Document:

Exhibit 4.1

 

 

  

 

CONDUENT FINANCE, INC.,

CONDUENT BUSINESS SERVICES, LLC,

THE GUARANTORS PARTY HERETO

 

and

U.S. BANK NATIONAL ASSOCIATION,

 

as Trustee

10.500% SENIOR NOTES DUE 2024

FIFTH SUPPLEMENTAL INDENTURE

DATED AS OF JULY 12, 2018

 

 

 

 

 

 

 

This FIFTH SUPPLEMENTAL INDENTURE, dated as of July 12, 2018 (this “Fifth Supplemental Indenture”), is entered into by and among Conduent Finance, Inc., a Delaware corporation (“CFI”), Conduent Business Services, LLC (f/k/a Xerox Business Services, LLC), a Delaware limited liability company (“CBS” and, together with CFI, the “Issuers”), the guarantors listed on Schedule A hereto (the “Guarantors”) and U.S. Bank National Association, as trustee under the Indenture referred to below (the “Trustee”).

RECITALS

WHEREAS, the Issuers, the guarantors from time to time party thereto and the Trustee entered into an Indenture, dated as of December 7, 2016 (as amended, supplemented, waived or otherwise modified from time to time, the “Indenture”), providing for the issuance of 10.500% Senior Notes due 2024 in an aggregate original principal amount equal to $510,000,000 (the “Notes”);

WHEREAS, Section 9.02 of the Indenture provides, among other things, that the Issuers and the Trustee may amend certain terms of the Indenture with the consent of the Holders (as defined in the Indenture) of at least a majority in aggregate principal amount of the then outstanding Notes;

WHEREAS, the Issuers have offered to purchase for cash any and all of the Notes and have solicited consents to certain amendments to the Indenture (the “Proposed Amendments”) pursuant to the Issuers’ Offer to Purchase and Consent Solicitation Statement dated as of June 28, 2018 (the “Tender Offer and Solicitation”);

WHEREAS, the Issuers have obtained the consent to the Proposed Amendments to the Indenture from the Holders of at least a majority in aggregate principal amount of the outstanding Notes;

WHEREAS, pursuant to Section 9.02 of the Indenture, the Trustee is authorized to execute and deliver this Fifth Supplemental Indenture; and

WHEREAS, the execution and delivery of this Fifth Supplemental Indenture has been duly authorized by the parties thereto and all conditions and requirements necessary to make this instrument a valid and binding agreement have been duly performed and complied with.

NOW, THEREFORE, for and in consideration of the mutual covenants contained herein and in the Indenture and for other good and valuable consideration, the receipt and sufficiency of which are herein acknowledged, the Issuers, the Guarantors and the Trustee hereby agree, for the equal and ratable benefit of all Holders, as follows:

  

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ARTICLE 1

INTERPRETATION

	
Section 1.01

	
To Be Read With the Indenture.

This Fifth Supplemental Indenture is supplemental to the Indenture, and the Indenture and this Fifth Supplemental Indenture shall hereafter be read together and shall have effect, so far as practicable, with respect to the Notes as if all the provisions of the Indenture and this Fifth Supplemental Indenture were contained in one instrument.

	
Section 1.02

	
Capitalized Terms.

All capitalized terms used but not defined in this Fifth Supplemental Indenture shall have the meanings ascribed to such terms in the Indenture.

ARTICLE 2

AMENDMENTS

	
Section 2.01

	
Amendments

	 	
(a)

	
Each of Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.17 and 5.01 of the Indenture shall be amended and restated in their entirety to read as follows:

	 	 	
“Section 4.03 [Intentionally Omitted]”

	 	 	 
	 	 	
“Section 4.04 [Intentionally Omitted]”

	 	 	 
	 	 	
“Section 4.05 [Intentionally Omitted]”

	 	 	 
	 	 	
“Section 4.06 [Intentionally Omitted]”

	 	 	 
	 	 	
“Section 4.07 [Intentionally Omitted]”

	 	 	 
	 	 	
“Section 4.08 [Intentionally Omitted]”

	 	 	 
	 	 	
“Section 4.09 [Intentionally Omitted]”

	 	 	 
	 	 	
“Section 4.10 [Intentionally Omitted]”

	 	 	 
	 	 	
“Section 4.11 [Intentionally Omitted]”

	 	 	 
	 	 	
“Section 4.12 [Intentionally Omitted]”

	 	 	 
	 	 	
“Section 4.13 [Intentionally Omitted]”

	 	 	 
	 	 	
“Section 4.14 [Intentionally Omitted]”

 

 

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“Section 4.16 [Intentionally Omitted]”

	 	 	 
	 	 	
“Section 4.17 [Intentionally Omitted]”

	 	 	 
	 	 	
“Section 5.01 [Intentionally Omitted]”

	 	
(b)

	
Clause (a) of Section 6.01 of the Indenture shall be amended and restated in its entirety to read as follows:

	 	 	
“Section 6.01 Events of Default.

 

(a) An “Event of Default” wherever used herein means any one of the following events with respect to the Notes:

 

	 	 	(1) default in payment when due and payable, upon redemption, maturity, acceleration or otherwise, of principal of the Notes;
	 	 	 
	 	 	(2) default for 30 days or more in the payment when due of interest on or with respect to the Notes;
	 	 	 
	 	 	
(3) [Intentionally Omitted];

	 	 	 
	 	 	
(4) [Intentionally Omitted];

	 	 	 
	 	 	
(5) [Intentionally Omitted];

	 	 	 
	 	 	
(6) [Intentionally Omitted];

	 	 	 
	 	 	
(7) [Intentionally Omitted]; or

	 	 	 
	 	 	
(8) [Intentionally Omitted].”

(c) The Indenture is hereby amended by deleting from the Indenture any definitions set forth in Section 1.01 for defined terms that are used solely in sections deleted by this Fifth Supplemental Indenture.

(d) All references in the Indenture to Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.17, 5.01 and 6.01 shall mean references to such sections as amended by this Fifth Supplemental Indenture.

(e) Any of the terms or provisions present in the Notes that relate to any of the provisions of the Indenture amended by Article 2 of this Fifth Supplemental Indenture shall also be amended so as to be consistent with the amendments made in this Fifth Supplemental Indenture.

 

 

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ARTICLE 3

MISCELLANEOUS

	
Section 3.01

	
Ratification of Indenture.

The Indenture as supplemented by this Fifth Supplemental Indenture is in all respects ratified and confirmed, and this Fifth Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided.

	
Section 3.02

	
Effective Time.

This Fifth Supplemental Indenture shall become effective upon execution hereof by the Trustee, the Issuers and the Guarantors. Notwithstanding the foregoing sentence, Article 2 of this Fifth Supplemental Indenture shall become operative only upon the purchase by the Issuers of at least a majority in principal amount of the outstanding Notes pursuant to the Tender Offer and Solicitation, with the result that the amendments to the Indenture effected by Article 2 of this Fifth Supplemental Indenture shall be deemed to be revoked retroactively to the date hereof if such purchase shall not occur.

	
Section 3.03

	
Governing Law.

THIS FIFTH SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

	
Section 3.04

	
Counterparts.

The parties may sign any number of copies of this Fifth Supplemental Indenture. Each signed copy will be an original, but all of them together represent the same agreement. The exchange of signed copies of this Fifth Supplemental Indenture by emailed portable document format (.pdf) shall constitute effective execution and delivery of this Fifth Supplemental Indenture as to the parties hereto and such copies may be used in lieu of the original Fifth Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by portable document format (.pdf) shall be deemed to be their original signatures for all purposes.

	
Section 3.05

	
Effect of Headings.

The Section headings herein are for convenience of reference only, and are not to be considered part of this Fifth Supplemental Indenture and shall in no way modify or restrict any of the terms or provisions.

	
Section 3.06

	
Trustee.

The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Fifth Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Issuers and the Guarantors.

[Signatures on following page]

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Fifth Supplemental Indenture to be duly executed and attested, all as of the date first above written.

  

	 	
CONDUENT FINANCE, INC.

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ J. Michael Peffer	 
	 	 	Name:  J. Michael Peffer	 
	 	 	Title:    Secretary	 
	 	 	 	 

 

	 	
CONDUENT BUSINESS SERVICES, LLC

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ J. Michael Peffer	 
	 	 	Name:  J. Michael Peffer	 
	 	 	Title:    Executive Vice President	 
	 	 	 	 

 

 

 

 

[Fifth Supplemental Indenture Signature Page]

 

 

	 	
GUARANTORS:

	 
	 	  	 
	 	
CONDUENT INCORPORATED

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ Brian J. Webb-Walsh	 
	 	 	Name:  Brian J. Webb-Walsh	 
	 	 	Title:    Executive Vice President and Chief Financial Officer	 
	 	 	 	 

 

 

 

 

 

 

 

 

 

 

 

[Fifth Supplemental Indenture Signature Page]

 

 

	 	
CGS LOCAL GOVERNMENT SOLUTIONS, LLC

CGSLGS HOLDINGS, LLC

CSLS HOLDINGS, LLC

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ J. Michael Peffer	 
	 	 	Name:  J. Michael Peffer	 
	 	 	Title:    President	 
	 	 	 	 

 

 

 

 

 

 

 

 

 

 

 

[Fifth Supplemental Indenture Signature Page]

 

 

	
CONDUENT ASSET MANAGEMENT GROUP,

	 	
CONDUENT LEARNING SERVICES, INC.

	
LLC

	 	
CONDUENT LEGAL & COMPLIANCE

	
CONDUENT BILL REVIEW CORPORATION

	 	
SOLUTIONS, LLC

	
CONDUENT BPO SERVICES, LLC

	 	
CONDUENT MIDDLE EAST, INC.

	
CONDUENT BUSINESS PROCESS

	 	
CONDUENT MORTGAGE SERVICES, INC.

	
OPTIMIZATION SERVICES, INC.

	 	
CONDUENT PARKINDY, LLC

	
CONDUENT CARE AND QUALITY

	 	
CONDUENT PATIENT ACCESS SOLUTIONS,

	
SOLUTIONS, INC.

	 	
LLC

	
CONDUENT CARE MANAGEMENT, INC.

	 	
CONDUENT PAYMENT INTEGRITY

	
CONDUENT CARE SOLUTIONS, LLC

	 	
SOLUTIONS, INC.

	
CONDUENT COMMERCIAL SOLUTIONS,

	 	
CONDUENT PERFORMANCE

	
LLC

	 	
        IMPROVEMENT SOLUTIONS, INC.

	
CONDUENT COMPLIANCE & RISK

	 	
CONDUENT PUBLIC HEALTH SOLUTIONS,

	
CONSULTING CORPORATION

	 	
INC.

	
CONDUENT CREDIT BALANCE

	 	
CONDUENT SECURITIES SERVICES, INC.

	
SOLUTIONS, LLC

	 	
CONDUENT STATE & LOCAL SOLUTIONS,

	
CONDUENT CUSTOMER CARE SOLUTIONS,

	 	
INC.

	
INC.

	 	
CONDUENT TITLE RECORDS

	
CONDUENT DEFENSE, LLC

	 	
CORPORATION

	
CONDUENT EDI SOLUTIONS, INC.

	 	
CONDUENT TRADEONE MARKETING, INC.

	
CONDUENT EDUCATION INDUSTRY

	 	
CONDUENT TRANSPORT SOLUTIONS, INC.

	
SERVICES, LLC

	 	
CONDUENT UNCLAIMED PROPERTY

	
CONDUENT EDUCATION LOAN SERVICES,

	 	
SYSTEMS, INC.

	
LLC

	 	
CONDUENT WDS GLOBAL–TEXAS, INC.

	
CONDUENT EDUCATION SERVICES, LLC

	 	
CONDUENT WIRELESS DATA SERVICES

	
CONDUENT ENTERPRISE SOLUTIONS, LLC

	 	
(OPERATIONS), INC.

	
CONDUENT FEDERAL SOLUTIONS, LLC

	 	
CONDUENT WIRELESS DATA SERVICES

	
CONDUENT GOVERNMENT RECORDS

	 	
NORTH AMERICA, INC.

	
SERVICES, INC.

	 	
CONDUENT WORKERS COMPENSATION

	
CONDUENT GOVERNMENT SYSTEMS, LLC

	 	
HOLDINGS, INC.

	
CONDUENT HEALTH ASSESSMENTS, LLC

	 	
CONDUENT WORKERS COMPENSATION,

	
CONDUENT HEALTHCARE INFORMATION

	 	
LLC

	
SERVICES, INC.

	 	
THE NATIONAL ABANDONED PROPERTY

	
CONDUENT HEALTHCARE KNOWLEDGE

	 	
        PROCESSING CORPORATION

	
SOLUTIONS, INC.

	 	 
	
CONDUENT HEALTHY COMMUNITIES

	 	 
	
CORPORATION

	 	 
	
CONDUENT HERITAGE, LLC

	 	
By: 

	/s/ Brian J. Webb-Walsh
	
CONDUENT HR SERVICES, LLC

	 	 	
Name:  Brian J. Webb-Walsh

	
CONDUENT HUMAN RESOURCE SERVICES,

	 	 	
Title:    Senior Vice President

	
LLC

	 	 
	
CONDUENT HUMAN SERVICES, LLC

	 	 

 

 

[Fifth Supplemental Indenture Signature Page]

 

	 	
CONDUENT HR CONSULTING, LLC

CONDUENT IMAGE SOLUTIONS, INC.

CONDUENT LENDING, INC.

CONDUENT STATE HEALTHCARE, LLC

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ J. Michael Peffer	 
	 	 	Name:  J. Michael Peffer	 
	 	 	Title:    Vice President and Secretary	 
	 	 	 	 

 

 

 

 

 

 

 

 

 

 

 

[Fifth Supplemental Indenture Signature Page]

 

 

	 	
CONDUENT EDUCATION SOLUTIONS, LLC

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ Brian J. Webb-Walsh	 
	 	 	Name:  Brian J. Webb-Walsh	 
	 	 	Title:    Manager	 
	 	 	 	 

 

 

 

 

 

 

 

 

 

 

 

[Fifth Supplemental Indenture Signature Page]

 

 

	 	
CONDUENT HEALTH ADMINISTRATION, INC.

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ Brian J. Webb-Walsh	 
	 	 	Name:  Brian J. Webb-Walsh	 
	 	 	Title:    President and Secretary	 
	 	 	 	 

 

 

 

 

 

 

 

 

 

 

 

[Fifth Supplemental Indenture Signature Page]

 

 

	 	
CONDUENT CARD SERVICES, LLC

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ Sumeet Sanghani	 
	 	 	Name:  Sumeet Sanghani	 
	 	 	Title:    President and Secretary	 
	 	 	 	 

 

 

 

 

 

 

 

 

 

 

 

[Fifth Supplemental Indenture Signature Page]

 

 

	 	
CONDUENT SECURITIES, LLC

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ Nicolas Medina	 
	 	 	Name:  Nicolas Medina	 
	 	 	Title:    President	 
	 	 	 	 

 

 

 

 

 

 

 

 

 

 

 

[Fifth Supplemental Indenture Signature Page]

 

 

	
TRUSTEE:

	 	 
	 	 	 
	 	 	 
	
U.S. BANK NATIONAL ASSOCIATION

	 	 
	
as Trustee

	 	 
	 	 	 	 
	 	 	 	 
	
By:

	
/s/ Philip G. Kane, Jr.

	 	 
	 	Name:  Philip G. Kane, Jr.		 
	 	Title:    Vice President		 
	 	 	 	 

 

 

 

 

 

 

 

 

 

 

 

[Fifth Supplemental Indenture Signature Page]

 

Schedule A

Guarantors

CONDUENT INCORPORATED

CGS LOCAL GOVERNMENT SOLUTIONS, LLC

CGSLGS HOLDINGS, LLC

CSLS HOLDINGS, LLC

CONDUENT ASSET MANAGEMENT GROUP, LLC

CONDUENT BILL REVIEW CORPORATION

CONDUENT BPO SERVICES, LLC

CONDUENT BUSINESS PROCESS OPTIMIZATION SERVICES, INC.

CONDUENT CARE AND QUALITY SOLUTIONS, INC.

CONDUENT CARE MANAGEMENT, INC.

CONDUENT CARE SOLUTIONS, LLC

CONDUENT COMMERCIAL SOLUTIONS, LLC

CONDUENT COMPLIANCE & RISK CONSULTING CORPORATION

CONDUENT CREDIT BALANCE SOLUTIONS, LLC

CONDUENT CUSTOMER CARE SOLUTIONS, INC.

CONDUENT DEFENSE, LLC

CONDUENT EDI SOLUTIONS, INC.

CONDUENT EDUCATION INDUSTRY SERVICES, LLC

CONDUENT EDUCATION LOAN SERVICES, LLC

CONDUENT EDUCATION SERVICES, LLC

CONDUENT ENTERPRISE SOLUTIONS, LLC

CONDUENT FEDERAL SOLUTIONS, LLC

CONDUENT GOVERNMENT RECORDS SERVICES, INC.

CONDUENT GOVERNMENT SYSTEMS, LLC

CONDUENT HEALTH ASSESSMENTS, LLC

CONDUENT HEALTHCARE INFORMATION SERVICES, INC.

CONDUENT HEALTHCARE KNOWLEDGE SOLUTIONS, INC.

CONDUENT HEALTHY COMMUNITIES CORPORATION

CONDUENT HERITAGE, LLC

CONDUENT HR SERVICES, LLC

CONDUENT HUMAN RESOURCE SERVICES, LLC

CONDUENT HUMAN SERVICES, LLC

CONDUENT LEARNING SERVICES, INC.

CONDUENT LEGAL & COMPLIANCE SOLUTIONS, LLC

CONDUENT MIDDLE EAST, INC.

CONDUENT MORTGAGE SERVICES, INC.

CONDUENT PARKINDY, LLC

CONDUENT PATIENT ACCESS SOLUTIONS, LLC

CONDUENT PAYMENT INTEGRITY SOLUTIONS, INC.

CONDUENT PERFORMANCE IMPROVEMENT SOLUTIONS, INC.

CONDUENT PUBLIC HEALTH SOLUTIONS, INC.

CONDUENT SECURITIES SERVICES, INC.

CONDUENT STATE & LOCAL SOLUTIONS, INC.

CONDUENT TITLE RECORDS CORPORATION

 

 

 

CONDUENT TRADEONE MARKETING, INC.

CONDUENT TRANSPORT SOLUTIONS, INC.

CONDUENT UNCLAIMED PROPERTY SYSTEMS, INC.

CONDUENT WDS GLOBAL–TEXAS, INC.

CONDUENT WIRELESS DATA SERVICES (OPERATIONS), INC.

CONDUENT WIRELESS DATA SERVICES NORTH AMERICA, INC.

CONDUENT WORKERS COMPENSATION HOLDINGS, INC.

CONDUENT WORKERS COMPENSATION, LLC

THE NATIONAL ABANDONED PROPERTY PROCESSING CORPORATION

CONDUENT HR CONSULTING, LLC

CONDUENT IMAGE SOLUTIONS, INC.

CONDUENT LENDING, INC.

CONDUENT STATE HEALTHCARE, LLC

CONDUENT EDUCATION SOLUTIONS, LLC

CONDUENT HEALTH ADMINISTRATION, INC.

CONDUENT CARD SERVICES, LLC

CONDUENT SECURITIES, LLCExhibit 4.1

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

RESHAPE LIFESCIENCES INC.

 

	
Warrant Shares:
    	
Issue Date:        ,   2018
    
	
 
    	
 
    
	
 
    	
Initial Exercise Date:        ,   2018
    

 

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 the date hereof (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on                (1) (the “Termination Date”) but not thereafter, to subscribe for and purchase from ReShape Lifesciences Inc., a Delaware corporation (the “Company”), up to             shares (as subject to adjustment hereunder, the “Warrant Shares”) of the Company’s common stock (the “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).

 

Section 1.                                           Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated July 10, 2018, among the Company and the purchasers signatory thereto.

 

(1)  Insert the date that is the 5.5 year anniversary of the Initial Exercise Date, provided that, if such date is not a Trading Day, insert the immediately following Trading Day.

 

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Section 2.                                           Exercise.

 

a)                                     Exercise of Warrant.  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 the Termination Date by delivery to the Company of a duly executed facsimile copy or PDF copy submitted by e-mail (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) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the Warrant 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 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 on which 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 Common Stock under this Warrant shall be $2.06, subject to adjustment hereunder (the “Exercise Price”).

 

c)                                      Cashless Exercise. If at any time after the six-month anniversary of the Closing Date, there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares by 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

 

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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.

 

“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 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 Holders 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.

 

“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

 

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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 Holders 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.

 

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 characteristics of the Warrants being exercised, and the holding period of the Warrant Shares being issued may be tacked on to the holding period of this Warrant.  The Company agrees not to take any position contrary to this Section 2(c).

 

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 the Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 (assuming cashless exercise of the Warrants), 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 by the Warrant Share Delivery Date.  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

 

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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, 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

 

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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 that 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

 

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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, nonexercised 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 nonconverted 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 one (1) Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder 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%/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

 

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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

 

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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 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, that 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

 

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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.  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 and the other Transaction Documents in accordance with the provisions of this Section 3(e) 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 and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise

 

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every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

e)                                      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.

 

f)                                       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

 

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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.  Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) 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 on which the Holder delivers an assignment form to the Company assigning this Warrant in 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 Issue 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

 

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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.

 

d)                                     Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, comply with the provisions of Section 5.7 of the Purchase Agreement.

 

e)                                      Representation by the Holder.  The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

Section 5.                                           Miscellaneous.

 

a)                                     No Rights as Stockholder Until Exercise; No Settlement in Cash.  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.  Without limiting the rights of a Holder to receive Warrant Shares on a “cashless exercise,” and to receive the cash payments contemplated pursuant to Sections 2(d)(i) and 2(d)(iv), in no event will the Company be required to net cash settle a Warrant exercise.

 

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.

 

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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 nonassessable 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 nonassessable 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)                                      Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

 

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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, notwithstanding the fact that the right to exercise this Warrant terminates on the Termination Date.  Without limiting any other provision of this Warrant or the Purchase Agreement, 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 notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

 

i)                                         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.

 

j)                                        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.

 

k)                                     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.

 

l)                                         Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m)                                 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

 

15

 

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.

 

n)                                     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.

 

********************

 

(Signature Page Follows)

 

16

 

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.

 

 

	
 
    	
RESHAPE LIFESCIENCES INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

17

 

NOTICE OF EXERCISE

 

TO:                           RESHAPE LIFESCIENCES 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):

 

o in lawful money of the United States; or

 

o 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:

 

 

 

 

(4)  Accredited Investor.  The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

 

	
[SIGNATURE OF HOLDER]
    
	
 
    
	
Name of Investing   Entity:
    	
 
    
	
Signature of Authorized   Signatory of Investing Entity:
    	
 
    
	
Name of Authorized   Signatory:
    	
 
    
	
Title of Authorized   Signatory:
    	
 
    
	
Date:
    	
 
    
						

 

 

EXHIBIT B

 

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:

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