying price per share used in
such calculation shall be the highest Weighted Average Price of the
Common Stock during the period beginning on the Trading Day prior
to the execution of definitive documentation relating to the
issuance of the applicable Option and ending on (A) the Trading Day
immediately following the public announcement of such issuance, if
the issuance of such Option is publicly announced or (B) the
Trading Day immediately following the issuance of the applicable
Option if the issuance of such Option is not publicly announced,
(iv) a zero cost of borrow and (v) a 360 day annualization
factor.
(t)
“
Options
” means any rights,
warrants or options to subscribe for or purchase (i) shares of
Common Stock or (ii) Convertible Securities.
(u)
“
Parent Entity
” of a Person means
an entity that, directly or indirectly, controls the applicable
Person, including such entity whose common capital or equivalent
equity security is quoted or listed on an Eligible Market (or, if
so elected by the Required Holders, any other market, exchange or
quotation system), or, if there is more than one such Person or
such entity, the Person or such entity designated by the Required
Holders or in the absence of such designation, such Person or
entity with the largest public market capitalization as of the date
of consummation of the Fundamental Transaction.
(v)
“
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.
(w)
“
Principal Market
” means the NASDAQ
Capital Market.
(x)
Intentionally
omitted.
(y)
Intentionally
omitted.
(z)
“Qualified Eligible Market
”
means the NYSE American, The Nasdaq Global Select Market, The
Nasdaq Global Market, The Nasdaq Capital Market or The New York
Stock Exchange, Inc.
(aa)
Intentionally
omitted.
(bb)
“
Registration
Rights Agreement
” means that certain Registration
Rights Agreement dated as of the Subscription Date by and among the
Company and the Buyers.
(cc)
“
Registration
Statement
” means that certain Registration Rights
Agreement dated as of the Subscription Date by and among the
Company and the Buyers.
(dd)
“
Required
Holders
” means the holders of the SPA Warrants
representing at least a majority of the shares of Common Stock
underlying the SPA Warrants then outstanding and shall include the
Designee so long as the Designee or any of its Affiliates holds any
SPA Warrants, Hudson Bay Capital Management LP so long as Hudson
Bay Capital Management LP or any of its Affiliates holds any SPA
Warrants, and Sabby Management, LLC so long as Sabby Management,
LLC or any of its Affiliates holds any SPA Warrants.
(ee)
“
Reset
Price
” shall have the meaning ascribed to such term in
the Series C Warrants.
(ff)
Intentionally
omitted.
(gg)
Intentionally
omitted.
(hh)
“
Series
B Warrants
” shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
(ii)
“
Series
C Warrants
” shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
(jj)
“
Standard
Settlement Period
” means the standard settlement
period, expressed in a number of Trading Days, on the Company's
primary Eligible Market with respect to the Common Stock as in
effect on the date of delivery of the applicable Exercise
Notice.
(kk)
“
Subject
Entity
” means any Person, Persons or Group or any
Affiliate or associate of any such Person, Persons or
Group.
(ll)
“
Successor
Entity
” means one or more Person or Persons (or, if so
elected by the Holder, the Company or Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or one or
more Person or Persons (or, if so elected by the Holder, the
Company or the Parent Entity) with which such Fundamental
Transaction shall have been entered into.
(mm)
Intentionally
omitted.
(nn)
Intentionally
omitted.
(oo)
“
Trading
Day
” means any day on which the Common Stock is traded
on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock on such day, then on
the principal securities exchange or securities market on which the
Common Stock is then traded.
(pp)
“
Weighted
Average Price
” means, for any security as of any date,
the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New
York time (or such other time as the Principal Market publicly
announces is the official open of trading), and ending at 4:00:00
p.m., New York time (or such other time as the Principal Market
publicly announces is the official close of trading), as reported
by Bloomberg through its “Volume at Price” function or,
if the foregoing does not apply, the dollar volume-weighted average
price of such security in the over-the-counter market on the
electronic bulletin board for such security during the period
beginning at 9:30:01 a.m., New York time (or such other time as
such market publicly announces is the official open of trading),
and ending at 4:00:00 p.m., New York time (or such other time as
such market publicly announces is the official close of trading),
as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours,
the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported
in the OTC Link or “pink sheets” by OTC Markets Group
Inc. (formerly Pink OTC Markets Inc.). If the Weighted Average
Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Weighted Average 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 such dispute shall be resolved pursuant to Section
12 with the term “Weighted Average Price” being
substituted for the term “Exercise Price.” All such
determinations shall be appropriately adjusted for any stock
dividend, stock split, stock combination, reclassification or other
similar transaction during the applicable calculation
period.
[Signature Page Follows]
IN WITNESS WHEREOF,
the Company has
caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.
BRIDGELINE
DIGITAL, INC.
By:
___________________________
Name:
Title:
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE
THIS
WARRANT TO PURCHASE COMMON STOCK
BRIDGELINE DIGITAL, INC.
The
undersigned holder hereby exercises the right to purchase
_________________ shares of Common Stock (“
Warrant Shares
”) of Bridgeline
Digital, Inc., a Delaware corporation (the “
Company
”), evidenced by the
attached Warrant to Purchase Common Stock (the “
Warrant
”). Capitalized terms used
herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.
1. Form
of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:
____________ a
“
Cash
Exercise
” with respect to _________________ Warrant
Shares; and/or
____________ a
“
Cashless
Exercise
” with respect to _______________ Warrant
Shares, resulting in a delivery obligation of the Company to the
Holder of __________ shares of Common Stock representing the
applicable Net Number.
2.
Payment of Exercise Price. In the event that the holder has elected
a Cash Exercise with respect to some or all of the Warrant Shares
to be issued pursuant hereto, the holder shall pay the Aggregate
Exercise Price in the sum of $___________________ to the Company in
accordance with the terms of the Warrant.
3.
Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the
Warrant.
Date:
_______________ __, ______
Name
of Registered Holder
Name:
Title:
ACKNOWLEDGMENT
The
Company hereby acknowledges this Exercise Notice and hereby directs
American Stock Transfer & Trust Company, LLC to issue the above
indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated March , 2019 from the Company and
acknowledged and agreed to by American Stock Transfer & Trust
Company, LLC.
BRIDGELINE
DIGITAL, INC.
By:
________________________________
Name:
Title:
Exhibit
4.2
SERIES B WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE 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 SELECTED BY THE HOLDER, 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.
BRIDGELINE DIGITAL, INC.
SERIES B WARRANT TO PURCHASE COMMON STOCK
Warrant No.:
_________________
Number
of Shares of Common Stock: ______________________
Date of
Issuance: March , 2019 (“
Issuance Date
”)
Bridgeline Digital,
Inc., a Delaware corporation (the “
Company
”), hereby certifies that,
for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, [ ], the registered holder hereof or
its permitted assigns (the “
Holder
”), is entitled, subject to
the terms set forth below, to purchase from the Company, at the
Exercise Price (as defined below) then in effect, at any time or
times on or after the earlier of (i) the date of the Authorized
Share Approval and (ii) six months following the Subscription Date,
but not after 11:59 p.m., New York time, on the Expiration Date,
(as defined below), ______________ (_____________)
1
fully paid nonassessable shares of
Common Stock, all subject to adjustment as provided
herein
(the
“
Warrant
Shares
”). Except as otherwise defined herein,
capitalized terms in this Warrant to Purchase Common Stock
(including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, this “
Warrant
”), shall have the meanings
set forth in Section 17. This Warrant is one of the Series
B
Warrants to purchase
Common Stock (the “
SPA
Warrants
”) issued pursuant to Section 1 of that
certain Securities Purchase Agreement, dated as of March __, 2019
(the “
Subscription
Date
”), by and among the Company and the investors
(the “
Buyers
”)
referred to therein (the “
Securities Purchase Agreement
”).
Capitalized terms used herein and not otherwise defined shall have
the definitions ascribed to such terms in the Securities Purchase
Agreement.
1.
EXERCISE
OF WARRANT.
(a)
Mechanics of Exercise
. Subject
to the terms and conditions hereof (including, without limitation,
the limitations set forth in Section 1(f) and 1(h)), this Warrant
may be exercised by the Holder at any time or times on or after the
Issuance Date, in whole or in part, by (i) delivery of a
written notice, in the form attached hereto as
Exhibit A
(the
“
Exercise
Notice
”), of the Holder's election to exercise this
Warrant and (ii) (A) payment to the Company of an amount equal
to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the
“
Aggregate Exercise
Price
”) in cash by wire transfer of immediately
available funds or (B) if the provisions of Section 1(d) are
applicable, by notifying the Company that this Warrant is being
exercised pursuant to a Cashless Exercise (as defined in Section
1(d)). 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 with respect to less than all of
the Warrant Shares 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. On or
before the first (1
st
) Trading Day
following the date on which the Company has received the Exercise
Notice, the Company shall transmit by electronic mail an
acknowledgment of confirmation of receipt of the Exercise Notice to
the Holder and the Company's transfer agent (the
“
Transfer
Agent
”). On or before the earlier of (i) the second
(2
nd
)
Trading Day and (ii) the number of Trading Days comprising the
Standard Settlement Period, in each case, following the date on
which the Holder delivers the Exercise Notice to the Company, so
long as the Holder delivers the Aggregate Exercise Price (or notice
of a Cashless Exercise) on or prior to the second (2
nd
) Trading Day
following the date on which the Company has received the Exercise
Notice (the “
Share Delivery
Date
”) (provided that if the Aggregate Exercise Price
has not been delivered by such date, the Share Delivery Date shall
be two (2) Trading Days after the Aggregate Exercise Price (or
notice of a Cashless Exercise) is delivered), the Company shall (X)
provided that the Transfer Agent is participating in The Depository
Trust Company (“
DTC
”) Fast Automated Securities
Transfer Program and (A) the Warrant Shares are subject to an
effective resale registration statement in favor of the Holder or
(B) if exercised via Cashless Exercise, at a time when Rule 144
would be available for immediate resale of the Warrant Shares by
the Holder, credit such aggregate number of Warrant Shares to which
the Holder is entitled pursuant to such exercise to the Holder's or
its designee's balance account with DTC through its Deposit /
Withdrawal At Custodian system, or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program
or (A) the Warrant Shares are not subject to an effective resale
registration statement in favor of the Holder and (B) if exercised
via Cashless Exercise, at a time when Rule 144 would not be
available for immediate resale of the Warrant Shares by the Holder,
issue and dispatch by overnight courier to the address as specified
in the Exercise Notice, a certificate, registered in the Company's
share register in the name of the Holder or its designee, for the
number of Warrant Shares to which the Holder is entitled pursuant
to such exercise. The Company shall be responsible for all fees and
expenses of the Transfer Agent and all fees and expenses with
respect to the issuance of Warrant Shares via DTC, if any. Upon
delivery of the Exercise Notice, the Holder shall be deemed for all
corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date such Warrant Shares are
credited to the Holder's DTC account or the date of delivery of the
certificates evidencing such Warrant Shares, as the case may be. If
this Warrant is submitted in connection with any exercise pursuant
to this Section 1(a) and the number of Warrant Shares represented
by this Warrant submitted for exercise is greater than the number
of Warrant Shares being acquired upon an exercise, then the Company
shall as soon as practicable and in no event later than three (3)
Trading Days after any exercise and at its own expense, issue a new
Warrant (in accordance with Section 7(d)) representing the right to
purchase the number of Warrant Shares issuable immediately prior to
such exercise under this Warrant, less the number of Warrant Shares
with respect to which this Warrant is exercised. No fractional
Warrant Shares are to be issued upon the exercise of this Warrant,
but rather the number of Warrant Shares to be issued shall be
rounded up to the nearest whole number. The Company shall pay any
and all taxes which may be payable with respect to the issuance and
delivery of Warrant Shares upon exercise of this Warrant. The
Company's obligations to issue and deliver Warrant Shares in
accordance with the terms and subject to the conditions hereof are
absolute and unconditional, irrespective of any action or inaction
by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any
setoff, counterclaim, recoupment, limitation or
termination.
(b)
Exercise Price
. For purposes of
this Warrant, “
Exercise
Price
” means $0.18 per share, subject to adjustment as
provided herein.
(c)
Company's Failure to Timely Deliver
Securities
. If the Company shall fail for any reason or for
no reason to issue to the Holder on or prior to the Share Delivery
Date either (I) if the Transfer Agent is not participating in the
DTC Fast Automated Securities Transfer Program, a certificate for
the number of shares of Common Stock to which the Holder is
entitled and register such shares of Common Stock on the Company's
share register or if the Transfer Agent is participating in the DTC
Fast Automated Securities Transfer Program, to credit the Holder's
balance account with DTC, for such number of shares of Common Stock
to which the Holder is entitled upon the Holder's exercise of this
Warrant or (II) if the Registration Statement covering the resale
of the Warrant Shares that are the subject of the Exercise Notice
(the “
Unavailable Warrant
Shares
”) is not available for the resale of such
Unavailable Warrant Shares and the Company fails to promptly, but
in no event later than as is required pursuant to the Registration
Rights Agreement (x) so notify the Holder and (y) deliver the
Warrant Shares electronically without any restrictive legend by
crediting such aggregate number of Warrant Shares to which the
Holder is entitled pursuant to such exercise to the Holder's or its
designee's balance account with DTC through its Deposit /
Withdrawal At Custodian system (the event described in the
immediately foregoing clause (II) is hereinafter referred as a
“
Notice Failure
”
and together with the event described in clause (I) above, an
“
Exercise
Failure
”), then, in addition to all other remedies
available to the Holder, (X) the Company shall pay in cash to the
Holder on each day after the Share Delivery Date and during such
Exercise Failure an amount equal to 1.0% of the product of (A) the
sum of the number of shares of Common Stock not issued to the
Holder on or prior to the Share Delivery Date and to which the
Holder is entitled, and (B) any trading price of the Common Stock
selected by the Holder in writing as in effect at any time during
the period beginning on the applicable date of delivery of an
Exercise Notice and ending on the applicable Share Delivery Date,
and (Y) the Holder, upon written notice to the Company, may void
its Exercise Notice with respect to, and retain or have returned,
as the case may be, any portion of this Warrant that has not been
exercised pursuant to such Exercise Notice; provided that the
voiding of an Exercise Notice shall not affect the Company's
obligations to make any payments which have accrued prior to the
date of such notice pursuant to this Section 1(c) or otherwise. In
addition to the foregoing, if on or prior to the Share Delivery
Date either (I) if the Transfer Agent is not participating in the
DTC Fast Automated Securities Transfer Program, the Company shall
fail to issue and deliver a certificate to the Holder and register
such shares of Common Stock on the Company's share register or, if
the Transfer Agent is participating in the DTC Fast Automated
Securities Transfer Program, credit the Holder's balance account
with DTC for the number of shares of Common Stock to which the
Holder is entitled upon the Holder's exercise hereunder or pursuant
to the Company's obligation pursuant to clause (ii) below or (II) a
Notice Failure occurs, and if on or after such Trading Day the
Holder purchases (in an open market transaction or otherwise)
shares of Common Stock relating to the applicable Exercise Failure
(a “
Buy-In
”),
then the Company shall, within five (5) Trading Days after the
Holder's request and in the Holder's discretion, either (i) pay
cash to the Holder in an amount equal to the Holder's total
purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so
purchased (the “
Buy-In
Price
”), at which point the Company's obligation to
deliver such certificate (and to issue such shares of Common Stock)
or credit the Holder's balance account with DTC for such shares of
Common Stock shall terminate, or (ii) promptly honor its obligation
to deliver to the Holder a certificate or certificates representing
such shares of Common Stock or credit the Holder's balance account
with DTC, as applicable, and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product
of (A) such number of shares of Common Stock, times (B) any trading
price of the Common Stock selected by the Holder in writing as in
effect at any time during the period beginning on the applicable
date of delivery of an Exercise Notice and ending on the applicable
Share Delivery Date. Nothing herein shall limit the Holder's right
to pursue any other remedies available to it hereunder, at law or
in equity, including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of
Common Stock (or to electronically deliver such shares of Common
Stock) upon the exercise of this Warrant as required pursuant to
the terms hereof.
(d)
Cashless Exercise
.
Notwithstanding anything contained
herein to the contrary, if the Registration Statement covering the
resale of the Unavailable Warrant Shares is not available for the
resale of such Unavailable Warrant Shares, the Holder may, in its
sole discretion, exercise this Warrant in whole or in part and, in
lieu of making the cash payment otherwise contemplated to be made
to the Company upon such exercise in payment of the Aggregate
Exercise Price, elect instead to receive upon such exercise the
“Net Number” of shares of Common Stock determined
according to the following formula (a “
Cashless Exercise
”):
Net
Number =
(A x B) - (A x
C)
B
For
purposes of the foregoing formula:
A= the
total number of shares with respect to which this Warrant is then
being exercised.
B= as
applicable: (i) the Weighted Average Price of the Common Stock on
the Trading Day immediately preceding the date of the applicable
Exercise Notice if such Exercise Notice is (1) both executed and
delivered pursuant to Section 1(a) hereof on a day that is not a
Trading Day or (2) both executed and delivered pursuant to Section
1(a) hereof on a Trading Day prior to the opening of “regular
trading hours” (as defined in Rule 600(b)(64) of Regulation
NMS promulgated under the federal securities laws) on such Trading
Day, (ii) at the option of the Holder, either (y) the Weighted
Average Price of the Common Stock on the Trading Day immediately
preceding the date of the applicable Exercise Notice or (z) the bid
price of the Common Stock on the principal Trading Market as
reported by Bloomberg as of the time of the Holder's execution of
the applicable Exercise Notice if such Exercise Notice is executed
during “regular trading hours” on a Trading Day and is
delivered within two (2) hours thereafter (including until two (2)
hours after the close of “regular trading hours” on a
Trading Day) pursuant to Section 1(a) hereof or (iii) the Weighted
Average Price of the Common Stock on the date of the applicable
Exercise Notice if the date of such Exercise Notice is a Trading
Day and such Exercise Notice is both executed and delivered
pursuant to Section 1(a) hereof after the close of “regular
trading hours” on such Trading Day;
C= the
Exercise Price then in effect for the applicable Warrant Shares at
the time of such exercise.
If
shares of Common Stock are issued pursuant to this Section 1(d),
the Company hereby acknowledges and agrees that the Warrant Shares
issued in a Cashless Exercise 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 Securities Purchase Agreement.
The Company agrees not to take any position contrary to this
Section 1(d).
(e)
Disputes
. In the case of a
dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section
12.
(f)
Beneficial Ownership Limitations on
Exercises
.
Notwithstanding
anything to the contrary contained herein, the Company shall not
effect the exercise of any portion of this Warrant, and the Holder
shall not have the right to exercise any portion of this Warrant,
pursuant to the terms and conditions of this Warrant and any such
exercise shall be null and void and treated as if never made, to
the extent that after giving effect to such exercise, the Holder
together with the other Attribution Parties collectively would
beneficially own in excess of 4.99% (the “
Maximum
Percentage
”) of the
number of
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 the Holder and the other
Attribution Parties shall include the number of
shares of
Common Stock
held by the Holder and
all other Attribution Parties plus 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 the number of
shares of Common Stock
which would be
issuable upon (A) exercise of the remaining, unexercised portion of
this Warrant beneficially owned by the Holder or any of the other
Attribution Parties and (B) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company (including, without limitation, any convertible notes or
convertible preferred stock or warrants, including
the
Series A
Warrants, Series C Warrants and
Preferred Shares (as defined in the Securities Purchase Agreement))
beneficially owned by the Holder or any other Attribution Party
subject to a limitation on conversion or exercise analogous to the
limitation contained in this Section 1(f). For purposes of this
Section 1(f), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the “
1934 Act
”). For purposes of this Warrant, in
determining the number of outstanding
shares of Common Stock
the Holder may acquire upon the
exercise of this Warrant without exceeding the Maximum Percentage,
the Holder may rely on the number of outstanding
shares of
Common Stock
as reflected in (x) the
Company's most recent Annual Report on Form 10-K, Quarterly Report
on Form 10-Q, Current Report on Form 8-K or other public filing
with the Securities and
Exchange Commission (the
“
SEC
”), as the
case may be, (y) a more recent public announcement by the Company
or (3) any other written
notice by the
Company or the Transfer Agent setting forth the number of
shares of Common Stock
outstanding
(the “
Reported Outstanding Share
Number
”). If the Company
receives an Exercise Notice from the Holder at a time when the
actual number of outstanding
shares of Common Stock
is less than the Reported Outstanding
Share Number, the Company shall (i) notify the Holder in writing of
the number of
shares of Common Stock
then outstanding and, to the extent that such
Exercise Notice would otherwise cause the Holder's beneficial
ownership, as determined pursuant to this Section 1(f), to exceed
the Maximum Percentage, the Holder must notify the Company of a
reduced number of Warrant Shares to be purchased pursuant to such
Exercise Notice
(the number of
shares by which such purchase is reduced, the
“
Reduction
Shares
”) and (ii) as soon
as reasonably practicable, the Company shall return to the Holder
any exercise price paid by the Holder for the Reduction
Shares.
For any reason at any time, upon the written or oral
request of the Holder,
the Company
shall within one (1) Trading Day confirm orally and in writing or
by electronic mail 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 any other Attribution
Party since the date as of which the Reported Outstanding Share
Number was reported. In the event that the issuance of
shares of Common Stock
to the Holder
upon exercise of this Warrant results in the Holder and the other
Attribution Parties being deemed to beneficially own, in the
aggregate, more than the Maximum Percentage of the number of
outstanding
shares of Common Stock
(as determined under Section 13(d) of the 1934
Act), the number of shares so issued by which the Holder's and the
other Attribution Parties' aggregate beneficial ownership exceeds
the Maximum Percentage (the “
Excess
Shares
”) shall be deemed
null and void and shall be cancelled ab initio, and the Holder
shall not have the power to vote or to transfer the Excess Shares.
As soon as reasonably practicable after the issuance of the Excess
Shares has been deemed null and void, the Company shall return to
the Holder the exercise price paid by the Holder for the Excess
Shares.
Upon delivery of a written notice to the Company,
the Holder may from time to time increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% as
specified in such notice; provided that (i) any such increase in
the Maximum Percentage will not be effective until the sixty-first
(61
st
) day
after such notice is delivered to the Company and (ii) any such
increase or decrease will apply only to the Holder and the other
Attribution Parties and not to any other holder of SPA Warrants
that is not an Attribution Party of the Holder. For purposes of
clarity, the shares of Common Stock issuable pursuant to the terms
of this Warrant in excess of the Maximum Percentage shall not be
deemed to be beneficially owned by the Holder for any purpose
including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the
1934 Act.
No
prior
inability to exercise this Warrant pursuant to this paragraph shall
have any effect on the applicability of the provisions of this
paragraph with respect to any subsequent determination of
exercisability.
The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 1(f) to
the extent necessary to correct this paragraph or any portion of
this paragraph which may be defective or inconsistent with the
intended beneficial ownership limitation contained in this Section
1(f) or to make changes or
supplements
necessary or desirable to properly give effect to
such limitation. The limitation contained in this paragraph may not
be waived and shall apply to a successor holder of this
Warrant.
(g)
Insufficient Authorized Shares
.
If at any time after the Company obtains Stockholder Approval, the
Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon exercise of this Warrant at least a
number of shares of Common Stock equal to 100% of the number of
shares of Common Stock as shall from time to time be necessary to
effect the exercise of all of this Warrant then outstanding without
regard to any limitation on exercise included herein (the
“
Required Reserve
Amount
” and the failure to have such sufficient number
of authorized and unreserved shares of Common Stock, an
“
Authorized Share
Failure
”), then the Company shall immediately take all
action 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 this Warrant then
outstanding either through an increase in the authorized number of
shares of Common Stock or a reverse stock split of the outstanding
shares of Common Stock. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the
occurrence of an Authorized Share Failure, but in no event later
than sixty (60) 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 or a reverse stock split of the outstanding shares of
Common Stock. In connection with such meeting, the Company shall
provide each stockholder with a proxy statement and shall use its
best efforts to solicit its stockholders' approval of such increase
in authorized shares of Common Stock or a reverse stock split of
the outstanding shares of Common Stock and to cause its board of
directors to recommend to the stockholders that they approve such
proposal. Notwithstanding the foregoing, if any such time of an
Authorized Share Failure, the Company is able to obtain the written
consent of a majority of the shares of its issued and outstanding
shares of Common Stock to approve the increase in the number of
authorized shares of Common Stock or a reverse stock split of the
outstanding shares of Common Stock, the Company may satisfy this
obligation by obtaining such consent and submitting for filing with
the SEC an Information Statement on Schedule 14C. In the event that
upon any exercise of this Warrant following six (6) months
following the Subscription Date, the Company does not have
sufficient authorized shares to deliver in satisfaction of such
exercise, then unless the Holder elects to void such attempted
exercise, in lieu of issuing shares of Common Stock hereunder, the
Company shall pay to the Holder within three (3) Trading Days of
the applicable exercise, cash in an amount equal to the product of
(i) the number of Warrant Shares that the Company is unable to
deliver pursuant to this Section 1(g) and (ii) as applicable, (A)
the Weighted Average Price of the Common Stock on the Trading Day
immediately preceding the date of the applicable Exercise Notice if
such Exercise Notice is (x) both executed and delivered pursuant to
Section 1(a) hereof on a day that is not a Trading Day or (y) both
executed and delivered pursuant to Section 1(a) hereof on a Trading
Day prior to the opening of “regular trading hours” (as
defined in Rule 600(b)(64) of Regulation NMS promulgated under the
federal securities laws) on such Trading Day, (B) at the option of
the Holder, either (x) the Weighted Average Price of the Common
Stock on the Trading Day immediately preceding the date of the
applicable Exercise Notice or (y) the bid price of the Common Stock
on the principal Trading Market as reported by Bloomberg as of the
time of the Holder's execution of the applicable Exercise Notice if
such Exercise Notice is executed during “regular trading
hours” on a Trading Day and is delivered within two (2) hours
thereafter (including until two (2) hours after the close of
“regular trading hours” on a Trading Day) pursuant to
Section 1(a) hereof or (C) the Weighted Average Price of the Common
Stock on the date of the applicable Exercise Notice if the date of
such Exercise Notice is a Trading Day and such Exercise Notice is
both executed and delivered pursuant to Section 1(a) hereof after
the close of “regular trading hours” on such Trading
Day.
(h)
Issuance Restrictions
. The
Company may not issue any shares of Common Stock upon exercise of
this Warrant unless and until such date that the Company has
obtained Stockholder Approval.
2.
ADJUSTMENT OF EXERCISE PRICE AND
NUMBER OF WARRANT SHARES
. The Exercise Price and the number
of Warrant Shares shall be adjusted from time to time as
follows:
(a)
Adjustment
Upon Subdivision or Combination of Common Stock
. If the
Company at any time on or after the Subscription Date 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 Exercise Price in effect
immediately prior to such subdivision will be proportionately
reduced and the number of Warrant Shares will be proportionately
increased. If the Company at any time on or after the Subscription
Date 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 Exercise Price in effect
immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately
decreased. Any adjustment under this Section 2(c) shall become
effective at the close of business on the date the subdivision or
combination becomes effective.
(b)
Reset
.
On the First Reset Date, the Second Reset Date, if any, and the
Third Reset Date, if any (as such terms are defined in the Series C
Warrants), the Exercise Price shall be adjusted to equal the lower
of (i) the Exercise Price then in effect and (ii) 100% of the
applicable Reset Price determined as of the applicable date of
determination. Upon each such reset of the Exercise Price pursuant
to this Section 2(d), the number of Warrant Shares issuable
immediately prior to such reset shall be adjusted to the number of
shares of Common Stock determined by multiplying the Exercise Price
then in effect immediately prior to such reset by the number of
Warrant Shares acquirable upon exercise of this Warrant immediately
prior to such reset and dividing the product thereof by the
Exercise Price resulting from such reset.
(c)
Other
Events
. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such
provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with
equity features), then the Company's Board of Directors will make
an appropriate adjustment in the Exercise Price and the number of
Warrant Shares, as mutually determined by the Company's Board of
Directors and the Required Holders, so as to protect the rights of
the Holder;
provided
that no such
adjustment pursuant to this Section 2(e) will increase the Exercise
Price or decrease the number of Warrant Shares as otherwise
determined pursuant to this Section 2.
(d)
Voluntary
Adjustment By Company
. The Company may at any time during
the term of this Warrant, with the prior written consent of the
Required Holders, reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board
of Directors of the Company.
3.
RIGHTS UPON DISTRIBUTION OF
ASSETS
. If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property, options, evidence of
indebtedness or any other assets by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a “
Distribution
”), at any time after
the issuance of this Warrant, then, in each such case, the Holder
shall be entitled to participate in such Distribution to the same
extent that the Holder would have participated therein if the
Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations or restrictions on exercise of this Warrant, including
without limitation, the Maximum Percentage) immediately before the
date of which a record is taken for such Distribution, or, if no
such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the participation
in such Distribution (
provided
,
however
, that to the extent
that the Holder's right to participate in any such Distribution
would result in the Holder and the other Attribution Parties
exceeding the Maximum Percentage, then the Holder shall not be
entitled to participate in such Distribution to such extent (and
shall not be entitled to beneficial ownership of such shares of
Common Stock as a result of such Distribution (and beneficial
ownership) to such extent) and the portion of such Distribution
shall be held in abeyance for the benefit of the Holder until such
time or times as its right thereto would not result in the Holder
and the other Attribution Parties exceeding the Maximum Percentage,
at which time or times the Holder shall be granted such
Distribution (and any Distributions declared or made on such
initial Distribution or on any subsequent Distribution held
similarly in abeyance) to the same extent as if there had been no
such limitation).
4.
PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS
.
(a)
Purchase Rights
. In addition to
any adjustments pursuant to Section 2 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities
or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Stock (the
“
Purchase
Rights
”), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any
limitations or restrictions on exercise of this Warrant, including
without limitation, the Maximum Percentage) immediately before the
date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights
(
provided
,
however
, that to
the extent that the Holder's right to participate in any such
Purchase Right would result in the Holder and the other Attribution
Parties exceeding the Maximum Percentage, then the Holder shall not
be entitled to participate in such Purchase Right to such extent
(and shall not be entitled to beneficial ownership of such shares
of Common Stock as a result of such Purchase Right (and beneficial
ownership) to such extent) and such Purchase Right to such extent
shall be held in abeyance for the benefit of the Holder
until such time or times as its right
thereto would not result in the Holder and
the other
Attribution Parties
exceeding the
Maximum Percentage, at which time or times the Holder shall be
granted such right
(and any Purchase Right granted, issued
or sold on such initial Purchase Right or on any subsequent
Purchase Right held similarly in abeyance)
to the same extent as if there had been no such
limitation)
.
(b)
Fundamental Transactions
. The
Company shall not enter into or be party to a Fundamental
Transaction unless the Successor Entity assumes in writing all of
the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this
Section 4(b) pursuant to written agreements in form and substance
satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements
, if so requested by the Holder, to deliver to each holder of the
SPA Warrants in exchange for such SPA Warrants a security of the
Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Warrant, including, without
limitation, an adjusted exercise price equal to the value for the
shares of Common Stock reflected by the terms of such Fundamental
Transaction, and exercisable for a corresponding number of shares
of capital stock equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) prior to
such Fundamental Transaction, and satisfactory to the Required
Holders, and with an exercise price which applies the exercise
price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant
to such Fundamental Transaction and the value of such shares of
capital stock, such adjustments to the number of shares of capital
stock and such exercise price being for the purpose of protecting
the economic value of this Warrant immediately prior to the
occurrence or consummation of such Fundamental Transaction). Any
security issuable or potentially issuable to the Holder pursuant to
the terms of this Warrant on the consummation of a Fundamental
Transaction shall be registered and freely tradable by the Holder
without any restriction or limitation or the requirement to be
subject to any holding period pursuant to any applicable securities
laws.
No later than (i)
thirty (30) days prior to the occurrence or consummation of any
Fundamental Transaction or (ii) if later, the first Trading Day
following the date the Company first becomes aware of the
occurrence or potential occurrence of a Fundamental Transaction,
the Company shall deliver written notice thereof via facsimile or
electronic mail and overnight courier to the Holder.
Upon
the occurrence or consummation of any Fundamental Transaction, and
it shall be a required condition to the occurrence or consummation
of any Fundamental Transaction that, the Company and the Successor
Entity or Successor Entities, jointly and severally, shall succeed
to, and the Company shall cause any Successor Entity or Successor
Entities to jointly and severally succeed to, and be added to the
term “Company” under this Warrant (so that from and
after the date of such Fundamental Transaction, each and every
provision of this Warrant referring to the “Company”
shall refer instead to each of the Company and the Successor Entity
or Successor Entities, jointly and severally), and the Company and
the Successor Entity or Successor Entities, jointly and severally,
may exercise every right and power of the Company prior thereto and
shall assume all of the obligations of the Company prior thereto
under this Warrant with the same effect as if the Company and such
Successor Entity or Successor Entities, jointly and severally, had
been named as the Company in this Warrant, and, solely at the
request of the Holder, if the Successor Entity and/or Successor
Entities is a publicly traded corporation whose common stock is
quoted on or listed for trading on an Eligible Market, shall
deliver (in addition to and without limiting any right under this
Warrant) to the Holder in exchange for this Warrant a security of
the Successor Entity and/or Successor Entities evidenced by a
written instrument substantially similar in form and substance to
this Warrant and exercisable for a corresponding number of shares
of capital stock of the Successor Entity and/or Successor Entities
(the “
Successor Capital
Stock
”) equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) prior to
such Fundamental Transaction (such corresponding number of shares
of Successor Capital Stock to be delivered to the Holder shall be
equal to the greater of (A) the quotient of (i) the aggregate
dollar value of all consideration (including cash consideration and
any consideration other than cash (“
Non-Cash Consideration
”), in such
Fundamental Transaction, as such values are set forth in any
definitive agreement for the Fundamental Transaction that has been
executed at the time of the first public announcement of the
Fundamental Transaction or, if no such value is determinable from
such definitive agreement, as determined in accordance with Section
12
with the term “Non-Cash
Consideration” being substituted for the term “Exercise
Price”)
that the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction or the
record, eligibility or other determination date for the event
resulting in such Fundamental Transaction, had this Warrant been
exercised immediately prior to such Fundamental Transaction or the
record, eligibility or other determination date for the event
resulting in such Fundamental Transaction (without regard to any
limitations on the exercise of this Warrant) (the
“
Aggregate
Consideration
”) divided by (ii) the per share Closing
Sale Price of such Successor Capital Stock on the Trading Day
immediately prior to the consummation or occurrence of the
Fundamental Transaction and (B) the product of (i) the quotient
obtained by dividing (x) the Aggregate Consideration, by (y) the
Closing Sale Price of the Common Stock on the Trading Day
immediately prior to the consummation or occurrence of the
Fundamental Transaction and (ii) the highest exchange ratio
pursuant to which any stockholder of the Company may exchange
shares of Common Stock for Successor Capital Stock) (
provided
,
however
, to the extent that the
Holder's right to receive any such shares of publicly traded common
stock (or their equivalent) of the Successor Entity would result in
the Holder and its other Attribution Parties exceeding the Maximum
Percentage, if applicable, then the Holder shall not be entitled to
receive such shares to such extent (and shall not be entitled to
beneficial ownership of such shares of publicly traded common stock
(or their equivalent) of the Successor Entity as a result of such
consideration to such extent) and the portion of such shares shall
be held in abeyance for the Holder until such time or times, as its
right thereto would not result in the Holder and its other
Attribution Parties exceeding the Maximum Percentage, at which time
or times the Holder shall be delivered such shares to the extent as
if there had been no such limitation), and such security shall be
satisfactory to the Holder, and with an identical exercise price to
the Exercise Price hereunder (such adjustments to the number of
shares of capital stock and such exercise price being for the
purpose of protecting after the consummation or occurrence of such
Fundamental Transaction the economic value of this Warrant that was
in effect immediately prior to the consummation or occurrence of
such Fundamental Transaction, as elected by the Holder solely at
its option). Upon occurrence or consummation of the Fundamental
Transaction, and it shall be a required condition to the occurrence
or consummation of such Fundamental Transaction that, the Company
and the Successor Entity or Successor Entities shall deliver to the
Holder confirmation that there shall be issued upon exercise of
this Warrant at any time after the occurrence or consummation of
the Fundamental Transaction, as elected by the Holder solely at its
option, shares of Common Stock, Successor Capital Stock or, in lieu
of the shares of Common Stock or Successor Capital Stock (or other
securities, cash, assets or other property purchasable upon the
exercise of this Warrant prior to such Fundamental Transaction),
such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or
subscription rights), which for purposes of clarification may
continue to be shares of Common Stock, if any, that the Holder
would have been entitled to receive upon the happening of such
Fundamental Transaction or the record, eligibility or other
determination date for the event resulting in such Fundamental
Transaction, had this Warrant been exercised immediately prior to
such Fundamental Transaction or the record, eligibility or other
determination date for the event resulting in such Fundamental
Transaction (without regard to any limitations on the exercise of
this Warrant), as adjusted in accordance with the provisions of
this Warrant. In addition to and not in substitution for any other
rights hereunder, prior to the occurrence or consummation of any
Fundamental Transaction pursuant to which holders of shares of
Common Stock are entitled to receive securities, cash, assets or
other property with respect to or in exchange for shares of Common
Stock (a “
Corporate
Event
”), the Company shall make appropriate provision
to ensure that, and any applicable Successor Entity or Successor
Entities shall ensure that, and it shall be a required condition to
the occurrence or consummation of such Corporate Event that, the
Holder will thereafter have the right to receive upon exercise of
this Warrant at any time after the occurrence or consummation of
the Corporate Event, shares of Common Stock or Successor Capital
Stock or, if so elected by the Holder, in lieu of the shares of
Common Stock (or other securities, cash, assets or other property)
purchasable upon the exercise of this Warrant prior to such
Corporate Event (but not in lieu of such items still issuable under
Sections 3 and 4(a), which shall continue to be receivable on the
shares of Common Stock or on the such shares of stock, securities,
cash, assets or any other property otherwise receivable with
respect to or in exchange for shares of Common Stock), such shares
of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights and
any shares of Common Stock) which the Holder would have been
entitled to receive upon the occurrence or consummation of such
Corporate Event or the record, eligibility or other determination
date for the event resulting in such Corporate Event, had this
Warrant been exercised immediately prior to such Corporate Event or
the record, eligibility or other determination date for the event
resulting in such Corporate Event (without regard to any
limitations on exercise of this Warrant). Provision made pursuant
to the preceding sentence shall be in a form and substance
reasonably satisfactory to the Holder. The provisions of this
Section 4(b) shall apply similarly and equally to successive
Fundamental Transactions and Corporate Events.
(c)
Notwithstanding the
foregoing, in the event of Fundamental Transaction, at the request
of the Holder delivered before the ninetieth (90
th
) day after the
occurrence or consummation of such Fundamental Transaction,
the Company (or the Successor Entity)
shall purchase this Warrant from the Holder by paying to the
Holder, within five (5) Business Days after such request (or, if
later, on the effective date of the Fundamental
Transaction)
, cash in an amount equal to the Black Scholes
Value of the remaining unexercised portion of this Warrant on the
date of such Fundamental Transaction;
provided
,
however
, that, if such
Fundamental Transaction is not within the Company's control,
including not approved by the Company's Board of Directors, the
Holder shall only be entitled to receive from the Company or any
Successor Entity, as of the date of consummation of such
Fundamental Transaction, the same type or form of consideration
(and in the same proportion), at the Black Scholes Value of the
unexercised portion of this Warrant, that is being offered and paid
to the holders of Common Stock of the Company in connection with
such Fundamental Transaction, whether that consideration be in the
form of cash, stock or any combination thereof, or whether the
holders of Common Stock are given the choice to receive from among
alternative forms of consideration in connection with such
Fundamental Transaction.
5.
NONCIRCUMVENTION
. The Company
hereby covenants and agrees that the Company will not, by amendment
of its Articles 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 Warrant, and will at all
times in good faith carry out all of the provisions of this Warrant
and take all action as may be required to protect the rights of the
Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect, (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 nonassessable
shares of Common Stock upon the exercise of this Warrant, and (iii)
shall, so long as any of the SPA Warrants are outstanding, take all
action necessary to reserve and keep available out of its
authorized and unissued shares of Common Stock, solely for the
purpose of effecting the exercise of the SPA Warrants, 100% of the
number of shares of Common Stock as shall from time to time be
necessary to effect the exercise of all Warrants issued pursuant to
the Securities Purchase Agreement then outstanding (without regard
to any limitations on exercise and assuming that the Maximum
Eligibility Number is being determined based on a Reset Price equal
to $0.08 (as adjusted for stock splits, stock dividends,
recapitalizations, reorganizations, reclassification, combinations,
reverse stock splits or other similar events occurring after the
Subscription Date)).
6.
WARRANT HOLDER NOT DEEMED A
STOCKHOLDER
. Except as otherwise specifically provided
herein, 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, 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 6, the
Company shall provide the Holder with copies of the same notices
and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the
stockholders.
7.
REISSUANCE OF
WARRANTS
.
(l)
Transfer of Warrant
. If this
Warrant is to be transferred, the Holder shall surrender this
Warrant to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)), registered as the Holder may
request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less than the total
number of Warrant Shares then underlying this Warrant is being
transferred, a new Warrant (in accordance with Section 7(d)) to the
Holder representing the right to purchase the number of Warrant
Shares not being transferred.
(a)
Lost, Stolen or Mutilated
Warrant
. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to
the Company in customary form and, in the case of mutilation, upon
surrender and cancellation of this Warrant, the Company shall
execute and deliver to the Holder a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the Warrant Shares
then underlying this Warrant.
(b)
Exchangeable for Multiple
Warrants
. This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a
new Warrant or Warrants (in accordance with Section 7(d))
representing in the aggregate the right to purchase the number of
Warrant Shares then underlying this Warrant, and each such new
Warrant will represent the right to purchase such portion of such
Warrant Shares as is designated by the Holder at the time of such
surrender;
provided
,
however
, that no SPA Warrants
for fractional Warrant Shares shall be given.
(c)
Issuance of New Warrants
.
Whenever the Company is required to issue a new Warrant pursuant to
the terms of this Warrant, such new Warrant (i) shall be of like
tenor with this Warrant, (ii) shall represent, as indicated on the
face of such new Warrant, the right to purchase the Warrant Shares
then underlying this Warrant (or in the case of a new Warrant being
issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares
designated by the Holder which, when added to the number of shares
of Common Stock underlying the other new Warrants issued in
connection with such issuance, does not exceed the number of
Warrant Shares then underlying this Warrant), (iii) shall have an
issuance date, as indicated on the face of such new Warrant which
is the same as the Issuance Date, and (iv) shall have the same
rights and conditions as this Warrant.
8.
NOTICES
. Whenever notice is
required to be given under this Warrant, 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 Warrant, 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) immediately upon any adjustment of the Exercise Price, setting
forth in reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least fifteen (15) days prior to the date on
which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any
Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of shares of
Common Stock or (C) for determining rights to vote with respect to
any Fundamental Transaction, dissolution or liquidation;
provided
in each
case that such information shall be made known to the public prior
to or in conjunction with such notice being provided to the Holder.
It is expressly understood and agreed that the time of exercise
specified by the Holder in each Exercise Notice shall be definitive
and may not be disputed or challenged by the Company.
9.
AMENDMENT AND WAIVER
. Except as
otherwise provided herein, the provisions of this Warrant may be
amended or waived and the Company may take any action herein
prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written
consent of the Holder.
10.
GOVERNING LAW; JURISDICTION; JURY
TRIAL
. This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the
construction, validity, interpretation and performance of this
Warrant 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. The
Company 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 the Company at the address
set forth in Section 9(f) of the Securities Purchase 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 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.
THE COMPANY
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 WITH OR ARISING OUT OF THIS WARRANT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
11.
CONSTRUCTION; HEADINGS
. This
Warrant shall be deemed to be jointly drafted by the Company and
all the Buyers and shall not be construed against any Person as the
drafter hereof. The headings of this Warrant are for convenience of
reference and shall not form part of, or affect the interpretation
of, this Warrant.
12.
DISPUTE RESOLUTION
. In the case
of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall
submit the disputed determinations or arithmetic calculations via
facsimile or electronic mail within two (2) Business Days of
receipt of the Exercise Notice giving rise to such dispute, as the
case may be, to the Holder. If the Holder and the Company are
unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three (3) Business Days
of such disputed determination or arithmetic calculation being
submitted to the Holder, then the Company shall, within two (2)
Business Days submit via facsimile or electronic mail (a) the
disputed determination of the 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 (10) 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.
13.
REMEDIES, OTHER OBLIGATIONS, BREACHES
AND INJUNCTIVE RELIEF
. The remedies provided in this Warrant
shall be cumulative and in addition to all other remedies available
under this Warrant and the other Transaction Documents, at law or
in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the
Holder to pursue actual damages for any failure by the Company to
comply with the terms of this Warrant. 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 of
this Warrant shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other
security being required.
14.
TRANSFER
. This Warrant and the
Warrant Shares may be offered for sale, sold, transferred, pledged
or assigned without the consent of the Company, except as may
otherwise be required by Section 2(f) of the Securities
Purchase Agreement.
15.
SEVERABILITY
. If any provision
of this Warrant 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 Warrant so long as this Warrant
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).
16.
DISCLOSURE
. Upon receipt or
delivery by the Company of any notice in accordance with the terms
of this Warrant, unless the Company has in good faith determined
that the matters relating to such notice do not constitute
material, nonpublic information relating to the Company or its
Subsidiaries (as defined in the Securities Purchase Agreement), the
Company shall contemporaneously with any such receipt or delivery
publicly disclose such material, nonpublic information on a Current
Report on Form 8-K or otherwise. In the event that the Company
believes that a notice contains material, nonpublic information
relating to the Company or its Subsidiaries, the Company so shall
indicate to the Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, the Holder shall
be allowed to presume that all matters relating to such notice do
not constitute material, nonpublic information relating to the
Company or its Subsidiaries.
17.
CERTAIN DEFINITIONS
. For
purposes of this Warrant, the following terms shall have the
following meanings:
(a)
“
1933 Act
” means the Securities Act
of 1933, as amended.
(b)
“
Affiliate
” shall have the meaning
ascribed to such term in Rule 405 of the 1933 Act.
(c)
“
Approved Stock
Plan
” means any employee benefit plan which has been
approved by the Board of Directors of the Company, pursuant to
which the Company's securities may be issued to any employee,
officer or director for services provided to the
Company.
(d)
“
Attribution
Parties
” means, collectively, the following Persons
and entities: (i) any investment vehicle, including, any funds,
feeder funds or managed accounts, currently, or from time to time
after the Issuance Date, directly or indirectly managed or advised
by the Holder's investment manager or any of its Affiliates or
principals, (ii) any direct or indirect Affiliates of the Holder or
any of the foregoing, (iii) any Person acting or who could be
deemed to be acting as a Group together with the Holder or any of
the foregoing and (iv) any other Persons whose beneficial ownership
of the Common Stock would or could be aggregated with the Holder's
and the other Attribution Parties for purposes of Section 13(d) of
the 1934 Act. For clarity, the purpose of the foregoing is to
subject collectively the Holder and all other Attribution Parties
to the Maximum Percentage.
(e) “
Black
Scholes Value
” means the value of this Warrant
calculated using the Black-Scholes Option Pricing Model obtained
from the “OV” function on Bloomberg determined as of
the day immediately following the public announcement of the
applicable Fundamental Transaction, or, if the Fundamental
Transaction is not publicly announced, the date the Fundamental
Transaction is consummated, for pricing purposes and reflecting (i)
a risk-free interest rate corresponding to the U.S. Treasury rate
for a period equal to the remaining term of this Warrant as of such
date of request, (ii) an expected volatility equal to the greater
of 100% and the 100 day volatility obtained from the HVT function
on Bloomberg as of the Trading Day immediately following the public
announcement of the applicable Fundamental Transaction, or, if the
Fundamental Transaction is not publicly announced, the date the
Fundamental Transaction is consummated, (iii) the underlying price
per share used in such calculation shall be the greater of (x) the
highest Weighted Average Price of the Common Stock during the
period beginning on the Trading Day prior to the execution of
definitive documentation relating to the applicable Fundamental
Transaction and ending on (A) the Trading Day immediately following
the public announcement of such Fundamental Transaction, if the
applicable Fundamental Transaction is publicly announced or (B) the
Trading Day immediately following the consummation of the
applicable Fundamental Transaction if the applicable Fundamental
Transaction is not publicly announced and (y) the sum of the price
per share being offered in cash, if any, plus the value of any
non-cash consideration, if any, being offered in the Fundamental
Transaction, (iv) a zero cost of borrow and (v) a 360 day
annualization factor.
(f) “
Bloomberg
”
means Bloomberg Financial Markets.
(g) “
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.
(h) “
Closing
Bid Price
” and “
Closing Sale Price
” means, for any
security as of any date, the last closing bid price and last
closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal
Market begins to operate on an extended hours basis and does not
designate the closing bid price or the closing trade price, as the
case may be, then the last bid price or the last trade price,
respectively, of such security prior to 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if the Principal Market is not
the principal securities exchange or trading market for such
security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price or last trade price, respectively, of such
security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing
bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask
prices, respectively, of any market makers for such security as
reported in the OTC Link or “pink sheets” by OTC
Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Closing
Bid Price or the Closing Sale Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the
Closing Bid Price or the Closing Sale Price, as the case may be, 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 such dispute shall be resolved pursuant to
Section 12. All such determinations to be appropriately adjusted
for any stock dividend, stock split, stock combination,
reclassification or other similar transaction during the applicable
calculation period.
(i) “
Common
Stock
” means (i) the Company's shares of common
stock, par value $0.001 per share, and (ii) any stock capital
into which such Common Stock shall have been changed or any stock
capital resulting from a reclassification, reorganization or
reclassification of such Common Stock.
(j) “
Convertible
Securities
” means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or
exchangeable for shares of Common Stock.
(k) “
Designee
”
means Empery Asset Management, LP.
(l) “
Eligible
Market
” means the Principal Market, the NYSE American,
The Nasdaq Global Select Market, The Nasdaq Global Market, The
Nasdaq Capital Market, The New York Stock Exchange, Inc. or the OTC
QX.
(m)
“
Excluded
Securities
” means any Common Stock issued or issuable
or deemed to be issued in accordance with Section 2(a) hereof by
the Company: (i) under any Approved Stock Plan, (ii) upon exercise
of any SPA, Series A Warrants, any Series B Warrants and any Series
C Warrants, in each case issued pursuant to the Securities Purchase
Agreement;
provided
, that the terms of
such SPA Warrants Series B Warrants and Series C Warrants are not
amended, modified or changed on or after the Subscription Date, or
(iii) upon conversion, exercise or exchange of any Options or
Convertible Securities which are outstanding on the day immediately
preceding the Subscription Date;
provided
, that such issuance of
Common Stock upon exercise of such Options or Convertible
Securities is made pursuant to the terms of such Options or
Convertible Securities in effect on the date immediately preceding
the Subscription Date and such Options or Convertible Securities
are not amended, modified or changed on or after the Subscription
Date.
(n) “
Expiration
Date
” means the date that is twenty four (24) months
after the Issuance Date or if such date falls on a day other than a
Business Day or on which trading does not take place on the
Principal Market (a “
Holiday
”), the next day that is
not a Holiday.
(o) Intentionally
omitted.
(p) “
Fundamental
Transaction
” means (A) that the Company shall,
directly or indirectly, including through Subsidiaries, Affiliates
or otherwise, in one or more related transactions, (i) consolidate
or merge with or into (whether or not the Company is the surviving
corporation) another Subject Entity, or (ii) sell, assign,
transfer, convey or otherwise dispose of all or substantially all
of the properties or assets of the Company or any of its
“significant subsidiaries” (as defined in Rule 1-02 of
Regulation S-X) to one or more Subject Entities, or (iii) make, or
allow one or more Subject Entities to make, or allow the Company to
be subject to or have its Common Stock be subject to or party to
one or more Subject Entities making, a purchase, tender or exchange
offer that is accepted by the holders of at least either (x) 50% of
the outstanding shares of Common Stock, (y) 50% of the outstanding
shares of Common Stock calculated as if any shares of Common Stock
held by all Subject Entities making or party to, or Affiliated with
any Subject Entities making or party to, such purchase, tender or
exchange offer were not outstanding; or (z) such number of shares
of Common Stock such that all Subject Entities making or party to,
or Affiliated with any Subject Entity making or party to, such
purchase, tender or exchange offer, become collectively the
beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of
at least 50% of the outstanding shares of Common Stock, or (iv)
consummate a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with one or more Subject
Entities whereby all such Subject Entities, individually or in the
aggregate, acquire, either (x) at least 50% of the outstanding
shares of Common Stock, (y) at least 50% of the outstanding shares
of Common Stock calculated as if any shares of Common Stock held by
all the Subject Entities making or party to, or Affiliated with any
Subject Entity making or party to, such stock purchase agreement or
other business combination were not outstanding; or (z) such number
of shares of Common Stock such that the Subject Entities become
collectively the beneficial owners (as defined in Rule 13d-3 under
the 1934 Act) of at least 50% of the outstanding shares of Common
Stock, or (v) reorganize, recapitalize or reclassify its Common
Stock, (B) that the Company shall, directly or indirectly,
including through Subsidiaries, Affiliates or otherwise, in one or
more related transactions, allow any Subject Entity individually or
the Subject Entities in the aggregate to be or become the
“beneficial owner” (as defined in Rule 13d-3 under the
1934 Act), directly or indirectly, whether through acquisition,
purchase, assignment, conveyance, tender, tender offer, exchange,
reduction in outstanding shares of Common Stock, merger,
consolidation, business combination, reorganization,
recapitalization, spin-off, scheme of arrangement, reorganization,
recapitalization or reclassification or otherwise in any manner
whatsoever, of either (x) at least 50% of the aggregate ordinary
voting power represented by issued and outstanding shares of Common
Stock, (y) at least 50% of the aggregate ordinary voting power
represented by issued and outstanding shares of Common Stock not
held by all such Subject Entities as of the Subscription Date
calculated as if any shares of Common Stock held by all such
Subject Entities were not outstanding, or (z) a percentage of the
aggregate ordinary voting power represented by issued and
outstanding shares of Common Stock or other equity securities of
the Company sufficient to allow such Subject Entities to effect a
statutory short form merger or other transaction requiring other
stockholders of the Company to surrender their shares of Common
Stock without approval of the stockholders of the Company or (C)
directly or indirectly, including through Subsidiaries, Affiliates
or otherwise, in one or more related transactions, the issuance of
or the entering into any other instrument or transaction structured
in a manner to circumvent, or that circumvents, the intent of this
definition in which case this definition shall be construed and
implemented in a manner otherwise than in strict conformity with
the terms of this definition to the extent necessary to correct
this definition or any portion of this definition which may be
defective or inconsistent with the intended treatment of such
instrument or transaction.
(q) “
Group
”
means a “group” as that term is used in Section 13(d)
of the 1934 Act and as defined in Rule 13d-5
thereunder.
(r) “
Maximum
Eligibility Number
” shall have the meaning ascribed to
such term in the Series C Warrants.
(s) “
Option
Value
” means the value of an Option calculated using
the Black-Scholes Option Pricing Model obtained from the
“OV” function on Bloomberg determined as of (A) the
Trading Day prior to the public announcement of the issuance of the
applicable Option, if the issuance of such Option is publicly
announced or (B) the Trading Day immediately following the issuance
of the applicable Option if the issuance of such Option is not
publicly announced, for pricing purposes and reflecting (i) a
risk-free interest rate corresponding to the U.S. Treasury rate for
a period equal to the remaining term of the applicable Option as of
the applicable date of determination, (ii) an expected volatility
equal to the greater of 100% and the 100 day volatility obtained
from the HVT function on Bloomberg as of (A) the Trading Day
immediately following the public announcement of the applicable
Option if the issuance of such Option is publicly announced or (B)
the Trading Day immediately following the issuance of the
applicable Option if the issuance of such Option is not publicly
announced, (iii) the underlying price per share used in such
calculation shall be the highest Weighted Average Price of the
Common Stock during the period beginning on the Trading Day prior
to the execution of definitive documentation relating to the
issuance of the applicable Option and ending on (A) the Trading Day
immediately following the public announcement of such issuance, if
the issuance of such Option is publicly announced or (B) the
Trading Day immediately following the issuance of the applicable
Option if the issuance of such Option is not publicly announced,
(iv) a zero cost of borrow and (v) a 360 day annualization
factor.
(t) “
Options
”
means any rights, warrants or options to subscribe for or purchase
(i) shares of Common Stock or (ii) Convertible
Securities.
(u) “
Parent
Entity
” of a Person means an entity that, directly or
indirectly, controls the applicable Person, including such entity
whose common capital or equivalent equity security is quoted or
listed on an Eligible Market (or, if so elected by the Required
Holders, any other market, exchange or quotation system), or, if
there is more than one such Person or such entity, the Person or
such entity designated by the Required Holders or in the absence of
such designation, such Person or entity with the largest public
market capitalization as of the date of consummation of the
Fundamental Transaction.
(v) “
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.
(w) “
Principal
Market
” means the NASDAQ Capital Market.
(x) Intentionally
omitted.
(y) Intentionally
omitted.
(z) “
Qualified
Eligible Market
” means the NYSE American, The Nasdaq
Global Select Market, The Nasdaq Global Market, The Nasdaq Capital
Market or The New York Stock Exchange, Inc.
(aa) Intentionally
omitted.
(bb) “
Registration
Rights Agreement
” means that certain Registration
Rights Agreement dated as of the Subscription Date by and among the
Company and the Buyers.
(cc) “
Registration
Statement
” means that certain Registration Rights
Agreement dated as of the Subscription Date by and among the
Company and the Buyers.
(dd) “
Required
Holders
” means the holders of the SPA Warrants
representing at least a majority of the shares of Common Stock
underlying the SPA Warrants then outstanding and shall include the
Designee so long as the Designee or any of its Affiliates holds any
SPA Warrants, Hudson Bay Capital Management LP so long as Hudson
Bay Capital Management LP or any of its Affiliates holds any SPA
Warrants, and Sabby Management, LLC so long as Sabby Management,
LLC or any of its Affiliates holds any SPA Warrants.
(ee) “
Reset
Price
” shall have the meaning ascribed to such term in
the Series C Warrants.
(ff) Intentionally
omitted.
(gg) Intentionally
omitted.
(hh) “
Series
A Warrants
” shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
(ii) “
Series
C Warrants
” shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
(jj) “
Standard
Settlement Period
” means the standard settlement
period, expressed in a number of Trading Days, on the Company's
primary Eligible Market with respect to the Common Stock as in
effect on the date of delivery of the applicable Exercise
Notice.
(kk) “
Subject
Entity
” means any Person, Persons or Group or any
Affiliate or associate of any such Person, Persons or
Group.
(ll) “
Successor
Entity
” means one or more Person or Persons (or, if so
elected by the Holder, the Company or Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or one or
more Person or Persons (or, if so elected by the Holder, the
Company or the Parent Entity) with which such Fundamental
Transaction shall have been entered into.
(mm)
“
Trading Day
”
means any day on which the Common Stock is traded on the Principal
Market, or, if the Principal Market is not the principal trading
market for the Common Stock on such day, then on the principal
securities exchange or securities market on which the Common Stock
is then traded.
(nn) “
Weighted
Average Price
” means, for any security as of any date,
the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New
York time (or such other time as the Principal Market publicly
announces is the official open of trading), and ending at 4:00:00
p.m., New York time (or such other time as the Principal Market
publicly announces is the official close of trading), as reported
by Bloomberg through its “Volume at Price” function or,
if the foregoing does not apply, the dollar volume-weighted average
price of such security in the over-the-counter market on the
electronic bulletin board for such security during the period
beginning at 9:30:01 a.m., New York time (or such other time as
such market publicly announces is the official open of trading),
and ending at 4:00:00 p.m., New York time (or such other time as
such market publicly announces is the official close of trading),
as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours,
the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported
in the OTC Link or “pink sheets” by OTC Markets Group
Inc. (formerly Pink OTC Markets Inc.). If the Weighted Average
Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Weighted Average 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 such dispute shall be resolved pursuant to Section
12 with the term “Weighted Average Price” being
substituted for the term “Exercise Price.” All such
determinations shall be appropriately adjusted for any stock
dividend, stock split, stock combination, reclassification or other
similar transaction during the applicable calculation
period.
[Signature Page Follows]
IN WITNESS WHEREOF,
the Company has
caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.
BRIDGELINE
DIGITAL, INC.
By:
___________________________
Name:
Title:
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE
THIS
WARRANT TO PURCHASE COMMON STOCK
BRIDGELINE DIGITAL, INC.
The
undersigned holder hereby exercises the right to purchase
_________________ shares of Common Stock (“
Warrant Shares
”) of Bridgeline
Digital, Inc., a Delaware corporation (the “
Company
”), evidenced by the
attached Warrant to Purchase Common Stock (the “
Warrant
”). Capitalized terms used
herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.
1. Form
of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:
____________ a
“
Cash
Exercise
” with respect to _________________ Warrant
Shares; and/or
____________ a
“
Cashless
Exercise
” with respect to _______________ Warrant
Shares, resulting in a delivery obligation of the Company to the
Holder of __________ shares of Common Stock representing the
applicable Net Number.
2.
Payment of Exercise Price. In the event that the holder has elected
a Cash Exercise with respect to some or all of the Warrant Shares
to be issued pursuant hereto, the holder shall pay the Aggregate
Exercise Price in the sum of $___________________ to the Company in
accordance with the terms of the Warrant.
3.
Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the
Warrant.
Date:
_______________ __, ______
Name
of Registered Holder
Name:
Title:
ACKNOWLEDGMENT
The
Company hereby acknowledges this Exercise Notice and hereby directs
American Stock Transfer & Trust Company, LLC to issue the above
indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated March , 2019 from the Company and
acknowledged and agreed to by American Stock Transfer & Trust
Company, LLC.
BRIDGELINE
DIGITAL, INC.
By:________________________________
Name:
Title:
Exhibit
4.3
SERIES C WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE 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 SELECTED BY THE HOLDER, 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.
BRIDGELINE DIGITAL, INC.
SERIES C WARRANT TO PURCHASE COMMON STOCK
Warrant No.:
_________________
Number
of Shares of Common Stock:___________________
Date of
Issuance: March , 2019 (“
Issuance Date
”)
Bridgeline Digital,
Inc., a Delaware corporation (the “
Company
”), hereby certifies that,
for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, [ ], the registered holder hereof or
its permitted assigns (the “
Holder
”), is entitled, subject to
the terms set forth below, to purchase from the Company, at the
Exercise Price (as defined below) then in effect, at any time or
times on or after the earlier of (i) the date of the Authorized
Share Approval and (ii) six months following the Subscription Date,
but not after 11:59 p.m., New York time, on the Expiration Date,
(as defined below), up to a maximum of ___________
(________________)
1
fully paid nonassessable shares of
Common Stock, subject to the Maximum Eligibility Number of fully
paid nonassessable shares of Common Stock, all subject to
adjustment as provided herein
(the “
Warrant Shares
”). Except as
otherwise defined herein, capitalized terms in this Warrant to
Purchase Common Stock (including any Warrants to Purchase Common
Stock issued in exchange, transfer or replacement hereof, this
“
Warrant
”),
shall have the meanings set forth in Section 17. This Warrant is
one of the Series C Warrants to purchase Common Stock (the
“
SPA Warrants
”)
issued pursuant to Section 1 of that certain Securities Purchase
Agreement, dated as of March __, 2019 (the “
Subscription Date
”), by and among
the Company and the investors (the “
Buyers
”) referred to therein (the
“
Securities Purchase
Agreement
”). Capitalized terms used herein and not
otherwise defined shall have the definitions ascribed to such terms
in the Securities Purchase Agreement.
1.
EXERCISE
OF WARRANT.
(a)
Mechanics of Exercise
. Subject
to the terms and conditions hereof (including, without limitation,
the limitations set forth in Section 1(f) and 1(h)), this Warrant
may be exercised by the Holder at any time or times on or after the
Issuance Date, in whole or in part, by (i) delivery of a
written notice, in the form attached hereto as
Exhibit A
(the
“
Exercise
Notice
”), of the Holder's election to exercise this
Warrant and (ii) (A) payment to the Company of an amount equal
to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the
“
Aggregate Exercise
Price
”) in cash by wire transfer of immediately
available funds or (B) by notifying the Company that this Warrant
is being exercised pursuant to a Cashless Exercise (as defined in
Section 1(d)). 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 with respect to less
than all of the Warrant Shares 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. On or before the first (1
st
) Trading Day
following the date on which the Company has received the Exercise
Notice, the Company shall transmit by electronic mail an
acknowledgment of confirmation of receipt of the Exercise Notice to
the Holder and the Company's transfer agent (the
“
Transfer
Agent
”). On or before the earlier of (i) the second
(2
nd
)
Trading Day and (ii) the number of Trading Days comprising the
Standard Settlement Period, in each case, following the date on
which the Holder delivers the Exercise Notice to the Company, so
long as the Holder delivers the Aggregate Exercise Price (or notice
of a Cashless Exercise) on or prior to the second (2
nd
) Trading Day
following the date on which the Company has received the Exercise
Notice (the “
Share Delivery
Date
”) (provided that if the Aggregate Exercise Price
has not been delivered by such date, the Share Delivery Date shall
be two (2) Trading Days after the Aggregate Exercise Price (or
notice of a Cashless Exercise) is delivered), the Company shall (X)
provided that the Transfer Agent is participating in The Depository
Trust Company (“
DTC
”) Fast Automated Securities
Transfer Program and (A) the Warrant Shares are subject to an
effective resale registration statement in favor of the Holder or
(B) if exercised via Cashless Exercise, at a time when Rule 144
would be available for immediate resale of the Warrant Shares by
the Holder, credit such aggregate number of Warrant Shares to which
the Holder is entitled pursuant to such exercise to the Holder's or
its designee's balance account with DTC through its Deposit /
Withdrawal At Custodian system, or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program
or (A) the Warrant Shares are not subject to an effective resale
registration statement in favor of the Holder and (B) if exercised
via Cashless Exercise, at a time when Rule 144 would not be
available for immediate resale of the Warrant Shares by the Holder,
issue and dispatch by overnight courier to the address as specified
in the Exercise Notice, a certificate, registered in the Company's
share register in the name of the Holder or its designee, for the
number of Warrant Shares to which the Holder is entitled pursuant
to such exercise. The Company shall be responsible for all fees and
expenses of the Transfer Agent and all fees and expenses with
respect to the issuance of Warrant Shares via DTC, if any. Upon
delivery of the Exercise Notice, the Holder shall be deemed for all
corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date such Warrant Shares are
credited to the Holder's DTC account or the date of delivery of the
certificates evidencing such Warrant Shares, as the case may be. If
this Warrant is submitted in connection with any exercise pursuant
to this Section 1(a) and the number of Warrant Shares represented
by this Warrant submitted for exercise is greater than the number
of Warrant Shares being acquired upon an exercise, then the Company
shall as soon as practicable and in no event later than three (3)
Trading Days after any exercise and at its own expense, issue a new
Warrant (in accordance with Section 7(d)) representing the right to
purchase the number of Warrant Shares issuable immediately prior to
such exercise under this Warrant, less the number of Warrant Shares
with respect to which this Warrant is exercised. No fractional
Warrant Shares are to be issued upon the exercise of this Warrant,
but rather the number of Warrant Shares to be issued shall be
rounded up to the nearest whole number. The Company shall pay any
and all taxes which may be payable with respect to the issuance and
delivery of Warrant Shares upon exercise of this Warrant. The
Company's obligations to issue and deliver Warrant Shares in
accordance with the terms and subject to the conditions hereof are
absolute and unconditional, irrespective of any action or inaction
by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any
setoff, counterclaim, recoupment, limitation or termination.
NOTWITHSTANDING ANY PROVISION OF
THIS WARRANT TO THE CONTRARY, NO MORE THAN THE MAXIMUM ELIGIBILITY
NUMBER OF WARRANT SHARES SHALL BE EXERCISABLE
HEREUNDER.
(b)
Exercise Price
. For
purposes of this Warrant, “
Exercise Price
” means $0.001 per
share, subject to adjustment as provided herein.
(b)
Company's Failure to Timely Deliver
Securities
. If the Company shall fail for any reason or for
no reason to issue to the Holder on or prior to the Share Delivery
Date either (I) if the Transfer Agent is not participating in the
DTC Fast Automated Securities Transfer Program, a certificate for
the number of shares of Common Stock to which the Holder is
entitled and register such shares of Common Stock on the Company's
share register or if the Transfer Agent is participating in the DTC
Fast Automated Securities Transfer Program, to credit the Holder's
balance account with DTC, for such number of shares of Common Stock
to which the Holder is entitled upon the Holder's exercise of this
Warrant or (II) if the Registration Statement covering the resale
of the Warrant Shares that are the subject of the Exercise Notice
(the “
Unavailable Warrant
Shares
”) is not available for the resale of such
Unavailable Warrant Shares and the Company fails to promptly, but
in no event later than as is required pursuant to the Registration
Rights Agreement (x) so notify the Holder and (y) deliver the
Warrant Shares electronically without any restrictive legend by
crediting such aggregate number of Warrant Shares to which the
Holder is entitled pursuant to such exercise to the Holder's or its
designee's balance account with DTC through its Deposit /
Withdrawal At Custodian system (the event described in the
immediately foregoing clause (II) is hereinafter referred as a
“
Notice Failure
”
and together with the event described in clause (I) above, an
“
Exercise
Failure
”), then, in addition to all other remedies
available to the Holder, (X) the Company shall pay in cash to the
Holder on each day after the Share Delivery Date and during such
Exercise Failure an amount equal to 1.0% of the product of (A) the
sum of the number of shares of Common Stock not issued to the
Holder on or prior to the Share Delivery Date and to which the
Holder is entitled, and (B) any trading price of the Common Stock
selected by the Holder in writing as in effect at any time during
the period beginning on the applicable date of delivery of an
Exercise Notice and ending on the applicable Share Delivery Date,
and (Y) the Holder, upon written notice to the Company, may void
its Exercise Notice with respect to, and retain or have returned,
as the case may be, any portion of this Warrant that has not been
exercised pursuant to such Exercise Notice; provided that the
voiding of an Exercise Notice shall not affect the Company's
obligations to make any payments which have accrued prior to the
date of such notice pursuant to this Section 1(c) or otherwise. In
addition to the foregoing, if on or prior to the Share Delivery
Date either (I) if the Transfer Agent is not participating in the
DTC Fast Automated Securities Transfer Program, the Company shall
fail to issue and deliver a certificate to the Holder and register
such shares of Common Stock on the Company's share register or, if
the Transfer Agent is participating in the DTC Fast Automated
Securities Transfer Program, credit the Holder's balance account
with DTC for the number of shares of Common Stock to which the
Holder is entitled upon the Holder's exercise hereunder or pursuant
to the Company's obligation pursuant to clause (ii) below or (II) a
Notice Failure occurs, and if on or after such Trading Day the
Holder purchases (in an open market transaction or otherwise)
shares of Common Stock relating to the applicable Exercise Failure
(a “
Buy-In
”),
then the Company shall, within five (5) Trading Days after the
Holder's request and in the Holder's discretion, either (i) pay
cash to the Holder in an amount equal to the Holder's total
purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so
purchased (the “
Buy-In
Price
”), at which point the Company's obligation to
deliver such certificate (and to issue such shares of Common Stock)
or credit the Holder's balance account with DTC for such shares of
Common Stock shall terminate, or (ii) promptly honor its obligation
to deliver to the Holder a certificate or certificates representing
such shares of Common Stock or credit the Holder's balance account
with DTC, as applicable, and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product
of (A) such number of shares of Common Stock, times (B) any trading
price of the Common Stock selected by the Holder in writing as in
effect at any time during the period beginning on the applicable
date of delivery of an Exercise Notice and ending on the applicable
Share Delivery Date. Nothing herein shall limit the Holder's right
to pursue any other remedies available to it hereunder, at law or
in equity, including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of
Common Stock (or to electronically deliver such shares of Common
Stock) upon the exercise of this Warrant as required pursuant to
the terms hereof.
(c)
Cashless Exercise
.
Notwithstanding anything contained
herein to the contrary, the Holder may, in its sole discretion,
exercise this Warrant in whole or in part and, in lieu of making
the cash payment otherwise contemplated to be made to the Company
upon such exercise in payment of the Aggregate Exercise Price,
elect instead to receive upon such exercise the “Net
Number” of shares of Common Stock determined according to the
following formula (a “
Cashless Exercise
”):
Net
Number =
(A x B) - (A x
C)
B
For
purposes of the foregoing formula:
A= the
total number of shares with respect to which this Warrant is then
being exercised.
B= as
applicable: (i) the Weighted Average Price of the Common Stock on
the Trading Day immediately preceding the date of the applicable
Exercise Notice if such Exercise Notice is (1) both executed and
delivered pursuant to Section 1(a) hereof on a day that is not a
Trading Day or (2) both executed and delivered pursuant to Section
1(a) hereof on a Trading Day prior to the opening of “regular
trading hours” (as defined in Rule 600(b)(64) of Regulation
NMS promulgated under the federal securities laws) on such Trading
Day, (ii) at the option of the Holder, either (y) the Weighted
Average Price of the Common Stock on the Trading Day immediately
preceding the date of the applicable Exercise Notice or (z) the bid
price of the Common Stock on the principal Trading Market as
reported by Bloomberg as of the time of the Holder's execution of
the applicable Exercise Notice if such Exercise Notice is executed
during “regular trading hours” on a Trading Day and is
delivered within two (2) hours thereafter (including until two (2)
hours after the close of “regular trading hours” on a
Trading Day) pursuant to Section 1(a) hereof or (iii) the Weighted
Average Price of the Common Stock on the date of the applicable
Exercise Notice if the date of such Exercise Notice is a Trading
Day and such Exercise Notice is both executed and delivered
pursuant to Section 1(a) hereof after the close of “regular
trading hours” on such Trading Day;
C= the
Exercise Price then in effect for the applicable Warrant Shares at
the time of such exercise.
If
shares of Common Stock are issued pursuant to this Section 1(d),
the Company hereby acknowledges and agrees that the Warrant Shares
issued in a Cashless Exercise 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 Securities Purchase Agreement.
The Company agrees not to take any position contrary to this
Section 1(d).
(d)
Disputes
. In the case of a
dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section
12.
(e)
Beneficial Ownership Limitations on
Exercises
.
Notwithstanding
anything to the contrary contained herein, the Company shall not
effect the exercise of any portion of this Warrant, and the Holder
shall not have the right to exercise any portion of this Warrant,
pursuant to the terms and conditions of this Warrant and any such
exercise shall be null and void and treated as if never made, to
the extent that after giving effect to such exercise, the Holder
together with the other Attribution Parties collectively would
beneficially own in excess of 4.99% (the “
Maximum
Percentage
”) of the
number of
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 the Holder and the other
Attribution Parties shall include the number of
shares of
Common Stock
held by the Holder and
all other Attribution Parties plus 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 the number of
shares of Common Stock
which would be
issuable upon (A) exercise of the remaining, unexercised portion of
this Warrant beneficially owned by the Holder or any of the other
Attribution Parties and (B) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company (including, without limitation, any convertible notes or
convertible preferred stock or warrants, including the
Series A
Warrants, Series B Warrants
and Preferred Shares (as defined in the Securities Purchase
Agreement)) beneficially owned by the Holder or any other
Attribution Party subject to a limitation on conversion or exercise
analogous to the limitation contained in this Section 1(f). For
purposes of this Section 1(f), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “
1934 Act
”). For purposes of this Warrant, in
determining the number of outstanding
shares of Common Stock
the Holder may acquire upon the
exercise of this Warrant without exceeding the Maximum Percentage,
the Holder may rely on the number of outstanding
shares of
Common Stock
as reflected in (x) the
Company's most recent Annual Report on Form 10-K, Quarterly Report
on Form 10-Q, Current Report on Form 8-K or other public filing
with the Securities and
Exchange Commission (the
“
SEC
”), as the
case may be, (y) a more recent public announcement by the Company
or (3) any other written
notice by the
Company or the Transfer Agent setting forth the number of
shares of Common Stock
outstanding
(the “
Reported Outstanding Share
Number
”). If the Company
receives an Exercise Notice from the Holder at a time when the
actual number of outstanding
shares of Common Stock
is less than the Reported Outstanding
Share Number, the Company shall (i) notify the Holder in writing of
the number of
shares of Common Stock
then outstanding and, to the extent that such
Exercise Notice would otherwise cause the Holder's beneficial
ownership, as determined pursuant to this Section 1(f), to exceed
the Maximum Percentage, the Holder must notify the Company of a
reduced number of Warrant Shares to be purchased pursuant to such
Exercise Notice
(the number of
shares by which such purchase is reduced, the
“
Reduction
Shares
”) and (ii) as soon
as reasonably practicable, the Company shall return to the Holder
any exercise price paid by the Holder for the Reduction
Shares.
For any reason at any time, upon the written or oral
request of the Holder,
the Company
shall within one (1) Trading Day confirm orally and in writing or
by electronic mail 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 any other Attribution
Party since the date as of which the Reported Outstanding Share
Number was reported. In the event that the issuance of
shares of Common Stock
to the Holder
upon exercise of this Warrant results in the Holder and the other
Attribution Parties being deemed to beneficially own, in the
aggregate, more than the Maximum Percentage of the number of
outstanding
shares of Common Stock
(as determined under Section 13(d) of the 1934
Act), the number of shares so issued by which the Holder's and the
other Attribution Parties' aggregate beneficial ownership exceeds
the Maximum Percentage (the “
Excess
Shares
”) shall be deemed
null and void and shall be cancelled ab initio, and the Holder
shall not have the power to vote or to transfer the Excess Shares.
As soon as reasonably practicable after the issuance of the Excess
Shares has been deemed null and void, the Company shall return to
the Holder the exercise price paid by the Holder for the Excess
Shares.
Upon delivery of a written notice to the Company,
the Holder may from time to time increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% as
specified in such notice; provided that (i) any such increase in
the Maximum Percentage will not be effective until the sixty-first
(61
st
) day
after such notice is delivered to the Company and (ii) any such
increase or decrease will apply only to the Holder and the other
Attribution Parties and not to any other holder of SPA Warrants
that is not an Attribution Party of the Holder. For purposes of
clarity, the shares of Common Stock issuable pursuant to the terms
of this Warrant in excess of the Maximum Percentage shall not be
deemed to be beneficially owned by the Holder for any purpose
including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the
1934 Act.
No
prior
inability to exercise this Warrant pursuant to this paragraph shall
have any effect on the applicability of the provisions of this
paragraph with respect to any subsequent determination of
exercisability.
The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 1(f) to
the extent necessary to correct this paragraph or any portion of
this paragraph which may be defective or inconsistent with the
intended beneficial ownership limitation contained in this Section
1(f) or to make changes or
supplements
necessary or desirable to properly give effect to
such limitation. The limitation contained in this paragraph may not
be waived and shall apply to a successor holder of this
Warrant.
(f)
Insufficient Authorized Shares
.
If at any time after the Company obtains Stockholder Approval, the
Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon exercise of this Warrant at least a
number of shares of Common Stock equal to 100% of the number of
shares of Common Stock as shall from time to time be necessary to
effect the exercise of all of this Warrant then outstanding without
regard to any limitation on exercise included herein and assuming
that the Maximum Eligibility Number is being determined based on a
Reset Price equal to $0.08 (as adjusted for stock splits, stock
dividends, recapitalizations, reorganizations, reclassification,
combinations, reverse stock splits or other similar events
occurring after the Subscription Date) (the “
Required Reserve Amount
” and the
failure to have such sufficient number of authorized and unreserved
shares of Common Stock, an “
Authorized Share Failure
”), then
the Company shall immediately take all action 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 this Warrant then outstanding either through an increase
in the authorized number of shares of Common Stock or a reverse
stock split of the outstanding shares of Common Stock. Without
limiting the generality of the foregoing sentence, as soon as
practicable after the date of the occurrence of an Authorized Share
Failure, but in no event later than sixty (60) 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 or a reverse stock
split of the outstanding shares of Common Stock. In connection with
such meeting, the Company shall provide each stockholder with a
proxy statement and shall use its best efforts to solicit its
stockholders' approval of such increase in authorized shares of
Common Stock or a reverse stock split of the outstanding shares of
Common Stock and to cause its board of directors to recommend to
the stockholders that they approve such proposal. Notwithstanding
the foregoing, if any such time of an Authorized Share Failure, the
Company is able to obtain the written consent of a majority of the
shares of its issued and outstanding shares of Common Stock to
approve the increase in the number of authorized shares of Common
Stock or a reverse stock split of the outstanding shares of Common
Stock, the Company may satisfy this obligation by obtaining such
consent and submitting for filing with the SEC an Information
Statement on Schedule 14C. In the event that upon any exercise of
this Warrant, following six (6) months following the Subscription
Date, the Company does not have sufficient authorized shares to
deliver in satisfaction of such exercise, then unless the Holder
elects to void such attempted exercise, in lieu of issuing shares
of Common Stock hereunder, the Company shall pay to the Holder
within three (3) Trading Days of the applicable exercise, cash in
an amount equal to the product of (i) the number of Warrant Shares
that the Company is unable to deliver pursuant to this Section 1(g)
and (ii) as applicable, (A) the Weighted Average Price of the
Common Stock on the Trading Day immediately preceding the date of
the applicable Exercise Notice if such Exercise Notice is (x) both
executed and delivered pursuant to Section 1(a) hereof on a day
that is not a Trading Day or (y) both executed and delivered
pursuant to Section 1(a) hereof on a Trading Day prior to the
opening of “regular trading hours” (as defined in Rule
600(b)(64) of Regulation NMS promulgated under the federal
securities laws) on such Trading Day, (B) at the option of the
Holder, either (x) the Weighted Average Price of the Common Stock
on the Trading Day immediately preceding the date of the applicable
Exercise Notice or (y) the bid price of the Common Stock on the
principal Trading Market as reported by Bloomberg as of the time of
the Holder's execution of the applicable Exercise Notice if such
Exercise Notice is executed during “regular trading
hours” on a Trading Day and is delivered within two (2) hours
thereafter (including until two (2) hours after the close of
“regular trading hours” on a Trading Day) pursuant to
Section 1(a) hereof or (C) the Weighted Average Price of the Common
Stock on the date of the applicable Exercise Notice if the date of
such Exercise Notice is a Trading Day and such Exercise Notice is
both executed and delivered pursuant to Section 1(a) hereof after
the close of “regular trading hours” on such Trading
Day.
(g)
Issuance Restrictions
. The
Company may not issue any shares of Common Stock upon exercise of
this Warrant unless and until such date that the Company has
obtained Stockholder Approval.
2.
ADJUSTMENT OF EXERCISE PRICE AND
NUMBER OF WARRANT SHARES
. The Exercise Price and the number
of Warrant Shares shall be adjusted from time to time as
follows:
(a)
Maximum Eligibility
Number
.
(i)
First
Reset
. The Maximum Eligibility Number shall be increased
(but not decreased) on the First Reset Date to equal the First
Reset Share Amount.
(ii)
Second
Reset
. If (A) the First Reset Date was triggered by clause
(i) of such definition and the Registration Statement is not
available for the resale of all Registrable Securities at all times
from the first date the SEC has declared the Registration Statement
covering the resale of all Registrable Securities effective until
the fortieth (40
th
) Trading Day
following such date or (B) the First Reset Date was triggered by
either clause (ii) or clause (iii) of such definition and there
shall occur a Public Information Failure at any time on or prior to
the fortieth (40
th
) Trading Day
following the date that is six (6) months immediately following the
Issuance Date, the Maximum Eligibility Number shall be further
increased (but not decreased) on the Second Reset Date, by the
Second Reset Share Amount.
(iii)
Third
Reset
. If (A) the Second Reset Date was triggered by clause
(ii)(x) of such definition and the Registration Statement is not
available for the resale of all Registrable Securities at all times
from the first date the SEC has declared the Registration Statement
covering the resale of all Registrable Securities effective until
the fortieth (40
th
) Trading Day
following such date or (B) the Second Reset Date was triggered by
any other clause of such definition and there shall occur a Public
Information Failure at any time on or prior to the fortieth
(40
th
)
Trading Day following the first (1
st
) year anniversary
of the Issuance Date, the Maximum Eligibility Number shall be
further increased (but not decreased) on the Third Reset Date, by
the Third Reset Share Amount.
(b)
Voluntary Adjustment By
Company
. The Company may at any time during the term of this
Warrant, with the prior written consent of the Required Holders,
reduce the then current Exercise Price to any amount and for any
period of time deemed appropriate by the Board of Directors of the
Company.
(c)
Adjustment Upon Subdivision or
Combination of Common Stock
. If the Company at any time on
or after the Subscription Date 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 Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of
Warrant Shares will be proportionately increased. If the Company at
any time on or after the Subscription Date 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 Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of
Warrant Shares will be proportionately decreased. Any adjustment
under this Section 2(c) shall become effective at the close of
business on the date the subdivision or combination becomes
effective.
3.
RIGHTS UPON DISTRIBUTION OF
ASSETS
. If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property, options, evidence of
indebtedness or any other assets by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a “
Distribution
”), at any time after
the issuance of this Warrant, then, in each such case, the Holder
shall be entitled to participate in such Distribution to the same
extent that the Holder would have participated therein if the
Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations or restrictions on exercise of this Warrant, including
without limitation, the Maximum Percentage) immediately before the
date of which a record is taken for such Distribution, or, if no
such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the participation
in such Distribution (
provided
,
however
, that to the extent
that the Holder's right to participate in any such Distribution
would result in the Holder and the other Attribution Parties
exceeding the Maximum Percentage, then the Holder shall not be
entitled to participate in such Distribution to such extent (and
shall not be entitled to beneficial ownership of such shares of
Common Stock as a result of such Distribution (and beneficial
ownership) to such extent) and the portion of such Distribution
shall be held in abeyance for the benefit of the Holder until such
time or times as its right thereto would not result in the Holder
and the other Attribution Parties exceeding the Maximum Percentage,
at which time or times the Holder shall be granted such
Distribution (and any Distributions declared or made on such
initial Distribution or on any subsequent Distribution held
similarly in abeyance) to the same extent as if there had been no
such limitation).
4.
PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS
.
(a)
Purchase Rights
. In addition to
any adjustments pursuant to Section 2 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities
or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Stock (the
“
Purchase
Rights
”), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any
limitations or restrictions on exercise of this Warrant, including
without limitation, the Maximum Percentage) immediately before the
date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights
(
provided
,
however
, that to
the extent that the Holder's right to participate in any such
Purchase Right would result in the Holder and the other Attribution
Parties exceeding the Maximum Percentage, then the Holder shall not
be entitled to participate in such Purchase Right to such extent
(and shall not be entitled to beneficial ownership of such shares
of Common Stock as a result of such Purchase Right (and beneficial
ownership) to such extent) and such Purchase Right to such extent
shall be held in abeyance for the benefit of the Holder
until such time or times as its right
thereto would not result in the Holder and
the other
Attribution Parties
exceeding the
Maximum Percentage, at which time or times the Holder shall be
granted such right
(and any Purchase Right granted, issued
or sold on such initial Purchase Right or on any subsequent
Purchase Right held similarly in abeyance)
to the same extent as if there had been no such
limitation)
.
(b)
Fundamental Transactions
. The
Company shall not enter into or be party to a Fundamental
Transaction unless the Successor Entity assumes in writing all of
the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this
Section 4(b) pursuant to written agreements in form and substance
satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements
, if so requested by the Holder, to deliver to each holder of the
SPA Warrants in exchange for such SPA Warrants a security of the
Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Warrant, including, without
limitation, an adjusted exercise price equal to the value for the
shares of Common Stock reflected by the terms of such Fundamental
Transaction, and exercisable for a corresponding number of shares
of capital stock equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) prior to
such Fundamental Transaction, and satisfactory to the Required
Holders, and with an exercise price which applies the exercise
price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant
to such Fundamental Transaction and the value of such shares of
capital stock, such adjustments to the number of shares of capital
stock and such exercise price being for the purpose of protecting
the economic value of this Warrant immediately prior to the
occurrence or consummation of such Fundamental Transaction). Any
security issuable or potentially issuable to the Holder pursuant to
the terms of this Warrant on the consummation of a Fundamental
Transaction shall be registered and freely tradable by the Holder
without any restriction or limitation or the requirement to be
subject to any holding period pursuant to any applicable securities
laws.
No later than (i)
thirty (30) days prior to the occurrence or consummation of any
Fundamental Transaction or (ii) if later, the first Trading Day
following the date the Company first becomes aware of the
occurrence or potential occurrence of a Fundamental Transaction,
the Company shall deliver written notice thereof via facsimile or
electronic mail and overnight courier to the Holder.
Upon
the occurrence or consummation of any Fundamental Transaction, and
it shall be a required condition to the occurrence or consummation
of any Fundamental Transaction that, the Company and the Successor
Entity or Successor Entities, jointly and severally, shall succeed
to, and the Company shall cause any Successor Entity or Successor
Entities to jointly and severally succeed to, and be added to the
term “Company” under this Warrant (so that from and
after the date of such Fundamental Transaction, each and every
provision of this Warrant referring to the “Company”
shall refer instead to each of the Company and the Successor Entity
or Successor Entities, jointly and severally), and the Company and
the Successor Entity or Successor Entities, jointly and severally,
may exercise every right and power of the Company prior thereto and
shall assume all of the obligations of the Company prior thereto
under this Warrant with the same effect as if the Company and such
Successor Entity or Successor Entities, jointly and severally, had
been named as the Company in this Warrant, and, solely at the
request of the Holder, if the Successor Entity and/or Successor
Entities is a publicly traded corporation whose common stock is
quoted on or listed for trading on an Eligible Market, shall
deliver (in addition to and without limiting any right under this
Warrant) to the Holder in exchange for this Warrant a security of
the Successor Entity and/or Successor Entities evidenced by a
written instrument substantially similar in form and substance to
this Warrant and exercisable for a corresponding number of shares
of capital stock of the Successor Entity and/or Successor Entities
(the “
Successor Capital
Stock
”) equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) prior to
such Fundamental Transaction (such corresponding number of shares
of Successor Capital Stock to be delivered to the Holder shall be
equal to the greater of (A) the quotient of (i) the aggregate
dollar value of all consideration (including cash consideration and
any consideration other than cash (“
Non-Cash Consideration
”), in such
Fundamental Transaction, as such values are set forth in any
definitive agreement for the Fundamental Transaction that has been
executed at the time of the first public announcement of the
Fundamental Transaction or, if no such value is determinable from
such definitive agreement, as determined in accordance with Section
12
with the term “Non-Cash
Consideration” being substituted for the term “Exercise
Price”)
that the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction or the
record, eligibility or other determination date for the event
resulting in such Fundamental Transaction, had this Warrant been
exercised immediately prior to such Fundamental Transaction or the
record, eligibility or other determination date for the event
resulting in such Fundamental Transaction (without regard to any
limitations on the exercise of this Warrant) (the
“
Aggregate
Consideration
”) divided by (ii) the per share Closing
Sale Price of such Successor Capital Stock on the Trading Day
immediately prior to the consummation or occurrence of the
Fundamental Transaction and (B) the product of (i) the quotient
obtained by dividing (x) the Aggregate Consideration, by (y) the
Closing Sale Price of the Common Stock on the Trading Day
immediately prior to the consummation or occurrence of the
Fundamental Transaction and (ii) the highest exchange ratio
pursuant to which any stockholder of the Company may exchange
shares of Common Stock for Successor Capital Stock) (
provided
,
however
, to the extent that the
Holder's right to receive any such shares of publicly traded common
stock (or their equivalent) of the Successor Entity would result in
the Holder and its other Attribution Parties exceeding the Maximum
Percentage, if applicable, then the Holder shall not be entitled to
receive such shares to such extent (and shall not be entitled to
beneficial ownership of such shares of publicly traded common stock
(or their equivalent) of the Successor Entity as a result of such
consideration to such extent) and the portion of such shares shall
be held in abeyance for the Holder until such time or times, as its
right thereto would not result in the Holder and its other
Attribution Parties exceeding the Maximum Percentage, at which time
or times the Holder shall be delivered such shares to the extent as
if there had been no such limitation), and such security shall be
satisfactory to the Holder, and with an identical exercise price to
the Exercise Price hereunder (such adjustments to the number of
shares of capital stock and such exercise price being for the
purpose of protecting after the consummation or occurrence of such
Fundamental Transaction the economic value of this Warrant that was
in effect immediately prior to the consummation or occurrence of
such Fundamental Transaction, as elected by the Holder solely at
its option). Upon occurrence or consummation of the Fundamental
Transaction, and it shall be a required condition to the occurrence
or consummation of such Fundamental Transaction that, the Company
and the Successor Entity or Successor Entities shall deliver to the
Holder confirmation that there shall be issued upon exercise of
this Warrant at any time after the occurrence or consummation of
the Fundamental Transaction, as elected by the Holder solely at its
option, shares of Common Stock, Successor Capital Stock or, in lieu
of the shares of Common Stock or Successor Capital Stock (or other
securities, cash, assets or other property purchasable upon the
exercise of this Warrant prior to such Fundamental Transaction),
such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or
subscription rights), which for purposes of clarification may
continue to be shares of Common Stock, if any, that the Holder
would have been entitled to receive upon the happening of such
Fundamental Transaction or the record, eligibility or other
determination date for the event resulting in such Fundamental
Transaction, had this Warrant been exercised immediately prior to
such Fundamental Transaction or the record, eligibility or other
determination date for the event resulting in such Fundamental
Transaction (without regard to any limitations on the exercise of
this Warrant), as adjusted in accordance with the provisions of
this Warrant. In addition to and not in substitution for any other
rights hereunder, prior to the occurrence or consummation of any
Fundamental Transaction pursuant to which holders of shares of
Common Stock are entitled to receive securities, cash, assets or
other property with respect to or in exchange for shares of Common
Stock (a “
Corporate
Event
”), the Company shall make appropriate provision
to ensure that, and any applicable Successor Entity or Successor
Entities shall ensure that, and it shall be a required condition to
the occurrence or consummation of such Corporate Event that, the
Holder will thereafter have the right to receive upon exercise of
this Warrant at any time after the occurrence or consummation of
the Corporate Event, shares of Common Stock or Successor Capital
Stock or, if so elected by the Holder, in lieu of the shares of
Common Stock (or other securities, cash, assets or other property)
purchasable upon the exercise of this Warrant prior to such
Corporate Event (but not in lieu of such items still issuable under
Sections 3 and 4(a), which shall continue to be receivable on the
shares of Common Stock or on the such shares of stock, securities,
cash, assets or any other property otherwise receivable with
respect to or in exchange for shares of Common Stock), such shares
of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights and
any shares of Common Stock) which the Holder would have been
entitled to receive upon the occurrence or consummation of such
Corporate Event or the record, eligibility or other determination
date for the event resulting in such Corporate Event, had this
Warrant been exercised immediately prior to such Corporate Event or
the record, eligibility or other determination date for the event
resulting in such Corporate Event (without regard to any
limitations on exercise of this Warrant). Provision made pursuant
to the preceding sentence shall be in a form and substance
reasonably satisfactory to the Holder. The provisions of this
Section 4(b) shall apply similarly and equally to successive
Fundamental Transactions and Corporate Events.
Notwithstanding the
foregoing, in the event of Fundamental Transaction, at the request
of the Holder delivered before the ninetieth (90
th
) day after the
occurrence or consummation of such Fundamental Transaction,
the Company (or the Successor Entity)
shall purchase this Warrant from the Holder by paying to the
Holder, within five (5) Business Days after such request (or, if
later, on the effective date of the Fundamental
Transaction)
, cash in an amount equal to the Black Scholes
Value of the remaining unexercised portion of this Warrant on the
date of such Fundamental Transaction;
provided
,
however
, that, if such
Fundamental Transaction is not within the Company's control,
including not approved by the Company's Board of Directors, the
Holder shall only be entitled to receive from the Company or any
Successor Entity, as of the date of consummation of such
Fundamental Transaction, the same type or form of consideration
(and in the same proportion), at the Black Scholes Value of the
unexercised portion of this Warrant, that is being offered and paid
to the holders of Common Stock of the Company in connection with
such Fundamental Transaction, whether that consideration be in the
form of cash, stock or any combination thereof, or whether the
holders of Common Stock are given the choice to receive from among
alternative forms of consideration in connection with such
Fundamental Transaction.
5.
NONCIRCUMVENTION
. The Company
hereby covenants and agrees that the Company will not, by amendment
of its Articles 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 Warrant, and will at all
times in good faith carry out all of the provisions of this Warrant
and take all action as may be required to protect the rights of the
Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect, (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 nonassessable
shares of Common Stock upon the exercise of this Warrant, and (iii)
shall, so long as any of the SPA Warrants are outstanding, take all
action necessary to reserve and keep available out of its
authorized and unissued shares of Common Stock, solely for the
purpose of effecting the exercise of the SPA Warrants, 100% of the
number of shares of Common Stock as shall from time to time be
necessary to effect the exercise of the SPA Warrants then
outstanding (without regard to any limitations on exercise and
assuming that the Maximum Eligibility Number is being determined
based on a Reset Price equal to $0.08 (as adjusted for stock
splits, stock dividends, recapitalizations, reorganizations,
reclassification, combinations, reverse stock splits or other
similar events occurring after the Subscription
Date)).
6.
WARRANT HOLDER NOT DEEMED A
STOCKHOLDER
. Except as otherwise specifically provided
herein, 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, 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 6, the
Company shall provide the Holder with copies of the same notices
and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the
stockholders.
7.
REISSUANCE OF
WARRANTS
.
(a)
Transfer of Warrant
. If this
Warrant is to be transferred, the Holder shall surrender this
Warrant to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)), registered as the Holder may
request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less than the total
number of Warrant Shares then underlying this Warrant is being
transferred, a new Warrant (in accordance with Section 7(d)) to the
Holder representing the right to purchase the number of Warrant
Shares not being transferred.
(b)
Lost, Stolen or Mutilated
Warrant
. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to
the Company in customary form and, in the case of mutilation, upon
surrender and cancellation of this Warrant, the Company shall
execute and deliver to the Holder a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the Warrant Shares
then underlying this Warrant.
(c)
Exchangeable for Multiple
Warrants
. This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a
new Warrant or Warrants (in accordance with Section 7(d))
representing in the aggregate the right to purchase the number of
Warrant Shares then underlying this Warrant, and each such new
Warrant will represent the right to purchase such portion of such
Warrant Shares as is designated by the Holder at the time of such
surrender;
provided
,
however
, that no SPA Warrants
for fractional Warrant Shares shall be given.
(d)
Issuance of New Warrants
.
Whenever the Company is required to issue a new Warrant pursuant to
the terms of this Warrant, such new Warrant (i) shall be of like
tenor with this Warrant, (ii) shall represent, as indicated on the
face of such new Warrant, the right to purchase the Warrant Shares
then underlying this Warrant (or in the case of a new Warrant being
issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares
designated by the Holder which, when added to the number of shares
of Common Stock underlying the other new Warrants issued in
connection with such issuance, does not exceed the number of
Warrant Shares then underlying this Warrant), (iii) shall have an
issuance date, as indicated on the face of such new Warrant which
is the same as the Issuance Date, and (iv) shall have the same
rights and conditions as this Warrant.
8.
NOTICES
. Whenever notice is
required to be given under this Warrant, 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 Warrant, 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) immediately upon any adjustment of the Exercise Price, setting
forth in reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least fifteen (15) days prior to the date on
which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any
Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of shares of
Common Stock or (C) for determining rights to vote with respect to
any Fundamental Transaction, dissolution or liquidation;
provided
in each
case that such information shall be made known to the public prior
to or in conjunction with such notice being provided to the Holder.
It is expressly understood and agreed that the time of exercise
specified by the Holder in each Exercise Notice shall be definitive
and may not be disputed or challenged by the Company.
9.
AMENDMENT AND WAIVER
. Except as
otherwise provided herein, the provisions of this Warrant may be
amended or waived and the Company may take any action herein
prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written
consent of the Holder.
10.
GOVERNING LAW; JURISDICTION; JURY
TRIAL
. This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the
construction, validity, interpretation and performance of this
Warrant 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. The
Company 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 the Company at the address
set forth in Section 9(f) of the Securities Purchase 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 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.
THE COMPANY
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 WITH OR ARISING OUT OF THIS WARRANT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
11.
CONSTRUCTION; HEADINGS
. This
Warrant shall be deemed to be jointly drafted by the Company and
all the Buyers and shall not be construed against any Person as the
drafter hereof. The headings of this Warrant are for convenience of
reference and shall not form part of, or affect the interpretation
of, this Warrant.
12.
DISPUTE RESOLUTION
. In the case
of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall
submit the disputed determinations or arithmetic calculations via
facsimile or electronic mail within two (2) Business Days of
receipt of the Exercise Notice giving rise to such dispute, as the
case may be, to the Holder. If the Holder and the Company are
unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three (3) Business Days
of such disputed determination or arithmetic calculation being
submitted to the Holder, then the Company shall, within two (2)
Business Days submit via facsimile or electronic mail (a) the
disputed determination of the 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 (10) 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.
13.
REMEDIES, OTHER OBLIGATIONS, BREACHES
AND INJUNCTIVE RELIEF
. The remedies provided in this Warrant
shall be cumulative and in addition to all other remedies available
under this Warrant and the other Transaction Documents, at law or
in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the
Holder to pursue actual damages for any failure by the Company to
comply with the terms of this Warrant. 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 of
this Warrant shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other
security being required.
14.
TRANSFER
. This Warrant
and the Warrant Shares may be offered for sale, sold, transferred,
pledged or assigned without the consent of the Company, except as
may otherwise be required by Section 2(f) of the Securities
Purchase Agreement.
15.
SEVERABILITY
. If any provision
of this Warrant 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 Warrant so long as this Warrant
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).
16.
DISCLOSURE
. Upon receipt or
delivery by the Company of any notice in accordance with the terms
of this Warrant, unless the Company has in good faith determined
that the matters relating to such notice do not constitute
material, nonpublic information relating to the Company or its
Subsidiaries (as defined in the Securities Purchase Agreement), the
Company shall contemporaneously with any such receipt or delivery
publicly disclose such material, nonpublic information on a Current
Report on Form 8-K or otherwise. In the event that the Company
believes that a notice contains material, nonpublic information
relating to the Company or its Subsidiaries, the Company so shall
indicate to the Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, the Holder shall
be allowed to presume that all matters relating to such notice do
not constitute material, nonpublic information relating to the
Company or its Subsidiaries.
17.
CERTAIN DEFINITIONS
. For
purposes of this Warrant, the following terms shall have the
following meanings:
(a)
“
1933 Act
” means the Securities Act
of 1933, as amended.
(b)
“
Affiliate
” shall have the meaning
ascribed to such term in Rule 405 of the 1933 Act.
(c)
Intentionally
omitted.
(d)
“
Attribution Parties
” means,
collectively, the following Persons and entities: (i) any
investment vehicle, including, any funds, feeder funds or managed
accounts, currently, or from time to time after the Issuance Date,
directly or indirectly managed or advised by the Holder's
investment manager or any of its Affiliates or principals, (ii) any
direct or indirect Affiliates of the Holder or any of the
foregoing, (iii) any Person acting or who could be deemed to be
acting as a Group together with the Holder or any of the foregoing
and (iv) any other Persons whose beneficial ownership of the Common
Stock would or could be aggregated with the Holder's and the other
Attribution Parties for purposes of Section 13(d) of the 1934 Act.
For clarity, the purpose of the foregoing is to subject
collectively the Holder and all other Attribution Parties to the
Maximum Percentage.
(e)
“
Black Scholes Value
” means the
value of this Warrant calculated using the Black-Scholes Option
Pricing Model obtained from the “OV” function on
Bloomberg determined as of the day immediately following the public
announcement of the applicable Fundamental Transaction, or, if the
Fundamental Transaction is not publicly announced, the date the
Fundamental Transaction is consummated, for pricing purposes and
reflecting (i) a risk-free interest rate corresponding to the U.S.
Treasury rate for a period equal to the remaining term of this
Warrant as of such date of request, (ii) an expected volatility
equal to the greater of 100% and the 100 day volatility obtained
from the HVT function on Bloomberg as of the Trading Day
immediately following the public announcement of the applicable
Fundamental Transaction, or, if the Fundamental Transaction is not
publicly announced, the date the Fundamental Transaction is
consummated, (iii) the underlying price per share used in such
calculation shall be the greater of (x) the highest Weighted
Average Price of the Common Stock during the period beginning on
the Trading Day prior to the execution of definitive documentation
relating to the applicable Fundamental Transaction and ending on
(A) the Trading Day immediately following the public announcement
of such Fundamental Transaction, if the applicable Fundamental
Transaction is publicly announced or (B) the Trading Day
immediately following the consummation of the applicable
Fundamental Transaction if the applicable Fundamental Transaction
is not publicly announced and (y) the sum of the price per share
being offered in cash, if any, plus the value of any non-cash
consideration, if any, being offered in the Fundamental
Transaction, (iv) a zero cost of borrow and (v) a 360 day
annualization factor.
(f)
“
Bloomberg
” means Bloomberg
Financial Markets.
(g)
“
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.
(h)
“
Closing Bid Price
” and
“
Closing Sale
Price
” means, for any security as of any date, the
last closing bid price and last closing trade price, respectively,
for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price
or the closing trade price, as the case may be, then the last bid
price or the last trade price, respectively, of such security prior
to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if
the Principal Market is not the principal securities exchange or
trading market for such security, the last closing bid price or
last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed
or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price or last trade price,
respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any
market makers for such security as reported in the OTC Link or
“pink sheets” by OTC Markets Group Inc. (formerly Pink
OTC Markets Inc.). If the Closing Bid Price or the Closing Sale
Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Closing Bid Price or the Closing
Sale Price, as the case may be, 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 such dispute shall be
resolved pursuant to Section 12. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock
combination, reclassification or other similar transaction during
the applicable calculation period.
(i)
“
Closing Date
” shall have the
meaning ascribed to such term in the Securities Purchase
Agreement.
(j)
“
Common Shares
” shall have the
meaning ascribed to such term in the Securities Purchase
Agreement.
(k)
“
Common Stock
” means (i) the
Company's shares of common stock, par value $0.001 per share, and
(ii) any stock capital into which such Common Stock shall have
been changed or any stock capital resulting from a
reclassification, reorganization or reclassification of such Common
Stock.
(l)
“
Convertible Securities
” means any
stock or securities (other than Options) directly or indirectly
convertible into or exercisable or exchangeable for shares of
Common Stock.
(m)
“
Designee
” means Empery Asset
Management, LP or its affiliates.
(n)
“
Eligible Market
” means the
Principal Market, the NYSE American, The Nasdaq Global Select
Market, The Nasdaq Global Market, The Nasdaq Capital Market, The
New York Stock Exchange, Inc. or the OTC QX.
(o)
Intentionally
omitted.
(p)
“
Expiration Date
” means the date
sixty six (66) months after the Issuance
Date
or, if such date falls on a day other
than a Business Day or on which trading does not take place on the
Principal Market (a “
Holiday
”), the next day that is
not a Holiday.
(q)
“
First Reset Date
” means the date
that is the twenty first (21
th
) Trading Day after
the date that is the earliest of (i) the date that all Registrable
Securities have become registered pursuant to an effective
Registration Statement that is available for the resale of all
Registrable Securities,
provided
,
however
, if less than all
Registrable Securities have become registered for resale on the
date that a Registration Statement is declared effective, the
Holder with respect to itself only, shall have the right in its
sole and absolute discretion to deem such condition satisfied, (ii)
the date that the Holder can sell all Registrable Securities
pursuant to Rule 144 without restriction or limitation and (iii)
the date that is six (6) month immediately following the Issuance
Date.
(r)
“
First Reset Share Amount
” means
the number of shares of Common Stock equal to the number (if
positive) obtained by subtracting (I) the number of shares of
Common Stock issuable upon conversion in full of all Preferred
Shares (as defined in the Securities Purchase Agreement) purchased
by the Holder on the Closing Date pursuant to the Securities
Purchase Agreement (as adjusted for stock splits, stock dividends,
recapitalizations, reorganizations, reclassification, combinations,
reverse stock splits or other similar events occurring after the
Subscription Date), from (II) the quotient determined by dividing
(x) the aggregate Purchase Price paid by the Holder on the Closing
Date, by (y) the applicable Reset Price determined as of the First
Reset Date.
(s)
“
Fundamental Transaction
” means (A)
that the Company shall, directly or indirectly, including through
Subsidiaries, Affiliates or otherwise, in one or more related
transactions, (i) consolidate or merge with or into (whether or not
the Company is the surviving corporation) another Subject Entity,
or (ii) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of the Company or
any of its “significant subsidiaries” (as defined in
Rule 1-02 of Regulation S-X) to one or more Subject Entities, or
(iii) make, or allow one or more Subject Entities to make, or allow
the Company to be subject to or have its Common Stock be subject to
or party to one or more Subject Entities making, a purchase, tender
or exchange offer that is accepted by the holders of at least
either (x) 50% of the outstanding shares of Common Stock, (y) 50%
of the outstanding shares of Common Stock calculated as if any
shares of Common Stock held by all Subject Entities making or party
to, or Affiliated with any Subject Entities making or party to,
such purchase, tender or exchange offer were not outstanding; or
(z) such number of shares of Common Stock such that all Subject
Entities making or party to, or Affiliated with any Subject Entity
making or party to, such purchase, tender or exchange offer, become
collectively the beneficial owners (as defined in Rule 13d-3 under
the 1934 Act) of at least 50% of the outstanding shares of Common
Stock, or (iv) consummate a stock purchase agreement or other
business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with one or more Subject Entities whereby all such
Subject Entities, individually or in the aggregate, acquire, either
(x) at least 50% of the outstanding shares of Common Stock, (y) at
least 50% of the outstanding shares of Common Stock calculated as
if any shares of Common Stock held by all the Subject Entities
making or party to, or Affiliated with any Subject Entity making or
party to, such stock purchase agreement or other business
combination were not outstanding; or (z) such number of shares of
Common Stock such that the Subject Entities become collectively the
beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of
at least 50% of the outstanding shares of Common Stock, or (v)
reorganize, recapitalize or reclassify its Common Stock, (B) that
the Company shall, directly or indirectly, including through
Subsidiaries, Affiliates or otherwise, in one or more related
transactions, allow any Subject Entity individually or the Subject
Entities in the aggregate to be or become the “beneficial
owner” (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, whether through acquisition, purchase,
assignment, conveyance, tender, tender offer, exchange, reduction
in outstanding shares of Common Stock, merger, consolidation,
business combination, reorganization, recapitalization, spin-off,
scheme of arrangement, reorganization, recapitalization or
reclassification or otherwise in any manner whatsoever, of either
(x) at least 50% of the aggregate ordinary voting power represented
by issued and outstanding shares of Common Stock, (y) at least 50%
of the aggregate ordinary voting power represented by issued and
outstanding shares of Common Stock not held by all such Subject
Entities as of the Subscription Date calculated as if any shares of
Common Stock held by all such Subject Entities were not
outstanding, or (z) a percentage of the aggregate ordinary voting
power represented by issued and outstanding shares of Common Stock
or other equity securities of the Company sufficient to allow such
Subject Entities to effect a statutory short form merger or other
transaction requiring other stockholders of the Company to
surrender their shares of Common Stock without approval of the
stockholders of the Company or (C) directly or indirectly,
including through Subsidiaries, Affiliates or otherwise, in one or
more related transactions, the issuance of or the entering into any
other instrument or transaction structured in a manner to
circumvent, or that circumvents, the intent of this definition in
which case this definition shall be construed and implemented in a
manner otherwise than in strict conformity with the terms of this
definition to the extent necessary to correct this definition or
any portion of this definition which may be defective or
inconsistent with the intended treatment of such instrument or
transaction.
(t)
“
Group
” means a “group”
as that term is used in Section 13(d) of the 1934 Act and as
defined in Rule 13d-5 thereunder.
(u)
“
Maximum Eligibility Number
” means
initially zero (0) and such number shall be increased (but not
decreased) on each of the First Reset Date and, if applicable, the
Second Reset Date and, if applicable, the Third Reset Date in
accordance with Section 2(a).
(v)
Intentionally
omitted.
(w)
“
Options
” means any rights,
warrants or options to subscribe for or purchase (i) shares of
Common Stock or (ii) Convertible Securities.
(x)
“
Parent Entity
” of a Person means
an entity that, directly or indirectly, controls the applicable
Person, including such entity whose common capital or equivalent
equity security is quoted or listed on an Eligible Market (or, if
so elected by the Required Holders, any other market, exchange or
quotation system), or, if there is more than one such Person or
such entity, the Person or such entity designated by the Required
Holders or in the absence of such designation, such Person or
entity with the largest public market capitalization as of the date
of consummation of the Fundamental Transaction.
(y)
“
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.
(z)
“Principal Market
” means the
NASDAQ Capital Market.
(aa)
“
Public
Information Failure
” shall have the meaning ascribed
to such term in the Securities Purchase Agreement.
(bb)
“
Purchase
Price
” shall have the meaning ascribed to such term in
the Securities Purchase Agreement.
(cc)
“Qualified
Eligible Market
” means the NYSE American, The Nasdaq
Global Select Market, The Nasdaq Global Market, The Nasdaq Capital
Market or The New York Stock Exchange, Inc.
(dd)
“Registrable
Securities
” shall have the meaning ascribed to such
term in the Registration Rights Agreement.
(ee)
“
Registration
Rights Agreement
” means that certain Registration
Rights Agreement dated as of the Subscription Date by and among the
Company and the Buyers.
(ff)
“Registration
Statement
” means that certain Registration Rights
Agreement dated as of the Subscription Date by and among the
Company and the Buyers.
(gg)
“
Required
Holders
” means the holders of the SPA Warrants
representing at least a majority of the shares of Common Stock
underlying the SPA Warrants then outstanding and shall include the
Designee so long as the Designee or any of its Affiliates holds any
SPA Warrants, Hudson Bay Capital Management LP so long as Hudson
Bay Capital Management LP or any of its Affiliates holds any SPA
Warrants, and Sabby Management, LLC so long as Sabby Management,
LLC or any of its Affiliates holds any SPA Warrants.
(hh)
“
Reset
Price
” means the greater of (i) eighty percent (80%)
of the arithmetic average of the two (2) lowest Weighted Average
Prices of the Common Stock during the twenty (20) Trading Days
immediately preceding the applicable Reset Date (as adjusted for
stock splits, stock dividends, recapitalizations, reorganizations,
reclassification, combinations, reverse stock splits or other
similar events during such period), and (ii) $0.08 (as adjusted for
stock splits, stock dividends, recapitalizations, reorganizations,
reclassification, combinations, reverse stock splits or other
similar events occurring after the Subscription Date).
(ii)
Second
Reset Date
” means a date after the First Reset Date
that is the twenty first (21
th
) Trading Day
immediately following the date that is (i) in case the First Reset
Date was triggered by clause (i) of such definition, the earlier of
(x) the date that the Holder can sell all Registrable Securities
without restriction or limitation pursuant to Rule 144 and (y) the
date that is the one (1) year anniversary of the Issuance Date and
(ii) in case the First Reset Date was triggered by clause (ii) or
(iii) of such definition, the earliest of (x) the date that all
Registrable Securities are registered pursuant to an effective
Registration Statement that is available for the resale of all
Registrable Securities;
provided
,
however
, if less than all
Registrable Securities have become registered for resale on the
date that a Registration Statement is declared effective, the
Holder with respect to itself only, shall have the right in its
sole and absolute discretion to deem such condition satisfied, (y)
the date that the Holder can sell all of Registrable Securities
without restriction or limitation pursuant to Rule 144 and without
the requirement to be in compliance with Rule 144(c)(i) and (z) the
date that is the one (1) year anniversary of the Issuance
Date
(jj)
“Second
Reset Share Amount
” means the number of shares of
Common Stock equal to the number (if positive) obtained by
subtracting (I) the sum of (x) the number of Common Shares issuable
upon conversion in full of all Preferred Shares (as defined in the
Securities Purchase Agreement) purchased by the Holder on the
Closing Date pursuant to the Securities Purchase Agreement (as
adjusted for stock splits, stock dividends, recapitalizations,
reorganizations, reclassification, combinations, reverse stock
splits or other similar events occurring after the Subscription
Date) and (y) the First Reset Share Amount (as adjusted for stock
splits, stock dividends, recapitalizations, reorganizations,
reclassification, combinations, reverse stock splits or other
similar events occurring after the First Reset Date), from (II) the
quotient determined by dividing (x) the aggregate Purchase Price
paid by the Holder on the Closing Date, by (y) the applicable Reset
Price determined as of the Second Reset Date.
(kk)
“
Series
A Warrants
” shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
(ll)
“
Series
B Warrants
” shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
(mm)
“
Standard
Settlement Period
” means the standard settlement
period, expressed in a number of Trading Days, on the Company's
primary Eligible Market with respect to the Common Stock as in
effect on the date of delivery of the applicable Exercise
Notice.
(nn)
“
Subject
Entity
” means any Person, Persons or Group or any
Affiliate or associate of any such Person, Persons or
Group.
(oo)
“
Successor
Entity
” means one or more Person or Persons (or, if so
elected by the Holder, the Company or Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or one or
more Person or Persons (or, if so elected by the Holder, the
Company or the Parent Entity) with which such Fundamental
Transaction shall have been entered into.
(pp)
“Third
Reset Date
” means a date after the Second Reset Date
that is the twenty first (21
th
) Trading Day
immediately following the date that is the earlier of (i) the date
that the Holder can sell all Registrable Securities pursuant to
Rule 144 without restriction or limitation and without the
requirement to be in compliance with Rule 144(c)(1) and (ii) the
one (1) year anniversary of the Issuance Date
.
(qq)
“Third
Reset Share Amount
” means the number of shares of
Common Stock equal to the number (if positive) obtained by
subtracting (I) the sum of (x) the number of shares of Common Stock
issuable upon conversion in full of all Preferred Shares (as
defined in the Securities Purchase Agreement) purchased by the
Holder on the Closing Date pursuant to the Securities Purchase
Agreement (as adjusted for stock splits, stock dividends,
recapitalizations, reorganizations, reclassification, combinations,
reverse stock splits or other similar events occurring after the
Subscription Date) (y) the First Reset Share Amount (as adjusted
for stock splits, stock dividends, recapitalizations,
reorganizations, reclassification, combinations, reverse stock
splits or other similar events occurring after the First Reset
Date) and (z) the Second Reset Share Amount (as adjusted for stock
splits, stock dividends, recapitalizations, reorganizations,
reclassification, combinations, reverse stock splits or other
similar events occurring after the Second Reset Date) from (II) the
quotient determined by dividing (x) the aggregate Purchase Price
paid by the Holder on the Closing Date, by (y) the applicable Reset
Price determined as of the Third Reset Date.
(rr)
“
Trading
Day
” means any day on which the Common Stock is traded
on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock on such day, then on
the principal securities exchange or securities market on which the
Common Stock is then traded.
(ss)
“
Weighted
Average Price
” means, for any security as of any date,
the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New
York time (or such other time as the Principal Market publicly
announces is the official open of trading), and ending at 4:00:00
p.m., New York time (or such other time as the Principal Market
publicly announces is the official close of trading), as reported
by Bloomberg through its “Volume at Price” function or,
if the foregoing does not apply, the dollar volume-weighted average
price of such security in the over-the-counter market on the
electronic bulletin board for such security during the period
beginning at 9:30:01 a.m., New York time (or such other time as
such market publicly announces is the official open of trading),
and ending at 4:00:00 p.m., New York time (or such other time as
such market publicly announces is the official close of trading),
as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours,
the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported
in the OTC Link or “pink sheets” by OTC Markets Group
Inc. (formerly Pink OTC Markets Inc.). If the Weighted Average
Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Weighted Average 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 such dispute shall be resolved pursuant to Section
12 with the term “Weighted Average Price” being
substituted for the term “Exercise Price.” All such
determinations shall be appropriately adjusted for any stock
dividend, stock split, stock combination, reclassification or other
similar transaction during the applicable calculation
period.
[Signature Page Follows]
IN WITNESS WHEREOF,
the Company has
caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.
BRIDGELINE
DIGITAL, INC.
By:___________________________
Title:
Chief Executive
Officer
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE
THIS
WARRANT TO PURCHASE COMMON STOCK
BRIDGELINE DIGITAL, INC.
The
undersigned holder hereby exercises the right to purchase
_________________ shares of Common Stock (“
Warrant Shares
”) of Bridgeline
Digital, Inc., a Delaware corporation (the “
Company
”), evidenced by the
attached Warrant to Purchase Common Stock (the “
Warrant
”). Capitalized terms used
herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.
1. Form
of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:
____________ a
“
Cash
Exercise
” with respect to _________________ Warrant
Shares; and/or
____________ a
“
Cashless
Exercise
” with respect to _______________ Warrant
Shares, resulting in a delivery obligation of the Company to the
Holder of __________ shares of Common Stock representing the
applicable Net Number.
2.
Payment of Exercise Price. In the event that the holder has elected
a Cash Exercise with respect to some or all of the Warrant Shares
to be issued pursuant hereto, the holder shall pay the Aggregate
Exercise Price in the sum of $___________________ to the Company in
accordance with the terms of the Warrant.
3.
Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the
Warrant.
Date:
_______________ __, ______
Name
of Registered Holder
Name:
Title:
ACKNOWLEDGMENT
The
Company hereby acknowledges this Exercise Notice and hereby directs
American Stock Transfer & Trust Company to issue the above
indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated March ___, 2019 from the Company
and acknowledged and agreed to by American Stock Transfer &
Trust Company.
BRIDGELINE
DIGITAL, INC.
By:________________________________
Name:
Title:
Exhibit
4.4
COMMON STOCK PURCHASE WARRANT
BRIDGELINE DIGITAL, INC.
Warrant Shares:
_______
|
Initial Exercise
Date: October 19, 2018
|
Original Issue
Date: October 19, 2018
|
Date of Exchange:
March __, 2019
|
This Common Stock Purchase Warrant is issued in exchange for a
Common Stock Purchase Warrant issued pursuant to the
Company’s registration statement on Form S-1
(File No. 333-227430)
THIS
COMMON STOCK PURCHASE WARRANT (the “
Warrant
”) certifies that,
for value received,
______________
or its assigns (the
“
Holder
”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after October
19, 2018 (the “
Initial Exercise Date
”)
and on or prior to the close of business on the five (5) year
anniversary of the Initial Exercise Date (the “
Termination Date
”) but
not thereafter, to subscribe for and purchase from Bridgeline
Digital, Inc., a Delaware corporation (the “
Company
”), up to
__________
shares (as
subject to adjustment hereunder, the “
Warrant Shares
”) of
Common Stock. The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).
This Warrant is issued
pursuant to an Exchange Agreement, dated as of March __, 2019, by
and between the Holder and the Company and is in exchange for and
issued in lieu of a Common Stock Purchase Warrant issued to Holder
to purchase
_______
shares
of Common Stock.
Section 1
.
Definitions
. In addition to the
terms defined elsewhere in this Warrant, the following terms have
the meanings indicated in this Section 1:
“
Affiliate
” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
“
Bid Price
” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the bid price of the Common Stock for the time in
question (or the nearest preceding date) on the Trading Market on
which the Common Stock is then listed or quoted as reported by
Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York
City time) to 4:02 p.m. (New York City time)), (b) if the
Common Stock is not then listed or quoted for trading on a Trading
Market and if the Common Stock is then quoted on the OTC Pink
Market (or any successor thereto) the most recent bid price per
share of the Common Stock so reported, or (c) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Holders of a majority in interest of the Warrants then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.
“
Business Day
” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
“
Change of Control
” means
any Fundamental Transaction other than (i) any reorganization,
recapitalization or reclassification of the Common Stock in which
holders of the Company's voting power immediately prior to such
reorganization, recapitalization or reclassification continue after
such reorganization, recapitalization or reclassification to hold
publicly traded securities and, directly or indirectly, are, in all
material respect, the holders of the voting power of the surviving
entity (or entities with the authority or voting power to elect the
members of the board of directors (or their equivalent if other
than a corporation) of such entity or entities) after such
reorganization, recapitalization or reclassification, (ii) pursuant
to a migratory merger effected solely for the purpose of changing
the jurisdiction of incorporation of the Company or (iii) a merger
in connection with a bona fide acquisition by the Company of any
Person in which (x) the gross consideration paid, directly or
indirectly, by the Company in such acquisition is not greater than
20% of the Company's market capitalization as calculated on the
date of the consummation of such merger and (y) such merger does
not contemplate a change to the identity of a majority of the board
of directors of the Company. Notwithstanding anything herein to the
contrary, any transaction or series of transaction that, directly
or indirectly, results in the Company or the Successor Entity not
having Common Stock or common stock, as applicable, registered
under the 1934 Act and listed on an Eligible Market shall be deemed
a Change of Control.
“
Commission
” means the
United States Securities and Exchange Commission.
“
Common Stock
” means the
common stock of the Company, par value $0.001 per share, and any
other class of securities into which such securities may hereafter
be reclassified or changed.
“
Common Stock Equivalents
”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.
“
Exchange Act
” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“
Parent Entity
” of a
Person means an entity that, directly or indirectly, controls the
applicable Person, including such entity whose common stock or
equivalent equity security is quoted or listed on a Trading Market
(or, if so elected by the Holder, any other market, exchange or
quotation system), or, if there is more than one such Person or
such entity, the Person or such entity designated by the Holder or
in the absence of such designation, such Person or entity with the
largest public market capitalization as of the date of consummation
of the Change of Control.
“
Person
” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“
Proceeding
” means an
action, claim, suit, investigation or proceeding (including,
without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or
threatened.
“
Registration Statement
”
means the Company's registration statement on Form S-1 (File No.
333-227430).
“
Securities Act
” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“
Subsidiaries
” means any
of the Company’s direct or indirect
subsidiaries.
“
Successor Entity
” means
one or more Person or Persons (or, if so elected by the Holder, the
Company or Parent Entity) formed by, resulting from or surviving
any Change of Control or one or more Person or Persons (or, if so
elected by the Holder, the Company or the Parent Entity) with which
such Change of Control shall have been entered into.
“
Trading Day
” means a day
on which the Common Stock is traded on a Trading
Market.
“
Trading Market
” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the NYSE American, the New York Stock Exchange, OTCQB or
OTCQX (or any successors to any of the foregoing).
“
Transfer Agent
” means
American Stock Transfer & Trust
Company, LLC
, with a mailing address of 6201 15th Avenue,
Brooklyn, NY 11219, and any successor transfer agent of the
Corporation.
“
Warrants
” means this
Warrant and other Common Stock Purchase Warrants issued by the
Company pursuant to the Registration Statement.
Section 2
.
Exercise
.
a)
Exercise of the purchase rights represented by this Warrant may be
made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before close of business on the
Termination Date by delivery to the Company of a duly executed
facsimile copy (or e-mail attachment) of the Notice of Exercise in
the form annexed hereto (the “
Notice of Exercise
”).
Within the earlier of (i) two (2) Trading Days and (ii) the number
of Trading Days comprising the Standard Settlement Period (as
defined in Section 2(d)(i) following the date of exercise as
aforesaid, the Holder shall deliver the aggregate Exercise Price
for the shares specified in the applicable Notice of Exercise by
wire transfer or cashier's check drawn on a United States bank
unless the cashless exercise procedure specified in Section 2(c)
below is specified in the applicable Notice of Exercise. No
ink-original Notice of Exercise shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of
any Notice of Exercise form be required. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within three
(3) Trading Days of the date the final Notice of Exercise is
delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise
within one (1) Trading Day of receipt of such notice.
The Holder and any assignee, by acceptance of
this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares
available for purchase hereunder at any given time may be less than
the amount stated on the face hereof.
b)
Exercise Price
. The
exercise price per share of the Common Stock under this Warrant
shall be
$0.18
, subject to
adjustment hereunder (the “
Exercise
Price
”).
c)
Cashless Exercise
.
If at the time of exercise hereof there is no effective
registration statement registering, or the prospectus contained
therein is not available for the issuance of the Warrant Shares to
the Holder, then this Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in
which the Holder shall be entitled to receive a number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by
(A), where:
(A) =
as applicable: (i) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise if such
Notice of Exercise is (1) both executed and delivered pursuant to
Section 2(a) hereof on a day that is not a Trading Day or (2) both
executed and delivered pursuant to Section 2(a) hereof on a Trading
Day prior to the opening of “regular trading hours” (as
defined in Rule 600(b)(64) of Regulation NMS promulgated under the
federal securities laws) on such Trading Day, (ii) at the option of
the Holder, either (y) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise or (z) the
Bid Price of the Common Stock on the principal Trading Market as
reported by Bloomberg L.P. as of the time of the Holder’s
execution of the applicable Notice of Exercise if such Notice of
Exercise is executed during “regular trading hours” on
a Trading Day and is delivered within two (2) hours thereafter
(including until two (2) hours after the close of “regular
trading hours” on a Trading Day) pursuant to Section 2(a)
hereof or (iii) the VWAP on the date of the applicable Notice of
Exercise if the date of such Notice of Exercise is a Trading Day
and such Notice of Exercise is both executed and delivered pursuant
to Section 2(a) hereof after the close of “regular trading
hours” on such Trading Day;
(B) = the
Exercise Price of this Warrant, as adjusted hereunder;
and
(X) =
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.
If Warrant Shares are issued in such a cashless exercise, the
parties acknowledge and agree that in accordance with Section
3(a)(9) of the Securities Act, the Warrant Shares shall take on the
registered characteristics of the Warrants being exercised. The
Company agrees not to take any position contrary to this Section
2(c).
Notwithstanding anything herein to the contrary but
without limiting the rights of the Holder to receive Warrant Shares
on a “cashless exercise” and without limiting the
liquidated damages provision in section 2(d)(i) and the Buy-In
provision in Section 2(d)(iv)
, in the
event
there is no effective registration statement
registering, or the prospectus contained therein is not available
for the issuance of the Warrant Shares to the Holder, under no
circumstance will the Company be required
to net cash settle the
warrants.
“
VWAP
” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)
if the Common Stock is not then listed or quoted for trading on a
Trading Market and if the Common Stock is then quoted on the OTC
Pink Market (or any successor thereto), the most recent bid price
per share of the Common Stock so reported, or (c) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the holders of a majority in interest of the Warrants then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.
Notwithstanding
anything herein to the contrary, on the Termination Date, this
Warrant shall be automatically exercised via cashless exercise
pursuant to this Section 2(c).
d)
Mechanics of
Exercise
.
i.
Delivery of Warrant Shares
Upon Exercise
. The Company shall cause the Warrant Shares
purchased hereunder to be transmitted by the Transfer Agent to the
Holder by crediting the account of the Holder’s or its
designee’s balance account with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system
(“
DWAC
”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by Holder or (B)
this Warrant is being exercised via cashless exercise, and
otherwise by physical delivery of a certificate, registered in the
Company’s share register in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the address specified by the
Holder in the Notice of Exercise by the date that is the earliest
of (i) two (2) Trading Days after the delivery to the Company of
the Notice of Exercise, (ii) one (1) Trading Day after delivery of
the aggregate Exercise Price to the Company and (iii) the number of
Trading Days comprising the Standard Settlement Period after the
delivery to the Company of the Notice of Exercise (such date, the
“
Warrant Share
Delivery Date
”). Upon delivery of the Notice of
Exercise, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect
to which this Warrant has been exercised, irrespective of the date
of delivery of the Warrant Shares, provided that payment of the
aggregate Exercise Price (other than in the case of a cashless
exercise) is received within the earlier of (i) two (2) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period following delivery of the Notice of Exercise. If
the Company fails for any reason to deliver to the Holder the
Warrant Shares subject to a Notice of Exercise by the Warrant Share
Delivery Date, the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $1,000 of Warrant
Shares subject to such exercise (based on the VWAP of the Common
Stock on the date of the applicable Notice of Exercise), $10 per
Trading Day (increasing to $20 per Trading Day on the fifth Trading
Day after such liquidated damages begin to accrue) for each Trading
Day after such Warrant Share Delivery Date until such Warrant
Shares are delivered or Holder rescinds such exercise. The Company
agrees to maintain a transfer agent that is a participant in the
FAST program so long as this Warrant remains outstanding and
exercisable. As used herein, “
Standard Settlement
Period
” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of the Notice of
Exercise.
ii.
Delivery of New Warrants
Upon Exercise
. If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of
the Warrant Shares, deliver to the Holder a new Warrant evidencing
the rights of the Holder to purchase the unpurchased Warrant Shares
called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
iii.
Rescission Rights
.
If the Company fails to cause the Transfer Agent to transmit to the
Holder the Warrant Shares pursuant to Section 2(d)(i) by the
Warrant Share Delivery Date, then the Holder will have the right to
rescind such exercise.
iv.
Compensation for Buy-In on
Failure to Timely Deliver Warrant Shares Upon Exercise
. In
addition to any other rights available to the Holder, if the
Company fails to cause the Transfer Agent to transmit to the Holder
the Warrant Shares in accordance with the provisions of Section
2(d)(i) above pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required
by its broker to purchase (in an open market transaction or
otherwise) or the Holder's brokerage firm otherwise purchases,
shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a “
Buy-In
”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the amount obtained by multiplying (1) the number of
Warrant Shares that the Company was required to deliver to the
Holder in connection with the exercise at issue times (2) the price
at which the sell order giving rise to such purchase obligation was
executed, and (B) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant Shares for
which such exercise was not honored (in which case such exercise
shall be deemed rescinded) or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having
a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted exercise of shares of Common Stock with an aggregate
sale price giving rise to such purchase obligation of $10,000,
under clause (A) of the immediately preceding sentence the Company
shall be required to pay the Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the
Company, evidence of the amount of such loss. Nothing herein shall
limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with
respect to the Company's failure to timely deliver shares of Common
Stock upon exercise of the Warrant as required pursuant to the
terms hereof.
v.
No Fractional Shares or
Scrip
. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which the Holder would otherwise be entitled to
purchase upon such exercise, the Company shall, at its election,
either pay a cash adjustment in respect of such final fraction in
an amount equal to such fraction multiplied by the Exercise Price
or round up to the next whole share.
vi.
Charges, Taxes and
Expenses
. Issuance of Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such Warrant
Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the
Holder or in such name or names as may be directed by the Holder;
provided
,
however
, that in
the event Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly
executed by the Holder and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto. The Company shall pay all Transfer
Agent fees required for same-day processing of any Notice of
Exercise and all fees to the Depository Trust Company (or another
established clearing corporation performing similar functions)
required for same-day electronic delivery of the Warrant
Shares.
vii.
Closing of Books
.
The Company will not close its stockholder books or records in any
manner which prevents the timely exercise of this Warrant, pursuant
to the terms hereof.
e)
Holder's Exercise
Limitations
. The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2 or otherwise, to the
extent that after giving effect to such issuance after exercise as
set forth on the applicable Notice of Exercise, the Holder
(together with the Holder's Affiliates, and any other Persons
acting as a group together with the Holder or any of the Holder's
Affiliates (such Persons, “Attribution Parties”)),
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, non-exercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or non-converted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) 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 Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company's most recent periodic or annual report filed with the
Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within two Trading Days
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 or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“
Beneficial
Ownership Limitation
” shall be 4.99% (or, upon
election by a Holder prior to the issuance of any Warrants, 9.99%)
of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock
issuable upon exercise of this Warrant. The Holder, upon notice to
the Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 2(e), provided that the
Beneficial Ownership Limitation in no event exceeds 9.99% of the
number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock upon
exercise of this Warrant held by the Holder and the provisions of
this Section 2(e) shall continue to apply. Any increase in the
Beneficial Ownership Limitation will not be effective until the
61st day after such notice is delivered to the Company. The
provisions of this paragraph shall be construed and implemented in
a manner otherwise than in strict conformity with the terms of this
Section 2(e) 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. The limitations contained in this paragraph shall apply
to a successor holder of this Warrant.
Section 3
.
Certain
Adjustments
.
a)
Stock Dividends and
Splits
. If the Company, at any time while this Warrant is
outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any
other equity or equity equivalent securities payable in shares of
Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon exercise of this
Warrant), (ii) subdivides outstanding shares of Common Stock into a
larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a
smaller number of shares, or (iv) issues by reclassification of
shares of the Common Stock any shares of capital stock of the
Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after
such event, and the number of shares issuable upon exercise of this
Warrant shall be proportionately adjusted such that the aggregate
Exercise Price of this Warrant shall remain unchanged. Any
adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in
the case of a subdivision, combination or
re-classification.
b)
Subsequent Rights
Offerings
. In addition to any adjustments pursuant to
Section 3(a) above, if at any time the Company grants, issues or
sells any Common Stock Equivalents or rights to purchase stock,
warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the
“
Purchase
Rights
”), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date on
which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder's right to
participate in any such Purchase Right would result in the Holder
exceeding the Beneficial Ownership Limitation, then the Holder
shall not be entitled to participate in such Purchase Right to such
extent (or beneficial ownership of such shares of Common Stock as a
result of such Purchase Right to such extent) and such Purchase
Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the
Holder exceeding the Beneficial Ownership Limitation).
c)
Pro Rata
Distributions
. During such time as this Warrant is
outstanding, if the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement,
scheme of arrangement or other similar transaction) (a
“
Distribution
”), at any
time after the issuance of this Warrant, then, in each such case,
the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if
the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (
provided
,
however
, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).
d)
Fundamental
Transaction
. If, at any time while this Warrant is
outstanding, (i) the Company, directly or indirectly, in one or
more related transactions effects any merger or consolidation of
the Company with or into another Person, (ii) the Company, directly
or indirectly, effects any sale, lease, license, assignment,
transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii)
any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Company, directly or indirectly,
in one or more related transactions effects any reclassification,
reorganization or recapitalization 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, or (v) the Company, directly or indirectly, in one or
more related transactions consummates a stock or share purchase
agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with another Person or group of Persons whereby
such other Person or group acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other
business combination) (each a “
Fundamental
Transaction
”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “
Alternate Consideration
”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction. Notwithstanding anything to the contrary,
in the event of a Fundamental Transaction, the Company or any
Successor Entity (as defined below) shall, at the Holder’s
option, exercisable at any time concurrently with, or within 30
days after, the consummation of the Fundamental Transaction (or, if
later, the date of the public announcement of the applicable
Fundamental Transaction),
purchase
this Warrant from the Holder by paying to the Holder
an
amount of cash equal to the Black Scholes Value of the remaining
unexercised portion of this Warrant on the date of the consummation
of such Fundamental Transaction;
provided
,
however
, that, if the
Fundamental Transaction is not within the Company's control,
including not approved by the Company’s board of directors,
Holder shall only be entitled to receive from the Company or any
Successor Entity, as of the date of consummation of such
Fundamental Transaction, the same type or form of consideration
(and in the same proportion), at the Black Scholes Value (as
defined below) of the unexercised portion of this Warrant, that is
being offered and paid to the holders of Common Stock of the
Company in connection with the Fundamental Transaction, whether
that consideration be in the form of cash, stock or any combination
thereof, or whether the holders of Common Stock are given the
choice to receive from among alternative forms of consideration in
connection with the Fundamental Transaction.
“
Black Scholes
Value
” means the value of this Warrant based on the
Black and Scholes Option Pricing Model obtained from the
“OV” function on Bloomberg, L.P. (“
Bloomberg
”) determined as
of the day of consummation of the applicable Fundamental
Transaction for pricing purposes and reflecting (A) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period
equal to the time between the date of the public announcement of
the applicable Fundamental Transaction and the Termination Date,
(B) an expected volatility equal to the greater of 100% and the 100
day volatility obtained from the HVT function on Bloomberg as of
the Trading Day immediately following the public announcement of
the applicable Fundamental Transaction, (C) the underlying price
per share used in such calculation shall be the greater of (i) the
sum of the price per share being offered in cash, if any, plus the
value of any non-cash consideration, if any, being offered in such
Fundamental Transaction and (ii) the greater of (x) the last VWAP
immediately prior to the public announcement of such Fundamental
Transaction and (y) the last VWAP immediately prior to the
consummation of such Fundamental Transaction and (D) a remaining
option time equal to the time between the date of the public
announcement of the applicable Fundamental Transaction and the
Termination Date, and (E) a zero cost of borrow.
The payment of the Black Scholes Value will be
made by wire transfer of immediately available funds (or such other
consideration) within five Business Days of the Holder’s
election (or, if later, on the effective date of the Fundamental
Transaction)
.
The
Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the
“
Successor
Entity
”) to assume in writing all of the obligations
of the Company under this Warrant in accordance with the provisions
of this Section 3(d) pursuant to written agreements in form and
substance reasonably satisfactory to the Holder and approved by the
Holder (without unreasonable delay) prior to such Fundamental
Transaction and shall, at the option of the Holder, deliver to the
Holder in exchange for this Warrant a security of the Successor
Entity evidenced by a written instrument substantially similar in
form and substance to this Warrant which is exercisable for a
corresponding number of shares of capital stock of such Successor
Entity (or its parent entity) equivalent to the shares of Common
Stock acquirable and receivable upon exercise of this Warrant
(without regard to any limitations on the exercise of this Warrant)
prior to such Fundamental Transaction, and with an exercise price
which applies the exercise price hereunder to such shares of
capital stock (but taking into account the relative value of the
shares of Common Stock pursuant to such Fundamental Transaction and
the value of such shares of capital stock, such number of shares of
capital stock and such exercise price being for the purpose of
protecting the economic value of this Warrant immediately prior to
the consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Warrant referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and
power of the Company and shall assume all of the obligations of the
Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein.
e)
Reset
. On the First
Reset Date, the Second Reset Date, if any, and the Third Reset
Date, if any (as such terms are defined in the Series C Warrants,
dated March __, 2019 (the “
Series C Warrants
”),
issued to certain investors in connection with the Company’s
offering of Series C convertible preferred stock), the Exercise
Price shall be adjusted to equal the lower of (i) the Exercise
Price then in effect and (ii) 100% of the applicable Reset Price
(as defined in the Series C Warrants) determined as of the
applicable date of determination.
f)
Calculations
. All
calculations under this Section 3 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, the number of shares of Common Stock deemed to
be issued and outstanding as of a given date shall be the sum of
the number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
g)
Notice to
Holder
.
i.
Adjustment to Exercise
Price
. Whenever the Exercise Price is adjusted pursuant to
any provision of this Section 3, the Company shall promptly deliver
to the Holder by facsimile or email a notice setting forth the
Exercise Price after such adjustment and any resulting adjustment
to the number of Warrant Shares and setting forth a brief statement
of the facts requiring such adjustment.
ii.
Notice to Allow
Exercise by Holder
. If (A) the Company shall declare a
dividend (or any other distribution in whatever form) on the Common
Stock, (B) the Company shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock, (C) the Company
shall authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights, (D) the approval of
any stockholders of the Company shall be required in connection
with any reclassification of the Common Stock, any consolidation or
merger to which the Company is a party, any sale or transfer of all
or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property, or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company, then, in each case, the
Company shall cause to be delivered by facsimile or email to the
Holder at its last facsimile number or email address as it shall
appear upon the Warrant Register of the Company, at least 20
calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock
of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to
deliver such notice or any defect therein or in the delivery
thereof shall not affect the validity of the corporate action
required to be specified in such notice. To the extent that any
notice provided in this Warrant constitutes, or contains, material,
non-public information regarding the Company or any of the
Subsidiaries, the Company shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form 8-K. The
Holder shall remain entitled to exercise this Warrant during the
period commencing on the date of such notice to the effective date
of the event triggering such notice except as may otherwise be
expressly set forth herein.
Section 4
.
Transfer of
Warrant
.
a)
Transferability
.
This Warrant and all rights hereunder are transferable, in whole or
in part, upon surrender of this Warrant at the principal office of
the Company or its designated agent, together with a written
assignment of this Warrant substantially in the form attached
hereto duly executed by the Holder or its agent or attorney and
funds sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees, as applicable,
and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, and
this Warrant shall promptly be cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date the Holder delivers an assignment form to the Company
assigning this Warrant full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.
b)
New Warrants
. This
Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section
4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice. All Warrants issued on
transfers or exchanges shall be dated the original Initial Exercise
Date of this Warrant and shall be identical with this Warrant
except as to the number of Warrant Shares issuable pursuant
thereto.
c)
Warrant Register
.
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 hereof 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.
Section 5
.
Miscellaneous
.
a)
No Rights as Stockholder
Until Exercise
. This Warrant does not entitle the Holder to
any voting rights, dividends or other rights as a stockholder of
the Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b)
Loss, Theft, Destruction
or Mutilation of Warrant
. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any
stock certificate relating to the Warrant Shares, and in case of
loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c)
Saturdays, Sundays,
Holidays, etc
. If the last or appointed day for the taking
of any action or the expiration of any right required or granted
herein shall not be a Business Day, then, such action may be taken
or such right may be exercised on the next succeeding Business
Day.
d)
Authorized
Shares
.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of issuing the necessary
Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and non-assessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
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 Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e)
Governing Law
. All
questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed
and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflict of laws
thereof. Each party agrees that all legal Proceedings concerning
the interpretation, enforcement and defense of this Warrant shall
be commenced in the state and federal courts sitting in the City of
New York, Borough of Manhattan (the “
New York Courts
”). Each
party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts 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 provision hereunder), 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
such New York Courts, or such New York Courts are improper or
inconvenient venue for such Proceeding. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal Proceeding
arising out of or relating to this Warrant. If any party shall
commence an action or Proceeding to enforce any provisions of this
Warrant, then the prevailing party in such action or Proceeding
shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred in the investigation, preparation
and prosecution of such action or Proceeding.
f)
Restrictions
. The
Holder acknowledges that the Warrant Shares acquired upon the
exercise of this Warrant, if not registered, and the Holder does
not utilize cashless exercise, will have restrictions upon resale
imposed by state and federal securities laws.
g)
Nonwaiver and
Expenses
. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice the Holder's rights,
powers or remedies. Without limiting any other provision of this
Warrant, if the Company willfully and knowingly fails to comply
with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to the Holder such
amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees,
including those of appellate Proceedings, incurred by the Holder in
collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies
hereunder.
h)
Notices
. Any and
all notices or other communications or deliveries to be provided by
the Holders hereunder including, without limitation, any Notice of
Exercise, shall be in writing and delivered personally, by e-mail,
or sent by a nationally recognized overnight courier service,
addressed to the Company, at 80 Blanchard Road, Burlington, MA
01803, Attention: Chief Executive Officer, email address:
akahn@bridgeline.com, or such other email address or address as the
Company may specify for such purposes by notice to the Holders. Any
and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile
number or address of such Holder appearing on the books of the
Company. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the time
of transmission, if such notice or communication is delivered via
facsimile at the facsimile number or e-mail at the e-mail address
set forth in this Section prior to 5:30 p.m. (New York City time)
on any date, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number or e-mail at the e-mail address
set forth in this Section on a day that is not a Trading Day or
later than 5:30 p.m. (New York City time) on any Trading Day, (iii)
the second Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service, or (iv) upon
actual receipt by the party to whom such notice is required to be
given.
i)
Reserved
.
j)
Limitation of
Liability
. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant to
purchase Warrant Shares, and no enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the
Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
k)
Remedies
. The
Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company
agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law
would be adequate.
l)
Successors and
Assigns
. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors and permitted assigns
of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit
of any Holder from time to time of this Warrant and shall be
enforceable by the Holder or holder of Warrant Shares.
m)
Amendment
. This
Warrant may be modified or amended or the provisions hereof waived
with the written consent of the Company, on the one hand, and the
Holder or the beneficial owner of this Warrant, on the other
hand.
n)
Severability
.
Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the
remaining provisions of this Warrant.
o)
Headings
. The
headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.
p)
Variable Rate
Transactions
. From the date hereof until the Termination
Date and so long as at least twenty-five percent (25%) of the
Warrants remain outstanding, the Company shall be prohibited from
effecting or entering into an agreement to effect any issuance by
the Company or any of its Subsidiaries of Common Stock or Common
Stock Equivalents (or a combination of units thereof) involving a
Variable Rate Transaction. For the purposes hereof,
“
Variable Rate
Transaction
” means a transaction in which the Company
(i) issues or sells any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the
right to receive, additional shares of Common Stock either (A) at a
conversion price, exercise price or exchange rate or other price
that is based upon, and/or varies with, the trading prices of or
quotations for the Common Stock at any time after the initial
issuance of such debt or equity 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 debt
or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of
the Company as currently carried on and as described in the
Registration Statement or the market for the Common Stock or (ii)
enters into any agreement, including, but not limited to, an equity
line of credit, whereby the Company may issue securities at a
future determined price that varies with the market per the terms
of such agreement; provided however that the foregoing does not
apply to any existing agreements or outstanding securities on the
date hereof. The Holder 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.
Notwithstanding the foregoing, this Section 5(p) will may be
amended or waived upon written consent of the holders of at least
eighty percent (80%) of the Warrants then outstanding.
********************
(Signature Page Follows)
IN WITNESS WHEREOF
, the Company has
caused this Warrant to be executed by its officer thereunto duly
authorized as of the date first above indicated.
BRIDGELINE
DIGITAL, INC.
By:
__________________________
Name: Carole
Tyner
Title: Chief
Financial Officer
NOTICE OF EXERCISE
TO:
BRIDGELINE DIGITAL, INC.
(1) The
undersigned hereby elects to purchase ________ Warrant Shares of
the Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if
any.
(2)
Payment shall take the form of (check applicable box):
[
] in lawful money of the United States; or
[
] if permitted the cancellation of such number of
Warrant Shares as is necessary, in accordance with the formula set
forth in subsection 2(c), to exercise this Warrant with respect to
the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection
2(c).
(3)
Please issue said Warrant Shares in the name of the undersigned or
in such other name as is specified below:
___________________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
___________________________________
____________________________________
____________________________________
[SIGNATURE
OF HOLDER]
Name of
Investing Entity:
________________________________________________________
Signature of Authorized Signatory of Investing
Entity
:__________________________________
Name of
Authorized
Signatory:____________________________________________________
Title
of Authorized Signatory:
______________________________________________________
Date:__________________________________________________________________________
ASSIGNMENT
FORM
(To assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase
shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
Name:
(Please
Print)
Address:
(Please
Print)
Phone
Number:
Email
Address:
Dated:
_____________________ __, ______
Holder's
Signature:
Holder's
Address:
Exhibit
4.5
FORM OF PLACEMENT AGENT WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE 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 SELECTED BY THE HOLDER, 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.
BRIDGELINE DIGITAL, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.:
_______________
Number
of Shares of Common Stock: ________________________
Date of
Issuance: March , 2019 (“
Issuance Date
”)
Bridgeline Digital,
Inc., a Delaware corporation (the “
Company
”), hereby certifies that,
for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, [ ], the registered holder hereof or
its permitted assigns (the “
Holder
”), is entitled, subject to
the terms set forth below, to purchase from the Company, at the
Exercise Price (as defined below) then in effect, at any time or
times on or after the earlier of (i) the date of the Authorized
Share Approval and (ii) six months following the Issuance Date, but
not after 11:59 p.m., New York time, on the Expiration Date, (as
defined below), ______________ (_____________)
1
fully paid nonassessable shares of
Common Stock, all subject to adjustment as provided
herein
(the
“
Warrant
Shares
”). Except as otherwise defined herein,
capitalized terms in this Warrant to Purchase Common Stock (this
“
Warrant
”),
shall have the meanings set forth in Section 17. This Warrant is
one of the Series A Warrants to purchase Common Stock (the
“
SPA Warrants
”)
issued pursuant to Section 1 of that certain Securities Purchase
Agreement, dated as of March 12, 2019 (the “
Subscription Date
”), by and among
the Company and the investors (the “
Buyers
”) referred to therein (the
“
Securities Purchase
Agreement
”). Capitalized terms used herein and not
otherwise defined shall have the definitions ascribed to such terms
in the Securities Purchase Agreement.
1.
EXERCISE
OF WARRANT.
(a)
Mechanics of Exercise
. Subject
to the terms and conditions hereof (including, without limitation,
the limitations set forth in Section 1(f) and 1(h)), this Warrant
may be exercised by the Holder at any time or times on or after the
Issuance Date, in whole or in part, by (i) delivery of a
written notice, in the form attached hereto as
Exhibit A
(the
“
Exercise
Notice
”), of the Holder's election to exercise this
Warrant and (ii) (A) payment to the Company of an amount equal
to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the
“
Aggregate Exercise
Price
”) in cash by wire transfer of immediately
available funds or (B) if the provisions of Section 1(d) are
applicable, by notifying the Company that this Warrant is being
exercised pursuant to a Cashless Exercise (as defined in Section
1(d)). 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 with respect to less than all of
the Warrant Shares 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. On or
before the first (1
st
) Trading Day
following the date on which the Company has received the Exercise
Notice, the Company shall transmit by electronic mail an
acknowledgment of confirmation of receipt of the Exercise Notice to
the Holder and the Company's transfer agent (the
“
Transfer
Agent
”). On or before the earlier of (i) the second
(2
nd
)
Trading Day and (ii) the number of Trading Days comprising the
Standard Settlement Period, in each case, following the date on
which the Holder delivers the Exercise Notice to the Company, so
long as the Holder delivers the Aggregate Exercise Price (or notice
of a Cashless Exercise) on or prior to the second (2
nd
) Trading Day
following the date on which the Company has received the Exercise
Notice (the “
Share Delivery
Date
”) (provided that if the Aggregate Exercise Price
has not been delivered by such date, the Share Delivery Date shall
be two (2) Trading Days after the Aggregate Exercise Price (or
notice of a Cashless Exercise) is delivered), the Company shall (X)
provided that the Transfer Agent is participating in The Depository
Trust Company (“
DTC
”) Fast Automated Securities
Transfer Program and (A) the Warrant Shares are subject to an
effective resale registration statement in favor of the Holder or
(B) if exercised via Cashless Exercise, at a time when Rule 144
would be available for immediate resale of the Warrant Shares by
the Holder, credit such aggregate number of Warrant Shares to which
the Holder is entitled pursuant to such exercise to the Holder's or
its designee's balance account with DTC through its Deposit /
Withdrawal At Custodian system, or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program
or (A) the Warrant Shares are not subject to an effective resale
registration statement in favor of the Holder and (B) if exercised
via Cashless Exercise, at a time when Rule 144 would not be
available for immediate resale of the Warrant Shares by the Holder,
issue and dispatch by overnight courier to the address as specified
in the Exercise Notice, a certificate, registered in the Company's
share register in the name of the Holder or its designee, for the
number of Warrant Shares to which the Holder is entitled pursuant
to such exercise. The Company shall be responsible for all fees and
expenses of the Transfer Agent and all fees and expenses with
respect to the issuance of Warrant Shares via DTC, if any. Upon
delivery of the Exercise Notice, the Holder shall be deemed for all
corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date such Warrant Shares are
credited to the Holder's DTC account or the date of delivery of the
certificates evidencing such Warrant Shares, as the case may be. If
this Warrant is submitted in connection with any exercise pursuant
to this Section 1(a) and the number of Warrant Shares represented
by this Warrant submitted for exercise is greater than the number
of Warrant Shares being acquired upon an exercise, then the Company
shall as soon as practicable and in no event later than three (3)
Trading Days after any exercise and at its own expense, issue a new
Warrant (in accordance with Section 7(d)) representing the right to
purchase the number of Warrant Shares issuable immediately prior to
such exercise under this Warrant, less the number of Warrant Shares
with respect to which this Warrant is exercised. No fractional
Warrant Shares are to be issued upon the exercise of this Warrant,
but rather the number of Warrant Shares to be issued shall be
rounded up to the nearest whole number. The Company shall pay any
and all taxes which may be payable with respect to the issuance and
delivery of Warrant Shares upon exercise of this Warrant. The
Company's obligations to issue and deliver Warrant Shares in
accordance with the terms and subject to the conditions hereof are
absolute and unconditional, irrespective of any action or inaction
by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any
setoff, counterclaim, recoupment, limitation or
termination.
(b)
Exercise Price
. For purposes of
this Warrant, “
Exercise
Price
” means $0.18 per share, subject to adjustment as
provided herein.
(c)
Company's Failure to Timely Deliver
Securities
. If the Company shall fail for any reason or for
no reason to issue to the Holder on or prior to the Share Delivery
Date either (I) if the Transfer Agent is not participating in the
DTC Fast Automated Securities Transfer Program, a certificate for
the number of shares of Common Stock to which the Holder is
entitled and register such shares of Common Stock on the Company's
share register or if the Transfer Agent is participating in the DTC
Fast Automated Securities Transfer Program, to credit the Holder's
balance account with DTC, for such number of shares of Common Stock
to which the Holder is entitled upon the Holder's exercise of this
Warrant or (II) if the Registration Statement covering the resale
of the Warrant Shares that are the subject of the Exercise Notice
(the “
Unavailable Warrant
Shares
”) is not available for the resale of such
Unavailable Warrant Shares and the Company fails to promptly, but
in no event later than as is required pursuant to the Registration
Rights Agreement (x) so notify the Holder and (y) deliver the
Warrant Shares electronically without any restrictive legend by
crediting such aggregate number of Warrant Shares to which the
Holder is entitled pursuant to such exercise to the Holder's or its
designee's balance account with DTC through its Deposit /
Withdrawal At Custodian system (the event described in the
immediately foregoing clause (II) is hereinafter referred as a
“
Notice Failure
”
and together with the event described in clause (I) above, an
“
Exercise
Failure
”), then, in addition to all other remedies
available to the Holder, (X) the Company shall pay in cash to the
Holder on each day after the Share Delivery Date and during such
Exercise Failure an amount equal to 1.0% of the product of (A) the
sum of the number of shares of Common Stock not issued to the
Holder on or prior to the Share Delivery Date and to which the
Holder is entitled, and (B) any trading price of the Common Stock
selected by the Holder in writing as in effect at any time during
the period beginning on the applicable date of delivery of an
Exercise Notice and ending on the applicable Share Delivery Date,
and (Y) the Holder, upon written notice to the Company, may void
its Exercise Notice with respect to, and retain or have returned,
as the case may be, any portion of this Warrant that has not been
exercised pursuant to such Exercise Notice; provided that the
voiding of an Exercise Notice shall not affect the Company's
obligations to make any payments which have accrued prior to the
date of such notice pursuant to this Section 1(c) or otherwise. In
addition to the foregoing, if on or prior to the Share Delivery
Date either (I) if the Transfer Agent is not participating in the
DTC Fast Automated Securities Transfer Program, the Company shall
fail to issue and deliver a certificate to the Holder and register
such shares of Common Stock on the Company's share register or, if
the Transfer Agent is participating in the DTC Fast Automated
Securities Transfer Program, credit the Holder's balance account
with DTC for the number of shares of Common Stock to which the
Holder is entitled upon the Holder's exercise hereunder or pursuant
to the Company's obligation pursuant to clause (ii) below or (II) a
Notice Failure occurs, and if on or after such Trading Day the
Holder purchases (in an open market transaction or otherwise)
shares of Common Stock relating to the applicable Exercise Failure
(a “
Buy-In
”),
then the Company shall, within five (5) Trading Days after the
Holder's request and in the Holder's discretion, either (i) pay
cash to the Holder in an amount equal to the Holder's total
purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so
purchased (the “
Buy-In
Price
”), at which point the Company's obligation to
deliver such certificate (and to issue such shares of Common Stock)
or credit the Holder's balance account with DTC for such shares of
Common Stock shall terminate, or (ii) promptly honor its obligation
to deliver to the Holder a certificate or certificates representing
such shares of Common Stock or credit the Holder's balance account
with DTC, as applicable, and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product
of (A) such number of shares of Common Stock, times (B) any trading
price of the Common Stock selected by the Holder in writing as in
effect at any time during the period beginning on the applicable
date of delivery of an Exercise Notice and ending on the applicable
Share Delivery Date. Nothing herein shall limit the Holder's right
to pursue any other remedies available to it hereunder, at law or
in equity, including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of
Common Stock (or to electronically deliver such shares of Common
Stock) upon the exercise of this Warrant as required pursuant to
the terms hereof.
(d)
Cashless Exercise
.
Notwithstanding anything contained
herein to the contrary, if the Registration Statement covering the
resale of the Unavailable Warrant Shares is not available for the
resale of such Unavailable Warrant Shares, the Holder may, in its
sole discretion, exercise this Warrant in whole or in part and, in
lieu of making the cash payment otherwise contemplated to be made
to the Company upon such exercise in payment of the Aggregate
Exercise Price, elect instead to receive upon such exercise the
“Net Number” of shares of Common Stock determined
according to the following formula (a “
Cashless Exercise
”):
Net
Number =
(A x B) - (A x
C)
B
For
purposes of the foregoing formula:
A= the
total number of shares with respect to which this Warrant is then
being exercised.
B= as
applicable: (i) the Weighted Average Price of the Common Stock on
the Trading Day immediately preceding the date of the applicable
Exercise Notice if such Exercise Notice is (1) both executed and
delivered pursuant to Section 1(a) hereof on a day that is not a
Trading Day or (2) both executed and delivered pursuant to Section
1(a) hereof on a Trading Day prior to the opening of “regular
trading hours” (as defined in Rule 600(b)(64) of Regulation
NMS promulgated under the federal securities laws) on such Trading
Day, (ii) at the option of the Holder, either (y) the Weighted
Average Price of the Common Stock on the Trading Day immediately
preceding the date of the applicable Exercise Notice or (z) the bid
price of the Common Stock on the principal Trading Market as
reported by Bloomberg as of the time of the Holder's execution of
the applicable Exercise Notice if such Exercise Notice is executed
during “regular trading hours” on a Trading Day and is
delivered within two (2) hours thereafter (including until two (2)
hours after the close of “regular trading hours” on a
Trading Day) pursuant to Section 1(a) hereof or (iii) the Weighted
Average Price of the Common Stock on the date of the applicable
Exercise Notice if the date of such Exercise Notice is a Trading
Day and such Exercise Notice is both executed and delivered
pursuant to Section 1(a) hereof after the close of “regular
trading hours” on such Trading Day;
C= the
Exercise Price then in effect for the applicable Warrant Shares at
the time of such exercise.
If
shares of Common Stock are issued pursuant to this Section 1(d),
the Company hereby acknowledges and agrees that the Warrant Shares
issued in a Cashless Exercise 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 Securities Purchase Agreement.
The Company agrees not to take any position contrary to this
Section 1(d).
(e)
Disputes
. In the case of a
dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section
12.
(f)
Beneficial Ownership Limitations on
Exercises
.
Notwithstanding
anything to the contrary contained herein, the Company shall not
effect the exercise of any portion of this Warrant, and the Holder
shall not have the right to exercise any portion of this Warrant,
pursuant to the terms and conditions of this Warrant and any such
exercise shall be null and void and treated as if never made, to
the extent that after giving effect to such exercise, the Holder
together with the other Attribution Parties collectively would
beneficially own in excess of 4.99% (the “
Maximum
Percentage
”) of the
number of
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 the Holder and the other
Attribution Parties shall include the number of
shares of
Common Stock
held by the Holder and
all other Attribution Parties plus 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 the number of
shares of Common Stock
which would be
issuable upon (A) exercise of the remaining, unexercised portion of
this Warrant beneficially owned by the Holder or any of the other
Attribution Parties and (B) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company (including, without limitation, any convertible notes or
convertible preferred stock or warrants, including
the
Series B
Warrants, Series C Warrants and
Preferred Shares (as defined in the Securities Purchase Agreement))
beneficially owned by the Holder or any other Attribution Party
subject to a limitation on conversion or exercise analogous to the
limitation contained in this Section 1(f). For purposes of this
Section 1(f), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the “
1934 Act
”). For purposes of this Warrant, in
determining the number of outstanding
shares of Common Stock
the Holder may acquire upon the
exercise of this Warrant without exceeding the Maximum Percentage,
the Holder may rely on the number of outstanding
shares of
Common Stock
as reflected in (x) the
Company's most recent Annual Report on Form 10-K, Quarterly Report
on Form 10-Q, Current Report on Form 8-K or other public filing
with the Securities and
Exchange Commission (the
“
SEC
”), as the
case may be, (y) a more recent public announcement by the Company
or (3) any other written
notice by the
Company or the Transfer Agent setting forth the number of
shares of Common Stock
outstanding
(the “
Reported Outstanding Share
Number
”). If the Company
receives an Exercise Notice from the Holder at a time when the
actual number of outstanding
shares of Common Stock
is less than the Reported Outstanding
Share Number, the Company shall (i) notify the Holder in writing of
the number of
shares of Common Stock
then outstanding and, to the extent that such
Exercise Notice would otherwise cause the Holder's beneficial
ownership, as determined pursuant to this Section 1(f), to exceed
the Maximum Percentage, the Holder must notify the Company of a
reduced number of Warrant Shares to be purchased pursuant to such
Exercise Notice
(the number of
shares by which such purchase is reduced, the
“
Reduction
Shares
”) and (ii) as soon
as reasonably practicable, the Company shall return to the Holder
any exercise price paid by the Holder for the Reduction
Shares.
For any reason at any time, upon the written or oral
request of the Holder,
the Company
shall within one (1) Trading Day confirm orally and in writing or
by electronic mail 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 any other Attribution
Party since the date as of which the Reported Outstanding Share
Number was reported. In the event that the issuance of
shares of Common Stock
to the Holder
upon exercise of this Warrant results in the Holder and the other
Attribution Parties being deemed to beneficially own, in the
aggregate, more than the Maximum Percentage of the number of
outstanding
shares of Common Stock
(as determined under Section 13(d) of the 1934
Act), the number of shares so issued by which the Holder's and the
other Attribution Parties' aggregate beneficial ownership exceeds
the Maximum Percentage (the “
Excess
Shares
”) shall be deemed
null and void and shall be cancelled ab initio, and the Holder
shall not have the power to vote or to transfer the Excess Shares.
As soon as reasonably practicable after the issuance of the Excess
Shares has been deemed null and void, the Company shall return to
the Holder the exercise price paid by the Holder for the Excess
Shares.
Upon delivery of a written notice to the Company,
the Holder may from time to time increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% as
specified in such notice; provided that (i) any such increase in
the Maximum Percentage will not be effective until the sixty-first
(61
st
) day
after such notice is delivered to the Company and (ii) any such
increase or decrease will apply only to the Holder and the other
Attribution Parties and not to any other holder of SPA Warrants
that is not an Attribution Party of the Holder. For purposes of
clarity, the shares of Common Stock issuable pursuant to the terms
of this Warrant in excess of the Maximum Percentage shall not be
deemed to be beneficially owned by the Holder for any purpose
including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the
1934 Act.
No
prior
inability to exercise this Warrant pursuant to this paragraph shall
have any effect on the applicability of the provisions of this
paragraph with respect to any subsequent determination of
exercisability.
The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 1(f) to
the extent necessary to correct this paragraph or any portion of
this paragraph which may be defective or inconsistent with the
intended beneficial ownership limitation contained in this Section
1(f) or to make changes or
supplements
necessary or desirable to properly give effect to
such limitation. The limitation contained in this paragraph may not
be waived and shall apply to a successor holder of this
Warrant.
(g)
Insufficient Authorized Shares
.
If at any time after the Company obtains Stockholder Approval, the
Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon exercise of this Warrant at least a
number of shares of Common Stock equal to 100% of the number of
shares of Common Stock as shall from time to time be necessary to
effect the exercise of all of this Warrant then outstanding without
regard to any limitation on exercise included herein (the
“
Required Reserve
Amount
” and the failure to have such sufficient number
of authorized and unreserved shares of Common Stock, an
“
Authorized Share
Failure
”), then the Company shall immediately take all
action 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 this Warrant then
outstanding either through an increase in the authorized number of
shares of Common Stock or a reverse stock split of the outstanding
shares of Common Stock. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the
occurrence of an Authorized Share Failure, but in no event later
than sixty (60) 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 or a reverse stock split of the outstanding shares of
Common Stock. In connection with such meeting, the Company shall
provide each stockholder with a proxy statement and shall use its
best efforts to solicit its stockholders' approval of such increase
in authorized shares of Common Stock or a reverse stock split of
the outstanding shares of Common Stock and to cause its board of
directors to recommend to the stockholders that they approve such
proposal. Notwithstanding the foregoing, if any such time of an
Authorized Share Failure, the Company is able to obtain the written
consent of a majority of the shares of its issued and outstanding
shares of Common Stock to approve the increase in the number of
authorized shares of Common Stock or a reverse stock split of the
outstanding shares of Common Stock, the Company may satisfy this
obligation by obtaining such consent and submitting for filing with
the SEC an Information Statement on Schedule 14C. In the event that
upon any exercise of this Warrant following six (6) months
following the Subscription Date, the Company does not have
sufficient authorized shares to deliver in satisfaction of such
exercise, then unless the Holder elects to void such attempted
exercise, in lieu of issuing shares of Common Stock hereunder, the
Company shall pay to the Holder within three (3) Trading Days of
the applicable exercise, cash in an amount equal to the product of
(i) the number of Warrant Shares that the Company is unable to
deliver pursuant to this Section 1(g) and (ii) as applicable, (A)
the Weighted Average Price of the Common Stock on the Trading Day
immediately preceding the date of the applicable Exercise Notice if
such Exercise Notice is (x) both executed and delivered pursuant to
Section 1(a) hereof on a day that is not a Trading Day or (y) both
executed and delivered pursuant to Section 1(a) hereof on a Trading
Day prior to the opening of “regular trading hours” (as
defined in Rule 600(b)(64) of Regulation NMS promulgated under the
federal securities laws) on such Trading Day, (B) at the option of
the Holder, either (x) the Weighted Average Price of the Common
Stock on the Trading Day immediately preceding the date of the
applicable Exercise Notice or (y) the bid price of the Common Stock
on the principal Trading Market as reported by Bloomberg as of the
time of the Holder's execution of the applicable Exercise Notice if
such Exercise Notice is executed during “regular trading
hours” on a Trading Day and is delivered within two (2) hours
thereafter (including until two (2) hours after the close of
“regular trading hours” on a Trading Day) pursuant to
Section 1(a) hereof or (C) the Weighted Average Price of the Common
Stock on the date of the applicable Exercise Notice if the date of
such Exercise Notice is a Trading Day and such Exercise Notice is
both executed and delivered pursuant to Section 1(a) hereof after
the close of “regular trading hours” on such Trading
Day.
(h)
Issuance Restrictions
. The
Company may not issue any shares of Common Stock upon exercise of
this Warrant unless and until such date that the Company has
obtained Stockholder Approval.
2.
ADJUSTMENT OF EXERCISE PRICE AND
NUMBER OF WARRANT SHARES
. The Exercise Price and the number
of Warrant Shares shall be adjusted from time to time as
follows:
(a)
Adjustment
Upon Subdivision or Combination of Common Stock
. If the
Company at any time on or after the Subscription Date 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 Exercise Price in effect
immediately prior to such subdivision will be proportionately
reduced and the number of Warrant Shares will be proportionately
increased. If the Company at any time on or after the Subscription
Date 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 Exercise Price in effect
immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately
decreased. Any adjustment under this Section 2(c) shall become
effective at the close of business on the date the subdivision or
combination becomes effective.
(b)
Reset
.
On the First Reset Date, the Second Reset Date, if any, and the
Third Reset Date, if any (as such terms are defined in the Series C
Warrants), the Exercise Price shall be adjusted to equal the lower
of (i) the Exercise Price then in effect and (ii) 100% of the
applicable Reset Price determined as of the applicable date of
determination. Upon each such reset of the Exercise Price pursuant
to this Section 2(d), the number of Warrant Shares issuable
immediately prior to such reset shall be adjusted to the number of
shares of Common Stock determined by multiplying the Exercise Price
then in effect immediately prior to such reset by the number of
Warrant Shares acquirable upon exercise of this Warrant immediately
prior to such reset and dividing the product thereof by the
Exercise Price resulting from such reset.
(c)
Other
Events
. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such
provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with
equity features), then the Company's Board of Directors will make
an appropriate adjustment in the Exercise Price and the number of
Warrant Shares, as mutually determined by the Company's Board of
Directors and the Required Holders, so as to protect the rights of
the Holder;
provided
that no such
adjustment pursuant to this Section 2(e) will increase the Exercise
Price or decrease the number of Warrant Shares as otherwise
determined pursuant to this Section 2.
(d)
Voluntary Adjustment By
Company
. The Company may at any time during the term of this
Warrant, with the prior written consent of the Required Holders,
reduce the then current Exercise Price to any amount and for any
period of time deemed appropriate by the Board of Directors of the
Company.
3.
RIGHTS UPON DISTRIBUTION OF
ASSETS
. If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property, options, evidence of
indebtedness or any other assets by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a “
Distribution
”), at any time after
the issuance of this Warrant, then, in each such case, the Holder
shall be entitled to participate in such Distribution to the same
extent that the Holder would have participated therein if the
Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations or restrictions on exercise of this Warrant, including
without limitation, the Maximum Percentage) immediately before the
date of which a record is taken for such Distribution, or, if no
such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the participation
in such Distribution (
provided
,
however
, that to the extent
that the Holder's right to participate in any such Distribution
would result in the Holder and the other Attribution Parties
exceeding the Maximum Percentage, then the Holder shall not be
entitled to participate in such Distribution to such extent (and
shall not be entitled to beneficial ownership of such shares of
Common Stock as a result of such Distribution (and beneficial
ownership) to such extent) and the portion of such Distribution
shall be held in abeyance for the benefit of the Holder until such
time or times as its right thereto would not result in the Holder
and the other Attribution Parties exceeding the Maximum Percentage,
at which time or times the Holder shall be granted such
Distribution (and any Distributions declared or made on such
initial Distribution or on any subsequent Distribution held
similarly in abeyance) to the same extent as if there had been no
such limitation).
4.
PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS
.
(a)
Purchase Rights
. In addition to
any adjustments pursuant to Section 2 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities
or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Stock (the
“
Purchase
Rights
”), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any
limitations or restrictions on exercise of this Warrant, including
without limitation, the Maximum Percentage) immediately before the
date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights
(
provided
,
however
, that to
the extent that the Holder's right to participate in any such
Purchase Right would result in the Holder and the other Attribution
Parties exceeding the Maximum Percentage, then the Holder shall not
be entitled to participate in such Purchase Right to such extent
(and shall not be entitled to beneficial ownership of such shares
of Common Stock as a result of such Purchase Right (and beneficial
ownership) to such extent) and such Purchase Right to such extent
shall be held in abeyance for the benefit of the Holder
until such time or times as its right
thereto would not result in the Holder and
the other
Attribution Parties
exceeding the
Maximum Percentage, at which time or times the Holder shall be
granted such right
(and any Purchase Right granted, issued
or sold on such initial Purchase Right or on any subsequent
Purchase Right held similarly in abeyance)
to the same extent as if there had been no such
limitation)
.
(b)
Fundamental Transactions
. The
Company shall not enter into or be party to a Fundamental
Transaction unless the Successor Entity assumes in writing all of
the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this
Section 4(b) pursuant to written agreements in form and substance
satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements
, if so requested by the Holder, to deliver to each holder of the
SPA Warrants in exchange for such SPA Warrants a security of the
Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Warrant, including, without
limitation, an adjusted exercise price equal to the value for the
shares of Common Stock reflected by the terms of such Fundamental
Transaction, and exercisable for a corresponding number of shares
of capital stock equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) prior to
such Fundamental Transaction, and satisfactory to the Required
Holders, and with an exercise price which applies the exercise
price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant
to such Fundamental Transaction and the value of such shares of
capital stock, such adjustments to the number of shares of capital
stock and such exercise price being for the purpose of protecting
the economic value of this Warrant immediately prior to the
occurrence or consummation of such Fundamental Transaction). Any
security issuable or potentially issuable to the Holder pursuant to
the terms of this Warrant on the consummation of a Fundamental
Transaction shall be registered and freely tradable by the Holder
without any restriction or limitation or the requirement to be
subject to any holding period pursuant to any applicable securities
laws.
No later than (i)
thirty (30) days prior to the occurrence or consummation of any
Fundamental Transaction or (ii) if later, the first Trading Day
following the date the Company first becomes aware of the
occurrence or potential occurrence of a Fundamental Transaction,
the Company shall deliver written notice thereof via facsimile or
electronic mail and overnight courier to the Holder.
Upon
the occurrence or consummation of any Fundamental Transaction, and
it shall be a required condition to the occurrence or consummation
of any Fundamental Transaction that, the Company and the Successor
Entity or Successor Entities, jointly and severally, shall succeed
to, and the Company shall cause any Successor Entity or Successor
Entities to jointly and severally succeed to, and be added to the
term “Company” under this Warrant (so that from and
after the date of such Fundamental Transaction, each and every
provision of this Warrant referring to the “Company”
shall refer instead to each of the Company and the Successor Entity
or Successor Entities, jointly and severally), and the Company and
the Successor Entity or Successor Entities, jointly and severally,
may exercise every right and power of the Company prior thereto and
shall assume all of the obligations of the Company prior thereto
under this Warrant with the same effect as if the Company and such
Successor Entity or Successor Entities, jointly and severally, had
been named as the Company in this Warrant, and, solely at the
request of the Holder, if the Successor Entity and/or Successor
Entities is a publicly traded corporation whose common stock is
quoted on or listed for trading on an Eligible Market, shall
deliver (in addition to and without limiting any right under this
Warrant) to the Holder in exchange for this Warrant a security of
the Successor Entity and/or Successor Entities evidenced by a
written instrument substantially similar in form and substance to
this Warrant and exercisable for a corresponding number of shares
of capital stock of the Successor Entity and/or Successor Entities
(the “
Successor Capital
Stock
”) equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) prior to
such Fundamental Transaction (such corresponding number of shares
of Successor Capital Stock to be delivered to the Holder shall be
equal to the greater of (A) the quotient of (i) the aggregate
dollar value of all consideration (including cash consideration and
any consideration other than cash (“
Non-Cash Consideration
”), in such
Fundamental Transaction, as such values are set forth in any
definitive agreement for the Fundamental Transaction that has been
executed at the time of the first public announcement of the
Fundamental Transaction or, if no such value is determinable from
such definitive agreement, as determined in accordance with Section
12
with the term “Non-Cash
Consideration” being substituted for the term “Exercise
Price”)
that the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction or the
record, eligibility or other determination date for the event
resulting in such Fundamental Transaction, had this Warrant been
exercised immediately prior to such Fundamental Transaction or the
record, eligibility or other determination date for the event
resulting in such Fundamental Transaction (without regard to any
limitations on the exercise of this Warrant) (the
“
Aggregate
Consideration
”) divided by (ii) the per share Closing
Sale Price of such Successor Capital Stock on the Trading Day
immediately prior to the consummation or occurrence of the
Fundamental Transaction and (B) the product of (i) the quotient
obtained by dividing (x) the Aggregate Consideration, by (y) the
Closing Sale Price of the Common Stock on the Trading Day
immediately prior to the consummation or occurrence of the
Fundamental Transaction and (ii) the highest exchange ratio
pursuant to which any stockholder of the Company may exchange
shares of Common Stock for Successor Capital Stock) (
provided
,
however
, to the extent that the
Holder's right to receive any such shares of publicly traded common
stock (or their equivalent) of the Successor Entity would result in
the Holder and its other Attribution Parties exceeding the Maximum
Percentage, if applicable, then the Holder shall not be entitled to
receive such shares to such extent (and shall not be entitled to
beneficial ownership of such shares of publicly traded common stock
(or their equivalent) of the Successor Entity as a result of such
consideration to such extent) and the portion of such shares shall
be held in abeyance for the Holder until such time or times, as its
right thereto would not result in the Holder and its other
Attribution Parties exceeding the Maximum Percentage, at which time
or times the Holder shall be delivered such shares to the extent as
if there had been no such limitation), and such security shall be
satisfactory to the Holder, and with an identical exercise price to
the Exercise Price hereunder (such adjustments to the number of
shares of capital stock and such exercise price being for the
purpose of protecting after the consummation or occurrence of such
Fundamental Transaction the economic value of this Warrant that was
in effect immediately prior to the consummation or occurrence of
such Fundamental Transaction, as elected by the Holder solely at
its option). Upon occurrence or consummation of the Fundamental
Transaction, and it shall be a required condition to the occurrence
or consummation of such Fundamental Transaction that, the Company
and the Successor Entity or Successor Entities shall deliver to the
Holder confirmation that there shall be issued upon exercise of
this Warrant at any time after the occurrence or consummation of
the Fundamental Transaction, as elected by the Holder solely at its
option, shares of Common Stock, Successor Capital Stock or, in lieu
of the shares of Common Stock or Successor Capital Stock (or other
securities, cash, assets or other property purchasable upon the
exercise of this Warrant prior to such Fundamental Transaction),
such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or
subscription rights), which for purposes of clarification may
continue to be shares of Common Stock, if any, that the Holder
would have been entitled to receive upon the happening of such
Fundamental Transaction or the record, eligibility or other
determination date for the event resulting in such Fundamental
Transaction, had this Warrant been exercised immediately prior to
such Fundamental Transaction or the record, eligibility or other
determination date for the event resulting in such Fundamental
Transaction (without regard to any limitations on the exercise of
this Warrant), as adjusted in accordance with the provisions of
this Warrant. In addition to and not in substitution for any other
rights hereunder, prior to the occurrence or consummation of any
Fundamental Transaction pursuant to which holders of shares of
Common Stock are entitled to receive securities, cash, assets or
other property with respect to or in exchange for shares of Common
Stock (a “
Corporate
Event
”), the Company shall make appropriate provision
to ensure that, and any applicable Successor Entity or Successor
Entities shall ensure that, and it shall be a required condition to
the occurrence or consummation of such Corporate Event that, the
Holder will thereafter have the right to receive upon exercise of
this Warrant at any time after the occurrence or consummation of
the Corporate Event, shares of Common Stock or Successor Capital
Stock or, if so elected by the Holder, in lieu of the shares of
Common Stock (or other securities, cash, assets or other property)
purchasable upon the exercise of this Warrant prior to such
Corporate Event (but not in lieu of such items still issuable under
Sections 3 and 4(a), which shall continue to be receivable on the
shares of Common Stock or on the such shares of stock, securities,
cash, assets or any other property otherwise receivable with
respect to or in exchange for shares of Common Stock), such shares
of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights and
any shares of Common Stock) which the Holder would have been
entitled to receive upon the occurrence or consummation of such
Corporate Event or the record, eligibility or other determination
date for the event resulting in such Corporate Event, had this
Warrant been exercised immediately prior to such Corporate Event or
the record, eligibility or other determination date for the event
resulting in such Corporate Event (without regard to any
limitations on exercise of this Warrant). Provision made pursuant
to the preceding sentence shall be in a form and substance
reasonably satisfactory to the Holder. The provisions of this
Section 4(b) shall apply similarly and equally to successive
Fundamental Transactions and Corporate Events.
(c)
Notwithstanding the
foregoing, in the event of Fundamental Transaction, at the request
of the Holder delivered before the ninetieth (90
th
) day after the
occurrence or consummation of such Fundamental Transaction,
the Company (or the Successor Entity)
shall purchase this Warrant from the Holder by paying to the
Holder, within five (5) Business Days after such request (or, if
later, on the effective date of the Fundamental
Transaction)
, cash in an amount equal to the Black Scholes
Value of the remaining unexercised portion of this Warrant on the
date of such Fundamental Transaction;
provided
,
however
, that, if such
Fundamental Transaction is not within the Company's control,
including not approved by the Company's Board of Directors, the
Holder shall only be entitled to receive from the Company or any
Successor Entity, as of the date of consummation of such
Fundamental Transaction, the same type or form of consideration
(and in the same proportion), at the Black Scholes Value of the
unexercised portion of this Warrant, that is being offered and paid
to the holders of Common Stock of the Company in connection with
such Fundamental Transaction, whether that consideration be in the
form of cash, stock or any combination thereof, or whether the
holders of Common Stock are given the choice to receive from among
alternative forms of consideration in connection with such
Fundamental Transaction.
5.
NONCIRCUMVENTION
. The Company
hereby covenants and agrees that the Company will not, by amendment
of its Articles 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 Warrant, and will at all
times in good faith carry out all of the provisions of this Warrant
and take all action as may be required to protect the rights of the
Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect, (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 nonassessable
shares of Common Stock upon the exercise of this Warrant, and (iii)
shall, so long as any of the SPA Warrants are outstanding, take all
action necessary to reserve and keep available out of its
authorized and unissued shares of Common Stock, solely for the
purpose of effecting the exercise of the SPA Warrants, 100% of the
number of shares of Common Stock as shall from time to time be
necessary to effect the exercise of all Warrants issued pursuant to
the Securities Purchase Agreement then outstanding (without regard
to any limitations on exercise and assuming that the Maximum
Eligibility Number is being determined based on a Reset Price equal
to $0.08 (as adjusted for stock splits, stock dividends,
recapitalizations, reorganizations, reclassification, combinations,
reverse stock splits or other similar events occurring after the
Subscription Date)).
6.
WARRANT HOLDER NOT DEEMED A
STOCKHOLDER
. Except as otherwise specifically provided
herein, 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, 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 6, the
Company shall provide the Holder with copies of the same notices
and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the
stockholders.
7.
REISSUANCE OF
WARRANTS
.
(a)
Transfer of Warrant
. If this
Warrant is to be transferred, the Holder shall surrender this
Warrant to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)), registered as the Holder may
request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less than the total
number of Warrant Shares then underlying this Warrant is being
transferred, a new Warrant (in accordance with Section 7(d)) to the
Holder representing the right to purchase the number of Warrant
Shares not being transferred.
(b)
Lost, Stolen or Mutilated
Warrant
. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to
the Company in customary form and, in the case of mutilation, upon
surrender and cancellation of this Warrant, the Company shall
execute and deliver to the Holder a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the Warrant Shares
then underlying this Warrant.
(c)
Exchangeable for Multiple
Warrants
. This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a
new Warrant or Warrants (in accordance with Section 7(d))
representing in the aggregate the right to purchase the number of
Warrant Shares then underlying this Warrant, and each such new
Warrant will represent the right to purchase such portion of such
Warrant Shares as is designated by the Holder at the time of such
surrender;
provided
,
however
, that no SPA Warrants
for fractional Warrant Shares shall be given.
(d)
Issuance of New Warrants
.
Whenever the Company is required to issue a new Warrant pursuant to
the terms of this Warrant, such new Warrant (i) shall be of like
tenor with this Warrant, (ii) shall represent, as indicated on the
face of such new Warrant, the right to purchase the Warrant Shares
then underlying this Warrant (or in the case of a new Warrant being
issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares
designated by the Holder which, when added to the number of shares
of Common Stock underlying the other new Warrants issued in
connection with such issuance, does not exceed the number of
Warrant Shares then underlying this Warrant), (iii) shall have an
issuance date, as indicated on the face of such new Warrant which
is the same as the Issuance Date, and (iv) shall have the same
rights and conditions as this Warrant.
8.
NOTICES
. Whenever notice is
required to be given under this Warrant, 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 Warrant, 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) immediately upon any adjustment of the Exercise Price, setting
forth in reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least fifteen (15) days prior to the date on
which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any
Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of shares of
Common Stock or (C) for determining rights to vote with respect to
any Fundamental Transaction, dissolution or liquidation;
provided
in each
case that such information shall be made known to the public prior
to or in conjunction with such notice being provided to the Holder.
It is expressly understood and agreed that the time of exercise
specified by the Holder in each Exercise Notice shall be definitive
and may not be disputed or challenged by the Company.
9.
AMENDMENT AND WAIVER
. Except as
otherwise provided herein, the provisions of this Warrant may be
amended or waived and the Company may take any action herein
prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written
consent of the Holder.
10.
GOVERNING LAW; JURISDICTION; JURY
TRIAL
. This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the
construction, validity, interpretation and performance of this
Warrant 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. The
Company 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 the Company at the address
set forth in Section 9(f) of the Securities Purchase 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 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.
THE COMPANY
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 WITH OR ARISING OUT OF THIS WARRANT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
11.
CONSTRUCTION; HEADINGS
. This
Warrant shall be deemed to be jointly drafted by the Company and
all the Buyers and shall not be construed against any Person as the
drafter hereof. The headings of this Warrant are for convenience of
reference and shall not form part of, or affect the interpretation
of, this Warrant.
12.
DISPUTE RESOLUTION
. In the case
of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall
submit the disputed determinations or arithmetic calculations via
facsimile or electronic mail within two (2) Business Days of
receipt of the Exercise Notice giving rise to such dispute, as the
case may be, to the Holder. If the Holder and the Company are
unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three (3) Business Days
of such disputed determination or arithmetic calculation being
submitted to the Holder, then the Company shall, within two (2)
Business Days submit via facsimile or electronic mail (a) the
disputed determination of the 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 (10) 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.
13.
REMEDIES, OTHER OBLIGATIONS, BREACHES
AND INJUNCTIVE RELIEF
. The remedies provided in this Warrant
shall be cumulative and in addition to all other remedies available
under this Warrant and the other Transaction Documents, at law or
in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the
Holder to pursue actual damages for any failure by the Company to
comply with the terms of this Warrant. 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 of
this Warrant shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other
security being required.
14.
TRANSFER
. This Warrant and the
Warrant Shares may be offered for sale, sold, transferred, pledged
or assigned without the consent of the Company, except as may
otherwise be required by Section 2(f) of the Securities
Purchase Agreement.
15.
SEVERABILITY
. If any provision
of this Warrant 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 Warrant so long as this Warrant
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).
16.
DISCLOSURE
. Upon receipt or
delivery by the Company of any notice in accordance with the terms
of this Warrant, unless the Company has in good faith determined
that the matters relating to such notice do not constitute
material, nonpublic information relating to the Company or its
Subsidiaries (as defined in the Securities Purchase Agreement), the
Company shall contemporaneously with any such receipt or delivery
publicly disclose such material, nonpublic information on a Current
Report on Form 8-K or otherwise. In the event that the Company
believes that a notice contains material, nonpublic information
relating to the Company or its Subsidiaries, the Company so shall
indicate to the Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, the Holder shall
be allowed to presume that all matters relating to such notice do
not constitute material, nonpublic information relating to the
Company or its Subsidiaries.
17.
CERTAIN DEFINITIONS
. For
purposes of this Warrant, the following terms shall have the
following meanings:
(a)
“
1933 Act
” means the Securities Act
of 1933, as amended.
(b)
“
Affiliate
” shall have the meaning
ascribed to such term in Rule 405 of the 1933 Act.
(c)
“
Approved Stock Plan
” means any
employee benefit plan which has been approved by the Board of
Directors of the Company, pursuant to which the Company's
securities may be issued to any employee, officer or director for
services provided to the Company.
(d)
“
Attribution Parties
” means,
collectively, the following Persons and entities: (i) any
investment vehicle, including, any funds, feeder funds or managed
accounts, currently, or from time to time after the Issuance Date,
directly or indirectly managed or advised by the Holder's
investment manager or any of its Affiliates or principals, (ii) any
direct or indirect Affiliates of the Holder or any of the
foregoing, (iii) any Person acting or who could be deemed to be
acting as a Group together with the Holder or any of the foregoing
and (iv) any other Persons whose beneficial ownership of the Common
Stock would or could be aggregated with the Holder's and the other
Attribution Parties for purposes of Section 13(d) of the 1934 Act.
For clarity, the purpose of the foregoing is to subject
collectively the Holder and all other Attribution Parties to the
Maximum Percentage.
(e)
“
Black Scholes Value
” means the
value of this Warrant calculated using the Black-Scholes Option
Pricing Model obtained from the “OV” function on
Bloomberg determined as of the day immediately following the public
announcement of the applicable Fundamental Transaction, or, if the
Fundamental Transaction is not publicly announced, the date the
Fundamental Transaction is consummated, for pricing purposes and
reflecting (i) a risk-free interest rate corresponding to the U.S.
Treasury rate for a period equal to the remaining term of this
Warrant as of such date of request, (ii) an expected volatility
equal to the greater of 100% and the 100 day volatility obtained
from the HVT function on Bloomberg as of the Trading Day
immediately following the public announcement of the applicable
Fundamental Transaction, or, if the Fundamental Transaction is not
publicly announced, the date the Fundamental Transaction is
consummated, (iii) the underlying price per share used in such
calculation shall be the greater of (x) the highest Weighted
Average Price of the Common Stock during the period beginning on
the Trading Day prior to the execution of definitive documentation
relating to the applicable Fundamental Transaction and ending on
(A) the Trading Day immediately following the public announcement
of such Fundamental Transaction, if the applicable Fundamental
Transaction is publicly announced or (B) the Trading Day
immediately following the consummation of the applicable
Fundamental Transaction if the applicable Fundamental Transaction
is not publicly announced and (y) the sum of the price per share
being offered in cash, if any, plus the value of any non-cash
consideration, if any, being offered in the Fundamental
Transaction, (iv) a zero cost of borrow and (v) a 360 day
annualization factor.
(f)
“
Bloomberg
” means Bloomberg
Financial Markets.
(g)
“
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.
(h)
“
Closing Bid Price
” and
“
Closing Sale
Price
” means, for any security as of any date, the
last closing bid price and last closing trade price, respectively,
for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price
or the closing trade price, as the case may be, then the last bid
price or the last trade price, respectively, of such security prior
to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if
the Principal Market is not the principal securities exchange or
trading market for such security, the last closing bid price or
last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed
or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price or last trade price,
respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any
market makers for such security as reported in the OTC Link or
“pink sheets” by OTC Markets Group Inc. (formerly Pink
OTC Markets Inc.). If the Closing Bid Price or the Closing Sale
Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Closing Bid Price or the Closing
Sale Price, as the case may be, 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 such dispute shall be
resolved pursuant to Section 12. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock
combination, reclassification or other similar transaction during
the applicable calculation period.
(i)
“
Common Stock
” means (i) the
Company's shares of common stock, par value $0.001 per share, and
(ii) any stock capital into which such Common Stock shall have
been changed or any stock capital resulting from a
reclassification, reorganization or reclassification of such Common
Stock.
(j)
“
Convertible Securities
” means any
stock or securities (other than Options) directly or indirectly
convertible into or exercisable or exchangeable for shares of
Common Stock.
(k)
“
Designee
” means Empery Asset
Management, LP.
(l)
“
Eligible Market
” means the
Principal Market, the NYSE American, The Nasdaq Global Select
Market, The Nasdaq Global Market, The Nasdaq Capital Market, The
New York Stock Exchange, Inc. or the OTC QX.
(m)
“
Excluded Securities
” means any
Common Stock issued or issuable or deemed to be issued in
accordance with Section 2(a) hereof by the Company: (i) under any
Approved Stock Plan, (ii) upon exercise of any SPA, Series A
Warrants, any Series B Warrants and any Series C Warrants, in each
case issued pursuant to the Securities Purchase Agreement;
provided
, that the
terms of such SPA Warrants Series B Warrants and Series C Warrants
are not amended, modified or changed on or after the Subscription
Date, or (iii) upon conversion, exercise or exchange of any Options
or Convertible Securities which are outstanding on the day
immediately preceding the Subscription Date;
provided
, that such issuance of
Common Stock upon exercise of such Options or Convertible
Securities is made pursuant to the terms of such Options or
Convertible Securities in effect on the date immediately preceding
the Subscription Date and such Options or Convertible Securities
are not amended, modified or changed on or after the Subscription
Date.
(n)
“
Expiration Date
” means the date
that is sixty-six(66) months after the Issuance Date or if such
date falls on a day other than a Business Day or on which trading
does not take place on the Principal Market (a “
Holiday
”), the next day that is
not a Holiday.
(o)
Intentionally
omitted.
(p)
“
Fundamental Transaction
” means (A)
that the Company shall, directly or indirectly, including through
Subsidiaries, Affiliates or otherwise, in one or more related
transactions, (i) consolidate or merge with or into (whether or not
the Company is the surviving corporation) another Subject Entity,
or (ii) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of the Company or
any of its “significant subsidiaries” (as defined in
Rule 1-02 of Regulation S-X) to one or more Subject Entities, or
(iii) make, or allow one or more Subject Entities to make, or allow
the Company to be subject to or have its Common Stock be subject to
or party to one or more Subject Entities making, a purchase, tender
or exchange offer that is accepted by the holders of at least
either (x) 50% of the outstanding shares of Common Stock, (y) 50%
of the outstanding shares of Common Stock calculated as if any
shares of Common Stock held by all Subject Entities making or party
to, or Affiliated with any Subject Entities making or party to,
such purchase, tender or exchange offer were not outstanding; or
(z) such number of shares of Common Stock such that all Subject
Entities making or party to, or Affiliated with any Subject Entity
making or party to, such purchase, tender or exchange offer, become
collectively the beneficial owners (as defined in Rule 13d-3 under
the 1934 Act) of at least 50% of the outstanding shares of Common
Stock, or (iv) consummate a stock purchase agreement or other
business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with one or more Subject Entities whereby all such
Subject Entities, individually or in the aggregate, acquire, either
(x) at least 50% of the outstanding shares of Common Stock, (y) at
least 50% of the outstanding shares of Common Stock calculated as
if any shares of Common Stock held by all the Subject Entities
making or party to, or Affiliated with any Subject Entity making or
party to, such stock purchase agreement or other business
combination were not outstanding; or (z) such number of shares of
Common Stock such that the Subject Entities become collectively the
beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of
at least 50% of the outstanding shares of Common Stock, or (v)
reorganize, recapitalize or reclassify its Common Stock, (B) that
the Company shall, directly or indirectly, including through
Subsidiaries, Affiliates or otherwise, in one or more related
transactions, allow any Subject Entity individually or the Subject
Entities in the aggregate to be or become the “beneficial
owner” (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, whether through acquisition, purchase,
assignment, conveyance, tender, tender offer, exchange, reduction
in outstanding shares of Common Stock, merger, consolidation,
business combination, reorganization, recapitalization, spin-off,
scheme of arrangement, reorganization, recapitalization or
reclassification or otherwise in any manner whatsoever, of either
(x) at least 50% of the aggregate ordinary voting power represented
by issued and outstanding shares of Common Stock, (y) at least 50%
of the aggregate ordinary voting power represented by issued and
outstanding shares of Common Stock not held by all such Subject
Entities as of the Subscription Date calculated as if any shares of
Common Stock held by all such Subject Entities were not
outstanding, or (z) a percentage of the aggregate ordinary voting
power represented by issued and outstanding shares of Common Stock
or other equity securities of the Company sufficient to allow such
Subject Entities to effect a statutory short form merger or other
transaction requiring other stockholders of the Company to
surrender their shares of Common Stock without approval of the
stockholders of the Company or (C) directly or indirectly,
including through Subsidiaries, Affiliates or otherwise, in one or
more related transactions, the issuance of or the entering into any
other instrument or transaction structured in a manner to
circumvent, or that circumvents, the intent of this definition in
which case this definition shall be construed and implemented in a
manner otherwise than in strict conformity with the terms of this
definition to the extent necessary to correct this definition or
any portion of this definition which may be defective or
inconsistent with the intended treatment of such instrument or
transaction.
(q)
“
Group
” means a “group”
as that term is used in Section 13(d) of the 1934 Act and as
defined in Rule 13d-5 thereunder.
(r)
“
Maximum Eligibility Number
” shall
have the meaning ascribed to such term in the Series C
Warrants.
(s)
“
Option Value
” means the value of
an Option calculated using the Black-Scholes Option Pricing Model
obtained from the “OV” function on Bloomberg determined
as of (A) the Trading Day prior to the public announcement of the
issuance of the applicable Option, if the issuance of such Option
is publicly announced or (B) the Trading Day immediately following
the issuance of the applicable Option if the issuance of such
Option is not publicly announced, for pricing purposes and
reflecting (i) a risk-free interest rate corresponding to the U.S.
Treasury rate for a period equal to the remaining term of the
applicable Option as of the applicable date of determination, (ii)
an expected volatility equal to the greater of 100% and the 100 day
volatility obtained from the HVT function on Bloomberg as of (A)
the Trading Day immediately following the public announcement of
the applicable Option if the issuance of such Option is publicly
announced or (B) the Trading Day immediately following the issuance
of the applicable Option if the issuance of such Option is not
publicly announced, (iii) the underlying price per share used in
such calculation shall be the highest Weighted Average Price of the
Common Stock during the period beginning on the Trading Day prior
to the execution of definitive documentation relating to the
issuance of the applicable Option and ending on (A) the Trading Day
immediately following the public announcement of such issuance, if
the issuance of such Option is publicly announced or (B) the
Trading Day immediately following the issuance of the applicable
Option if the issuance of such Option is not publicly announced,
(iv) a zero cost of borrow and (v) a 360 day annualization
factor.
(t)
“
Options
” means any rights,
warrants or options to subscribe for or purchase (i) shares of
Common Stock or (ii) Convertible Securities.
(u)
“
Parent Entity
” of a Person means
an entity that, directly or indirectly, controls the applicable
Person, including such entity whose common capital or equivalent
equity security is quoted or listed on an Eligible Market (or, if
so elected by the Required Holders, any other market, exchange or
quotation system), or, if there is more than one such Person or
such entity, the Person or such entity designated by the Required
Holders or in the absence of such designation, such Person or
entity with the largest public market capitalization as of the date
of consummation of the Fundamental Transaction.
(v)
“
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.
(w)
“
Principal Market
” means the NASDAQ
Capital Market.
(x)
Intentionally
omitted.
(y)
Intentionally
omitted.
(z)
“Qualified Eligible Market
”
means the NYSE American, The Nasdaq Global Select Market, The
Nasdaq Global Market, The Nasdaq Capital Market or The New York
Stock Exchange, Inc.
(aa)
Intentionally
omitted.
(bb)
“
Registration
Rights Agreement
” means that certain Registration
Rights Agreement dated as of the Subscription Date by and among the
Company and the Buyers.
(cc)
“
Registration
Statement
” means that certain Registration Rights
Agreement dated as of the Subscription Date by and among the
Company and the Buyers.
(dd)
“
Required
Holders
” means the holders of the SPA Warrants
representing at least a majority of the shares of Common Stock
underlying the SPA Warrants then outstanding and shall include the
Designee so long as the Designee or any of its Affiliates holds any
SPA Warrants, Hudson Bay Capital Management LP so long as Hudson
Bay Capital Management LP or any of its Affiliates holds any SPA
Warrants, and Sabby Management, LLC so long as Sabby Management,
LLC or any of its Affiliates holds any SPA Warrants.
(ee)
“
Reset
Price
” shall have the meaning ascribed to such term in
the Series C Warrants.
(ff)
Intentionally
omitted.
(gg)
Intentionally
omitted.
(ww)
“
Series
B Warrants
” shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
(xx)
“
Series
C Warrants
” shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
(yy)
“
Standard
Settlement Period
” means the standard settlement
period, expressed in a number of Trading Days, on the Company's
primary Eligible Market with respect to the Common Stock as in
effect on the date of delivery of the applicable Exercise
Notice.
(hh)
“
Subject
Entity
” means any Person, Persons or Group or any
Affiliate or associate of any such Person, Persons or
Group.
(ii)
“
Successor
Entity
” means one or more Person or Persons (or, if so
elected by the Holder, the Company or Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or one or
more Person or Persons (or, if so elected by the Holder, the
Company or the Parent Entity) with which such Fundamental
Transaction shall have been entered into.
(jj)
Intentionally
omitted.
(kk)
Intentionally
omitted.
(ll)
“
Trading
Day
” means any day on which the Common Stock is traded
on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock on such day, then on
the principal securities exchange or securities market on which the
Common Stock is then traded.
(mm)
“
Weighted
Average Price
” means, for any security as of any date,
the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New
York time (or such other time as the Principal Market publicly
announces is the official open of trading), and ending at 4:00:00
p.m., New York time (or such other time as the Principal Market
publicly announces is the official close of trading), as reported
by Bloomberg through its “Volume at Price” function or,
if the foregoing does not apply, the dollar volume-weighted average
price of such security in the over-the-counter market on the
electronic bulletin board for such security during the period
beginning at 9:30:01 a.m., New York time (or such other time as
such market publicly announces is the official open of trading),
and ending at 4:00:00 p.m., New York time (or such other time as
such market publicly announces is the official close of trading),
as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours,
the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported
in the OTC Link or “pink sheets” by OTC Markets Group
Inc. (formerly Pink OTC Markets Inc.). If the Weighted Average
Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Weighted Average 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 such dispute shall be resolved pursuant to Section
12 with the term “Weighted Average Price” being
substituted for the term “Exercise Price.” All such
determinations shall be appropriately adjusted for any stock
dividend, stock split, stock combination, reclassification or other
similar transaction during the applicable calculation
period.
[Signature Page Follows]
IN WITNESS WHEREOF,
the Company has
caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.
BRIDGELINE
DIGITAL, INC.
By:
___________________________
Name:
Title:
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE
THIS
WARRANT TO PURCHASE COMMON STOCK
BRIDGELINE DIGITAL, INC.
The
undersigned holder hereby exercises the right to purchase
_________________ shares of Common Stock (“
Warrant Shares
”) of Bridgeline
Digital, Inc., a Delaware corporation (the “
Company
”), evidenced by the
attached Warrant to Purchase Common Stock (the “
Warrant
”). Capitalized terms used
herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.
1. Form
of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:
____________ a
“
Cash
Exercise
” with respect to _________________ Warrant
Shares; and/or
____________ a
“
Cashless
Exercise
” with respect to _______________ Warrant
Shares, resulting in a delivery obligation of the Company to the
Holder of __________ shares of Common Stock representing the
applicable Net Number.
2.
Payment of Exercise Price. In the event that the holder has elected
a Cash Exercise with respect to some or all of the Warrant Shares
to be issued pursuant hereto, the holder shall pay the Aggregate
Exercise Price in the sum of $___________________ to the Company in
accordance with the terms of the Warrant.
3.
Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the
Warrant.
Date:
_______________ __, ______
Name
of Registered Holder
Name:
Title:
ACKNOWLEDGMENT
The
Company hereby acknowledges this Exercise Notice and hereby directs
American Stock Transfer & Trust Company, LLC to issue the above
indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated March , 2019 from the Company and
acknowledged and agreed to by American Stock Transfer & Trust
Company, LLC.
BRIDGELINE
DIGITAL, INC.
By:
________________________________
Name:
Title:
SECURITIES PURCHASE AGREEMENT
This
SECURITIES PURCHASE
AGREEMENT
(this “
Agreement
”), dated as of March __,
2019, is entered into by and among Bridgeline Digital, Inc., a
Delaware corporation, with headquarters located at 100 Summit
Drive, Burlington, Massachusetts 01803 (the “
Company
”), and the investors
listed on the Schedule of Buyers attached hereto (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(b) of Regulation D
(“
Regulation D
”)
as promulgated by the United States Securities and Exchange
Commission (the “
SEC
”) under the 1933
Act.
B. Each
Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, (i) that aggregate
number of shares of the Company’s Series C Convertible
Preferred Stock, par value $0.001 per share (the
“
Preferred
Stock
”), having the rights, preferences and privileges
as set forth on
Exhibit
A
attached hereto (the “
COD
”), set forth opposite such
Buyer’s name in column (3) on the Schedule of Buyers (which
aggregate amount for all Buyers together shall be [____________]
shares of Preferred Stock and shall collectively be referred to
herein as the “
Preferred
Shares
”), which Preferred Shares shall be convertible
into that number of shares of the Company’s common stock, par
value $0.001 per share (the “
Common Stock
”) in accordance with
its terms and conditions (as converted, collectively, the
“
Conversion
Shares
”); (ii) warrants, in substantially the form
attached hereto as
Exhibit
B
(the “
Series A
Warrants
”), representing the right to acquire
initially that number of shares of Common Stock set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers (as
exercised, collectively, the “
Series A Warrant Shares
”), (iii)
warrants, in substantially the form attached hereto as
Exhibit C
(the "
Series B Warrants
") representing the
right to acquire initially that number of shares of Common Stock
set forth opposite such Buyer’s name in column (5) on the
Schedule of Buyers (as exercised, collectively, the
“
Series B Warrant
Shares
”), and (iv) warrants, in substantially the form
attached hereto as
Exhibit
D
(the "
Series C
Warrants
" and collectively with the Series A Warrants and
the Series B Warrants, the "
Warrants
") representing the right to
acquire initially that number of shares of Common Stock set forth
opposite such Buyer’s name in column (6) on the Schedule of
Buyers (as exercised, collectively, the “
Series C Warrant Shares
” and
collectively with the Series A Warrant Shares and the Series B
Warrant Shares, the “
Warrant
Shares
”).
C.
Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement, in substantially the form attached
hereto as
Exhibit E
(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.
D. The
Preferred Shares, the Warrants and the Warrant Shares collectively
are referred to herein as the “
Securities
.”
NOW, THEREFORE
, the Company and each
Buyer hereby agree as follows:
1.
PURCHASE
AND SALE OF PREFERRED SHARES AND WARRANTS
.
(a)
Purchase of Preferred
Shares and Warrants
. Subject to the satisfaction (or waiver)
of the conditions set forth in Sections 6 and 7 below, the Company
shall issue and sell to each Buyer, and each Buyer severally, but
not jointly, agrees to purchase from the Company on the Closing
Date (as defined below), the number of Preferred Shares as is set
forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers, along with (x) Series A Warrants to acquire up
to that number of Series A Warrant Shares as is set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers,
(y) Series B Warrants to acquire up to that number of Series B
Warrant Shares as is set forth opposite such Buyer’s name in
column (5) on the Schedule of Buyers, and (z) Series C Warrants to
acquire up to that number of Series C Warrant Shares as is set
forth opposite such Buyer’s name in column (6) on the
Schedule of Buyers (the “
Closing
”).
(b)
Closing
. The date
and time of the Closing (the “
Closing Date
”) shall be 10:00
a.m., New York City time, on the date hereof (or such other date
and time as is mutually agreed to by the Company and each Buyer)
after notification of satisfaction (or waiver) of the conditions to
the Closing set forth in Sections 6 and 7 below, at the offices of
Gracin & Marlow, LLP, The Chrysler Building, 405 Lexington
Avenue, 26
th
Floor, New York,
New York 10174. The Closing may also be undertaken remotely by
electronic transfer of Closing documentation.
(c)
Purchase Price
. The
purchase price for the Preferred Shares and the related Warrants to
be purchased by each Buyer at the Closing shall be the amount set
forth opposite such Buyer’s name in column (7) of the
Schedule of Buyers (the “
Purchase Price
”), which shall be
equal to the amount of $1,000 per Preferred Share and related
Warrants.
(d)
Form of Payment
. On
the Closing Date, (i) each Buyer shall pay its respective Purchase
Price (less, in the case of Empery Asset Master, Ltd. (the
“
Lead
Investor
”), any amounts withheld pursuant to Section
4(g)) to the Company for the Preferred Shares and the Warrants to
be issued and sold to such Buyer at the Closing by wire transfer of
immediately available funds in accordance with the Company’s
written wire instructions, after deducting certain fees and
expenses due to the Buyers and the Placement Agent; and (ii) the
Company shall deliver to each Buyer (w) one or more stock
certificates, evidencing the number of Preferred Shares such Buyer
is purchasing as is set forth opposite such Buyer’s name in
column (3) of the Schedule of Buyers, (x) a Series A Warrant
pursuant to which such Buyer shall have the right to acquire such
number of Series A Warrant Shares as is set forth opposite such
Buyer’s name in column (4) of the Schedule of Buyers, (y) a
Series B Warrant pursuant to which such Buyer shall have the right
to acquire such number of Series B Warrant Shares as is set forth
opposite such Buyer’s name in column (5) of the Schedule of
Buyers, and (z) a Series C Warrant pursuant to which such Buyer
shall have the right to acquire such number of Series C Warrant
Shares as is set forth opposite such Buyer’s name in column
(6) of the Schedule of Buyers, in each case 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, severally and
not jointly, represents and warrants with respect to only itself to
the Company that:
(a)
No Public Sale or
Distribution
. Such Buyer is (i) acquiring the Preferred
Shares and the Warrants and (ii) upon exercise of the Warrants
(other than pursuant to a Cashless Exercise (as defined in the
Warrants)) will acquire the Warrant Shares issuable upon exercise
of the Warrants, for its own account and not with a view towards,
or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the
1933 Act;
provided
,
however
, that by
making the representations herein, such Buyer does not agree 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 is acquiring the
Securities hereunder in the ordinary course of its business. Such
Buyer does not presently have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the
Securities. As used herein, “
Person
“means an individual, a
limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other
entity and any governmental entity or any department or agency
thereof.
(b)
Accredited Investor
Status
. Such Buyer is an “accredited investor”
as that term is defined in Rule 501(a) of Regulation
D.
(c)
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.
(d)
Information
. Such
Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the
Securities that have been requested by such Buyer. Such Buyer and
its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors,
if any, or its representatives shall modify, amend or affect such
Buyer’s right to rely on the Company’s representations
and warranties contained herein. 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.
(e)
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.
(f)
Transfer or Resale
.
Such Buyer understands that except as provided in the Registration
Rights Agreement: (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 an opinion of counsel, in a generally
acceptable form, 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 that such Securities
can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A promulgated under the 1933 Act, as amended, (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 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. 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 and such pledge of Securities shall not be deemed to be
a transfer, sale or assignment of the Securities hereunder, and no
Buyer effecting 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 (as defined in Section 3(b)), including, without
limitation, this Section 2(f).
(g)
Legends
. Such Buyer
understands that the certificates or other instruments representing
the Preferred Shares and the Warrants and, until such time as the
resale of the Preferred Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration
Rights Agreement, the stock certificates representing the Warrant
Shares, except as set forth below, shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may
be placed against transfer of such stock
certificates):
[NEITHER THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE]
[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 SELECTED BY THE HOLDER, 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.]
The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of the Securities
upon which it is stamped or issue to such holder by electronic
delivery at the applicable balance account at The Depository Trust
Company (“
DTC
”),
if (i) such Securities are registered for resale under the 1933
Act, (ii) in connection with a sale, assignment or other transfer,
such holder provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that such sale, assignment
or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act, or (iii) the
Securities can be sold, assigned or transferred pursuant to Rule
144 or Rule 144A. The Company shall be responsible for the fees of
its transfer agent and all DTC fees associated with such issuance.
If the Company shall fail for any reason or for no reason to issue
to the holder of the Securities within two (2) Trading Days (as
defined in the Warrants) after the occurrence of any of (i) through
(iii) above (the initial date of such occurrence, the
“
Legend Removal
Date
”), a certificate without such legend to such
holder or to issue such Securities to such holder by electronic
delivery at the applicable balance account at DTC, and if on or
after such Trading Day the holder purchases (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction
of a sale by the holder of such Securities that the holder
anticipated receiving without legend from the Company (a
“
Buy-In
”), then
the Company shall, within two (2) Trading Days after the
holder’s request and in the holder’s discretion, either
(i) pay cash to the holder in an amount equal to the holder’s
total purchase price (including brokerage commissions, if any) for
the Common Stock so purchased (the “
Buy-In Price
”), at which point the
Company’s obligation to deliver such unlegended Securities
shall terminate, or (ii) promptly honor its obligation to deliver
to the holder such unlegended Securities as provided above and pay
cash to the holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of
Common Stock, times (B) any trading price of the Common Stock
selected by the Holder in writing as in effect at any time during
the period beginning on the applicable Legend Removal Date and the
date the Company makes the applicable cash
payment.
In
addition to such Buyer’s other available remedies, the
Company shall pay to a Buyer, in cash, (i) as partial liquidated
damages and not as a penalty, for each $1,000 of Preferred Shares
or Warrant Shares (based on the VWAP of the Common Stock on the
date such Preferred Shares or Warrant Shares are submitted to the
transfer agent) delivered for removal of the restrictive legend and
subject to Section 2(g), $10 per Trading Day (increasing to $20 per
Trading Day five (5) Trading Days after such damages have begun to
accrue) for each Trading Day after the Legend Removal Date until
such certificate is delivered without a legend. The Company shall
be responsible for the fees of its transfer agent and all DTC fees
associated with such issuance.
As used in this Section 2(g),
“
VWAP
” means, for any date, the price determined
by the first of the following clauses that applies: (a) if the
Common Stock is then listed or quoted on a Trading Market, the
daily volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the Trading Market on which
the Common Stock is then listed or quoted as reported by Bloomberg
L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to
4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a
Trading Market, the volume weighted average price of the Common
Stock for such date (or the nearest preceding date) on OTCQB or
OTCQX as applicable, (c) if the Common Stock is not then listed or
quoted for trading on OTCQB or OTCQX and if prices for the Common
Stock are then reported in the “Pink Sheets” published
by OTC Markets Group, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent
bid price per share of the Common Stock so reported, or (d) in all
other cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Purchasers of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company. As used in this
Section 2(g), “
Trading
Market
” means any of the
following markets or exchanges on which the Common Stock is listed
or quoted for trading on the date in question: the NYSE American,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market or the New York Stock Exchange (or any
successors to any of the foregoing).
(h)
Validity;
Enforcement
. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and
delivered on behalf of such Buyer and shall constitute 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 to 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 Registration Rights Agreement 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 or (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)
Stockholder
Approval
. Buyer
agrees and acknowledges that the Preferred Shares may not be
converted into Conversion Shares, and the Warrants cannot be
exercised for Warrant Shares unless and until such time as (i)
stockholders have approved an amendment to the Company’s
Certificate of Incorporation to increase the number of shares of
authorized Common Stock (or effect a reverse split of the Common
Stock) to permit the issuance of Conversion Shares and Warrant
Shares upon conversion of the Preferred Shares and exercise of the
Warrants, respectively (the “
Authorized Share Approval
”), and
(ii) the Company (A) obtains the approval of its stockholders, as
may be required by the applicable rules of the Nasdaq Stock Market
LLC (or any successor entity), for the issuances of Common Stock as
contemplated by the Transaction Documents, including, without
limitation, the issuance of all of the Conversion Shares and
Warrant Shares in accordance with Rule 5635(d) (the
“
Stockholder
Approval
”), or (B) obtains a waiver from the Nasdaq
Stock Market LLC (or any successor entity) of all applicable
listing rules requiring such Stockholder Approval. Buyer further
agrees and acknowledges that Buyer shall bear the economic risk of
loss associated with holding the Preferred Shares and Warrants
pending the satisfaction of the conditions set forth in this
Section 2(j).
3.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
. The Company represents and
warrants to each of the Buyers that, as of the date hereof and as
of the Closing Date:
(a)
Organization and
Qualification
. Each of the Company and each of its
“
Subsidiaries
“(which for purposes of this Agreement means any entity in
which the Company, directly or indirectly, owns any of the capital
stock or holds an equity or similar interest) are entities duly
organized and validly existing and in good standing under the laws
of the jurisdiction in which they are formed, and have the
requisite power and authorization to own their properties and to
carry on their business as now being conducted and as presently
proposed to be conducted. Each of the Company and each of its
Subsidiaries 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
reasonably be expected to have a Material Adverse Effect. As used
in this Agreement, “
Material
Adverse Effect
“means any material adverse effect on
the business, properties, assets, liabilities, operations, results
of operations, condition (financial or otherwise) or prospects of
the Company and its Subsidiaries, individually or taken as a whole,
or on the transactions contemplated hereby or on the other
Transaction Documents or by the agreements and instruments to be
entered into in connection herewith or therewith, or on the
authority or ability of the Company to perform any of its
obligations under any of the Transaction Documents (as defined
below). The Company has no Subsidiaries except as set forth in
Schedule 3(a)
. The
outstanding shares of capital stock of each of the Subsidiaries
have been duly authorized and validly issued, are fully paid and
non-assessable and are owned by the Company or another Subsidiary
free and clear of all liens, encumbrances and equities and claims;
and no options, warrants or other rights to purchase, agreements or
other obligations to issue or other rights to convert any
obligations into shares of capital stock or ownership interests in
the Subsidiaries are outstanding.
(b)
Authorization;
Enforcement; Validity
. The Company has the requisite
corporate power and authority to enter into and perform its
obligations under this Agreement, the COD, the Warrants, the
Registration Rights Agreement, the Lock-Up Agreements (as defined
in Section 7(x)), the Irrevocable Transfer Agent Instructions (as
defined in Section 5(b)), and each of the other agreements entered
into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the
“
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 Preferred Shares and the Warrants and the
reservation for issuance and the issuance of the Conversion Shares
issuable upon conversion of the Preferred Shares pursuant to the
terms of the COD and the Warrant Shares issuable upon exercise of
the Warrants have been duly authorized by the Company’s Board
of Directors 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
Board of Directors or its stockholders. This Agreement and the
other Transaction Documents have been duly executed and delivered
by the Company, and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company 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 or similar laws relating to, or affecting generally,
the enforcement of applicable creditors’ rights and
remedies.
(c)
Issuance of
Securities
. The issuance of the Preferred Shares and the
Warrants are duly authorized and, upon issuance in accordance with
the terms of the Transaction Documents, the Preferred Shares and
the Warrants shall be validly issued and free from all preemptive
or similar rights (except for those which have been validly waived
prior to the date hereof), taxes, liens and charges and other
encumbrances with respect to the issue thereof and the Preferred
Shares shall be fully paid and nonassessable with the holders being
entitled to all rights accorded to a holder of Preferred Stock. As
of the Closing Date, a number of shares of Common Stock shall have
been duly authorized and reserved for issuance which equals at
least the sum of (i)
the maximum number of
shares of Common Stock issuable upon conversion of the Preferred
Shares, (ii) the maximum number of shares of Common Stock issuable
upon exercise of the Series A Warrants, (iii) the maximum number of
shares of Common Stock issuable upon exercise of the Series B
Warrants and (iv) the maximum number of shares of Common Stock
issuable upon exercise of the Series C Warrants, in each case,
without giving effect to any limitation on exercise set forth
therein and, with respect to the Series A Warrants and Series B
Warrants, assuming that the Maximum Eligibility Number (as defined
in the Series C Warrant) is determined based on a Reset Price (as
defined in the Series C Warrants) equal to $0.08 (as adjusted for
stock splits, stock dividends, recapitalizations, reorganizations,
reclassification, combinations, reverse stock splits or other
similar events occurring after the date hereof). Upon conversion of
the Preferred Shares in accordance with the COD, the Conversion
Shares when issued will be validly issued, fully paid and
nonassessable and free from all preemptive or similar rights,
taxes, liens, charges and other encumbrances with respect to the
issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. Upon exercise of the Warrants
in accordance with the Warrants, the Warrant Shares when issued
will be validly issued, fully paid and nonassessable and free from
all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Stock.
Assuming the accuracy of each of the representations and warranties
set forth in Section 2 of 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 Preferred Shares and the Warrants and reservation
for issuance and issuance of the Warrant Shares) will not (i)
result in a violation of the Certificate of Incorporation (as
defined below) or Bylaws (as defined below) or other organizational
documents of the Company or any of its Subsidiaries, any capital
stock of the Company or any of its Subsidiaries or the articles of
association or bylaws of the Company or any of its Subsidiaries or
(ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) in any
respect under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including foreign,
federal and state securities laws and regulations and the rules and
regulations of the NASDAQ Capital Market (the “
Principal Market
”) and including
all applicable foreign, federal, state laws, rules and regulations)
applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries is
bound or affected.
(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, a Notification of Additional
Listing of Securities with Nasdaq 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
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 pursuant to the preceding
sentence have been obtained or effected on or prior to the Closing
Date (or in the case of filings detailed above, will be made timely
after the Closing Date), and the Company is unaware 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. Except as set forth on
Schedule 3.1(e)
,
the Company is not in violation of the listing requirements of the
Principal Market and has no knowledge of any facts or circumstances
which would reasonably lead to delisting or suspension of the
Common Stock in the foreseeable future. The issuance by the Company
of the Securities shall not have the effect of delisting or
suspending the Common Stock from the Principal Market.
(f)
Acknowledgment Regarding
Buyer’s Purchase of Securities
. The Company
acknowledges and agrees that each Buyer is acting solely in the
capacity of an arm’s length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby and
thereby and that no Buyer is (i) an officer or director of the
Company or any of its Subsidiaries, (ii) an “affiliate”
of the Company or any of its Subsidiaries (as defined in Rule 144)
or (iii) to the knowledge of the Company, a “beneficial
owner” of more than 10% of the Common Stock (as defined for
purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the “
1934
Act
”)). The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company or any
of its Subsidiaries (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
has been based solely on the independent evaluation by the Company
and its representatives.
(g)
No General Solicitation;
Placement Agent’s Fees
. Neither the Company, nor any
of its Subsidiaries or affiliates, nor any Person acting on its or
their 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,
including, without limitation, placement agent fees payable to
ThinkEquity, a Division of Fordham Financial Management Inc. and
Taglich Brothers Inc.(the “
Placement Agents
”) in connection
with the sale of the Securities. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense
(including, without limitation, reasonable attorney’s fees
and out-of-pocket expenses) arising in connection with any such
claim. The Company acknowledges that it has engaged the Placement
Agents in connection with the sale of the Securities. Other than
the Placement Agents, neither the Company nor any of its
Subsidiaries has engaged any placement agent or other agent in
connection with the offer or sale of the Securities.
(h)
No Integrated
Offering
. None of the Company, its Subsidiaries or any of
their affiliates, nor any Person acting on their 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 for purposes of the
1933 Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the
securities of the Company are listed or designated for quotation.
None of the Company, its Subsidiaries, their 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 for purposes of any such
applicable stockholder approval provisions.
(i)
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 Articles of
Incorporation, Bylaws or other organizational documents or the laws
of the jurisdiction of its formation which is or could become
applicable to any Buyer as a result 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 Common Stock
or a change in control of the Company or any of its
Subsidiaries.
(j)
SEC Documents; Financial
Statements
. Except as disclosed in
Schedule 3(j)
, during the two
(2) years prior to the date hereof, the Company has timely filed
all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to
the date hereof or prior to the Closing Date, and all exhibits
included therein and financial statements, notes and schedules
thereto and documents incorporated by reference therein being
hereinafter referred to as the “
SEC Documents
”). The Company has
delivered to the Buyers or their respective representatives true,
correct and complete copies of the SEC Documents not available on
the EDGAR system. As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements
of the 1934 Act applicable to the Company and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were
filed with the SEC, contained any untrue statement of a material
fact or omitted 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 filing dates, the financial
statements of the Company included in the SEC Documents complied as
to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared
in accordance with U.S. generally accepted accounting principles
(“
GAAP
”),
consistently applied during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to
the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the
financial position of the Company and its Subsidiaries as of the
dates thereof and the results of its operations and cash flows for
the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments which will not be
material, either individually or in the aggregate). No other
information provided by or on behalf of the Company to any of the
Buyers which is not included in the SEC Documents (including,
without limitation, information referred to in Section 2(d) of this
Agreement or in the disclosure schedules to this Agreement)
contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or
were made, not misleading.
(k)
Absence of Certain
Changes
. Except as disclosed in
Schedule 3(k)(i)
, since
September 30, 2018, there has been no material adverse change and
no material adverse development in the business, assets,
liabilities, properties, operations, condition (financial or
otherwise), results of operations or prospects of the Company or
any of its Subsidiaries. Except as disclosed in
Schedule 3(k)(ii)
, since
September 30, 2018, neither the Company nor any of its Subsidiaries
has (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $100,000 outside of
the ordinary course of business or (iii) had capital expenditures,
individually or in the aggregate, in excess of $100,000. Neither
the Company nor any of its Subsidiaries has 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 or any Subsidiary have any knowledge or
reason to believe that any of their respective 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 and its Subsidiaries, individually and on a consolidated
basis, are 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). For purposes of this Section
3(k), “
Insolvent”
means, with respect to
any Person, (i) the present fair saleable value of such
Person’s assets is less than the amount required to pay such
Person’s total Indebtedness (as defined in Section 3(r)),
(ii) such Person is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends
to incur or believes that it will incur debts that would be beyond
its ability to pay as such debts mature or (iv) such Person has
unreasonably small capital with which to conduct the business in
which it is engaged as such business is now conducted and is
proposed to be conducted.
(l)
No Undisclosed Events,
Liabilities, Developments or Circumstances
. Except as set
forth on
Schedule
3(l)
, no event, liability, development or circumstance has
occurred or exists, or is contemplated to occur with respect to the
Company, its Subsidiaries or their respective business, properties,
prospects, operations or financial condition, that would be
required to be disclosed by the Company under applicable securities
laws on a registration statement on Form S-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock
and which has not been publicly announced.
(m)
Conduct of Business;
Regulatory Permits
. Neither the Company nor any of its
Subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation, any certificate of designations,
preferences or rights of any other outstanding series of preferred
stock of the Company or any of its Subsidiaries or Bylaws or their
organizational charter, certificate of formation or certificate of
incorporation or bylaws, respectively. Neither the Company nor any
of its Subsidiaries is in violation of any judgment, decree or
order or any statute, ordinance, rule or regulation applicable to
the Company or any of its Subsidiaries, and neither the Company nor
any of its Subsidiaries will conduct its business in violation of
any of the foregoing, except in all cases for possible violations
which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company and each of
its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate foreign, federal or state
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 neither the Company nor
any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate,
authorization or permit. Without limiting the generality of the
foregoing, the Company is not in violation of any of the rules,
regulations or requirements of the Principal Market and has no
knowledge of any facts or circumstances that would reasonably lead
to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future. During the two (2) years prior to
the date hereof, (i) the Common Stock have been listed or
designated for quotation on the Principal Market, (ii) trading in
the Common Stock has not been suspended by the SEC or the Principal
Market and (iii) the Company has received no communication, written
or oral, from the SEC or the Principal Market regarding the
suspension or delisting of the Common Stock from the Principal
Market.
(n)
Foreign Corrupt
Practices
. Neither the Company, nor any of its Subsidiaries,
nor any director, officer, agent, employee or other Person acting
on behalf of the Company or any of its Subsidiaries has, in the
course of its actions for, or on behalf of, the Company or any of
its Subsidiaries (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.
(o)
Sarbanes-Oxley Act
.
The Company is in compliance with any and all applicable
requirements of the Sarbanes-Oxley Act of 2002, as amended, that
are effective as of the date hereof, and any and all applicable
rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof.
(p)
Transactions With
Affiliates
. Except as set forth in
Schedule 3(p)
, none of the
officers, directors or employees of the Company or any of its
Subsidiaries is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for ordinary course
services as employees, officers or directors), 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 or employee or, to the knowledge of
the Company or any of its Subsidiaries, any corporation,
partnership, trust or other Person in which any such officer,
director, or employee has a substantial interest or is an employee,
officer, director, trustee or partner.
(q)
Equity
Capitalization
. As of the date hereof, the authorized
capital stock of the Company consists of (i) 50,000,000 shares of
Common Stock, of which as of the date hereof, 16,241,259 are issued
and outstanding, 662,902 shares are reserved for issuance pursuant
to the Company’s stock option and purchase plans and
11,443,073 shares are reserved for issuance pursuant to securities
(other than the aforementioned options and Warrants) exercisable or
exchangeable for, or convertible into, Common Stock; and (ii)
1,000,000 shares of preferred stock, par value $0.001 per share, of
which 264,000 shares are designated as Series A convertible
preferred stock, of which 262,310 are currently issued and
outstanding, 5,000 shares are designated as Series B convertible
preferred stock, none which are currently issued and outstanding,
and 11,000 shares are designated as Series C convertible preferred
stock, none of which are currently issued and outstanding. No
Common Stock are held in treasury. All of such outstanding shares
are duly authorized and have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. 1,059,173
shares of the Company’s issued and outstanding Common Stock
on the date hereof are as of the date hereof owned by Persons who
are “affiliates” (as defined in Rule 405 of the 1933
Act) of the Company or any of its Subsidiaries. (i) Except as
disclosed in
Schedule
3(q)(i),
hereto, none of the Company’s or any
Subsidiary’s capital stock is subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or
permitted by the Company or any Subsidiary; (ii) except as
disclosed in
Schedule
3(q)(ii),
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 any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional capital
stock of the Company or any of its Subsidiaries 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 or any of its Subsidiaries; (iii) except as
disclosed in
Schedule
3(q)(iii),
there are no outstanding debt securities, notes,
credit agreements, credit facilities or other agreements, documents
or instruments evidencing Indebtedness of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is
or may become bound; (iv) except as disclosed in
Schedule 3(q)(iv),
there are no
financing statements securing obligations in any amounts filed in
connection with the Company or any of its Subsidiaries; (v), except
as disclosed in
Schedule
3(q)(v),
there are no agreements or arrangements (other than
pursuant to the Registration Rights Agreement) under which the
Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act; (vi) except as
disclosed in
Schedule
3(q)(vi),
there are no outstanding securities or instruments
of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or
any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (vii) except as
disclosed in
Schedule
3(q)(vii)
, there are no securities or instruments
containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities; (viii) except as
disclosed in
Schedule
3(q)(viii),
neither the Company nor any Subsidiary has any
stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement; and (ix) neither the
Company nor any of its Subsidiaries have any liabilities or
obligations required to be disclosed in the SEC Documents which are
not so disclosed in the SEC Documents, other than those incurred in
the ordinary course of the Company’s or its
Subsidiaries’ respective businesses and which, individually
or in the aggregate, do not or could not have a Material Adverse
Effect. 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, Common Stock and the material rights of the
holders thereof in respect thereto have heretofore been filed as
part of the SEC Documents.
(r)
Indebtedness and Other
Contracts
. Neither the Company nor any of its Subsidiaries,
(i) except as disclosed in
Schedule 3(r)(i)
, has any
outstanding Indebtedness (as defined below), (ii) except as
disclosed in
Schedule
3(r)(ii)
, is 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 would
reasonably be expected to result in a Material Adverse Effect,
(iii) except as disclosed in
Schedule 3(r)(iii)
, is 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, or (iv) except as
disclosed in
Schedule
3(r)(iv)
, is 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.
Schedule 3(r)
provides a
detailed description of the material terms of such outstanding
Indebtedness. For purposes of this Agreement: (x)
“
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
GAAP, consistently applied during the periods involved) (other than
trade payables entered into in the ordinary course of business
consistent with past practice), (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 GAAP,
consistently applied for the periods covered thereby, is classified
as a capital lease, (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, claim, lien, tax, right of first refusal,
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; and (y) “
Contingent Obligation
“means, as
to any Person, any direct or indirect liability, contingent or
otherwise, of that Person with respect to any indebtedness, capital
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.
(s)
Absence of
Litigation
. There is no action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public
board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries, the Common Stock
or any of the Company’s Subsidiaries or any of the
Company’s or its Subsidiaries’ officers or directors,
whether of a civil or criminal nature or otherwise, in their
capacities as such, except as set forth in
Schedule 3(s)
. The matters set
forth in
Schedule
3(s)
would not reasonably be expected to have a Material
Adverse Effect.
(t)
Insurance
. The
Company and each of its Subsidiaries are 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 and
its Subsidiaries are engaged. Neither the Company nor any such
Subsidiary has been refused any insurance coverage sought or
applied for and neither the Company nor any such Subsidiary has 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.
(u)
Employee Relations
.
Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or employs any member of a union.
The Company believes that its and its Subsidiaries’ relations
with their respective employees are good. No executive officer (as
defined in Rule 501(f) promulgated under the 1933 Act) or other key
employee of the Company or any of its Subsidiaries has notified the
Company or any such Subsidiary that such officer intends to leave
the Company or any such Subsidiary or otherwise terminate such
officer’s employment with the Company or any such Subsidiary.
No executive officer or other key employee of the Company or any of
its Subsidiaries 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 or any of its Subsidiaries to any liability with
respect to any of the foregoing matters. The Company and its
Subsidiaries are 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.
(v)
Title
. The Company
and its Subsidiaries have good and marketable title in fee simple
to all real property and good and marketable title to all personal
property owned by them which is material to the business of the
Company and its Subsidiaries, 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 and
any of its Subsidiaries. Any real property and facilities held
under lease by the Company or any of its Subsidiaries are held by
them 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 or any of its Subsidiaries.
(w)
Intellectual Property
Rights
. The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents,
patent rights, copyrights, original works of authorship,
inventions, licenses, approvals, governmental authorizations, trade
secrets and other intellectual property rights and all applications
and registrations therefor (“
Intellectual Property Rights
”)
necessary to conduct their respective businesses as now conducted
and as presently proposed to be conducted. Each of patents owned by
the Company or any of its Subsidiaries is listed on
Schedule 3(w)(i)
. Except as set
forth in
Schedule
3(w)(ii)
, none of the Company’s or its
Subsidiaries’ 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 or any of its Subsidiaries of Intellectual Property Rights
of others. There is no claim, action or proceeding being made or
brought, or to the knowledge of the Company or any of its
Subsidiaries, being threatened, against the Company or any of its
Subsidiaries regarding their 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 and each of its Subsidiaries have taken
reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property
Rights.
(x)
Environmental Laws
.
The Company and its Subsidiaries (A) are in compliance with all
Environmental Laws (as defined below), (B) have received all
permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective
businesses and (C) are in compliance with all terms and conditions
of any such permit, license or approval where, in each of the
foregoing clauses (A), (B) and (C), the failure to so comply could
be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect. The term “
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.
(y)
Subsidiary Rights
.
The Company or one of its Subsidiaries has the unrestricted right
to vote, and (subject to limitations imposed by applicable law) to
receive dividends and distributions on, all capital securities of
its Subsidiaries as owned by the Company or such
Subsidiary.
(z)
Tax Status
. The
Company and each of its Subsidiaries (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 and its Subsidiaries
know of no basis for any such claim.
(aa)
Internal Accounting and
Disclosure Controls
. The Company and each of its
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance 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 in
conformity with GAAP, consistently applied during the periods
involved and applicable law, and 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 maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15
under the 1934 Act) that are effective in ensuring that information
required to be disclosed by the Company in the reports that it
files or submits under the 1934 Act is recorded, processed,
summarized and reported, within the time periods specified in the
rules and forms of the SEC, including, without limitation, controls
and procedures designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits
under the 1934 Act is accumulated and communicated to the
Company’s management, including its principal executive
officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding
required disclosure. Except as set forth in
Schedule 3(aa)
, during the
twelve months prior to the date hereof neither the Company nor any
of its Subsidiaries has received any notice or correspondence from
any accountant relating to any material weakness in any part of the
system of internal accounting controls of the Company or any of its
Subsidiaries.
(bb)
Off Balance Sheet
Arrangements
. There is no transaction, arrangement, or other
relationship between the Company or any of its Subsidiaries and an
unconsolidated or other off balance sheet entity that is required
to be disclosed by the Company in its 1934 Act filings and is not
so disclosed or that otherwise would be reasonably likely to have a
Material Adverse Effect.
(cc)
Investment Company
Status
. Neither the Company nor any of its Subsidiaries is,
and upon consummation of the sale of the Securities, and for so
long as any Buyer holds any Securities, will not be, an
“investment 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)
Acknowledgement Regarding
Buyers’ Trading Activity
. The Company acknowledges and
agrees that (i) none of the Buyers has been asked to agree, nor has
any Buyer agreed, to desist from purchasing or selling, long and/or
short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the
Securities for any specified term; (ii) any Buyer, and
counter-parties in “derivative” transactions to which
any such Buyer is a party, directly or indirectly, presently may
have a “short” position in the Common Stock and (iii)
each Buyer shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any
“derivative” transaction. The Company further
understands and acknowledges that one or more Buyers may engage in
hedging and/or trading activities at various times during the
period that the Securities are outstanding, including, without
limitation, during the periods that the value of the Warrant Shares
are being determined and (b) such hedging and/or trading
activities, if any, can reduce the value of the existing
stockholders’ equity interest in the Company both at and
after the time the hedging and/or trading activities are being
conducted. The Company acknowledges that such aforementioned
hedging and/or trading activities do not constitute a breach of
this Agreement, the Warrants or any of the documents executed in
connection herewith.
(ee)
Manipulation of
Price
. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result, or that could reasonably be
expected to cause or result, in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale
or resale of any of the Securities, (ii) other than the Placement
Agent, sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) other than
the Placement Agent, paid or agreed to pay to any person any
compensation for soliciting another to purchase any other
securities of the Company.
(ff)
U.S. Real Property Holding
Corporation
. Neither the Company nor any of its Subsidiaries
is, or has ever been, and so long as any of the Securities are held
by any of the Buyers, shall become, 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 and each
Subsidiary shall so certify upon any Buyer’s
request.
(gg)
Eligibility for
Registration
. The Company is eligible to register the
Conversion Shares and the Warrant Shares for resale by the Buyers
using Form S-1 promulgated under the 1933 Act.
(hh)
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.
(ii)
Bank Holding Company
Act.
Neither the Company nor any of its Subsidiaries or
affiliates is 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 any of its
Subsidiaries or 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 entity that is subject to the
BHCA and to regulation by the Federal Reserve. Neither the Company
nor any of its Subsidiaries or 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.
(jj)
Shell Company
Status
. The Company is not, and has never been, an issuer
identified in, or subject to, Rule 144(i)(1) of the 1933
Act.
(kk)
Compliance with Anti-Money
Laundering Laws
. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial recordkeeping and reporting requirements
and all other applicable U.S. and non-U.S. anti-money laundering
laws, rules and regulations, including, but not limited to, those
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, the United States Bank Secrecy Act, as amended by the USA
PATRIOT Act of 2001, and the United States Money Laundering Control
Act of 1986 (18 U.S.C. §§1956 and 1957), as amended, as
well as the implementing rules and regulations promulgated
thereunder, and the applicable money laundering statutes of all
applicable jurisdictions, the rules and regulations thereunder and
any related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency or
self-regulatory body (collectively, the “
Anti-Money Laundering Laws
”), and
no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
the Company or any of its Subsidiaries with respect to the
Anti-Money Laundering Laws is pending or, to the knowledge of the
Company, threatened.
(ll)
No Conflicts with
Sanctions Laws
. Neither the Company nor any of its
Subsidiaries, nor any director, officer, employee, agent, affiliate
or other person associated with or acting on behalf of the Company
or any of its Subsidiaries or affiliates is, or is directly or
indirectly owned or controlled by, a Person that is currently the
subject or the target of any sanctions administered or enforced by
the U.S. government (including, without limitation, the Office of
Foreign Assets Control of the U.S. Department of the Treasury
(“
OFAC
”) or the
U.S. Departments of State or Commerce and including, without
limitation, the designation as a “Specially Designated
National” or on the “Sectoral Sanctions Identifications
List”, collectively “Blocked Persons”), the
United Nations Security Council (“
UNSC
”), the European Union, Her
Majesty’s Treasury (“
HMT
”) or any other relevant
sanctions authority (collectively, “
Sanctions Laws
”); neither the
Company, any of its Subsidiaries, nor any director, officer,
employee, agent, affiliate or other person associated with or
acting on behalf of the Company or any of its Subsidiaries or
affiliates, is located, organized or resident in a country or
territory that is the subject or target of a comprehensive embargo
or Sanctions Laws prohibiting trade with the country or territory,
including, without limitation, Crimea, Cuba, Iran, North Korea,
Sudan and Syria (each, a “
Sanctioned Country
”); the Company
maintains in effect and enforces policies and procedures designed
to ensure compliance by the Company and its Subsidiaries with
applicable Sanctions Laws; neither the Company, any of its
Subsidiaries, nor any director, officer, employee, agent, affiliate
or other person associated with or acting on behalf of the Company
or any of its Subsidiaries or affiliates, acting in any capacity in
connection with the operations of the Company, conducts any
business with or for the benefit of any Blocked Person or engages
in making or receiving any contribution of funds, goods or services
to, from or for the benefit of any Blocked Person, or deals in, or
otherwise engages in any transaction relating to, any property or
interests in property blocked or subject to blocking pursuant to
any applicable Sanctions Laws; no action of the Company or any of
its Subsidiaries in connection with (i) the execution, delivery and
performance of this Agreement and the other Transaction Documents,
(ii) the issuance and sale of the Securities, or (iii) the direct
or indirect use of proceeds from the Securities or the consummation
of any other transaction contemplated hereby or by the other
Transaction Documents or the fulfillment of the terms hereof or
thereof, will result in the proceeds of the transactions
contemplated hereby and by the other Transaction Documents being
used, or loaned, contributed or otherwise made available, directly
or indirectly, to any Subsidiary, joint venture partner or other
person or entity, for the purpose of (i) unlawfully funding or
facilitating any activities of or business with any person that, at
the time of such funding or facilitation, is the subject or target
of Sanctions Laws, (ii) unlawfully funding or facilitating any
activities of or business in any Sanctioned Country or (iii) in any
other manner that will result in a violation by any Person
(including any Person participating in the transaction, whether as
underwriter, advisor, investor or otherwise) of Sanctions Laws. For
the past five (5) years, the Company and its Subsidiaries have not
knowingly engaged in and are not now knowingly engaged in any
dealings or transactions with any person that at the time of the
dealing or transaction is or was the subject or the target of
Sanctions Laws or with any Sanctioned Country.
(mm)
Anti-Bribery
.
Neither the Company nor any of the Subsidiaries has made any
contribution or other payment to any official of, or candidate for,
any federal, state or foreign office in violation of any law which
violation is required to be disclosed in the Prospectus. Neither
the Company, nor any of its Subsidiaries or affiliates, nor any
director, officer, agent, employee or other person associated with
or acting on behalf of the Company, or any of its Subsidiaries or
affiliates, has (i) used any funds for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political
activity, (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee, to any
employee or agent of a private entity with which the Company does
or seeks to do business (a “
Private Sector Counterparty
”) or
to foreign or domestic political parties or campaigns, (iii)
violated or is in violation of any provision of any applicable law
or regulation implementing the OECD Convention on Combating Bribery
of Foreign Public Officials in International Business Transactions
or any applicable provision of the U.S. Foreign Corrupt Practices
Act of 1977, as amended (the “
FCPA
”), the U.K. Bribery Act 2010,
or any other similar law of any other jurisdiction in which the
Company operates its business, including, in each case, the rules
and regulations thereunder (the “
Anti-Bribery Laws
”), (iv) taken,
is currently taking or will take any action in furtherance of an
offer, payment, gift or anything else of value, directly or
indirectly, to any person while knowing that all or some portion of
the money or value will be offered, given or promised to anyone to
improperly influence official action, to obtain or retain business
or otherwise to secure any improper advantage or (v) otherwise made
any offer, bribe, rebate, payoff, influence payment, unlawful
kickback or other unlawful payment; the Company and each of its
respective Subsidiaries has instituted and has maintained, and will
continue to maintain, policies and procedures reasonably designed
to promote and achieve compliance with the laws referred to in
(iii) above and with this representation and warranty; none of the
Company, nor any of its Subsidiaries or affiliates will directly or
indirectly use the proceeds of the convertible securities or lend,
contribute or otherwise make available such proceeds to any
subsidiary, affiliate, joint venture partner or other person or
entity for the purpose of financing or facilitating any activity
that would violate the laws and regulations referred to in (iii)
above; there are, and have been, no allegations, investigations or
inquiries with regard to a potential violation of any Anti-Bribery
Laws by the Company, its Subsidiaries or affiliates, or any of
their respective current or former directors, officers, employees,
stockholders, representatives or agents, or other persons acting or
purporting to act on their behalf.
(nn)
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.
(oo)
Disclosure
. Except
for discussions specifically regarding the offer and sale of the
Securities, the Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Buyers or their
agents or counsel with any information that constitutes or could
reasonably be expected to constitute material, non-public
information concerning the Company or any of its Subsidiaries,
other than the existence of the transactions contemplated by this
Agreement and the other Transaction Documents. The Company
understands and confirms that each of the Buyers will rely on the
foregoing representations in effecting transactions in securities
of the Company. All disclosure provided to the Buyers regarding the
Company and its Subsidiaries, their businesses and the transactions
contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company or any of its Subsidiaries
is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order
to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. All of
the written information furnished after the date hereof by or on
behalf of the Company or any of its Subsidiaries to you pursuant to
or in connection with this Agreement and the other Transaction
Documents, taken as a whole, will be true and correct in all
material respects as of the date on which such information is so
provided and will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances
under which they are made, not misleading. Each press release
issued by the Company or any of its Subsidiaries during the twelve
(12) months preceding the date of this Agreement did not at the
time of release 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. No
event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their
business, properties, liabilities, prospects, operations (including
results thereof) or conditions (financial or otherwise), which,
under applicable law, rule or regulation, requires public
disclosure at or before the date hereof or announcement by the
Company but which has not been so publicly disclosed. 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.
(pp)
Stock Option Plans
.
Each stock option granted by the Company was granted (i) in
accordance with the terms of the applicable Company stock option
plan and (ii) with an exercise price at least equal to the fair
market value of the Common Stock on the date such stock option
would be considered granted under GAAP, consistently applied during
the periods involved and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The
Company has not knowingly granted, and there is no and has been no
Company policy or practice to knowingly grant, stock options prior
to, or otherwise knowingly coordinate the grant of stock options
with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their
financial results or prospects.
(qq)
No Disagreements with
Accountants and Lawyers
. There are no material disagreements
of any kind presently existing, or reasonably anticipated by the
Company to arise, between the Company and the accountants and
lawyers formerly or presently employed by the Company and the
Company is current with respect to any fees owed to its accountants
and lawyers which could affect the Company’s ability to
perform any of its obligations under any of the Transaction
Documents.
(rr)
No Disqualification
Events
. With respect to Securities to be offered and sold
hereunder in reliance on Rule 506(b) under the 1933 Act
(“
Regulation D
Securities
”), none of the Company, any of its
predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the offering
hereunder, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is
defined in Rule 405 under the 1933 Act) connected with the Company
in any capacity at the time of sale (each, an “
Issuer Covered Person
“and,
together, “
Issuer Covered
Persons
”) is subject to any of the “Bad
Actor” disqualifications described in Rule 506(d)(1)(i) to
(viii) under the 1933 Act (a ”
Disqualification Event
”), except
for a Disqualification Event covered by Rule 506(d)(2) or (d)(3).
The Company has exercised reasonable care to determine whether any
Issuer Covered Person is subject to a Disqualification Event. The
Company has complied, to the extent applicable, with its disclosure
obligations under Rule 506(e), and has furnished to the Buyers a
copy of any disclosures provided thereunder.
(ss)
Other Covered
Persons
. The Company is not aware of any Person (other than
the Placement Agent) that has been or will be paid (directly or
indirectly) remuneration for solicitation of Buyers or potential
purchasers in connection with the sale of any Regulation D
Securities.
(tt)
Dilutive Effect
.
The Company understands and acknowledges that the number of Warrant
Shares issuable pursuant to terms of the Warrants will increase in
certain circumstances. The Company further acknowledges that its
obligation to issue Warrant Shares pursuant to the terms of the
Warrants in accordance with this Agreement and the Warrants is
absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other
stockholders of the Company.
(uu)
Related Party
Loans
. All loans payable by the Company and/or its
Subsidiaries to any of its directors, officers and/or any of their
Affiliates (the “
Related
Party Loans
”), including, without limitation, all
loans set forth on under the caption “Related Party Notes
Payable” on
Schedule
3(r)(i)
, have been amended such that no payments under any
of such Related Party Loans will be due prior to December 31,
2019.
4.
COVENANTS
.
(a)
Best Efforts
. Each
party shall use its best efforts timely to satisfy each of the
covenants and the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
(b)
Form D and Blue
Sky
. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action 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
Buyers on or prior to the Closing Date. The Company shall make all
filings and reports relating to the offer and sale of the
Securities required under applicable securities or “Blue
Sky” laws of the states of the United States following the
Closing Date.
(c)
Reporting Status
.
Until the date on which the Investors (as defined in the
Registration Rights Agreement) shall have sold all of the Preferred
Shares and Warrant Shares and none of the Preferred Shares or
Warrants are outstanding (the “
Reporting Period
”), the Company
shall 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, and the
Company shall take all actions necessary to maintain its
eligibility to register the Conversion Shares and Warrant Shares
for resale by the Investors on Form S-3, or any other form for
which the Company then qualifies or which counsel for the Company
shall deem appropriate and which form shall be available for the
resale by the Buyers of all Registrable Securities.
(d)
Use of Proceeds
.
The Company will use the proceeds from the sale of the Securities
for its acquisition of the assets of Stantive Technologies Group
Inc. pursuant to the terms of the proposed Asset Purchase Agreement
the Company submitted to the Ontario Superior Court of Justice in
Bankruptcy and Solvency, to pay $2.7 million of Indebtedness, and
for working capital purposes.
(e)
Financial
Information
. The Company agrees to send the following to
each Investor (as defined in the Registration Rights Agreement)
during the Reporting Period (i) unless the following are filed with
the SEC through EDGAR and are available to the public through the
EDGAR system, within one (1) Business Day after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-K, any
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K (or
any analogous reports under the 1934 Act) and any registration
statements (other than on Form S-8) or amendments filed pursuant to
the 1933 Act, (ii) on the same day as the release thereof,
facsimile or e-mailed copies of all press releases issued by the
Company or any of its Subsidiaries and (iii) copies of any notices
and other information made available or given to the stockholders
of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders. As used herein,
“
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.
(f)
Listing
. The
Company shall promptly secure the listing of all of the Registrable
Securities (as defined in the Registration Rights Agreement) upon
each national securities exchange and automated quotation system,
if any, upon which the Common Stock are then listed (subject to
official notice of issuance) and shall maintain such listing of all
Registrable Securities from time to time issuable under the terms
of the Transaction Documents. The Company shall maintain the
authorization for quotation of the Common Stock on the Principal
Market or any other Eligible Market (as defined in the COD and
Warrants). Neither the Company nor any of its Subsidiaries shall
take any action which would be reasonably expected to result in the
delisting or suspension of the Common Stock on the Principal
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 reimburse the Lead Investor (a Buyer) or its designee(s) (in
addition to any other expense amounts paid to any Buyer or its
counsel prior to the date of this Agreement) for all costs and
expenses incurred in connection with the transactions contemplated
by the Transaction Documents (including all reasonable legal fees
and disbursements in connection therewith, documentation and
implementation of the transactions contemplated by the Transaction
Documents and due diligence in connection therewith), which amount
may be withheld by such Buyer from its Purchase Price at the
Closing to the extent not previously reimbursed by the Company.
Notwithstanding the foregoing, in no event will the fees of counsel
of the Lead Investor reimbursed by the Company pursuant to this
Section 4(g) (in addition to any other expense amounts paid to any
Buyer or its counsel prior to the date of this Agreement) exceed
$15,000 without the prior approval from the Company. 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, including, without
limitation, any fees or commissions payable to the Placement Agent,
including any reasonable legal fees and expenses of the Placement
Agent. The Company shall pay, and hold each Buyer harmless against,
any liability, loss or expense (including, without limitation,
reasonable attorney’s 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
. The Company acknowledges and agrees that the
Securities may be pledged by an Investor in connection with a bona
fide margin agreement or other 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 Investor effecting 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, including, without
limitation, Section 2(f) hereof;
provided
that an Investor and
its pledgee shall be required to comply with the provisions of
Section 2(f) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee. The Company hereby agrees
to execute and deliver such documentation as a pledgee of the
Securities may reasonably request in connection with a pledge of
the Securities to such pledgee by an Investor.
(i)
Disclosure of Transactions
and Other Material Information
. On or before 9:00 AM on
March ___, 2019
1
, the Company shall (A) issue a press
release (the “
Press
Release
”) reasonably acceptable to the Buyers
disclosing all material terms of the transactions contemplated
hereby and (B) file a Current Report on Form 8-K describing the
terms of the transactions contemplated by the Transaction Documents
in the form required by the 1934 Act and attaching the material
Transaction Documents (including, without limitation, this
Agreement (and all schedules and exhibits to this Agreement), the
COD, the form of the Warrants, the form of Exchange Agreement, the
form of Lock-Up Agreement and the form of the Registration Rights
Agreement as exhibits to such filing (including all attachments),
the “
8-K
Filing
”). From and after the filing of the 8-K Filing,
no Buyer shall be in possession of any material, non-public
information received from the Company, any of its Subsidiaries or
any of their respective officers, directors, employees, affiliates
or agents, that is not disclosed in the 8-K Filing. In addition,
effective upon the filing of the 8-K Filing, the Company
acknowledges and agrees that any and all confidentiality or similar
obligations under any agreement, whether written or oral, between
the Company, any of its Subsidiaries or any of their respective
officers, directors, affiliates, employees or agents, on the one
hand, and any of the Buyers or any of their affiliates, on the
other hand, shall terminate. The Company shall not, and shall cause
each of its Subsidiaries and its and each of their respective
officers, directors, employees, affiliates and agents, not to,
provide any Buyer with any material, non-public information
regarding the Company or any of its Subsidiaries from and after the
date hereof without the express prior written consent of such
Buyer. If a Buyer has, or believes it has, received any such
material, non-public information regarding the Company or any of
its Subsidiaries from the Company, any of its Subsidiaries or any
of their respective officers, directors, employees, affiliates or
agents, it may provide the Company with written notice thereof. The
Company shall, within two (2) Trading Days of receipt of such
notice, make public disclosure of such material, non-public
information. In the event of a breach of the foregoing covenant by
the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, employees, affiliates and agents,
in addition to any other remedy provided herein or in the
Transaction Documents, a Buyer shall have the right to make a
public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, non-public
information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers,
directors, employees, affiliates or agents. No Buyer shall have any
liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, affiliates or agents for
any such disclosure. To the extent that the Company delivers any
material, non-public information to a Buyer without such
Buyer’s consent, the Company hereby covenants and agrees that
such Buyer shall not have any duty of confidentiality to the
Company, any of its Subsidiaries or any of their respective
officers, directors, employees, affiliates or agents with respect
to, or a duty to the Company, any of its Subsidiaries or any of
their respective officers, directors, employees, affiliates or
agents not to trade on the basis of, such material, non-public
information. Subject to the foregoing, neither the Company, its
Subsidiaries nor any Buyer shall issue any press releases or any
other public statements with respect to the transactions
contemplated hereby;
provided
,
however
, that the Company shall
be entitled, without the prior approval of any Buyer, to make any
press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable
law and regulations (provided that in the case of clause (i) each
Buyer shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release).
Except for the Registration Statement required to be filed pursuant
to the Registration Rights Agreement, without the prior written
consent of any applicable Buyer, neither the Company nor any of its
Subsidiaries or affiliates shall disclose the name of such Buyer in
any filing, announcement, release or otherwise.
(j)
Corporate
Existence
. So long as any Buyer beneficially owns any
Securities, the Company shall maintain its corporate existence and
shall not be party to any Fundamental Transaction (as defined in
the Warrants) unless the Company is in compliance with the
applicable provisions governing Fundamental Transactions set forth
in the Warrants.
(k)
Reservation of
Shares
. So long as any Buyer owns any Preferred Shares or
Warrants, the Company shall take all action necessary to at all
times after the date hereof have authorized, and reserved for the
purpose of issuance, no less than the number of shares of Common
Stock issuable upon conversion of the Preferred Shares (without
taking into account any limitations on the conversion of the
Preferred Shares set forth in the COD) and upon exercise of the
Warrants then outstanding (without taking into account any
limitations on the exercise of the Warrants set forth in the
Warrants) (herein, the “
Required Reserve Amount
”). If at
any time the number of shares of Common Stock authorized and
reserved for issuance is not sufficient to meet the Required
Reserved Amount, the Company will promptly take all corporate
action necessary to authorize and reserve a sufficient number of
shares, including, without limitation, calling a special meeting of
stockholders to authorize additional shares to meet the
Company’s obligations under Section 3(c), in the case of an
insufficient number of authorized shares, obtain stockholder
approval of an increase in such authorized number of shares (or
effecting a reverse stock split of the Common Stock), and voting
the management shares of the Company in favor of an increase in the
authorized shares (or effecting a reverse stock split of the Common
Stock) of the Company to ensure that the number of authorized
shares is sufficient to meet the Required Reserved
Amount.
As soon
as practicable following the Closing Date, the Company shall hold a
special meeting of stockholders for
the purpose of
obtaining Authorized Share Approval and Stockholder Approval (the
“
Special
Meeting
”). The Special Meeting shall be held no later
than May 1, 2019. The Company shall use its reasonable best efforts
to obtain Authorized Share Approval and Stockholder Approval of
such items and shall cause the Board of Directors of the Company to
recommend to the stockholder that they approve such items. If,
despite the Company’s reasonable best efforts the Authorized
Share Approval and Stockholder Approval is not obtained on or prior
to the May 1, 2019, the Company shall cause an additional
stockholder meeting to be held every three months thereafter until
such Authorized Share Approval and Stockholder Approval is
obtained.
(l)
Conduct of
Business
. The business of the Company and its Subsidiaries
shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, including, without
limitation, FCPA and other applicable Anti-Bribery Laws, OFAC
regulations and other applicable Sanctions Laws, and Anti-Money
Laundering Laws.
(i)
Neither the Company, nor any of its Subsidiaries or affiliates,
directors, officers, employees, representatives or agents
shall:
(a)
conduct any business or engage in any transaction or dealing with
or for the benefit of any Blocked Person, including the making or
receiving of any contribution of funds, goods or services to, from
or for the benefit of any Blocked Person;
(b)
deal in, or otherwise engage in any transaction relating to, any
property or interests in property blocked or subject to blocking
pursuant to the applicable Sanctions Laws;
(c) use
any of the proceeds of the transactions contemplated by this
Agreement to finance, promote or otherwise support in any manner
any illegal activity, including, without limitation, any Anti-Money
Laundering Laws, Sanctions Laws, or Anti-Bribery Laws;
or
(d)
violate, attempt to violate, or engage in or conspire to engage in
any transaction that evades or avoids, or has the purpose of
evading or avoiding, any of the Anti-Money Laundering Laws,
Sanctions Laws, or Anti-Bribery Laws.
(ii)
The Company shall maintain in effect and enforce policies and
procedures designed to ensure compliance by the Company and its
Subsidiaries and their directors, officers, employees, agents
representatives and affiliates with the Sanctions Laws and
Anti-Bribery Laws.
(iii)
The Company will promptly notify the Buyers in writing if any of
the Company, or any of its Subsidiaries or affiliates, directors,
officers, employees, representatives or agents, shall become a
Blocked Person, or become directly or indirectly owned or
controlled by a Blocked Person.
(iv)
The Company shall provide such information and documentation as the
Buyers or any of their affiliates may require to satisfy compliance
with the Anti-Money Laundering Laws, Sanctions Laws, or
Anti-Bribery Laws.
(v) The
covenants set forth above shall be ongoing. The Company shall
promptly notify the Buyers in writing should it become aware (a) of
any changes to these covenants, or (b) if it cannot comply with the
covenants set forth herein. The Company shall also promptly notify
the Buyers in writing should they become aware of an investigation,
litigation or regulatory action relating to an alleged or potential
violation of the Anti-Money Laundering Laws, Sanctions Laws, and
Anti-Bribery Laws.
(m)
Additional Issuances of
Securities
.
(i) For
purposes of this Section 4(m), the following definitions shall
apply.
(1)
“
Convertible
Securities
“means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for Common
Stock.
(2)
“
Options
“means
any rights, warrants or options to subscribe for or purchase Common
Stock or Convertible Securities.
(3)
“
Common Stock
Equivalents
“means, collectively, Options and
Convertible Securities.
(ii)
From the date hereof until the Trigger Date, the Company shall not,
directly or indirectly, file any registration statement with the
SEC, or file any amendment or supplement thereto or cause any
registration statement or amendment thereto to be declared
effective by the SEC, or grant any registration rights to any
Person that can be exercised prior to such time as set forth above,
other than pursuant to the Registration Rights Agreement. From the
date hereof until the date that is ninety (90) calendar days after
the Trigger Date, the Company shall not, (1) directly or
indirectly, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition of) any of its or its
Subsidiaries’ debt, equity or equity equivalent securities,
including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and
under any circumstances, convertible into or exchangeable or
exercisable for Common Stock or Common Stock Equivalents,
including, without limitation, any rights, warrants or options to
subscribe for or purchase Common Stock or directly or indirectly
convertible into or exchangeable or exercisable for Common Stock at
a price which varies or may vary with the market price of the
Common Stock, including by way of one or more reset(s) to any fixed
price (any such offer, sale, grant, disposition or announcement
being referred to as a “
Subsequent Placement
”), (2) enter
into, or effect a transaction under, any agreement, including, but
not limited to, an equity line of credit or
“at-the-market” offering, whereby the Company may issue
securities at a future determined price or (3) be party to any
solicitations, negotiations or discussions with regard to the
foregoing. As used herein, “
Trigger Date
“means the latest of
(I) the date of Stockholder Approval, (II) the date of Authorized
Share Approval and (III) the earlier of (x) such time as one or
more Registration Statement(s) covering the resale of all
Registrable Securities has been effective and available for the
re-sale of all such Registrable Securities and (y) such time as all
of the Registrable Securities may be sold without restriction or
limitation pursuant to Rule 144 and without the requirement to be
in compliance with Rule 144(c)(1). At any time prior to the date
that is ninety (90) calendar days after the Trigger Date, the
Company and each Subsidiary shall be prohibited from effecting or
entering into an agreement to effect any Subsequent Placement
involving a Variable Rate Transaction. “
Variable Rate Transaction
“means a
transaction in which the Company or any Subsidiary (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 Ordinary
Shares 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
Ordinary Shares, other than pursuant to a customary “weighted
average” anti-dilution provision or (ii) enters into any
agreement (including, without limitation, an equity line of credit
or an “at-the-market” offering) whereby the Company or
any Subsidiary may sell securities at a future determined price
(other than standard and customary “preemptive” or
“participation” rights). Each Buyer shall be entitled
to obtain injunctive relief against the Company and its
Subsidiaries to preclude any such issuance, which remedy shall be
in addition to any right to collect damages.
(iii)
From 90 days following the Trigger Date until the two year
anniversary of the Closing Date (the “
Participation Period
”), the
Company will not, directly or indirectly, effect any Subsequent
Placement unless the Company shall have first complied with this
Section 4(m)(iii).
(1) The
Company shall deliver to each Buyer an irrevocable written notice
(the “
Offer
Notice
”) of any proposed or intended issuance or sale
or exchange (the “
Offer
”) of the securities being
offered (the “
Offered
Securities
”) in a Subsequent Placement, which Offer
Notice shall (A) identify and describe the Offered Securities, (B)
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, (C) identify the
Persons (if known) to which or with which the Offered Securities
are to be offered, issued, sold or exchanged and (D) offer to issue
and sell to or exchange with such Buyers at least 35% of the
Offered Securities, allocated among such Buyers (I) based on such
Buyer’s pro rata portion of the aggregate number of Preferred
Shares purchased hereunder (the “
Basic Amount
”), and (II) with
respect to each Buyer that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the
Basic Amounts of other Buyers as such Buyer shall indicate it will
purchase or acquire should the other Buyers subscribe for less than
their Basic Amounts (the “
Undersubscription
Amount
”).
(2) To
accept an Offer, in whole or in part, such Buyer must deliver a
written notice to the Company prior to the end of the third
(3
rd
)
Business Day after such Buyer’s receipt of the Offer Notice
(the “
Offer
Period
”), setting forth the portion of such
Buyer’s Basic Amount that such Buyer elects to purchase and,
if such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to
purchase (in either case, the “
Notice of Acceptance
”). If the
Basic Amounts subscribed for by all Buyers are less than the total
of all of the Basic Amounts, then each Buyer who has set forth an
Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed
for, the Undersubscription Amount it has subscribed for;
provided
,
however
, that if
the Undersubscription Amounts subscribed for exceed the difference
between the total of all the Basic Amounts and the Basic Amounts
subscribed for (the “
Available Undersubscription
Amount
”), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that
portion of the Available Undersubscription Amount as the Basic
Amount of such Buyer bears to the total Basic Amounts of all Buyers
that have subscribed for Undersubscription Amounts, subject to
rounding by the Company to the extent its deems reasonably
necessary. Notwithstanding anything to the contrary contained
herein, if the Company desires to modify or amend the terms and
conditions of the Offer prior to the expiration of the Offer
Period, the Company may deliver to the Buyers a new Offer Notice
and the Offer Period shall expire on the third (3
rd
) Business Day after
such Buyer’s receipt of such new Offer Notice.
(3) The
Company shall have five (5) Business Days from the expiration of
the Offer Period above (A) to offer, issue, sell or exchange all or
any part of such Offered Securities as to which a Notice of
Acceptance has not been given by the Buyers (the
“
Refused
Securities
”) pursuant to a definitive agreement (the
“
Subsequent Placement
Agreement
”) but only to the offerees described in the
Offer Notice (if so described therein) and only upon terms and
conditions (including, without limitation, unit prices and interest
rates) that are not more favorable to the acquiring Person or
Persons or less favorable to the Company than those set forth in
the Offer Notice and (B) to publicly announce (I) the execution of
such Subsequent Placement Agreement, and (II) either (x) the
consummation of the transactions contemplated by such Subsequent
Placement Agreement or (y) the termination of such Subsequent
Placement Agreement, in each case, which shall be filed with the
SEC on a Current Report on Form 8-K with such Subsequent Placement
Agreement and any documents contemplated therein filed as exhibits
thereto.
(4) In
the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and on the
terms specified in Section 4(m)(iii)(3) above), then each Buyer
may, at its sole option and in its sole discretion, reduce the
number or amount of the Offered Securities specified in its Notice
of Acceptance to an amount that shall be not less than the number
or amount of the Offered Securities that such Buyer elected to
purchase pursuant to Section 4(m)(iii)(2) above multiplied by a
fraction, (A) the numerator of which shall be the number or amount
of Offered Securities the Company actually proposes to issue, sell
or exchange (including Offered Securities to be issued or sold to
Buyers pursuant to Section 4(m)(iii)(3) above prior to such
reduction) and (B) the denominator of which shall be the original
amount of the Offered Securities. In the event that any Buyer so
elects to reduce the number or amount of Offered Securities
specified in its Notice of Acceptance, the Company may not issue,
sell or exchange more than the reduced number or amount of the
Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(m)(iii)(1)
above.
(5)
Upon the closing of the issuance, sale or exchange of all or less
than all of the Refused Securities, the Buyers shall acquire from
the Company, and the Company shall issue to the Buyers, the number
or amount of Offered Securities specified in the Notices of
Acceptance, as reduced pursuant to Section 4(m)(iii)(3) above if
the Buyers have so elected, upon the terms and conditions specified
in the Offer. The purchase by the Buyers of any Offered Securities
is subject in all cases to the preparation, execution and delivery
by the Company and the Buyers of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and
substance to the Buyers and their respective counsel.
(6) Any
Offered Securities not acquired by the Buyers or other persons in
accordance with Section 4(m)(iii)(3) above may not be issued, sold
or exchanged until they are again offered to the Buyers under the
procedures specified in this Agreement.
(7) The
Company and the Buyers agree that if any Buyer elects to
participate in the Offer, (A) neither the Subsequent Placement
Agreement with respect to such Offer nor any other transaction
documents related thereto (collectively, the “
Subsequent Placement Documents
”)
shall include any term or provisions whereby any Buyer shall be
required to agree to any restrictions in trading as to any
securities of the Company owned by such Buyer prior to such
Subsequent Placement, and (B) any registration rights set forth in
such Subsequent Placement Documents shall be similar in all
material respects to the registration rights contained in the
Registration Rights Agreement.
(8)
Notwithstanding anything to the contrary in this Section 4(m) and
unless otherwise agreed to by the Buyers, the Company shall either
confirm in writing to the Buyers that the transaction with respect
to the Subsequent Placement has been abandoned or shall publicly
disclose its intention to issue the Offered Securities, in either
case in such a manner such that the Buyers will not be in
possession of material non-public information, by the tenth (10
th
)
Business Day following delivery of the Offer Notice. If by the
tenth (10
th
) Business Day
following delivery of the Offer Notice no public disclosure
regarding a transaction with respect to the Offered Securities has
been made, and no notice regarding the abandonment of such
transaction has been received by the Buyers, such transaction shall
be deemed to have been abandoned and the Buyers shall not be deemed
to be in possession of any material, non-public information with
respect to the Company. Should the Company decide to pursue such
transaction with respect to the Offered Securities, the Company
shall provide each Buyer with another Offer Notice and each Buyer
will again have the right of participation set forth in this
Section 4(m)(iii). The Company shall not be permitted to deliver
more than one such Offer Notice to the Buyers in any 60 day
period.
(iv)
The restrictions contained in subsection (iii) of this Section 4(m)
shall not apply in connection with (x) the issuance of any Excluded
Securities (as defined in the COD and the Warrants).
(v)
Notwithstanding anything to the contrary in Section 4(m)(iii), if,
during the Participation Period, the Company becomes eligible to
register its securities on a Registration Statement on Form S-3
with the SEC, the Company will not, directly or indirectly, effect
any Subsequent Placement by means of a sale (i.e. “shelf
take-down”) of securities registered on such Form S-3 (a
“
Subsequent Overnight
Placement
”) unless the Company shall have first
complied with this Section 4(m)(v).
(1)
Between the time period of 4:00 pm (New York City time) and 6:00 pm
(New York City time) on the Trading Day immediately prior to the
Trading Day of the expected announcement of the Subsequent
Overnight Placement (or, if the Trading Day of the expected
announcement of the Subsequent Overnight Placement is the first
Trading Day following a holiday or a weekend (including a holiday
weekend), between the time period of 4:00 p.m. (New York City time)
on the Trading Day immediately prior to such holiday or weekend and
2:00 p.m. (New York City time) on the day immediately prior to the
Trading Day of the expected announcement of the Subsequent
Overnight Placement), the Company shall deliver to each Buyer a
written notice of the Company’s intention to effect a
Subsequent Overnight Placement (a “
Subsequent Overnight Placement
Notice
”), which notice shall describe in reasonable
detail the proposed terms of such Subsequent Overnight Placement,
the amount of proceeds intended to be raised thereunder and the
Person or Persons through or with whom such Subsequent Overnight
Placement is proposed to be effected and shall include a term sheet
and transaction documents relating thereto as an
attachment.
(2) Any
Buyer desiring to participate in such Subsequent Overnight
Placement must provide written notice to the Company by 6:30 am
(New York City time) on the Trading Day following the date on which
the Subsequent Overnight Placement Notice is delivered to such
Buyer (the “
Overnight Notice
Termination Time
”) that such Buyer is willing to
participate in the Subsequent Overnight Placement, the amount of
such Buyer’s participation (subject to the amounts provided
for in Section 4(m)(iii)(1), and representing and warranting that
such Buyer has such funds ready, willing, and available for
investment on the terms set forth in the Subsequent Overnight
Placement Notice. If the Company receives no such notice from a
Buyer as of such Overnight Notice Termination Time, such Buyer
shall be deemed to have notified the Company that it does not elect
to participate in such Subsequent Overnight Placement.
(3) If,
by the Overnight Notice Termination Time, notifications by the
Buyer of their willingness to participate in the Subsequent
Overnight Placement (or to cause their designees to participate)
is, in the aggregate, less than the total amount of the Subsequent
Overnight Placement, then the Company may effect the remaining
portion of such Subsequent Overnight Placement on the terms and
with the Persons set forth in the Subsequent Overnight Placement
Notice.
(4) The
Company must provide the Buyers with a second Subsequent Overnight
Placement Notice, and the Buyers will again have the right of
participation set forth above in this Section 4(m)(v), if the
definitive agreement related to the initial Subsequent Overnight
Placement Notice is not entered into for any reason on the terms
set forth in such Subsequent Overnight Placement Notice within two
(2) Trading Days after the date of delivery of the initial
Subsequent Overnight Placement Notice.
(5) The
Company and each Buyer agree that, if any Buyer elects to
participate in the Subsequent Overnight Placement, the transaction
documents related to the Subsequent Overnight Placement shall not
include any term or provision whereby such Buyer shall be required
to agree to any restrictions on trading as to any of the Securities
purchased hereunder or be required to consent to any amendment to
or termination of, or grant any waiver, release or the like under
or in connection with, this Agreement, without the prior written
consent of such Buyer. In addition, the Company and each Buyer
agree that, in connection with a Subsequent Overnight Placement,
the transaction documents related to the Subsequent Overnight
Placement shall include a requirement for the Company to issue a
widely disseminated press release by 9:30 a.m. (New York City time)
on the Trading Day of execution of the transaction documents in
such Subsequent Overnight Placement (or, if the date of execution
is not a Trading Day, on the immediately following Trading Day)
that discloses the material terms of the transactions contemplated
by the transaction documents in such Subsequent Overnight
Placement.
(6)
Notwithstanding anything to the contrary in this 4(m)(v) and unless
otherwise agreed to by such Buyer, the Company shall either confirm
in writing to such Buyer that the transaction with respect to the
Subsequent Overnight Placement has been abandoned or shall publicly
disclose its intention to issue the securities in the Subsequent
Overnight Placement, in either case, in such a manner such that
such Buyer will not be in possession of any material, non-public
information, by 9:30 a.m. (New York City time) on the second (2nd)
Trading Day following date of delivery of the Subsequent Overnight
Placement Notice. If by 9:30 a.m. (New York City time) on such
second (2
nd
) Trading Day, no
public disclosure regarding a transaction with respect to the
Subsequent Overnight Placement has been made, and no notice
regarding the abandonment of such transaction has been received by
such Buyer, such transaction shall be deemed to have been abandoned
and such Buyer shall not be deemed to be in possession of any
material, non-public information with respect to the Company or any
of its Subsidiaries.
(n)
Public Information
.
At any time during the period commencing from the six (6) month
anniversary of the Closing Date and ending at such time that all of
the Securities, if a registration statement is not available for
the resale of all of the Securities, may be sold without
restriction or limitation pursuant to Rule 144 and without the
requirement to be in compliance with Rule 144(c)(1), if the Company
shall (i) fail for any reason to satisfy the requirements of Rule
144(c)(1), including, without limitation, the failure to satisfy
the current public information requirements under Rule 144(c) or
(ii) if the Company has ever been an issuer described in Rule
144(i)(1)(i) or becomes such an issuer in the future, and the
Company shall fail to satisfy any condition set forth in Rule
144(i)(2) (each, a “
Public
Information Failure
”) then, as partial relief for the
damages to any holder of Securities by reason of any such delay in
or reduction of its ability to sell the Securities (which remedy
shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each such holder an amount in
cash equal to one percent (1.0%) of the aggregate Purchase Price of
such holder’s Securities on the day of a Public Information
Failure and on every thirtieth day (pro-rated for periods totaling
less than thirty days) thereafter until the earlier of (i) the date
such Public Information Failure is cured and (ii) such time that
such Public Information Failure no longer prevents a holder of
Securities from selling such Securities pursuant to Rule 144
without any restrictions or limitations. The payments to which a
holder shall be entitled pursuant to this Section 4(p) are referred
to herein as “
Public
Information Failure Payments
.”
Notwithstanding
anything to the contrary contained herein, the aggregate amount of
all Public Information Failure Payments shall not exceed 8% of the
aggregate Purchase Price of such holder’s Securities. Public
Information Failure Payments shall be paid on the earlier of (I)
the last day of the calendar month during which such Public
Information Failure Payments are incurred and (II) the third
Business Day after the event or failure giving rise to the Public
Information Failure Payments is cured. In the event the Company
fails to make Public Information Failure Payments in a timely
manner, such Public Information Failure Payments shall bear
interest at the rate of 1.5% per month (prorated for partial
months) until paid in full.
(o)
Lock-Up
. The
Company shall not amend, modify, waive or terminate any provision
of any of the Lock-Up Agreements except to extend the term of the
lock-up period and shall enforce the provisions of each Lock-Up
Agreement in accordance with its terms. If any officer or director
that is a party to a Lock-Up Agreement breaches any provision of a
Lock-Up Agreement, the Company shall promptly use its best efforts
to seek specific performance of the terms of such Lock-Up
Agreement.
(p)
Voting Agreements
.
Until the Stockholder Approval and the Authorized Share Approval
have each been obtained, the Company shall not amend, modify, waive
or terminate any provision of any of the Voting Agreements and
shall enforce the provisions of each Voting Agreement in accordance
with its terms. If any party to a Voting Agreement breaches any
provision of a Voting Agreement, the Company shall promptly use its
best efforts to seek specific performance of the terms of such
Voting Agreement.
(q)
Notice of Disqualification
Events
. The Company will notify the Buyers in writing, prior
to the Closing Date of (i) any Disqualification Event relating to
any Issuer Covered Person and (ii) any event that would, with the
passage of time, become a Disqualification Event relating to any
Issuer Covered Person.
(r)
FAST Compliance
.
While any Warrants are outstanding, the Company shall maintain a
transfer agent that participates in the DTC Fast Automated
Securities Transfer Program.
(s)
Closing Documents
.
On or prior to fourteen (14) calendar days after the Closing Date,
the Company agrees to deliver, or cause to be delivered, to each
Buyer and Gracin &Marlow, LLP a complete closing set of the
executed Transaction Documents, Securities and any other documents
required to be delivered to any party pursuant to Section 7 hereof
or otherwise.
(t)
Related Party
Loans
. While any Securities remain outstanding, without the
prior written consent of the Required Holders, the Company hereby
covenants and agrees that it will not, and will cause its
Subsidiaries not to, (i) change the date on which any payments are
due under any of the Related Party Loans to a date prior to
December 31, 2019, (ii) make any payments under any of the Related
Party Loans prior to December 31, 2019.
(u)
2018 Public
Warrants
. The Company shall (i) enter into an exchange
agreement (each, an "
Exchange
Agreement
" and collectively, the "
Exchange Agreements
") with each Buyer
that acquired warrants that were registered pursuant to the
Company’s registration statement (the “
2018 Registration Statement
”) on
Form S-1 (File No. 333-
227430
)
declared effective by the Securities and Exchange Commission on
October 16, 2018 (the “
2018
Warrants
”), pursuant to which the Company shall, at
the Buyer’s option, exchange each 2018 Warrant for a new
warrant (the, "
Exchange
Warrants
") with identical terms to such 2018 Warrant other
than the exercise price which shall be equal to the exercise price
of the Series A Warrants (subject to further adjustment as set
forth in the Series A Warrants), and (ii) file a prospectus
supplement to the 2018 Registration Statement within five (5)
Business Days of the Closing Date and take all other steps
necessary, at the Company’s expense and Buyer’s option,
to maintain the registration of the shares of Common Stock
underlying the Exchange Warrants.
5.
REGISTER;
TRANSFER AGENT INSTRUCTIONS
.
(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 Warrants in which
the Company shall record the name and address of the Person in
whose name the Warrants have been issued (including the name and
address of each transferee) and the number of Warrant Shares
issuable upon exercise of the Warrants held by such Person. 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
. Subject to the terms and conditions of the COD
and the Warrants, the Company shall issue irrevocable instructions
to its transfer agent, and any subsequent transfer agent, in the
form of
Exhibit I
attached hereto (the “
Irrevocable Transfer Agent
Instructions
”) to issue certificates or credit shares
to the applicable balance accounts at DTC, registered in the name
of each Buyer or its respective nominee(s), for the Conversion
Shares issuable upon conversion of the Preferred Shares and the
Warrant Shares issuable upon exercise of the Warrants in such
amounts as specified from time to time by each Buyer to the Company
upon exercise of the Warrants. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5(b), and stop transfer instructions to
give effect to Section 2(f) hereof, will be given by the Company to
its transfer agent, and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the other Transaction
Documents. If a Buyer effects a sale, assignment or transfer of the
Securities in accordance with Section 2(f), the Company shall
permit the transfer and shall promptly instruct its transfer agent
to issue one or more certificates or credit shares to the
applicable balance accounts at 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 the Conversion Shares or the Warrant Shares sold,
assigned or transferred pursuant to an effective registration
statement or pursuant to Rule 144, the transfer agent shall issue
such Securities to the Buyer, assignee or transferee, as the case
may be, without any restrictive legend. The Company acknowledges
that a breach by it of its obligations hereunder will cause
irreparable harm to a 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 a 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.
6.
CONDITIONS TO THE
COMPANY’S OBLIGATION TO SELL
. The obligation of the
Company hereunder to issue and sell the Preferred Shares and the
related Warrants 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 Transaction Documents to
which it is a party and delivered the same to the
Company.
(ii)
Such Buyer shall have delivered to the Company the Purchase Price
(less, in the case of the Lead Investor, the amounts withheld
pursuant to Section 4(g)), for the Preferred Shares and the related
Warrants being purchased by such Buyer at the Closing by 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 as of the date when made and as of the Closing Date as
though 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 specified 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.
7.
CONDITIONS TO EACH
BUYER’S OBLIGATION TO PURCHASE
. The obligation of each
Buyer hereunder to purchase the Preferred Shares and the related
Warrants 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 (A)
each of the Transaction Documents, (B) the Preferred Shares
(allocated in such amounts as such Buyer shall request), being
purchased by such Buyer at the Closing pursuant to this Agreement
and (C) the related Warrants (allocated in such amounts as such
Buyer shall request) being purchased by such Buyer at the Closing
pursuant to this Agreement.
(ii)
Such Buyer and the Placement Agent shall have received the opinion
of Disclosure Law Group, the Company’s outside counsel, dated
as of the Closing Date, in substantially the form of
Exhibit F
attached
hereto.
(iii)
The Company shall have delivered to such Buyer a copy of the
Irrevocable Transfer Agent Instructions, which instructions shall
have been delivered to and acknowledged in writing by the
Company’s transfer agent.
(iv)
The Company shall have delivered to such Buyer a certificate
evidencing the formation and good standing of the Company and each
of its Subsidiaries in such entity’s jurisdiction of
formation issued by the Secretary of State (or comparable office)
of such jurisdiction, as of a date within ten (10) calendar 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
(or comparable office) of the Company’s jurisdiction of
formation within ten (10) calendar days of the Closing
Date.
(vi)
The Company shall have delivered to such Buyer a certificate,
executed by the Secretary of the Company and 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, (ii) the
Certificate of Incorporation, and (iii) the Bylaws, each as in
effect at the Closing, in the form attached hereto as
Exhibit H
.
(vii)
The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as
though 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 specified date) and the Company shall have performed,
satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents 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 Chief Executive Officer 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
attached hereto as
Exhibit
G
.
(viii)
The Company shall have delivered to such Buyer a letter from the
Company’s transfer agent certifying the number of shares of
Common Stock outstanding as of a date within five (5) calendar days
of the Closing Date.
(ix)
The Company shall have delivered to each Buyer a lock-up agreement
in the form attached hereto as
Exhibit J
executed and
delivered by each of the Persons listed on
Schedule 7(ix)
(collectively,
the “
Lock-Up
Agreements
”).
(x) The
Company shall have delivered to each Buyer a voting agreement in
the form attached hereto as
Exhibit K
executed and
delivered by each of the Persons listed on Schedule 7(x)
(collectively, the "
Voting
Agreements
").
(x) The
Common Stock (I) shall be designated for quotation or listed on the
Principal Market and (II) shall not have been suspended, as of the
Closing Date, by the SEC or the Principal Market from trading on
the Principal Market.
(xi)
The Company shall have filed the COD with the Secretary of State of
Delaware and shall have delivered to each Buyer evidence of the
filing, and acceptance of the COD;
(xii)
The Company shall have obtained all governmental, regulatory or
third party consents and approvals, if any, necessary for the sale
of the Securities.
(xiii)
The Company shall have entered into the Placement Agency Agreement
with the Placement Agent.
(ix)
The Company shall have delivered to such Buyer such other documents
relating to the transactions contemplated by this Agreement as such
Buyer or its counsel may reasonably request.
8.
TERMINATION
. In the
event that the Closing shall not have occurred with respect to a
Buyer on or before five (5) Business Days from the date hereof due
to the Company’s or such Buyer’s failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the
nonbreaching party’s failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at
the close of business on such date by delivering a written notice
to that effect to each other party to this Agreement and without
liability of any party to any other party;
provided
,
however
, that if this
Agreement is terminated pursuant to this Section 8, the Company
shall remain obligated to reimburse the Lead Investor or its
designee(s), as applicable, for the expenses described in Section
4(g) above.
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.
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 WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
If any Buyer shall commence a suit,
action or proceeding to enforce any provisions of the Transaction
Documents, then, in addition to the obligations of the Company
under Section 9(k) below, such Buyer shall be reimbursed by the
Company for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and
prosecution of such suit, action or proceeding.
(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; provided that a facsimile
or.pdf signature shall be considered due execution and shall be
binding upon the signatory thereto with the same force and effect
as if the signature were an original, not a facsimile or.pdf
signature.
(c)
Headings
. The
headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this
Agreement.
(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).
(e)
Entire Agreement;
Amendments
. This Agreement and the other Transaction
Documents supersede all other prior oral or written agreements
between the Buyers, the Company, their affiliates and Persons
acting on their behalf with respect to the matters discussed
herein, and this Agreement, the other Transaction Documents and the
instruments referenced herein and therein contain the entire
understanding of the parties with respect to the matters covered
herein and therein and, 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. No provision of this Agreement may be amended other
than by an instrument in writing signed by the Company and the
holders of at least a majority of the aggregate amount of
Securities issued and issuable hereunder and under the Warrants
(without regard to any restriction or limitation on the exercise of
the Warrants contained therein) and shall include the Lead Investor
so long as the Lead Investor or any of its Affiliates holds any
Securities, Hudson Bay Capital Management LP so long as Hudson Bay
Capital Management LP or any of its Affiliates holds any
Securities, and Sabby Management, LLC so long as Sabby Management,
LLC or any of its Affiliates holds any Securities (the
“
Required
Holders
”), and any amendment to this Agreement made in
conformity with the provisions of this Section 9(e) shall be
binding on all Buyers and holders of Securities and the Company. No
provisions hereto may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought. No
such amendment shall be effective to the extent that it applies to
less than all of the Buyers or holders of the applicable Securities
then outstanding. 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 (other than the reimbursement of legal fees) also is
offered to all of the parties to the Transaction Documents, holders
of Preferred Shares or holders of the Warrants, as the case may be.
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.
(f)
Notices
. Any
notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement or any of
the other Transaction Documents must be in writing and will be
deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon delivery, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party) or by electronic
mail; (iii) upon delivery, when sent by electronic mail (provided
that the sending party does not receive an automated rejection
notice); or (iv) one (1) Business Day after deposit with an
overnight courier service, 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:
Bridgeline Digital,
Inc.
100
Summit Drive, Suite 916
Burlington, MA
01803
Telephone: (781)
376-5555
Attention: Roger
Kahn, President and Chief Executive Officer
E-mail:
akahn@bridgline.com
With a
copy (for informational purposes only) to:
Disclosure Law
Group, a Professional Corporation
600
West Broadway, Suite 700
San
Diego, CA 92101
Telephone: (619)
272-7050
Facsimile: (619)
330-2101
Attention: Daniel
W. Rumsey, Esq.
Email:
drumsey@disclosurelawgroup.com
If to
the Transfer Agent:
American Stock
Transfer Company
6201
15th Avenue
Brooklyn, NY
11219
Telephone:
(800)
937-5449
Facsimile:
Attention:
Email:
If to a
Buyer, to its address, facsimile number and e-mail address set
forth on the Schedule of Buyers, with copies to such Buyer’s
representatives as set forth on the Schedule of
Buyers,
With a
copy (for informational purposes only) to:
Gracin
& Marlow, LLP
The
Chrysler Building
405
Lexington Avenue, 26th Floor
New
York, NY 10174
Attention: Leslie
Marlow, Esq.
Telephone: (212)
907-6457
Facsimile: (212)
208-4657
or to
such other address, facsimile number and/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)
calendar 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
e-mail containing the time, date, recipient facsimile number and an
image of the first page of such transmission 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 (iii) above,
respectively.
(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 any purchasers of the Preferred Shares or the
Warrants. The Company shall not assign this Agreement or any rights
or obligations hereunder without the prior written consent of the
Required Holders, including by way of a Fundamental Transaction
(unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Warrants). A
Buyer may assign some or all of its rights hereunder 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, except that each
Indemnitee shall have the right to enforce the obligations of the
Company with respect to Section 9(k).
(i)
Survival
. Unless
this Agreement is terminated under Section 8, the representations
and warranties of the Company and the Buyers contained in Sections
2 and 3, and the agreements and covenants set forth in Sections 4,
5 and 9 shall survive the Closing. 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 other holder of the
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 (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 the Transaction
Documents or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction
Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit 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) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of the Transaction
Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to
be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Securities, (iii) any disclosure
made by such Buyer pursuant to Section 4(i), or (iv) the status of
such Buyer or holder of the Securities as an investor in the
Company pursuant to the transactions contemplated by the
Transaction Documents. 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 that 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.
(l)
No Strict
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.
(m)
Remedies
. Each
Buyer and each holder of the Securities 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 temporary and permanent
injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other
security.
(n)
Rescission and 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
.
To the extent that the Company makes a payment or payments to the
Buyers hereunder or pursuant to any of the other Transaction
Documents or 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.
(p)
Independent Nature of
Buyers’ Obligations and Rights
. The obligations of
each Buyer under any Transaction Document 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 entity, or create a presumption that the Buyers
are in any way 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 and the
Company acknowledges that the Buyers are not acting in concert or
as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. The Company acknowledges
and each Buyer confirms that it has independently participated 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.
(q)
Equal Treatment
. No
consideration (including any modification of any Transaction
Document) shall be offered or paid to any Buyer to amend or consent
to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration (other than the
reimbursement of legal fees) also is offered to all of the parties
to the Transaction Documents, holders of Preferred Shares or
holders of the Warrants, as the case may be. 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.
For clarification purposes, this provision constitutes a separate
right granted to each Buyer by the Company and negotiated
separately by each Buyer, and is intended for the Company to treat
the Buyers as a class and shall not in any way be construed as the
Buyers acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or
otherwise.
[
Signature
Page Follows
]
IN WITNESS WHEREOF,
each Buyer and the
Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date
first written above.
|
COMPANY:
|
|
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BRIDGELINE DIGITAL, INC.
|
|
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By:
|
|
|
|
Name:
Roger Kahn
|
|
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Title:
Chief Executive Officer
|
[Signature Page to Securities Purchase Agreement]
IN WITNESS WHEREOF,
each Buyer and the
Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date
first written above.
Name of
Purchaser:
__________________________________________________________
Signature of Authorized Signatory of
Purchaser
:
__________________________________________________________
Joint Signature of Authorized Signatory of
Purchaser, if applicable
:
__________________________________________________________
Name(s)
of Authorized Signatory:
__________________________________________________________
Title of Authorized
Signatory:
__________________________________________________________
Email
Address of Authorized Signatory:
__________________________________________________________
Address
for Notice to Purchaser:
__________________________________________________________
Social
Security/EIN Number(s):
__________________________________________________________
Election for
book-entry Preferred Shares:
_____
[check
for book-entry shares]
Election for
physical delivery of a Preferred Stock certificate:
_____
[check
for physical stock certificate]
Address
for Delivery of Warrants (and Preferred Stock certificate, if
applicable), to Purchaser (if not same as address for
notice):
______________________________________________________________________________
In
accordance with Section 1(f) of the Warrants, the applicable
Beneficial Ownership Limitation of the Purchaser shall be:
____
4.99%
____
9.99%
[check one]
In
accordance with Section 4(d) of the Certificate of Designation, the
applicable Beneficial Ownership Limitation of the Purchaser
relating to conversions of the Series C Convertible Preferred Stock
shall be:
____
4.99%
____
9.99%
[check one]
Affiliate of the
Issuer: __________[Check if an affiliate of the
Company]
Subscription
Amount: $ ______________________
[Signature Page to Securities Purchase Agreement]
SCHEDULE OF BUYERS
(1)
|
|
(2)
|
|
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(3)
|
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|
(4)
|
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(5)
|
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(6)
|
(7)
|
(8)
|
|
Buyer
|
|
Address, Facsimile Number and E-mail
|
|
|
Number of Preferred Shares
|
|
|
|
Number of Series A Warrant Shares
|
|
|
Number of Series B Warrants Shares
|
|
|
Number of Series C Warrant Shares
|
|
Purchase Price
|
Legal Representative’s Address, Facsimile Number
andE-mail
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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TOTAL
|
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EXHIBITS
Exhibit
A
|
Certificate
of Designations for Series C Preferred Stock
|
Exhibit
B
|
Form of
Series A Warrant
|
Exhibit
C
|
Form of
Series B Warrant
|
Exhibit
D
|
Form of
Series C Warrant
|
Exhibit
E
|
Form of
Registration Rights Agreement
|
Exhibit
F
|
Company
Opinion
|
Exhibit
G
|
Form of
Officer’s Certificate
|
Exhibit
H
|
Form of
Secretary’s Certificate
|
Exhibit
I
|
Irrevocable
Transfer Agent Instructions
|
Exhibit
J
Exhibit
K
|
Form of
Lock-Up Agreement
Form of
Voting Agreement
|
SCHEDULES
Schedule
3(a)
|
Subsidiaries
|
Schedule
3(j)
|
SEC
Documents
|
Schedule
3(k)
|
Absence
of Certain Changes
|
Schedule
3(p)
|
Transactions
with Affiliates
|
Schedule
3(q)
|
Equity
Capitalization
|
Schedule
3(r)
|
Indebtedness
and Other Contracts
|
Schedule
3(s)
|
Absence
of Litigation
|
Schedule
3(w)
|
Intellectual
Property Rights
|
Schedule
3(aa)
|
Internal
Accounting and Disclosure Controls
|
Exhibit
10.2
EXCHANGE AGREEMENT
This Exchange
Agreement
(this
“Agreement”), dated as of March [ ], 2019, is entered
into by and between _________________________ (“Warrant
Holder”) and Bridgeline Digital, Inc. (the
“Company”).
WITNESSETH:
Whereas,
Warrant Holder is the beneficial owner of a warrant
(“Existing Warrant”) that is exercisable for
___________ shares (the “Existing Warrant Shares”) of
the Company’s common stock, par value $0.001 (the
“Common Stock”)
at an
exercise price of $0.50 per share which expires on October 19, 2023
(the “Existing Warrant Expiration Date”);
and
Whereas
,
Warrant Holder and the Company desire to exchange the Existing
Warrant (the “Exchange”) for a new warrant, in the form
attached hereto (the “New Warrant”), exercisable to
purchase a number of shares of Common Stock equal to the number of
Existing Warrant Shares at an exercise price of $0.18 per share,
subject to adjustment, which New Warrant shall expire on the
Existing Warrant Expiration Date.
Now,
Therefore,
in consideration for the foregoing, the parties
hereto agree as follows:
1.
Exchange and/or
Amendment
. By signing the signature page hereto and electing
to participate in the Exchange, the Warrant Holder hereby agrees
that the Existing Warrant and rights appertaining thereto held by
Warrant Holder are hereby exchanged for the New Warrant and agrees
to deliver to the Company the original executed copy of the
Existing Warrant. The Warrant Holder’s election shall be
effective as of the date of acceptance of this Exchange Agreement
by the Company, which shall be evidenced by its signature
hereto.
2.
Warrant
Holder’s Representations and Warranties
.
The Warrant Holder represents and
warrants to the Company as follows:
a.
Warrant Holder is
exchanging the Existing Warrant for the New Warrant for Warrant
Holder’s own account, for investment only and not with a view
towards the public sale or distribution thereof, and not with a
view to or for sale in connection with any distribution
thereof;
b.
Warrant Holder is:
(i) an “accredited investor” as that term is defined in
Rule 501 of the General Rules and Regulations under the Securities
Act of 1933, as amended (the "1933 Act"), by reason of Rule
501(a)(3); (ii) experienced in making investments of the kind
described in this Agreement and the related documents hereto; and
(iii) able to afford the entire loss of Warrant Holder’s
investment in the New Warrant;
c. Warrant
Holder is the sole owner of all rights, title and interest in and
to the rights to the Existing Warrant and Warrant Holder has not
assigned, transferred, licensed, pledged or otherwise encumbered
such rights or agreed to do so;
d. Warrant
Holder has full power and authority to enter into this Exchange
Agreement and to exchange the Existing Warrant;
e. There
are no current challenges with respect to the ownership of the
Existing Warrant; and
f. By
entering into this Exchange Agreement, Warrant Holder will not
breach the terms of any agreement or arrangement with any third
party.
3.
Company’s
Representations
and Warranties
.
The
Company
represents and
warrants to Warrant Holder as follows:
a.
Upon issuance, the New Warrant will be a valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except as the enforceability may be
limited by bankruptcy and general equitable principles. The shares
of Common Stock issuable upon exercise of the New Warrant will be
duly authorized, validly issued, fully paid and
non-assessable;
b.
The Company has full power and authority to enter into this
Exchange Agreement and to issue the New Warrant as provided for
herein;
c.
Assuming the
accuracy of the representations and warranties of the Warrant
Holder contained herein, the offer and issuance by the Company of
the New Warrants is exempt from registration under the 1933 Act
pursuant to an exemption provided by Rule 3(a)(9)
thereof;
d.
By virtue of Rule
3(a)(9) under the 1933 Act, each of the New Warrants shall take on
the registered characteristics of the Existing Warrants and, the
shares of Common Stock issuable upon exercise of the New Warrants
shall be freely tradeable and shall not bear any restrictive
legends; and.
e.
By entering into this Exchange Agreement, the Company will not
breach the terms of any agreement or arrangement with any third
party.
4.
Governing
Law; Miscellaneous
.
This Exchange Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware. A facsimile
transmission of this signed Exchange Agreement shall be legal and
binding on all parties hereto. This Exchange Agreement may be
signed in one or more counterparts, each of which shall be deemed
an original. The headings of this Exchange Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Exchange Agreement. If any provision of
this Exchange 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 Exchange
Agreement or the validity or enforceability of this Exchange
Agreement in any other jurisdiction. This Exchange Agreement may be
amended only by an instrument in writing signed by the party to be
charged with enforcement. This Agreement contains the entire
agreement of the parties with respect to the subject matter hereto,
superseding all prior agreements, understandings or
discussions.
[Signature page
follows]
IN WITNESS WHEREOF,
the parties have
executed this Exchange Agreement as of the date as first written
above.
BRIDGELINE
DIGITAL, INC.
Name:
Title:
WARRANT
HOLDER:
Name of
Warrant Holder
Name:
Title:
Signature, if
Joint
Name:
Exhibit
10.3
VOTING AGREEMENT
VOTING
AGREEMENT, dated as of March , 2019 (this “
Agreement
”), by and among
Bridgeline Digital, Inc., a Delaware corporation (the
“
Company
”), and
the shareholder listed on the signature page hereto under the
heading “
Shareholder
” (the
“
Shareholder
”).
WHEREAS, as
contemplated by the attached Term Sheet (the “
Term Sheet
”), the Company and
certain investors (each, an “
Investor
”, and collectively, the
“
Investors
”)
intend to enter into a Securities Purchase Agreement (the “
Securities Purchase
Agreement
”), pursuant to which, among other things,
the Company will agree to issue and sell to the Investors and the
Investors will agree to purchase, (i) shares of Series C
convertible preferred stock, par value $0.001 per share (the
“
Preferred
Stock
”), of the Company and (iii) three (3) series of
warrants (the “
Warrants
”) which will be
exercisable to purchase shares of common stock, par value $0.001
per share, of the Company (the “
Common Stock
”);
WHEREAS, as of the
date hereof, the Shareholder owns collectively [ ] shares of Common
Stock, which represent in the aggregate approximately [ ]% of the
total issued and outstanding capital stock of the Company;
and
WHEREAS, as a
condition to the willingness of the Investors to enter into the
Securities Purchase Agreement and to consummate the transactions
contemplated thereby (collectively, the “
Transaction
”), the Investors have
required that each Shareholder agrees, and in order to induce the
Investors to enter into the Securities Purchase Agreement, each
Shareholder has agreed, to enter into this Agreement with respect
to all the Common Stock now owned and which may hereafter be
acquired by the Shareholder and any other securities, if any, which
such Shareholder is currently entitled to vote, or after the date
hereof, becomes entitled to vote, at any meeting of shareholders of
the Company (the “
Other
Securities
”).
NOW,
THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be
legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE I
VOTING AGREEMENT OF THE SHAREHOLDER
SECTION
1.01.
Voting
Agreement
. Subject to the last sentence of this Section
1.01, each Shareholder hereby agrees that at any meeting of the
shareholders of the Company, however called, and in any action by
written consent of the Company’s shareholders, the
Shareholder shall vote the Common Stock and the Other Securities:
(a) in favor of increasing the authorized number of shares of
Common Stock (or effecting a reverse stock split of the Common
Stock) up to the maximum amount recommended by the Company’s
Board of Directors
to permit the issuance
in full of Common Stock upon conversion of the Preferred Stock and
exercise of the Warrants, respectively, without giving effect to
any limitations on conversion of the Preferred Stock or exercise of
the Warrants thereunder or under the Securities Purchase Agreement;
(b) in favor of the Transaction and the issuance of the shares of
Common Stock which may be issued under the terms of the Securities
Purchase Agreement in order for the Company to be able to issue the
shares of Common Stock issuable upon conversion of the Preferred
Stock and upon exercise of the Warrants, without giving effect to
any limitations on conversion of the Preferred Stock or exercise of
the Warrants thereunder or under the Securities Purchase Agreement;
and (c) against any proposal or any other corporate action or
agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of
the Company under the Securities Purchase Agreement or which could
result in any of the conditions to the Company’s obligations
under the Securities Purchase Agreement not being fulfilled
(together, “
Shareholder
Approval
”). Each Shareholder acknowledges receipt and
review of a copy of the Securities Purchase Agreement and the other
Transaction Documents (as defined in the Securities Purchase
Agreement). The obligations of the Shareholder under this Section
1.01 shall terminate immediately following the occurrence of the
Shareholder Approval.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
Each
Shareholder hereby represents and warrants, severally but not
jointly, to each of the Investors as follows:
SECTION
2.01.
Authority Relative
to This Agreement
. Each Shareholder has all necessary legal
capacity, power and authority to execute and deliver this
Agreement, to perform his or its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has
been duly executed and delivered by such Shareholder and
constitutes a legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance
with its terms, except (a) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws now or hereafter in effect
relating to, or affecting generally the enforcement of
creditors’ and other obligees’ rights, (b) where the
remedy of specific performance or other forms of equitable relief
may be subject to certain equitable defenses and principles and to
the discretion of the court before which the proceeding may be
brought, and (c) where rights to indemnity and contribution
thereunder may be limited by applicable law and public
policy.
SECTION
2.02.
No Conflict
.
(a) The execution and delivery of this Agreement by such
Shareholder does not, and the performance of this Agreement by such
Shareholder shall not, (i) conflict with or violate any federal,
state or local law, statute, ordinance, rule, regulation, order,
judgment or decree applicable to such Shareholder or by which the
Common Stock or the Other Securities owned by such Shareholder are
bound or affected or (ii) result in any breach of or constitute a
default (or an event that 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, or result
in the creation of a lien or encumbrance on any of the Common Stock
or the Other Securities owned by such Shareholder pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to
which such Shareholder is a party or by which such Shareholder or
the Common Stock or Other Securities owned by such Shareholder are
bound.
(b) The
execution and delivery of this Agreement by such Shareholder does
not, and the performance of this Agreement by such Shareholder
shall not, require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental entity by
such Shareholder.
SECTION
2.03.
Title to the
Stock
. As of the date hereof, each Shareholder is the owner
of the number of shares of Common Stock set forth opposite its name
on
Appendix A
attached hereto, entitled to vote, without restriction, on all
matters brought before holders of capital stock of the Company,
which Common Stock represent on the date hereof the percentage of
the outstanding stock and voting power of the Company set forth on
such Appendix. Such Common Stock are all the securities of the
Company owned, either of record or beneficially, by such
Shareholder. Such Common Stock are owned free and clear of all
security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on such Shareholder’s
voting rights, charges and other encumbrances of any nature
whatsoever. No Shareholder has appointed or granted any proxy,
which appointment or grant is still effective, with respect to the
Common Stock or Other Securities owned by such shareholder.
ARTICLE III
COVENANTS
SECTION
3.01.
No Disposition or
Encumbrance of Stock
. Notwithstanding anything herein to the
contrary, each Shareholder hereby covenants and agrees that until
the date the Shareholder Approval has been obtained, except as
contemplated by this Agreement, such Shareholder shall not offer or
agree to sell, transfer, tender, assign, hypothecate or otherwise
dispose of, grant a proxy or power of attorney with respect to, or
create or permit to exist any security interest, lien, claim,
pledge, option, right of first refusal, agreement, limitation on
such Shareholder’s voting rights, charge or other encumbrance
of any nature whatsoever (“
Encumbrance
”) with respect to the
Common Stock or Other Securities, directly or indirectly, initiate,
solicit or encourage any person to take actions which could
reasonably be expected to lead to the occurrence of any of the
foregoing;
provided
,
however
, that any such
Shareholder may assign, sell or transfer any Common Stock or Other
Securities provided that any such recipient of the Common Stock or
Other Securities has delivered to the Company and each Investor a
written agreement in a form reasonably satisfactory to the
Investors that the recipient shall be bound by, and the Common
Stock and/or Other Securities so transferred, assigned or sold
shall remain subject to this Agreement.
SECTION
3.02.
Company
Cooperation
. The Company hereby covenants and agrees that it
will not, and such Shareholder irrevocably and unconditionally
acknowledges and agrees that the Company will not (and waives any
rights against the Company in relation thereto), recognize any
Encumbrance or agreement on any of the Common Stock or Other
Securities subject to this Agreement unless the provisions of
Section 3.01 have been complied with. The Company agrees to use its
reasonable best efforts to ensure that at any time in which any
Shareholder Approval is required pursuant to Section 4(p) of the
Securities Purchase Agreement, it will cause holders of Common
Stock or Other Securities representing the percentage of
outstanding capital stock required to vote in favor of the
Transaction in order for the Company to comply with its obligations
under Section 4(p) of the Securities Purchase Agreement to become
party to and bound by the terms and conditions of this Agreement
and the Common Stock and Other Securities held by such holders to
be subject to the terms and conditions of this
Agreement.
ARTICLE IV
MISCELLANEOUS
SECTION
4.01.
Further
Assurances
. Each Shareholder will execute and deliver such
further documents and instruments and take all further action as
may be reasonably necessary in order to consummate the transactions
contemplated hereby.
SECTION
4.02.
Specific
Performance
. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that any
Investor (without being joined by any other Investor) shall be
entitled to specific performance of the terms hereof, in addition
to any other remedy at law or in equity. Any Investor shall be
entitled to its reasonable attorneys’ fees in any action
brought to enforce this Agreement in which it is the prevailing
party.
SECTION
4.03.
Entire
Agreement
. This Agreement constitutes the entire agreement
among the Company and the Shareholder with respect to the subject
matter hereof and supersedes all prior agreements and
understandings, both written and oral, among the Company and the
Shareholder with respect to the subject matter hereof.
SECTION
4.04.
Amendment
.
The provisions of this Agreement may not be amended or waived, nor
may this Agreement be terminated by the Company other than pursuant
to the provisions of Section 4.07.
SECTION
4.05.
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).
SECTION
4.06.
Governing
Law
. 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. The parties hereby agree that all
actions or proceedings arising directly or indirectly from or in
connection with this Agreement shall be litigated only in the
Supreme Court of the State of New York or the United States
District Court for the Southern District of New York located in New
York County, New York. The parties consent to the jurisdiction and
venue of the foregoing courts and consent that any process or
notice of motion or other application to any of said courts or a
judge thereof may be served inside or outside the State of New York
or the Southern District of New York by registered mail, return
receipt requested, directed to the party being served at its
address set forth on the signature ages to this Agreement (and
service so made shall be deemed complete three (3) days after the
same has been posted as aforesaid) or by personal service or in
such other manner as may be permissible under the rules of said
courts. Each of the Company and each Shareholder irrevocably
waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such
suit, action, or proceeding brought in such a court and any claim
that suit, action, or proceeding has been brought in an
inconvenient forum.
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 WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
SECTION
4.07.
Termination
.
Except as set forth in Section 3.01 with respect to the
Shareholder’s obligations set forth in Section 3.01, this
Agreement shall terminate immediately following the occurrence of
the Shareholder Approval.
[Signature Page Follows]
IN WITNESS WHEREOF
, each Shareholder and the Company has
duly executed this Agreement.
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THE COMPANY:
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BRIDGELINE DIGITAL, INC.
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By:
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Name:
Roger Kahn
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Title:
Chief Executive Officer
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Dated:
March , 2019
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Address:
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100
Summit Road, Suite 916
Burlington,
Massachusetts 01803
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SHAREHOLDER:
[
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Dated:
March , 2019
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Address:
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APPENDIX A
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Percentage of Stock
Outstanding
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Voting Percentage of
Stock Outstanding
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[
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[]
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
(this
“
Agreement
”),
dated as of March __, 2019, by and among Bridgeline Digital, Inc.,
a Delaware corporation, with headquarters located at 80 Blanchard
Road, Burlington, Massachusetts 01803 (the “
Company
”), and the investors
listed on the Schedule of Buyers attached hereto (each, a
“
Buyer
” and
collectively, the “
Buyers
”).
RECITALS
A. In
connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the “
Securities Purchase Agreement
”),
the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue and sell
to each Buyer (i) shares (the “
Preferred Shares
”) of the
Company’s Series C Convertible Preferred Stock (the
“
Preferred
Stock
”) which will be convertible into shares of the
Company's common stock, par value $0.001 per share (as converted
collectively the “
Conversion
Shares
”), and (ii) three (3) series of warrants (the
“
Warrants
”)
which will be exercisable to purchase shares of Common Stock (as
exercised, collectively, the “
Warrant Shares
”) in accordance
with the terms of the Warrants.
B. In
accordance with the terms of the Securities Purchase Agreement, the
Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the
“
1933 Act
”), and
applicable state securities laws.
NOW, THEREFORE,
in consideration of the
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 each of the Buyers hereby
agree as follows:
1.
Definitions
.
Capitalized terms
used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.
As used in this Agreement, the following terms shall have the
following meanings:
(a)
“
Additional Effective Date
” means
the date the Additional Registration Statement is declared
effective by the SEC.
(b)
“
Additional Effectiveness Deadline
”
means the date which is the earlier of
(i) in the event that the Additional Registration Statement (x) is
not subject to a full review by the SEC, the date which is sixty
(60) calendar days after the earlier of the Additional Filing Date
and the Additional Filing Deadline or (y) is subject to a full
review by the SEC, the date which is ninety (90) calendar days
after the earlier of the Additional Filing Date and the Additional
Filing Deadline and (ii) the fifth (5th) Business Day after the
date the Company is notified (orally or in writing, whichever is
earlier) by the SEC that such Additional Registration Statement
will not be reviewed or will not be subject to further review;
provided, however, that if the Additional Effectiveness Deadline
falls on a Saturday, Sunday or other day that the SEC is closed for
business, the Additional Effectiveness Deadline shall be extended
to the next Business Day on which the SEC is open for
business.
(c)
“
Additional Filing Date
” means the
date on which the Additional Registration Statement is filed with
the SEC.
(d)
“
Additional Filing Deadline
” means
if Cutback Shares are required to be included in any Additional
Registration Statement, the later of (i) the date sixty (60) days
after the date substantially all of the Registrable Securities
registered under the immediately preceding Registration Statement
are sold and (ii) the date six (6) months from the Initial
Effective Date or the most recent Additional Effective Date, as
applicable.
(e)
“
Additional Registrable Securities
”
means, (i) any Cutback Shares not previously included on a
Registration Statement, and (ii) any capital stock of the Company
issued or issuable with respect to the Preferred Shares, the
Conversion Shares, the Warrants, the Warrant Shares or the Cutback
Shares, as applicable, as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise,
without regard to any limitations on exercise of the Warrants or
conversion of the Preferred Shares.
(f)
“
Additional Registration Statement
”
means a registration statement or registration statements of the
Company filed under the 1933 Act covering the resale any Additional
Registrable Securities.
(g)
“
Additional Required Registration
Amount
” means any Cutback Shares not previously
included on a Registration Statement, all subject to adjustment as
provided in Section 2(f), without regard to any limitations on the
exercise of the Warrants or conversion of the Preferred Shares
.
(h)
“
Business Day
” means any day other
than Saturday, Sunday or any other day on which commercial banks in
the City of New York are authorized or required by law to remain
closed.
(i)
“
Closing Date
” shall have the
meaning set forth in the Securities Purchase
Agreement.
(j)
“
Cutback
Shares
” means any of the Initial Required Registration
Amount or the Additional Required Registration Amount of
Registrable Securities not included in all Registration Statements
previously declared effective hereunder as a result of a limitation
on the maximum number of shares of Common Stock of the Company
permitted to be registered by the staff of the SEC pursuant to Rule
415.
For the purpose of determining
the Cutback Shares, in order to determine any applicable Required
Registration Amount, unless an Investor gives written notice to the
Company to the contrary with respect to the allocation of its
Cutback Shares, first the Warrant Shares shall be excluded on a pro
rata basis among the Investors until all of the Warrant Shares have
been excluded and second the Conversion Shares shall be excluded on
a pro rata basis among the Investors until all of the Conversion
Shares have been excluded.
(k)
“
Designee
” means Empery Asset
Management LP.
(l)
“
effective
” and “
effectiveness
” refer to a
Registration Statement that has been declared effective by the SEC
and is available for the resale of the Registrable Securities
required to be covered thereby.
(m)
“
Effective Date
” means the Initial
Effective Date and the Additional Effective Date, as
applicable.
(n)
“
Effectiveness Deadline
” means the
Initial Effectiveness Deadline and the Additional Effectiveness
Deadline, as applicable.
(o)
“
Eligible Market
” means the
Principal Market, the OTC QX, The New York Stock Exchange, Inc.,
the NYSE American, The NASDAQ Global Select Market, The NASDAQ
Global Market or The NASDAQ Capital Market.
(p)
“
Filing Deadline
” means the Initial
Filing Deadline and the Additional Filing Deadline, as
applicable.
(q)
“
Initial Effective Date
” means the
date that the Initial Registration Statement has been declared
effective by the SEC.
(r)
“
Initial
Effectiveness Deadline
” means the date which is the
earlier of (x) (i) in the event that the Initial Registration
Statement is not subject to a full review by the SEC, ninety (90)
calendar days after the Closing Date or (ii) in the event that the
Initial Registration Statement is subject to a full review by the
SEC, one hundred twenty (120) calendar days after the Closing Date
and (y) the fifth (5th) Business Day after the date the Company is
notified (orally or in writing, whichever is earlier) by the SEC
that such Initial Registration Statement will not be reviewed or
will not be subject to further review; provided, however, that if
the Initial Effectiveness Deadline falls on a Saturday, Sunday or
other day that the SEC is closed for business, the Initial
Effectiveness Deadline shall be extended to the next Business Day
on which the SEC is open for business.
(s)
“
Initial Filing Date
” means the
date on which the Initial Registration Statement is filed with the
SEC.
(t)
“
Initial Filing Deadline
” means the
date which is thirty (30) calendar days after the Closing
Date.
(u)
“
Initial Registrable Securities
”
means (i) the Conversion Shares issued or issuable upon conversion
of the Preferred Shares, (ii) the Warrant Shares issued or issuable
upon exercise of the Warrants and (iii) any capital stock of the
Company issued or issuable with respect to the Preferred Shares,
the Conversion Shares, the Warrant Shares or the Warrants, in each
case as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without
regard to any limitations on the exercise of the Warrants or
conversion of the Preferred Shares.
(v)
“
Initial Registration Statement
”
means a registration statement or registration statements of the
Company filed under the 1933 Act covering the resale of Initial
Registrable Securities.
(w)
“
Initial Required Registration
Amount
”
means the sum of
(i)
the maximum number of Conversion Shares issued and
issuable upon conversion of the Preferred Shares and (ii) the
maximum number of Warrant Shares issued and issuable pursuant to
the Warrants without giving effect to any limitation on exercise
set forth therein and assuming that the Maximum Eligibility Number
is determined based on a Reset Price equal to $0.08 (as adjusted
for stock splits, stock dividends, recapitalizations,
reorganizations, reclassification, combinations, reverse stock
splits or other similar events occurring after the date hereof),
each as of the Trading Day immediately preceding the applicable
date of determination and all subject to adjustment as provided in
Section 2(f), without regard to any limitations on the exercise of
the Warrants or conversion of the Preferred Shares.
(x)
“
Investor
” means a Buyer or any
transferee or assignee thereof to whom a Buyer assigns its rights
under this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9 and any
transferee or assignee thereof to whom a transferee or assignee
assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with
Section 9.
(y)
“
Maximum Eligibility Number
” shall
have the meaning set forth in the Series C Warrants.
(z)
“
Person
” means an individual, a
limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(aa)
“
Principal
Market
” means the NASDAQ Capital Market.
(bb)
“
register
,”
“
registered
,”
and “
registration
” refer to a
registration effected by preparing and filing one or more
Registration Statements (as defined below) in compliance with the
1933 Act and pursuant to Rule 415, and the declaration or ordering
of effectiveness of such Registration Statement(s) by the
SEC.
(cc)
“
Registrable
Securities
” means the Initial Registrable Securities
and the Additional Registrable Securities.
(dd)
“
Registration
Statement
” means the Initial Registration Statement
and the Additional Registration Statement, as
applicable.
(ee)
“
Required
Holders
” means the holders of at least a majority of
the Registrable Securities and shall include the Designee so long
as the Designee or any of its affiliates holds any Registrable
Securities, Hudson Bay Capital Management LP so long as Hudson Bay
Capital Management LP or any of its affiliates holds any
Registrable Securities, and Sabby Management, LLC so long as Sabby
Management, LLC or any of its affiliates holds any Registrable
Securities.
(ff)
“
Required
Registration Amount
”
means either the Initial Required
Registration Amount or the Additional Required Registration Amount,
as applicable.
(gg)
“
Reset
Price
” shall have the meaning set forth in the Series
C Warrants.
(hh)
“
Rule
415
” means Rule 415 promulgated under the 1933 Act or
any successor rule providing for offering securities on a
continuous or delayed basis.
(ii)
“
SEC
”
means the United States Securities and Exchange
Commission.
(jj)
“
Series
C Warrants
” shall have the meaning set forth in the
Securities Purchase Agreement.
(kk)
“
Trading
Day
” means any day on
which the
Common Stock
is
traded on the Principal Market, or, if the Principal Market is not
the principal trading market for the
Common Stock on such
day
, then on the principal securities
exchange or securities market on which the
Common Stock is
then traded.
2.
Registration
.
(a)
Initial Mandatory Registration
.
The Company shall prepare, and, as soon as practicable but in no
event later than the Initial Filing Deadline, file with the SEC the
Initial Registration Statement on Form S-1 covering the resale of
all of the Initial Registrable Securities. The Initial Registration
Statement prepared pursuant hereto shall register for resale at
least the number of shares of Common Stock equal to the Initial
Required Registration Amount determined as of the date the Initial
Registration Statement is initially filed with the SEC, subject to
adjustment as provided in Section 2(f). The Initial Registration
Statement shall contain (except if otherwise directed by the
Required Holders) the “
Plan of Distribution
” and
“
Selling
Stockholders
” sections in substantially the form
attached hereto as
Exhibit
B
. The Company shall use its best efforts to have the
Initial Registration Statement declared effective by the SEC as
soon as practicable, but in no event later than the Initial
Effectiveness Deadline. By 9:30 a.m. New York time on the Business
Day following the Initial Effective Date, the Company shall file
with the SEC in accordance with Rule 424 under the 1933 Act the
final prospectus to be used in connection with sales pursuant to
such Initial Registration Statement.
(b)
Additional Mandatory
Registrations
. The Company shall prepare, and, as soon as
practicable but in no event later than the Additional Filing
Deadline, file with the SEC an Additional Registration Statement on
Form S-1 covering the resale of all of the Additional Registrable
Securities not previously registered on an Additional Registration
Statement hereunder. To the extent the staff of the SEC does not
permit the Additional Required Registration Amount to be registered
on an Additional Registration Statement, the Company shall file
Additional Registration Statements successively trying to register
on each such Additional Registration Statement the maximum number
of remaining Additional Registrable Securities until the Additional
Required Registration Amount has been registered with the SEC. In
the event that Form S-1 is unavailable for such a registration, the
Company shall use such other form as is available for such a
registration on another appropriate form reasonably acceptable to
the Required Holders, subject to the provisions of Section 2(e).
Each Additional Registration Statement prepared pursuant hereto
shall register for resale at least that number of shares of Common
Stock equal to the Additional Required Registration Amount
determined as of the date such Additional Registration Statement is
initially filed with the SEC, subject to adjustment as provided in
Section 2(f). Each Additional Registration Statement shall contain
(except if otherwise directed by the Required Holders) the
“
Plan of
Distribution
” and “
Selling Stockholders
”
sections in substantially the form attached hereto as
Exhibit B
. The Company shall
use its best efforts to have each Additional Registration Statement
declared effective by the SEC as soon as practicable, but in no
event later than the Additional Effectiveness Deadline. By 9:30
a.m. New York time on the Business Day following the Additional
Effective Date, the Company shall file with the SEC in accordance
with Rule 424 under the 1933 Act the final prospectus to be used in
connection with sales pursuant to such Additional Registration
Statement.
(c)
Allocation of Registrable
Securities
. The initial number of Registrable Securities
included in any Registration Statement and any increase or decrease
in the number of Registrable Securities included therein shall be
allocated pro rata among the Investors based on the number of
Registrable Securities held by each Investor at the time the
Registration Statement covering such initial number of Registrable
Securities or increase or decrease thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers
any of such Investor's Registrable Securities, each transferee
shall be allocated a pro rata portion of the then remaining number
of Registrable Securities included in such Registration Statement
for such transferor. Any shares of Common Stock included in a
Registration Statement and which remain allocated to any Person
which ceases to hold any Registrable Securities covered by such
Registration Statement shall be allocated to the remaining
Investors, pro rata based on the number of Registrable Securities
then held by such Investors which are covered by such Registration
Statement. In no event shall the Company include any securities
other than Registrable Securities on any Registration Statement
without the prior written consent of the Required
Holders.
(d)
Legal Counsel
. Subject to
Section 5 hereof, the Designee shall have the right to select one
legal counsel to review and oversee any registration pursuant to
this Section 2 (“
Legal
Counsel
”), which shall be Schulte Roth & Zabel,
LLP or such other counsel as thereafter designated by the Designee.
The Company and Legal Counsel shall reasonably cooperate with each
other in performing the Company's obligations under this
Agreement.
(e)
Ineligibility for Form S-3
. The
Company shall (i) register the resale of the Registrable Securities
on Form S-1 and (ii) undertake to register the Registrable
Securities on Form S-3 as soon as such form is available, provided
that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as a
Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the SEC.
(f)
Sufficient Number of Shares
Registered
. In the event the number of shares available
under a Registration Statement filed pursuant to Section 2(a) or
Section 2(b) is insufficient to cover the Required Registration
Amount of Registrable Securities required to be covered by such
Registration Statement or an Investor's allocated portion of the
Registrable Securities pursuant to Section 2(c), the Company shall
amend the applicable Registration Statement, or file a new
Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover at least the Required
Registration Amount as of the Trading Day immediately preceding the
date of the filing of such amendment or new Registration Statement,
in each case, as soon as practicable, but in any event not later
than thirty (30) days after the necessity therefor arises. The
Company shall use its best efforts to cause such amendment and/or
new Registration Statement to become effective as soon as
practicable following the filing thereof. For purposes of the
foregoing provision, the number of shares available under a
Registration Statement shall be deemed “insufficient to cover
all of the Registrable Securities” if at any time the number
of shares of Common Stock available for resale under the
Registration Statement is less than the product determined by
multiplying (i) the Required Registration Amount as of such time by
(ii) 0.90. The calculation set forth in the foregoing sentence
shall be made without regard to any limitations on conversion of
the Preferred Shares or on the exercise of the Warrants, and such
calculation shall assume that (i) the Preferred Shares are then
convertible in all into shares of Common Stock without regard to
any limitation on conversion set forth in the COD; and (ii) the
Warrants are then exercisable in full into shares of Common Stock
without regard to any limitation on exercise set forth therein, and
assuming that the Maximum Eligibility Number is being determined
based on a Reset Price equal to $0.08 (as adjusted for stock
splits, stock dividends, recapitalizations, reorganizations,
reclassification, combinations, reverse stock splits or other
similar events occurring after the date hereof).
(g)
Effect of Failure to File and Obtain
and Maintain Effectiveness of Registration Statement
. If (i)
the Initial Registration Statement when declared effective fails to
register the Initial Required Registration Amount of Initial
Registrable Securities (a “
Registration Failure
”), (ii) a
Registration Statement covering all of the Registrable Securities
required to be covered thereby and required to be filed by the
Company pursuant to this Agreement is (A) not filed with the SEC on
or before the applicable Filing Deadline (a “
Filing Failure
”) or (B) not
declared effective by the SEC on or before the applicable
Effectiveness Deadline, (an “
Effectiveness Failure
”) or (iii)
on any day after the applicable Effective Date sales of all of the
Registrable Securities required to be included on such Registration
Statement cannot be made (other than during an Allowable Grace
Period (as defined in Section 3(r)) pursuant to such Registration
Statement or otherwise (including, without limitation, because of
the suspension of trading or any other limitation imposed by an
Eligible Market, a failure to keep such Registration Statement
effective, a failure to disclose such information as is necessary
for sales to be made pursuant to such Registration Statement, a
failure to register a sufficient number of shares of Common Stock
or a failure to maintain the listing of the Common Stock) (a
“
Maintenance
Failure
”) then, as partial relief for the damages to
any holder by reason of any such delay in or reduction of its
ability to sell the underlying shares of Common Stock (which remedy
shall not be exclusive of any other remedies available at law or in
equity, including, without limitation, specific performance or the
additional obligation of the Company to register any Cutback
Shares), the Company shall pay to each holder of Registrable
Securities relating to such Registration Statement an amount in
cash equal to four percent (4.0%) of the aggregate Purchase Price
(as such term is defined in the Securities Purchase Agreement) of
such Investor's Registrable Securities whether or not included in
such Registration Statement on each of the following dates: (i) the
day of a Registration Failure, (ii) the day of a Filing Failure;
(iii) the day of an Effectiveness Failure; (iv) the initial day of
a Maintenance Failure; (v) on the thirtieth day after the date of a
Registration Failure and every thirtieth day thereafter (pro-rated
for periods totaling less than thirty days) until such Registration
Failure is cured, (vi) on the thirtieth day after the date of a
Filing Failure and every thirtieth day thereafter (pro-rated for
periods totaling less than thirty days) until such Filing Failure
is cured; (vii) on the thirtieth day after the date of an
Effectiveness Failure and every thirtieth day thereafter (pro-rated
for periods totaling less than thirty days) until such
Effectiveness Failure is cured; and (viii) on the thirtieth day
after the initial date of a Maintenance Failure and every thirtieth
day thereafter (pro-rated for periods totaling less than thirty
days) until such Maintenance Failure is cured. The payments to
which a holder shall be entitled pursuant to this Section 2(g) are
referred to herein as “
Registration Delay Payments
.” In
no event shall the aggregate amount of all Registration Delay
Payments payable to an Investor exceed 20% of the aggregate
Purchase Price of such Investor's Registrable Securities.
Registration Delay Payments shall be paid on the earlier of (I) the
dates set forth above and (II) the third Business Day after the
event or failure giving rise to the Registration Delay Payments is
cured. In the event the Company fails to make Registration Delay
Payments in a timely manner, such Registration Delay Payments shall
bear interest at the rate of three percent (3.0%) per month
(prorated for partial months) until paid in full.
3.
Related
Obligations
.
At such
time as the Company is obligated to file a Registration Statement
with the SEC pursuant to Section 2(a), 2(b), 2(e) or 2(f), the
Company will use its best efforts to effect the registration of the
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
promptly prepare and file with the SEC a Registration Statement
with respect to the Registrable Securities and use its best efforts
to cause such Registration Statement relating to the Registrable
Securities to become effective as soon as practicable after such
filing (but in no event later than the Effectiveness Deadline). The
Company shall keep each Registration Statement effective pursuant
to Rule 415 at all times until the earlier of (i) the date as of
which the Investors may sell all of the Registrable Securities
covered by such Registration Statement without restriction or
limitation pursuant to Rule 144 and without the requirement to be
in compliance with Rule 144(c)(1) (or any successor thereto)
promulgated under the 1933 Act or (ii) the date on which the
Investors shall have sold all of the Registrable Securities covered
by such Registration Statement (the “
Registration Period
”). The Company
shall ensure that each Registration Statement (including any
amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein, or
necessary to make the statements therein (in the case of
prospectuses, in the light of the circumstances in which they were
made) not misleading. The term “best efforts” shall
mean, among other things, that the Company shall submit to the SEC,
within two (2) Business Days after the later of the date that (i)
the Company learns that no review of a particular Registration
Statement will be made by the staff of the SEC or that the staff
has no further comments on a particular Registration Statement, as
the case may be, and (ii) the approval of Legal Counsel (which
approval is immediately sought), a request for acceleration of
effectiveness of such Registration Statement to a time and date not
later than two (2) Business Days after the submission of such
request. The Company shall respond in writing to comments made by
the SEC in respect of a Registration Statement as soon as
practicable, but in no event later than fifteen (15) days after the
receipt of comments by or notice from the SEC that an amendment is
required in order for a Registration Statement to be declared
effective.
(b)
The Company shall
prepare and file with the SEC 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 1933 Act, as may be necessary to
keep such Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by such Registration
Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof as set forth in
such Registration Statement. In the case of amendments and
supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this
Section 3(b)) by reason of the Company filing a report on Form
10-K, Form 10-Q or Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the
“
1934 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 SEC on the same day on which the
1934 Act report is filed which created the requirement for the
Company to amend or supplement such Registration
Statement.
(c)
The Company shall
(A) permit Legal Counsel and the Registration Consultant to review
and comment upon (i) a Registration Statement at least five (5)
Business Days prior to its filing with the SEC and (ii) all
amendments and supplements to all Registration Statements (except
for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, and any similar or successor reports)
within a reasonable number of days prior to their filing with the
SEC, and (B) not file any Registration Statement or amendment or
supplement thereto in a form to which Legal Counsel or the
Registration Consultant reasonably objects. The Company shall not
submit a request for acceleration of the effectiveness of a
Registration Statement or any amendment or supplement thereto
without the prior approval of Legal Counsel and the Registration
Consultant, which consent shall not be unreasonably withheld. The
Company shall furnish to Legal Counsel and the Registration
Consultant, without charge, (i) copies of any correspondence from
the SEC or the staff of the SEC to the Company or its
representatives relating to any Registration Statement, (ii)
promptly after the same is prepared and filed with the SEC, one
copy of any Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents
incorporated therein by reference, if requested by an Investor, and
all exhibits and (iii) upon the effectiveness of any Registration
Statement, one copy of the prospectus included in such Registration
Statement and all amendments and supplements thereto. The Company
shall reasonably cooperate with Legal Counsel and the Registration
Consultant in performing the Company's obligations pursuant to this
Section 3.
(d)
The Company shall
furnish to each Investor whose Registrable Securities are included
in any Registration Statement, without charge, (i) promptly after
the same is prepared and filed with the SEC, 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 an Investor, all exhibits and
each preliminary prospectus, (ii) 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 Investor may
reasonably request) and (iii) such other documents, including
copies of any preliminary or final prospectus, as such Investor may
reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such
Investor.
(e)
The Company shall
use its best efforts to (i) register and qualify, unless an
exemption from registration and qualification applies, the resale
by Investors 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 Registration Period,
(iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the
Registration 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(e), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process
in any such jurisdiction. The Company shall promptly notify Legal
Counsel and each Investor who holds Registrable Securities of the
receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or “blue
sky” laws of any jurisdiction in the United States or its
receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
(f)
The Company shall
notify Legal Counsel and each Investor in writing of the happening
of any event, as promptly as practicable after becoming aware of
such event but in any event on the same Trading Day as 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 deliver
ten (10) copies of such supplement or amendment to Legal Counsel
and each Investor (or such other number of copies as Legal Counsel
or such Investor may reasonably request). The Company shall also
promptly notify Legal Counsel and each Investor 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 Legal Counsel and each Investor
by facsimile or email on the same day of such effectiveness and by
overnight mail), (ii) of any request by the SEC 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. By 9:30 a.m. New York City time on
the date following the date any post-effective amendment has become
effective, the Company shall file with the SEC in accordance with
Rule 424 under the 1933 Act the final prospectus to be used in
connection with sales pursuant to such Registration
Statement.
(g)
The Company shall
use its 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 the 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 possible moment and to notify Legal
Counsel and each Investor who holds Registrable Securities being
sold of the issuance of such order and the resolution thereof or
its receipt of actual notice of the initiation or threat of any
proceeding for such purpose.
(h)
If any Investor is
required under applicable securities laws to be described in the
Registration Statement as an underwriter or an Investor believes
that it could reasonably be deemed to be an underwriter of
Registrable Securities, at the reasonable request of such Investor,
the Company shall furnish to such Investor, on the date of the
effectiveness of the Registration Statement and thereafter from
time to time on such dates as an Investor 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
Investors, 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
Investors.
(i)
If any Investor is
required under applicable securities laws to be described in the
Registration Statement as an underwriter or an Investor believes
that it could reasonably be deemed to be an underwriter of
Registrable Securities, the Company shall make available for
inspection by (i) such Investor, (ii) Legal Counsel and (iii) one
firm of accountants or other agents retained by the Investors
(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 an Investor) 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 disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) 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 (c) the information in such Records has
been made generally available to the public other than by
disclosure in violation of this Agreement. Each Investor 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 any Investor) shall be deemed to limit the Investors'
ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and
regulations.
(j)
The Company shall
hold in confidence and not make any disclosure of information
concerning an Investor 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, or
(iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or
any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor
is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at the Investor's expense,
to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
(k)
The Company shall
use its best efforts either to (i) 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) secure the inclusion for quotation of all of
the Registrable Securities on the Principal Market or (iii) if,
despite the Company's best efforts, the Company is unsuccessful in
satisfying the preceding clauses (i) and (ii), to secure the
inclusion for quotation on an Eligible Market for such Registrable
Securities and, without limiting the generality of the foregoing,
to use its best efforts to arrange for at least two market makers
to register with the Financial Industry Regulatory Authority, Inc.
(“
FINRA
”) as
such with respect to such Registrable Securities. The Company shall
pay all fees and expenses in connection with satisfying its
obligation under this Section 3(k).
(l)
The Company shall
cooperate with the Investors who hold 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 Investors may reasonably request and registered in
such names as the Investors may request.
(m)
If requested by an
Investor, the Company shall as soon as practicable (i) incorporate
in a prospectus supplement or post-effective amendment such
information as an Investor reasonably requests to be included
therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect
to the number of 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) 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) supplement or make amendments to any
Registration Statement if reasonably requested by an Investor
holding any Registrable Securities.
(n)
The Company shall
use its best efforts to cause the Registrable Securities covered by
a Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable
Securities.
(o)
The Company shall
make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of
the period covered thereby, an earnings statement (in form
complying with, and in the manner provided by, the provisions of
Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal
quarter next following the applicable Effective Date of a
Registration Statement.
(p)
The Company shall
otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC in connection with any registration
hereunder.
(q)
Within two (2)
Business Days after a Registration Statement which covers
Registrable Securities is declared effective by the SEC, 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 Investors whose Registrable
Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as
Exhibit A
.
(r)
Notwithstanding
anything to the contrary herein, at any time after the Effective
Date, 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 and its counsel, in the best interest of the Company
and, in the opinion of counsel to the Company, otherwise required
(a “
Grace
Period
”); provided, that the Company shall promptly
(i) notify the Investors 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 Investors) and the date on
which the Grace Period will begin, and (ii) notify the Investors in
writing of the date on which the Grace Period ends; and, provided
further, that no Grace Period shall exceed five (5) consecutive
days and during any three hundred sixty five (365) day period such
Grace Periods shall not exceed an aggregate of twenty (20) days and
the first day of any Grace Period must be at least five (5) Trading
Days after the last day of any prior Grace Period (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 Investors receive the notice referred to in clause (i) and
shall end on and include the later of the date the Investors
receive the notice referred to in clause (ii) and the date referred
to in such notice. The provisions of Section 3(g) 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
the first sentence of 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 an Investor in accordance with
the terms of the Securities Purchase Agreement in connection with
any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale, prior to the
Investor's receipt of the notice of a Grace Period and for which
the Investor has not yet settled.
(s)
Neither the Company
nor any Subsidiary or affiliate thereof shall identify any Investor
as an underwriter in any public disclosure or filing with the SEC,
the Principal Market
or
any Eligible Market and any Investor being deemed an underwriter by
the SEC shall not relieve the Company of any obligations it has
under this Agreement or any other Transaction Document
(as defined in the Securities Purchase Agreement);
provided, however, that the foregoing shall not prohibit the
Company from including the disclosure found in the “Plan of
Distribution” section attached hereto as
Exhibit B
in the Registration
Statement
.
(t)
Neither the Company
nor any of its Subsidiaries has entered, as of the date hereof, nor
shall the Company or any of its Subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its
securities, that would have the effect of impairing the rights
granted to the Buyers in this Agreement or otherwise conflicts with
the provisions hereof.
4.
Obligations of the
Investors
.
(a)
At least five (5)
Business Days prior to the first anticipated Filing Date of a
Registration Statement, the Company shall notify each Investor in
writing of the information the Company requires from each such
Investor if such Investor elects to have any of such Investor's
Registrable Securities included in such Registration Statement. It
shall be a condition precedent to the obligations of the Company to
complete any registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such
Investor 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 and maintain 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)
Each Investor, by
such Investor'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 such Investor has notified the Company
in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from such Registration
Statement.
(c)
Each Investor
agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(g) or the
first sentence of Section 3(f), such Investor will immediately
discontinue disposition of Registrable Securities pursuant to any
Registration Statement(s) covering such Registrable Securities
until such Investor's receipt of copies of the supplemented or
amended prospectus as contemplated by Section 3(g) or the first
sentence of Section 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 an Investor in accordance
with the terms of the Securities Purchase Agreement in connection
with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the
Investor's receipt of a notice from the Company of the happening of
any event of the kind described in Section 3(g) or the first
sentence of Section 3(f) and for which the Investor has not yet
settled.
(d)
Each Investor
covenants and agrees that it will comply with the prospectus
delivery requirements of the 1933 Act as applicable to it or an
exemption therefrom in connection with sales of Registrable
Securities pursuant to the Registration Statement.
5.
Expenses of
Registration
.
All
reasonable expenses, other than underwriting discounts and
commissions, if applicable, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and
3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and
disbursements of counsel for the Company shall be paid by the
Company. The Company shall engage counsel mutually acceptable to
the Company and the Designee in connection with the registration,
filing or qualification pursuant to Sections 2 and 3 of this
Agreement to act as a registration consultant (the
“
Registration
Consultant
”) and shall pay such Registration
Consultant's reasonable fees and expenses, which amount shall be
limited to $25,000 for each such registration, filing or
qualification without the prior consent of the
Company.
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 each Investor, the directors,
officers, partners, members, employees, agents, representatives of,
and each Person, if any, who controls any Investor within the
meaning of the 1933 Act or the 1934 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 SEC, 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 (“
Blue Sky Filing
”), 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 SEC) or the
omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not
misleading, (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 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 in reliance upon and in
conformity with information furnished in writing to the Company by
such Indemnified Person for such Indemnified Person expressly for
use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant
to Section 3(d); and (ii) 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 Investors pursuant to Section
9.
(b)
In connection with
any Registration Statement in which an Investor is participating,
each such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its
directors, each of its officers who signs the Registration
Statement and each Person, if any, who controls the Company within
the meaning of the 1933 Act or the 1934 Act (each, an
“
Indemnified
Party
”), against any Claim or Indemnified Damages to
which any of them may become subject, under the 1933 Act, the 1934
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 in
reliance upon and in conformity with written information furnished
to the Company by such Investor expressly for use in connection
with such Registration Statement; and, subject to Section 6(c),
such Investor shall reimburse the Indemnified Party for any legal
or other expenses reasonably incurred by an Indemnified Party in
connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this
Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the
prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that
the Investor 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 such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and
shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
(c)
Promptly after
receipt by an Indemnified Person or Indemnified Party 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 Indemnified Party shall, if a
Claim 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 the Indemnified Person or the Indemnified
Party, as the case may be; provided, however, that an Indemnified
Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for
all such Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel
retained by the Indemnified Person or Indemnified Party, as
applicable, the representation by such counsel of the Indemnified
Person or Indemnified Party, as the case may be, and the
indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel
in such proceeding. In the case of an Indemnified Person, legal
counsel referred to in the immediately preceding sentence shall be
selected by the Investors holding at least a majority in interest
of the Registrable Securities included in the Registration
Statement to which the Claim relates. The Indemnified Party or
Indemnified Person shall reasonably cooperate 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 the
Indemnified Party or Indemnified Person which relates to such
action or Claim. The indemnifying party shall keep the Indemnified
Party or Indemnified Person fully 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
Indemnified Party or Indemnified Person, 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 Indemnified Party or Indemnified
Person of a release from all liability in respect to such Claim or
litigation and such settlement shall not include any admission as
to fault on the part of the Indemnified Party. Following
indemnification as provided for hereunder, the indemnifying party
shall be subrogated to all rights of the Indemnified Party or
Indemnified Person 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 Indemnified Party under this
Section 6, except to the extent that the indemnifying party is
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.
(e)
The indemnity
agreements contained herein shall be in addition to (i) any cause
of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to
the law.
7.
Contribution
.
To the
extent any indemnification by an indemnifying party is prohibited
or limited by law, the 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 11(f) of the 1933
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 amount of net proceeds received by such
seller from the sale of such Registrable Securities pursuant to
such Registration Statement.
8.
Reports Under the 1934
Act
.
With a
view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to
sell securities of the Company to the public without registration
(“
Rule 144
”),
the Company agrees to:
(a)
make and keep
public information available, as those terms are understood and
defined in Rule 144;
(b)
file with the SEC
in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 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 each
Investor so long as such Investor 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 1933 Act and the 1934 Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports
and documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit the Investors
to sell such securities pursuant to Rule 144 without
registration.
9.
Assignment of Registration
Rights
.
The
rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of such
Investor's Registrable Securities if: (i) the Investor 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
restricted under the 1933 Act or applicable state securities laws;
(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; and (v) such transfer shall have
been made in accordance with the applicable requirements of the
Securities Purchase Agreement.
10.
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 Required Holders; provided that any such
amendment or waiver that complies with the foregoing but that
disproportionately, materially and adversely affects the rights and
obligations of any Investor relative to the comparable rights and
obligations of the other Investors shall require the prior written
consent of such adversely affected Investor. Any amendment or
waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company. No such amendment shall be
effective to the extent that it applies to less than all of the
holders of the Registrable Securities. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or
modification of any provision of this Agreement unless the same
consideration (other than the reimbursement of legal fees) also is
offered to all of the parties to this Agreement.
11.
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 delivery, when sent by facsimile
(provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party),
(iii) upon delivery, when sent by electronic mail (provided that
the sending party does not receive an automated rejection notice);
or (iv) 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, facsimile numbers and
e-mail addresses for such communications shall be:
If to
the Company:
Bridgeline Digital,
Inc.
100
Summit Drive Burlington, MA 01803
Telephone: (781)
376-5555
Facsimile:
Email:
akahn@bridgeline.com
Attention: Roger
Kahn
President and Chief
Executive Officer
With a
copy (for informational purposes only) to:
Disclosure Law
Group, a Professional Corporation
600
West Broadway, Suite 700
San
Diego, CA 92101
Telephone: (619)
272-7050
Facsimile: (619)
330-2101
Attention: Daniel
W. Rumsey, Esq.
If to
the Transfer Agent:
American Stock
Transfer Company
6201
15th Avenue
Brooklyn, NY
11219
Telephone:
(800)
937-5449
Facsimile:
Attention:
Email:
If to
Legal Counsel:
Schulte
Roth & Zabel
919
Third Avenue
New
York, NY 10022
Telephone: (212)
756-2000
Facsimile: (212)
593-5955
Attention: Eleazer
Klein, Esq.
Email:
eleazer.klein@srz.com
If to a
Buyer, to its address, facsimile number or email address set forth
on the Schedule of Buyers attached hereto, with copies to such
Buyer's representatives as set forth on the Schedule of Buyers, or
to such other address, facsimile number and/or email address 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 e-mail transmission containing the
time, date, recipient facsimile number or e-mail address 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 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, 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)
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).
(f)
This Agreement, the
other Transaction Documents (as defined in the Securities Purchase
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,
the other Transaction Documents 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.
(g)
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.
(h)
The headings in
this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
(i)
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 of a
copy of this Agreement bearing the signature of the party so
delivering this Agreement.
(j)
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)
All consents and
other determinations required to be made by the Investors pursuant
to this Agreement shall be made, unless otherwise specified in this
Agreement, by the Required Holders, determined as if all of the
Warrants held by Investors then outstanding have been exercised for
Registrable Securities without regard to any limitations on
exercise of the Warrants.
(l)
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.
(m)
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.
(n)
The obligations of
each Investor hereunder are several and not joint with the
obligations of any other Investor, and no provision of this
Agreement is intended to confer any obligations on any Investor
vis-à-vis any other Investor. Nothing contained herein, and no
action taken by any Investor pursuant hereto, shall be deemed to
constitute the Investors as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that
the Investors are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated
herein.
* * * *
* *
[Signature Page Follows]
IN WITNESS WHEREOF,
each Buyer and the
Company have caused their respective signature page to this
Registration Rights Agreement to be duly executed as of the date
first written above.
|
COMPANY:
|
|
BRIDGELINE DIGITAL, INC.
_________________________________
Title:
Chief Executive Officer
|
|
|
IN WITNESS WHEREOF,
each Buyer and the
Company have caused their respective signature page to this
Registration Rights Agreement to be duly executed as of the date
first written above.
|
BUYER:
|
|
________________________________
Name of
Buyer
By:
_____________________________
Signature
Name:
Title,
if an entity:
By:
_____________________________
Signature, if
Joint
Name:
|
|
|
[Signature
Page to Registration Rights Agreement]
-22-
SCHEDULE OF BUYERS
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
American
Stock Transfer & Trust Company, LLC
6201
15
th
Avenue
Brooklyn,
New York 11219
Re:
Bridgeline Digital, Inc.
Ladies
and Gentlemen:
We are
counsel to Bridgeline Digital, Inc., a Delaware corporation (the
“
Company
”), and
have represented the Company in connection with that certain
Securities Purchase Agreement, dated as of March , 2019 (the
“
Securities
Purchase Agreement
”),
entered into by and among the Company and the buyers named therein
(collectively, the “
Holders
”) pursuant to which the
Company issued to the Holders (i) shares (the “
Preferred Shares
”) of the
Company's Series C Convertible Preferred Stock (the
“
Preferred
Stock
”) which are convertible into shares of the
Company’s common stock, par value $0.001 per share (as
converted collectively the “
Conversion Shares
”) and (ii) three
series of warrants exercisable for shares of Common Stock (the
“
Warrants
”).
Pursuant to the Securities Purchase Agreement, the Company also has
entered into a Registration Rights Agreement with the Holders (the
“
Registration Rights
Agreement
”) pursuant to which the Company agreed,
among other things, to register the resale of the Registrable
Securities (as defined in the Registration Rights Agreement),
including the Common Shares and the shares of Common Stock issuable
upon exercise of the Warrants under the Securities Act of 1933, as
amended (the “
1933
Act
”). In connection with the Company's obligations
under the Registration Rights Agreement, on ____________ ___, 2019,
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 each of the Holders as a selling stockholder
thereunder.
In
connection with the foregoing, we advise you that a member of the
SEC's staff has advised us 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 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.
This
letter shall serve as our standing instruction to you that the
shares of Common Stock are freely transferable by the Holders
pursuant to the Registration Statement. You need not require
further letters from us to effect any future legend-free issuance
or reissuance of shares of Common Stock to the Holders as
contemplated by the Company's Irrevocable Transfer Agent
Instructions dated March , 2019.
Very
truly yours,
DISCLOSURE
LAW GROUP
By:_____________________
CC:
LIST NAMES OF
HOLDERS
EXHIBIT B
SELLING STOCKHOLDERS
The
shares of common stock being offered by the selling stockholders
are those previously issued to the selling stockholders, and those
issuable to the selling stockholders, upon conversion of the
Preferred Shares and the exercise of the Warrants. For additional
information regarding the issuances of those shares of common
stock, the Preferred Shares and the warrants, see “Private
Placement of Preferred Shares and Warrants” above. We are
registering the 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 shares of common stock, Preferred
Shares and the Warrants, 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 of the shares of common stock by
each of the selling stockholders. The second column lists the
number of shares of common stock beneficially owned by each selling
stockholder, based on its ownership of the shares of common stock,
the Preferred Shares and the Warrants, as of ________, 2019,
assuming conversion of the Preferred Shares and exercise of the
Warrants held by the selling stockholders on that date, without
regard to any limitations on conversions or exercises.
The
third column lists the shares of common stock being offered by this
prospectus by the selling stockholders.
In
accordance with the terms of a registration rights agreement with
the selling stockholders, this prospectus generally covers the
resale of at least the sum of (i) the maximum number of shares of
common stock issued and (ii) the maximum number of shares of common
stock issuable upon conversion of the Preferred Shares and exercise
of the related Warrants, determined as if the outstanding Preferred
Shares and Warrants were converted or exercised in full as of the
trading day immediately preceding the date this registration
statement was initially filed with the SEC, each as of the trading
day immediately preceding the applicable date of determination and
all subject to adjustment as provided in the registration right
agreement, without regard to any limitations on the conversion of
the Preferred Shares or exercise of the Warrants.
The fourth column assumes the sale
of all of the shares offered by the selling stockholders pursuant
to this prospectus.
Under
the terms of the Preferred Shares and the Warrants, a selling
stockholder may not convert the Preferred Shares or exercise the
Warrants to the extent such exercise would cause such selling
stockholder, together with its affiliates, to beneficially own a
number of shares of common stock which would exceed 4.99% of our
then outstanding common stock following such exercise, excluding
for purposes of such determination common stock issuable upon
exercise of the warrants which have not been exercised. The number
of shares in the second column does not reflect this limitation.
The selling stockholders may sell all, some or none of their shares
in this offering. See “Plan of
Distribution.”
Name
of Selling Stockholder
|
Number
of Shares of Common Stock Owned Prior to
Offering
|
Maximum
Number of Shares of Common Stock to be Sold Pursuant to this
Prospectus
|
Number
of Shares of Common Stock Owned After Offering
|
PLAN
OF DISTRIBUTION
We are
registering the shares of common stock previously issued and
issuable upon conversion of the Preferred Shares and exercise of
the Warrants to permit the resale of these shares of common stock
by the holders thereof and holders of the common stock 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 beneficially owned 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,
●
on any national
securities exchange or quotation service on which the securities
may be listed or quoted at the time of sale;
●
in the
over-the-counter market;
●
in transactions
otherwise than on these exchanges or systems or in the
over-the-counter market;
●
through the writing
of options, whether such options are listed on an options exchange
or otherwise;
●
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
●
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;
●
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its account;
●
an
exchange distribution in accordance with the rules of the
applicable exchange;
●
privately
negotiated transactions;
●
sales
pursuant to Rule 144;
●
broker-dealers
may agree with the selling securityholders to sell a specified
number of such shares at a stipulated price per share;
●
a
combination of any such methods of sale; and
●
any
other method permitted pursuant to applicable law.
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 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 of 1933, as
amended, 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.
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 reallowed
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 Exchange Act of 1934, as amended, and the rules and
regulations thereunder, including, without limitation, 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. 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 or entity 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, that 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 agreement, 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.
PLACEMENT AGENCY AGREEMENT
March
12, 2019
ThinkEquity,
a division of Fordham Financial Management, Inc.
17
State Street, 22nd Floor New York, NY 10004
Taglich
Brothers
790 New
York Avenue
Huntington,
NY 11743
Ladies
and Gentlemen:
Subject
to the terms and conditions herein (this “
Agreement
”) and the
Transaction Documents (defined below), Bridgeline Digital, Inc., a
Delaware corporation (the “
Company
”), hereby agrees
to sell securities consisting of, (i) shares of Series C
Convertible Preferred Stock, par value $0.001 per share with
rights, preferences and privileges as set forth in the Certificate
of Designations attached as
Exhibit A
(each a “
Preferred Share
” and
collectively, the “
Preferred Shares”
), (ii)
Series A warrants to purchase Common Stock (the “
Series A Warrants
”) in
the form attached as
Exhibit B
; (iii) Series B
warrants to purchase Common Stock in the form attached as
Exhibit C
(the
“
Series B
Warrants
”); and (iv) Series C warrants to purchase
Common Stock in the form attached as
Exhibit D
(the
“
Series C
Warrants
” and together with the Series A Warrants and
Series B Warrants, the “
Warrants
”), directly to
various investors (each, an “
Investor
” and,
collectively, the “
Investors
”) through
ThinkEquity, a division of Fordham Financial Management, Inc. and
Taglich Brothers Inc. (the “
Placement Agents
”), as
placement agents. The Securities (as defined herein) shall be
offered and sold pursuant to Section 4(a)(2) under the Securities
Act of 1933, as amended (the “
Securities Act
”). The
documents executed and delivered by the Company and the Investors
in connection with the Offering (as defined below), including,
without limitation, a securities purchase agreement (the
“
Purchase
Agreement
”) and a registration rights agreement (the
“
RRA
”)
shall be collectively referred to herein as the “
Transaction Documents
.”
The Purchase Price to the Investors for each Preferred Share and
related Warrants is $1,000. The exercise price to the Investors for
each share of Common Stock issuable upon exercise of the Series A
Warrants, Series B Warrants and Series C Warrants is $0.18, $0.18
and $0.001, respectively. The Placement Agent may retain other
brokers or dealers to act as sub-agents or selected-dealers on its
behalf in connection with the Offering (as defined below). The
Shares, the Preferred Shares, the Warrants, the shares of Common
Stock issuable upon conversion of the Preferred Shares (the
“
Conversion
Shares
”) and the shares of Common Stock issuable upon
exercise of the Warrants (the “
Warrant Shares
”) are
hereafter referred to as the “
Securities
”).
The
Company hereby confirms its agreement with the Placement Agent as
follows:
Section
1.
Agreement to Act as Placement
Agent
.
(a)
On the basis of the
representations, warranties and agreements of the Company herein
contained, and subject to all the terms and conditions of this
Agreement, the Placement Agents shall be the exclusive Placement
Agents in connection with the offering and sale by the Company of
the Securities pursuant to Section 4(a)(2) under the Securities
Act, with the terms of such offering (the “
Offering
”) to be subject
to market conditions and negotiations between the Company, the
Placement Agent and the prospective Investors. The Placement Agents
will act on a reasonable best efforts basis and the Company agrees
and acknowledges that there is no guarantee of the successful
placement of the Securities, or any portion thereof, in the
prospective Offering. Under no circumstances will the Placement
Agents or any of its “Affiliates” (as defined below) be
obligated to underwrite or purchase any of the Securities for its
own account or otherwise provide any financing. The Placement
Agents shall act solely as the Company’s agent and not as
principal. The Placement Agents shall have no authority to bind the
Company with respect to any prospective offer to purchase
Securities and the Company shall have the sole right to accept
offers to purchase Securities and may reject any such offer, in
whole or in part. Subject to the terms and conditions hereof,
payment of the purchase price for, and delivery of, the Securities
shall be made at one or more closings (each a “
Closing
” and the date on
which each Closing occurs, a “
Closing Date
”). As
compensation for services rendered, on each Closing Date, the
Company shall pay to the Placement Agent the fees and expenses set
forth below:
(i)
A cash fee equal to
8% of the gross proceeds received by the Company from the sale of
the Securities at the Closing of the Offering to Investors;
provided,
however
, the
Company shall not be required to pay such fee for the existing
investors of the Company or the investors set forth on
Schedule A
attached hereto.
(ii)
The
Company also agrees to pay to the Placement Agents $90,000 for
out-of-pocket expenses;
provided
,
however
, that in the event that
the Offering is terminated, the Company agrees to reimburse the
Placement Agents pursuant to Section 6 hereof.
(b)
The Company hereby
agrees to issue to the Placement Agents (and/or its designees) on
the Closing Date, upon payment of $100.00 by the Placement Agents
on the Closing Date, warrants (“
Placement Agent’s
Warrants
”) to purchase that number of shares of Common
Stock equal to 5% of the aggregate number of Shares placed in the
Offering, plus any Shares underlying any convertible securities
Placed in the Offering. The Placement Agent’s Warrants shall
have the same terms, including exercise price and registration
rights, as the Series A Warrants issued to investors in the
Offering;
provided
,
however
, in the
event no Warrants are issued to Investors, the exercise price of
the Placement Agent’s Warrants shall be 110% of the price at
which the Preferred Shares are sold to Investors
provided
,
further that
, in the event no
Preferred Shares are issued to Investors, the exercise price of the
Placement Agent’s Warrants shall be 110% of market price of
the Company’s Common Stock on the Closing Date. The Placement
Agent’s Warrant agreement, shall be exercisable, in whole or
in part, commencing on the issuance date and will have the same
terms as the Warrants issued to the Investors. The Placement
Agents’ Warrant Agreement and the shares of Common Stock and
Preferred Shares issuable upon exercise thereof are hereinafter
referred to together as the “
Placement Agents’
Securities
.” The Placement Agent understands and
agrees that there are significant restrictions pursuant to FINRA
Rule 5110 against transferring the Placement Agents’ Warrant
Agreement and the underlying Placement Agent’s Securities
during the one hundred eighty (180) days after the Closing Date and
by its acceptance thereof shall agree that it will not sell,
transfer, assign, pledge or hypothecate the Placement Agents’
Warrant Agreement, or any portion thereof, or be the subject of any
hedging, short sale, derivative, put or call transaction that would
result in the effective economic disposition of such securities for
a period of one hundred eighty (180) days following the Closing
Date to anyone other than (i) a selected dealer in connection with
the Offering, or (ii) a bona fide officer or partner of the
Placement Agents or selected dealer; and only if any such
transferee agrees to the foregoing lock-up restrictions. Delivery
of the Placement Agents’ Warrant Agreement shall be made on
the Closing Date and shall be issued in the name or names and in
such authorized denominations as the Placement Agents may
request.
(c)
The term of the
Placement Agents' exclusive engagement will be until the completion
of the Offering (the “
Exclusive Term
”);
provided
,
however
, that a
party hereto may terminate the engagement with respect to itself at
any time upon fifteen (15) days written notice to the other
parties. Notwithstanding anything to the contrary contained herein,
the provisions concerning confidentiality, indemnification and
contribution contained herein and the Company’s obligations
contained in the indemnification provisions will survive any
expiration or termination of this Agreement, and the
Company’s obligation to pay fees actually earned and payable
and to reimburse expenses actually incurred and reimbursable
pursuant to Section 1 hereof and which are permitted to be
reimbursed under FINRA Rule 5110(f)(2)(D)(i), will survive any
expiration or termination of this Agreement. Nothing in this
Agreement shall be construed to limit the ability of the Placement
Agents or their Affiliates to pursue, investigate, analyze, invest
in, or engage in investment banking, financial advisory or any
other business relationship with Persons (as defined herein) other
than the Company. As used herein (i) “
Persons
” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind and (ii)
“
Affiliate
” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under
Rule 405 under the Securities Act.
Section
2.
Representations and Warranties
. The
Company represents and warrants to the Placement Agents, as of the
date hereof and as of the Closing Date, all of the representations,
warranties and agreements of the Company that were made by the
Company to the Buyers (as defined in the Purchase Agreement) in
Section 3 of the Purchase Agreement, and that such representations
and warranties set forth in Section 3 thereof are hereby
incorporated by reference herein. The Company agrees to all of the
agreements and covenants in Section 4 of the Purchase Agreement
with respect to the Placement Agents and that such agreements and
covenants set forth in Section 4 thereof are incorporated by
reference herein.
Section
3.
Delivery and Payment
. Each Closing shall
occur at the offices of Gracin & Marlow, LLP, The Chrysler
Building,405 Lexington Avenue, 26
th
Floor, New York,
New York 10174 (or at such other place as shall be agreed upon by
the Placement Agents and the Company) (“
Placement Agent
Counsel
”). Subject to the terms and conditions hereof,
at each Closing payment of the purchase price for the Securities
sold on such Closing Date shall be made by Federal Funds wire
transfer, against delivery of such Securities, and such Securities
shall be registered in such name or names and shall be in such
denominations, as the Placement Agents may request at least one (1)
business day before the time of purchase.
Deliveries of the
documents with respect to the purchase of the Securities, if any,
shall be made at the offices of Placement Agent Counsel. All
actions taken at a Closing shall be deemed to have occurred
simultaneously.
Section
4.
Covenants and Agreements of the Company
.
The Company further covenants and agrees with the Placement Agent
as follows:
(a)
Intentionally
Omitted
.
(b)
Blue Sky Compliance
. The
Company will cooperate with the Placement Agents and the Investors
in endeavoring to qualify the Securities for sale under the
securities laws of such jurisdictions (United States and foreign)
as the Placement Agents and the Investors may reasonably request
and will make such applications, file such documents, and furnish
such information as may be reasonably required for that purpose,
provided the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in
any jurisdiction where it is not now so qualified or required to
file such a consent, and provided further that the Company shall
not be required to produce any new disclosure document other than
the Transaction Documents. The Company will, from time to time,
prepare and file such statements, reports and other documents as
are or may be required to continue such qualifications in effect
for so long a period as the Placement Agents may reasonably request
for distribution of the Securities. The Company will advise the
Placement Agents promptly of the suspension of the qualification or
registration of (or any such exemption relating to) the Securities
for offering, sale or trading in any jurisdiction or any initiation
or threat of any proceeding for any such purpose, and in the event
of the issuance of any order suspending such qualification,
registration or exemption, the Company shall use its best efforts
to obtain the withdrawal thereof at the earliest possible
moment.
(c)
Amendments and Supplements to the
Transaction Documents and Other Matters
. The Company will
comply with the Securities Act and the Securities Exchange Act of
1934, and the rules and regulations of the Commission thereunder,
so as to permit the completion of the distribution of the
Securities as contemplated in this Agreement and the Transaction
Documents. If, prior to the termination of the Offering, any event
shall occur as a result of which, in the judgment of the Company or
in the opinion of the Placement Agents or counsel for the Placement
Agents, it becomes necessary to amend or supplement the Transaction
Documents in order to make the statements therein, in the light of
the circumstances under which they were made, as the case may be,
not misleading, or if it is necessary at any time to amend or
supplement the Transaction Documents, the Company will promptly
prepare and furnish at its own expense to the Placement Agent and
to dealers, an appropriate amendment or supplement to the
Transaction Documents that is necessary in order to make the
statements therein as so amended or supplemented, in the light of
the circumstances under which they were made, as the case may be,
not misleading, or so that the Transaction Documents, as so amended
or supplemented, will comply with law. Before amending or
supplementing Transaction Documents in connection with the
Offering, the Company will furnish the Placement Agents with a copy
of such proposed amendment or supplement and will disseminate any
such amendment or supplement to which the Placement Agents
reasonably objects.
(d)
Copies of any Amendments and
Supplements to the Transaction Documents
. The Company will
furnish the Placement Agents, without charge, during the period
beginning on the date hereof and ending on the later of the last
Closing Date of the Offering, as many copies of the Transaction
Documents and any amendments and supplements thereto as the
Placement Agents may reasonably request.
(e)
Intentionally
Omitted
.
(f)
Transfer Agent
. The Company
will maintain, at its expense, a registrar and transfer agent for
the Common Stock and the Preferred Shares.
(g)
Intentionally
Omitted
.
(h)
Intentionally
Omitted
.
(i)
Additional
Documents
.
The
Company will enter into any subscription, purchase or other
customary agreements as the Placement Agents or the Investors
reasonably deem necessary or appropriate to consummate the
Offering, all of which will be in form and substance reasonably
acceptable to the Placement Agents and the Investors. The Company
agrees that the Placement Agents may rely upon, and each is a third
party beneficiary of, the representations and warranties, and
applicable covenants, set forth in any such purchase, subscription
or other agreement with Investors in the Offering.
(j)
No Manipulation of
Price
.
The
Company will not take, directly or indirectly, any action designed
to cause or result in, or that has constituted or might reasonably
be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.
(k)
Acknowledgment
. The Company
acknowledges that any advice given by the Placement Agents to the
Company is solely for the benefit and use of the Board of Directors
of the Company and may not be used, reproduced, disseminated,
quoted or referred to, without the Placement Agents' prior written
consent.
Intentionally
Omitted
.
Section
5.
Conditions of the Obligations of the Placement
Agents
. The obligations of the Placement Agents hereunder
shall be subject to the accuracy of the representations and
warranties on the part of the Company set forth in Section 2
hereof, in each case as of the date hereof and as of each Closing
Date as though then made, to the timely performance by each of the
Company of its covenants and other obligations hereunder on and as
of such dates, and to each of the following additional
conditions:
(a)
No Untrue Statements
. The
Placement Agents shall not have discovered and disclosed to the
Company on or prior to the Closing Date that the SEC Filings
contains an untrue statement of a fact which, in the opinion of
Placement Agents’ Counsel, is material or omits to state
any fact which, in the opinion of such counsel, is material
and is required to be stated therein or is necessary to make
the statements therein not misleading..
(b)
Compliance with Regulatory
Requirements.
No order having the effect of ceasing or
suspending the distribution of the Securities or any other
securities of the Company shall have been issued by any securities
commission, securities regulatory authority or stock exchange and
no proceedings for that purpose shall have been instituted or shall
be pending or, to the knowledge of the Company, contemplated by any
securities commission, securities regulatory authority or stock
exchange.
(c)
Corporate Proceedings
. All
corporate proceedings and other legal matters in connection with
this Agreement, the Transaction Documents, and the registration or
exemption therefrom, sale and delivery of the Securities, shall
have been completed or resolved in a manner reasonably satisfactory
to the Placement Agent Counsel, and such counsel shall have been
furnished with such papers and information as it may reasonably
have requested to enable such counsel to pass upon the matters
referred to in this Section 5.
(d)
No Material Adverse Change
.
Subsequent to the execution and delivery of this Agreement and
prior to each Closing Date, in the Placement Agents’ sole
judgment after consultation with the Company, there shall not have
occurred any Material Adverse Effect (as defined in the Purchase
Agreement).
(e)
Opinion of Counsel for the
Company
. The Placement Agents shall have received on each
Closing Date the favorable opinion of Disclosure Law Group, legal
counsel to the Company, dated as of such Closing Date.
(f)
Secretary’s Certificate
.
At the Closing Date, the Placement Agents shall have received a
certificate of the Company signed by the Secretary of the Company,
dated the Closing Date certifying: (i) that each of the
Company’s charter, bylaws and Certificate of Designation is
true and complete, has not been modified and is in full force and
effect; (ii) that the resolutions of the Company’s Board of
Directors relating to the Offering are in full force and effect and
have not been modified; (iii) as to the accuracy and completeness
of all correspondence between the Company or its counsel and the
Commission; and (iv) as to the incumbency of the officers of the
Company. The documents referred to in such certificate shall be
attached to such certificate..
(g)
Officer’s Certificate.
.
The Placement Agents shall have received on each Closing Date a
certificate of the Company, dated as of such Closing Date, signed
by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and the Placement Agents shall be
satisfied that, the signers of such certificate have reviewed this
Agreement and the Transaction Documents and to the further effect
that:
(h)
Intentionally
Omitted
.
(i)
Stock Exchange Listing
. The
Common Stock shall be registered under the Exchange Act and shall
be listed on the Trading Market, and the Company shall not have
taken any action designed to terminate, or likely to have the
effect of terminating, the registration of the Common Stock
under the Exchange Act or delisting or suspending from trading the
Common Stock from the Trading Market, nor shall the Company have
received any information suggesting that the Commission or the
Trading Market is contemplating terminating such registration or
listing. “
Trading
Market
” means the Nasdaq Capital Market.
(j)
Placement Agents’ Warrant
Agreements
. On or before the Closing Date, the Placement
Agents shall have received executed copies of the Placement
Agents’ Warrant Agreements, provided the Company has received
the Placement Agents’ designees for such Warrant Agreements
at least two (2) business days prior to Closing Date.
(k)
Lock-Up Agreements
. On or
before the date of this Agreement, the Company shall have delivered
to the Placement Agents executed copies of the Lock-Up Agreements
from each of the Lock-Up Parties set forth in the Purchase
Agreement.
(l)
Additional Documents
. On or
before each Closing Date, the Placement Agents and counsel for the
Placement Agents shall have received such information and documents
as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Securities as contemplated
herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the
conditions or agreements, herein contained.
If any
condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the
Placement Agents by notice to the Company at any time on or prior
to a Closing Date, which termination shall be without liability on
the part of any party to any other party, except that Section 6
(Payment of Expenses), Section 7 (Indemnification and Contribution)
and Section 8 (Representations and Indemnities to Survive Delivery)
shall at all times be effective and shall survive such
termination.
Section
6.
Payment of Expenses
. The Company agrees
to pay all costs, fees and expenses incurred by the Company in
connection with the performance of its obligations hereunder and in
connection with the transactions contemplated hereby, including,
without limitation: (i) all expenses incident to the issuance,
delivery and qualification of the Securities (including all
printing and engraving costs); (ii) all fees and expenses of the
registrar and transfer agent of the Common Stock and Preferred
Shares; (iii) all necessary issue, transfer and other stamp taxes
in connection with the issuance and sale of the Securities;
(iv) all fees and expenses of the Company’s counsel,
independent public or certified public accountants and other
advisors; (v) all costs and expenses incurred in connection with
the preparation, printing, filing, shipping and distribution of the
Transaction Documents, and all amendments and supplements thereto,
and this Agreement; (vi) all filing fees, reasonable
attorneys’ fees and expenses incurred by the Company or the
Placement Agents in connection with qualifying or registering (or
obtaining exemptions from the qualification or registration of) all
or any part of the Securities for offer and sale under the state
securities or blue sky laws or the securities laws of any other
country, and, if requested by the Placement Agents, preparing and
printing a “
Blue Sky
Survey
,” an “
International Blue Sky
Survey
” or other memorandum, and any supplements
thereto, advising the Placement Agents of such qualifications,
registrations and exemptions; (vii) the fees and expenses
associated with including the Securities on the Trading Market;
(viii) the costs associated with post-Closing advertising the
Offering in the national editions of the Wall Street Journal and
New York Times; and (ix) the fees and expenses of the Placement
Agents’ due diligence and legal counsel not to exceed
$90,000;
provided
,
however
, if the
Engagement Agreement (as defined herein) between the Company and
ThinkEquity is terminated without an offering then such amount
shall not exceed $90,000. The Advance of $15,000 paid by the
Company in connection the Engagement Agreement, dated January 29,
2019 by and between the Company and ThinkEquity shall be applied
towards the fees and expenses of the Placement Agents’ due
diligence and legal counsel.
Section
7.
Indemnification and
Contribution
.
(a) The
Company agrees to indemnify and hold harmless the Placement Agents,
their Affiliates and each person controlling the Placement Agents
(within the meaning of Section 15 of the Securities Act), and the
directors, officers, agents and employees of the Placement Agents,
their Affiliates and each such controlling person (the Placement
Agents, and each such entity or person. an “
Indemnified Person
”) from
and against any losses, claims, damages, judgments, assessments,
costs and other liabilities (collectively, the “
Liabilities
”), and shall
reimburse each Indemnified Person for all fees and expenses
(including the reasonable fees and expenses of one counsel for all
Indemnified Persons, except as otherwise expressly provided herein)
(collectively, the “
Expenses
”) as they are
incurred by an Indemnified Person in investigating, preparing,
pursuing or defending any Actions, whether or not any Indemnified
Person is a party thereto, (i) caused by, or arising out of or in
connection with, any untrue statement or alleged untrue statement
of a material fact contained in any Transaction Document or by any
omission or alleged omission to state therein a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (other
than untrue statements or alleged untrue statements in, or
omissions or alleged omissions from, information relating to an
Indemnified Person furnished in writing by or on behalf of such
Indemnified Person expressly for use in the Transaction Documents)
or (ii) otherwise arising out of or in connection with advice or
services rendered or to be rendered by any Indemnified Person
pursuant to this Agreement, the transactions contemplated thereby
or any Indemnified Person's actions or inactions in connection with
any such advice, services or transactions;
provided
,
however
, that, the Company
shall not be responsible for any Liabilities or Expenses of any
Indemnified Person that are finally judicially determined to have
resulted solely from such Indemnified Person's (x) gross negligence
or willful misconduct in connection with any of the advice,
actions, inactions or services referred to above or (y) use of any
offering materials or information concerning the Company in
connection with the offer or sale of the Securities in the Offering
which were not authorized for such use by the Company and which use
constitutes gross negligence or willful misconduct. The Company
also agrees to reimburse each Indemnified Person for all Expenses
as they are incurred in connection with enforcing such Indemnified
Person's rights under this Agreement.
(b) Upon
receipt by an Indemnified Person of actual notice of an Action
against such Indemnified Person with respect to which indemnity may
be sought under this Agreement, such Indemnified Person shall
promptly notify the Company in writing; provided that failure by
any Indemnified Person so to notify the Company shall not relieve
the Company from any liability which the Company may have on
account of this indemnity or otherwise to such Indemnified Person,
except to the extent the Company shall have been prejudiced by such
failure. The Company shall, if requested by the Placement Agent,
assume the defense of any such Action including the employment of
counsel reasonably satisfactory to the Placement Agents, which
counsel may also be counsel to the Company. Any Indemnified Person
shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Person
unless: (i) the Company has failed promptly to assume the defense
and employ counsel or (ii) the named parties to any such Action
(including any impeded parties) include such Indemnified Person and
the Company, and such Indemnified Person shall have been advised in
the reasonable opinion of counsel that there is an actual conflict
of interest that prevents the counsel selected by the Company from
representing both the Company (or another client of such counsel)
and any Indemnified Person; provided that the Company shall not in
such event be responsible hereunder for the fees and expenses of
more than one firm of separate counsel for all Indemnified Persons
in connection with any Action or related Actions (as defined
herein), in addition to any local counsel. The Company shall not be
liable for any settlement of any Action effected without its
written consent (which shall not be unreasonably withheld). In
addition, the Company shall not, without the prior written consent
of the Placement Agents (which shall not be unreasonably withheld),
settle, compromise or consent to the entry of any judgment in or
otherwise seek to terminate any pending or threatened Action in
respect of which indemnification or contribution may be sought
hereunder (whether or not such Indemnified Person is a party
thereto) unless such settlement, compromise, consent or termination
includes an unconditional release of each Indemnified Person from
all Liabilities arising out of such Action for which
indemnification or contribution may be sought hereunder. The
indemnification required hereby shall be made by periodic payments
of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and
is due and payable. “
Action
” means any action,
suit, inquiry, notice of violation, proceeding or investigation
affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state,
county, local or foreign).
(c) In
the event that the foregoing indemnity is unavailable to an
Indemnified Person other than in accordance with this Agreement,
the Company shall contribute to the Liabilities and Expenses paid
or payable by such Indemnified Person in such proportion as is
appropriate to reflect (i) the relative benefits to the Company, on
the one hand, and to the Placement Agents and any other Indemnified
Person, on the other hand, of the matters contemplated by this
Agreement or (ii) if the allocation provided by the immediately
preceding clause is not permitted by applicable law, not only such
relative benefits but also the relative fault of the Company, on
the one hand, and the Placement Agents and any other Indemnified
Person, on the other hand, in connection with the matters as to
which such Liabilities or Expenses relate, as well as any other
relevant equitable considerations; provided that in no event shall
the Company contribute less than the amount necessary to ensure
that all Indemnified Persons, in the aggregate, are not liable for
any Liabilities and Expenses in excess of the amount of fees
actually received by the Placement Agents pursuant to this
Agreement. For purposes of this paragraph, the relative benefits to
the Company, on the one hand, and to the Placement Agents on the
other hand, of the matters contemplated by this Agreement shall be
deemed to be in the same proportion as (a) the total value paid or
contemplated to be paid to or received or contemplated to be
received by the Company in the transaction or transactions that are
within the scope of this Agreement, whether or not any such
transaction is consummated, bears to (b) the fees paid to the
Placement Agents under this Agreement. Notwithstanding the above,
no person guilty of fraudulent misrepresentation within the meaning
of Section 11(f) of the Securities Act, as amended, shall be
entitled to contribution from a party who was not guilty of
fraudulent misrepresentation.
(d) The
Company also agrees that no Indemnified Person shall have any
liability (whether direct or indirect, in contract or tort or
otherwise) to the Company for or in connection with advice or
services rendered or to be rendered by any Indemnified Person
pursuant to this Agreement, the transactions contemplated thereby
or any Indemnified Person's actions or inactions in connection with
any such advice, services or transactions except for Liabilities
(and related Expenses) of the Company that are finally judicially
determined to have resulted solely from such Indemnified Person's
gross negligence or willful misconduct in connection with any such
advice, actions, inactions or services.
(e) The
reimbursement, indemnity and contribution obligations of the
Company set forth herein shall apply to any modification of this
Agreement and shall remain in full force and effect regardless of
any termination of, or the completion of any Indemnified Person's
services under or in connection with, this Agreement.
Section
8.
Representations and Indemnities to Survive
Delivery
. The respective indemnities, agreements,
representations, warranties and other statements of the Company or
any person controlling the Company, of its officers, and of the
Placement Agents set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any
investigation made by or on behalf of the Placement Agent, the
Company, or any of its or their partners, officers or directors or
any controlling person, as the case may be, and will survive
delivery of and payment for the Securities sold hereunder and any
termination of this Agreement. A successor to a Placement Agents,
or to the Company, its directors or officers or any person
controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in
this Agreement.
Section
9.
Notices
. All communications hereunder
shall be in writing and shall be mailed, hand delivered or
telecopied and confirmed to the parties hereto as
follows:
If to
the Placement Agent to:
ThinkEquity
17
State Street, 22nd Floor
New
York, NY 10004
Attn:
Mr. Eric Lord, Head of Investment Banking
Fax:
(212) 349-2550
Email:
notices@think-equity.com
With a copy to:
Gracin
& Marlow, LLP
The
Chrysler Building
405
Lexington Avenue, 26
th
Floor New York, NY
101174
Facsimile:
(212) 907-6457
Attention:
Leslie Marlow, Esq.
If to
the Company:
Bridgeline
Digital, Inc.
100
Summit Drive
Burlington,
MA 01803
Telephone:
(781) 376-5555
Attention: Ari Kahn, CEO
E-mail:
akahn@bridgeline.com
with a copy (for informational purposes only) to:
Disclosure
Law Group, a Professional Corporation
600
West Broadway, Suite 700
San
Diego, CA 92101
Telephone:
(619) 272-7050
Facsimile:
(619) 330-2101
Attention:
Daniel W. Rumsey, Esq.
Email:
drumsey@disclosurelawgroup.com
Any
party hereto may change the address for receipt of communications
by giving written notice to the others.
Section
10.
Right of First Refusal
. The Placement
Agent shall have an irrevocable right of first refusal (the
“
Right of First
Refusal
”), to act as sole financial advisor, sole
investment banker, sole book-runner, and/or sole placement agent,
at the Placement Agent’s sole discretion, for each and every
future public and private equity and debt offering (each, a
“
Subject
Transaction
”), during the six (6) month period after
the Closing Date, of the Company, or any successor to or subsidiary
of the Company, on terms and conditions customary to the Placement
Agents for such Subject Transactions. For the avoidance of any
doubt, the Company shall not retain, engage or solicit any
additional investment banker, book-runner, financial advisor,
underwriter and/or placement agent in a Subject Transaction without
the express written consent of the Placement Agents.
Section
11.
Successors
. This Agreement will inure to
the benefit of and be binding upon the parties hereto, and to the
benefit of the employees, officers and directors and controlling
persons referred to in Section 7 hereof, and to their respective
successors, and personal representative, and no other person will
have any right or obligation hereunder.
Section
12.
Partial Unenforceability
. The invalidity
or unenforceability of any section, paragraph or provision of this
Agreement shall not affect the validity or enforceability of any
other section, paragraph or provision hereof. If any Section,
paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to
be made such minor changes (and only such minor changes) as are
necessary to make it valid and enforceable.
Section
13.
Governing Law Provisions
. This Agreement
shall be deemed to have been made and delivered in New York City
and both this Agreement and the transactions contemplated hereby
shall be governed as to validity, interpretation, construction,
effect and in all other respects by the internal laws of the State
of New York, without regard to the conflict of laws principles
thereof. Each of the Placement Agent and the Company: (i) agrees
that any legal suit, action or proceeding arising out of or
relating to this Agreement and/or the transactions contemplated
hereby shall be instituted exclusively in New York Supreme Court,
County of New York, or in the United States District Court for the
Southern District of New York, (ii) waives any objection which it
may have or hereafter to the venue of any such suit, action or
proceeding, and (iii) irrevocably consents to the jurisdiction of
the New York Supreme Court, County of New York, and the United
States District Court for the Southern District of New York in any
such suit, action or proceeding. Each of the Placement Agent and
the Company further agrees to accept and acknowledge service of any
and all process which may be served in any such suit, action or
proceeding in the New York Supreme Court, County of New York, or in
the United States District Court for the Southern District of New
York and agrees that service of process upon the Company mailed by
certified mail to the Company’s address shall be deemed in
every respect effective service of process upon the Company, in any
such suit, action or proceeding, and service of process upon the
Placement Agent mailed by certified mail to the Placement
Agent’s address shall be deemed in every respect effective
service process upon the Placement Agent, in any such suit, action
or proceeding. Notwithstanding any provision of this Agreement to
the contrary, the Company agrees that neither the Placement Agent
nor its Affiliates, and the respective officers, directors,
employees, agents and representatives of the Placement Agent, its
Affiliates and each other person, if any, controlling the Placement
Agent or any of its Affiliates, shall have any liability (whether
direct or indirect, in contract or tort or otherwise) to the
Company for or in connection with the engagement and transaction
described herein except for any such liability for losses, claims,
damages or liabilities incurred by us that are finally judicially
determined to have resulted from the bad faith or gross negligence
of such individuals or entities. If either party shall commence an
action or proceeding to enforce any provision of this Agreement,
then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorney’s
fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or
proceeding.
Section
14.
General Provisions
.
(a) This
Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. Notwithstanding anything
herein to the contrary, the Engagement Agreement, dated January 29,
2019, as amended February 4, 2019 (the “
Engagement Agreement
”),
between the Company and ThinkEquity shall continue to be effective
and the terms therein shall continue to survive and be enforceable
by the in accordance with its terms, provided that, in the event of
a conflict between the terms of the Engagement Agreement and this
Agreement, the terms of this Agreement shall prevail shall continue
to be effective and the terms therein shall continue to survive and
be enforceable by the Placement Agents in accordance with its
terms. This Agreement may be executed in two or more counterparts,
each one of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by
all of the parties hereto, and no condition herein (express or
implied) may be waived unless waived in writing by each party whom
the condition is meant to benefit. Section headings herein are for
the convenience of the parties only and shall not affect the
construction or interpretation of this Agreement.
(b) The
Company acknowledges that in connection with the offering of the
Securities: (i) the Placement Agents have acted at arms length, are
not agents of, and owe no fiduciary duties to the Company or any
other person, (ii) the Placement Agent owes the Company only those
duties and obligations set forth in this Agreement and (iii) the
Placement Agents may have interests that differ from those of the
Company. The Company waives to the full extent permitted by
applicable law any claims it may have against the Placement Agents
arising from an alleged breach of fiduciary duty in connection with
the offering of the Securities.
Section
15.
Fee Tail.
ThinkEquity shall be entitled
to the Placement Fee and Placement Agent’s Warrants with
respect to any private or public financing or other capital raising
transaction of any kind consummated within 24 months period of the
termination or expiration of this Agreement with an investor whom
ThinkEquity has, directly or indirectly, introduced to the Company
in connection with the Offering or during the term of this
Agreement
.
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If the
foregoing is in accordance with your understanding of our
agreement, please sign below whereupon this instrument, along with
all counterparts hereof, shall become a binding agreement in
accordance with its terms.
Very
truly yours,
BRIDGELINE
DIGITAL, INC.
a
Delaware corporation
By:
Name:
Title:
The
foregoing Placement Agency Agreement is hereby confirmed and
accepted as of the date first above written.
THINKEQUITY, A DIVISION OF FORDHAM FINANCIAL MANAGEMENT,
INC.
Name:
Title:
TAGLICH BROTHERS, INC.
Name:
Title:
Schedule A
Excluded
Investors
Exhibit
99.1
Bridgeline Digital Announces $10.0 Million Financing
BURLINGTON,
Mass., Mar. 13, 2019 (GLOBE NEWSWIRE) -- Bridgeline Digital, Inc.
(NASDAQ: BLIN), a provider in cloud-based Web Content Management,
eCommerce and Marketing Automation software, announced today that
it has closed a private placement (Private Placement) resulting in
gross proceeds to the Company of $10,227,500, before deducting
placement agent fees and other offering expenses payable by the
Company.
The
Private Placement involves the offer and sale of securities
consisting of an aggregate of (i) 10,227.5 shares of the
Company’s newly-created Series C Convertible Preferred Stock,
with a stated value of $1,000 per share and convertible at $0.18
into an aggregate of 56,819,473 shares of Company common stock;
(ii) 5.5 year Series A Warrants to purchase 56,819,473 shares of
Company common stock, subject to adjustment; 24 month Series B
Warrants to purchase 56,819,473 shares of Company common stock,
subject to adjustment; and 5.5 year Series C Warrants, which may
become exercisable following the registration of the securities
issued in the Private Placement. The Series A Warrants and Series B
Warrants have an initial exercise price of $0.18 per share. The
shares of Series C Convertible Preferred Stock, Series A Warrants,
Series B Warrants and Series C Warrants were offered and sold as
units, with each unit being offered for $1,000.
The
Company expects to use $4.5 million of the net proceeds to complete
its previously announced agreement to purchase certain assets from
Stantive Technologies, Inc., to retire all remaining debt on its
balance sheet of approximately $2.7 million, and the remainder is
reserved for general working capital.
Further
details regarding the Private Placement will be described in a
Current Report on Form 8-K to be filed with the Securities and
Exchange Commission (SEC) by the Company and the information herein
is qualified in its entirety by the Current Report on Form 8-K to
be filed with respect to the Private Placement.
“This
financing further positions Bridgeline as a leader in Marketing
Technology by bringing the Stantive assets, including OrchestraCMS,
into the Bridgeline product suite. Bridgeline will continue to
provide outstanding support for OrchestraCMS and invest in the
software’s growth, while focusing on the integration of the
recently acquired Celebros search technology” said
Bridgeline’s President and Chief Executive Officer Ari Kahn.
“This year, Bridgeline has already doubled its customer base
and, with the acquisition of Stantive, we are able to introduce new
technologies to this expanded audience to fuel growth and drive
innovation, including artificial intelligence capabilities acquired
as a result of the Celebros acquisition.”
ThinkEquity,
a division of Fordham Financial Management, Inc., and Taglich
Brothers, Inc. acted as co-placement agents for the Private
Placement.
The
securities offered and sold by the Company in the Private Placement
were not registered under the Securities Act of 1933, as amended,
or state securities laws and may not be offered or sold in the
United States absent registration with the SEC or an applicable
exemption from such registration requirements. The Company has
agreed to file a registration statement with the SEC covering the
resale of the shares of common stock, including shares of common
stock issuable upon conversion of the Series C Preferred and
exercise of the warrants, to be issued in the Private Placement.
Any resale of Company securities under such resale registration
statement will be made only by means of a prospectus.
This
press release shall not constitute an offer to sell or a
solicitation of an offer to buy these securities, nor shall there
be any sale of these securities in any state or other jurisdiction
in which such offer, solicitation or sale would be unlawful prior
to the registration or qualification under the securities laws of
any such state or other jurisdiction.
Bridgeline
Digital, The Digital Engagement Company™, helps customers
maximize the performance of their complete digital experience
– from websites and intranets to online stores and marketing
campaigns. Bridgeline’s Unbound platform deeply integrates
Web Content Management, eCommerce, eMarketing, Social Media
management, and Web Analytics to ensure marketers deliver digital
experiences that attract, engage and convert their customers across
all channels. Headquartered in Burlington, Mass., Bridgeline has
thousands of quality customers that range from small- and
medium-sized organizations to Fortune 1000 companies. To learn
more, please visit
www.bridgeline.com
or call (800) 603-9936.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
All statements included in this press release, other than
statements or characterizations of historical fact, are
forward-looking statements. These forward-looking statements are
based on our current expectations, estimates and projections about
this offering including our intended use of proceeds from this
offering, our industry, management's beliefs, and certain
assumptions made by us, all of which are subject to change.
Forward-looking statements can often be identified by words such as
“anticipates,” “expects,”
“intends,” “plans,” “predicts,”
“believes,” “seeks,”
“estimates,” “may,” “will,”
“should,” “would,” “could,”
“potential,” “continue,”
“ongoing,” or similar expressions, and variations or
negatives of these words. These forward-looking statements are not
guarantees of future results and are subject to risks,
uncertainties and assumptions, including, but not limited to,
shareholder approval of (i) an amendment to the Company’s
Amended and Restated Certificate of Incorporation to increase the
authorized shares of the Company’s commons stock, and (ii)
the issuance of common stock upon the conversion or exercise of the
Series C Preferred, Series A Warrants, Series B Warrants and Series
C Warrants, as required by the Nasdaq Marketplace Rules; our
ability to successfully integrate recently completed and
contemplated acquisitions; the impact of the weakness in the U.S.
and international economies on our business, our inability to
manage our future growth effectively or profitably; fluctuations in
our revenue and quarterly results; our license renewal rate; the
impact of competition and our ability to maintain margins or market
share; the limited market for our common stock; the volatility of
the market price of our common stock; the ability to maintain our
listing on the NASDAQ Capital market; the ability to raise
capital;
the performance of our products; our ability to
respond to rapidly evolving technology and customer requirements;
our ability to protect our proprietary technology; the security of
our software; our dependence on our management team and key
personnel; our ability to hire and retain future key personnel; or
our ability to maintain an effective system of internal
controls;
as well as other risks described in our filings
with the SEC, including in our most recent annual report on Form
10-K that was filed with the SEC, and our other filings with the
SEC, including subsequent periodic reports on Forms 10-Q and 8-K.
The information in this release is provided only as of the date of
this release, and the Company undertakes no obligation to update
any forward-looking statements contained in this release on account
of new information, future events, or otherwise, except as required
by law.
Contact:
Carl
Prizzi
Bridgeline
Digital, Inc
EVP
Products & Solutions
press@bridgeline.com