Document:

Exhibit 4.8

 

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT, dated as of November 17, 2016 (the “Agreement”), is entered into by and among ELIO MOTORS, INC., an Arizona corporation (the “Company”), and SHREVEPORT BUSINESS PARK, LLC, a Delaware limited liability company and its permitted assignees (the “Holder” or “Holders”).

This Agreement is made pursuant to the Preferred Stock and Warrant Purchase Agreement (the “Purchase Agreement”), dated as of the date hereof, between the Company and the Holder, and pertains to the 435,036 shares of Series C Preferred Stock (the “Series C Shares”), the 96,380 shares of Series D Preferred Stock (the “Series D Shares”) and a warrant to purchase up to 25,000 shares of Common Stock (the “Warrant”) issued to the Holder under the terms of the Purchase Agreement.

ARTICLE 1

Definitions

“Affiliate” means any Person that directly or indirectly controls, or is under control with, or is controlled by such Person. As used in this definition, “control” (including with its correlative meanings, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise).

“Business Day” means any day excluding Saturday, Sunday or any other day which is a legal holiday under the laws of the State of Wisconsin or is a day on which banking institutions therein located are authorized or required by law or other governmental action to close.

“Closing Date” has the meaning ascribed to such term in the Securities Purchase Agreement.

“Common Stock” means the common stock, no par value per share, of the Company.

“Company” has the meaning set forth in the preamble.

“Demand Notice” has the meaning set forth in Section 2.2.

“Direct Registration Expenses” has the meaning set forth in Section 2.7.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Indemnified Party” has the meaning set forth in Section 2.8.

“Losses” has the meaning set forth in Section 2.8.

“Majority Holders” means those Holders holding a majority of the Registrable Securities.

 

“Person” means any individual, company, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, governmental body or other entity.

“Piggyback Registration” has the meaning set forth in Section 2.3.

“Registrable Securities” means, subject to the immediately following sentences, (i) all of the shares of Common Stock issuable upon conversion in full of the Series C Shares, (ii) all of the shares of Common Stock issuable upon conversion in full of the Series D Shares, (iii) all of the shares of Common Stock issuable upon exercise in full of the Warrant, (iv) any additional shares of Common Stock issuable in connection with any anti-dilution provisions of the Warrants, and (v) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing.

“Registration Statement” means a registration statement on Form S-3 (or, if the Company is not eligible to use Form S-3, such other appropriate registration form of the SEC pursuant to which the Company is eligible to register the resale of Registrable Securities) filed by the Company under the Securities Act which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated by reference in such registration statement, which shall permit the Holders to offer and sell, on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, the Registrable Securities.

“register,” “registered” and “registration” each shall refer to a registration effected by preparing and filing a registration statement or statements or similar documents in compliance with the Securities Act and the declaration or ordering of effectiveness of such registration statement(s) or documents by the SEC.

“Representatives” has the meaning set forth in Section 2.8.

“Rule 144” means Rule 144 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.

“Rule 415” means Rule 415 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.

“SEC” means the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

 

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ARTICLE 2

Registration Rights

2.1           Current Public Information. The Company covenants that it will use its best efforts to file all reports required to be filed by it under the Exchange Act and the rules and regulations adopted by the SEC thereunder, and will use its reasonable best efforts to take such further action as the Holders may reasonably request, all to the extent required to enable the Holders to sell Registrable Securities pursuant to Rule 144 or Rule 144A adopted by the SEC under the Securities Act or any similar rule or regulation hereafter adopted by the SEC. The Company shall, upon the request of a Holder, deliver to such Holder a written statement as to whether it has complied with such requirements during the twelve-month period immediately preceding the date of such request.

2.2           Demand Registration.

(a) Upon the written request of the Majority Holders, requesting that the Company effect the registration under the Securities Act of all or part of such Holders’ Registrable Securities and specifying the intended method of disposition thereof (the “Demand Notice”), the Company will promptly give written notice of such requested registration to all Holders, and thereupon the Company will use its reasonable best efforts to file with the SEC as soon as reasonably practicable following the Demand Notice (but in no event later than the date that is 90 days after the Demand Notice) a Registration Statement. The Company shall use its reasonable best efforts to cause such Registration Statement to be declared effective by the SEC within 90 days after the initial filing of the Registration Statement. The Company shall include in such Registration Statement:

(i)            the Registrable Securities which the Company has been so requested to be registered by such Holders for disposition in accordance with the intended method of disposition stated in such request;

(ii)           all other Registrable Securities the holders of which shall have made a written request to the Company for registration thereof within 30 days after the giving of such written notice by the Company (which request shall specify the intended method of disposition of such Registrable Securities); and

(iii)          all shares of Common Stock which the Company or Persons entitled to exercise “piggy-back” registration rights pursuant to contractual commitments of the Company may elect to register in connection with the offering of Registrable Securities pursuant to this Section 2.2;

all to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities and the additional shares of Common Stock, if any, so to be registered; provided, that, the provisions of this Section 2.2 shall not require the Company to effect more than two registrations of Registrable Securities.

(b) Notwithstanding anything to the contrary contained in this Agreement, the Company shall not be required to effect a registration pursuant to this Section 2.2 within 180 days following the effective date of a Registration Statement filed by the Company in accordance with this Section 2.2 or for the account of another Holder of Registrable Securities if the Holders were afforded the opportunity to include the Registrable Securities in such registration.

 

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(c) The registrations under this Section 2.2 shall be on an appropriate Registration Statement that permits the disposition of such Registrable Securities in accordance with the intended methods of distribution specified by the Majority Holders in their request for registration. The Company agrees to include in any such Registration Statement all information which Holders of Registrable Securities being registered shall reasonably request to effect the registration.

(d) A registration requested pursuant to this Section 2.2 shall not be deemed to have been effected (i) unless a Registration Statement with respect thereto has become effective; provided, that a Registration Statement which does not become effective after the Company has filed a Registration Statement with respect thereto solely by reason of the refusal to proceed of the Majority Holders (other than a refusal to proceed based upon the advice of counsel relating to a matter with respect to the Company) or because of a breach of this Agreement by any Holder shall be deemed to have been effected by the Company at the request of the Majority Holders unless the Holders electing to have Registrable Securities registered pursuant to such Registration Statement shall have elected to pay all fees and expenses otherwise payable by the Company in connection with such registration pursuant to Section 2.7, (ii) if, after it has become effective, such registration is withdrawn by the Company (other than at the request of the Majority Holders) or interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court for any reason prior to the expiration of a 180- day period following such Registration Statement’s effectiveness, or (iii) if the conditions to closing specified in any purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied, other than due solely to some act or omission by the Holders electing to have Registrable Securities registered pursuant to such Registration Statement.

(e) If a requested registration pursuant to this Section 2.2 involves an underwritten offering, and the managing underwriter shall advise the Company in writing (with a copy to each Holder of Registrable Securities requesting registration) that, in its opinion, the number of securities requested to be included in such registration (including securities of the Company which are not Registrable Securities) exceeds the number which can be sold in such offering within a price range reasonably acceptable to the Company and to the holders of a majority (by number of shares) of the Registrable Securities requested to be included in such Registration Statement, the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, (i) first, the Registrable Securities which have been requested to be included in such registration by the Holders pursuant to this Agreement (pro rata based on the amount of Registrable Securities sought to be registered by such Persons), (ii) second, provided that no securities sought to be included by the Holders have been excluded from such registration, the securities of other Persons entitled to exercise “piggy-back” registration rights pursuant to contractual commitments of the Company (pro rata based on the amount of securities sought to be registered by such Persons) and (iii) third, securities the Company proposes to register.

 

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(f) The Company shall use its reasonable best efforts to keep any Registration Statement filed pursuant to this Section 2.2 continuously effective (i) for a period of one year after the Registration Statement first becomes effective, plus the number of days during which such Registration Statement was not effective or usable pursuant to Sections 2.2(g), 2.5(e) or 2.5(i); or (ii) if such Registration Statement related to an underwritten offering, for such period as in the opinion of counsel for the underwriters a prospectus is required by law to be delivered in connection with sales of Registrable Securities by an underwriter or dealer. In the event the Company shall give any notice pursuant to Sections 2.5(e) or (i), the additional time period mentioned in this Section 2.2(f)(i) during which the Registration Statement is to remain effective shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Sections 2.5(e) or (i) to and including the date when each seller of a Registrable Security covered by the Registration Statement shall have received the copies of the supplemented or amended prospectus contemplated by Sections 2.5(e) or (i).

(g) The Company shall have the right at any time, to suspend the filing of a Registration Statement under this Section 2.2 or require that the Holders of Registrable Securities suspend further open market offers and sales of Registrable Securities pursuant to a Registration Statement filed hereunder for a period not to exceed an aggregate of 30 days in any six-month period or an aggregate of 60 days in any twelve-month period for valid business reasons (not including avoidance of their obligations hereunder) (i) to avoid premature public disclosure of a pending corporate transaction, including pending acquisitions or divestitures of assets, mergers and combinations and similar events; (ii) upon the occurrence of any of the events specified in Section 2.5(e), until the time that the Holders receive copies of a supplement or amendment to the prospectus included in the applicable Registration Statement as contemplated in Section 2.5(e); and (iii) upon the occurrence of any of the events specified in Section 2.5(i), until the time the Company notifies the Holders in writing that such suspension is no longer effective.

2.3           Piggyback Registration.

(a) Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to a registration pursuant to Section 2.2 or a registration on Form S-4 or S-8 or any successor or similar forms) and the registration form to be used may be used for the registration of Registrable Securities, whether or not for sale for its own account, the Company will give prompt written notice (but in no event less than 30 days before the anticipated filing date) to all Holders (other than Holders all of whose Registrable Securities are then covered by an effective Registration Statement), and such notice shall describe the proposed registration and distribution and offer to all such Holders the opportunity to register the number of Registrable Securities as each such Holder may request. The Company will include in such registration statement all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the Holders’ receipt of the Company’s notice (a “Piggyback Registration”).

(b) The Company shall use its reasonable best efforts to cause the managing underwriter or underwriters of a proposed underwritten offering involving a Piggyback Registration to permit the Registrable Securities requested to be included in a Piggyback Registration to be included on the same terms and conditions as any similar securities of the Company or any other security holder included therein and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method of distribution thereof.

 

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(c) Any Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any Registration Statement pursuant to this Section 2.3 by giving written notice to the Company of its request to withdraw; provided, that in the event of such withdrawal (other than pursuant to Section 2.3(e) hereof), the Company shall not be required to reimburse such Holder for the fees and expenses referred to in Section 2.7 hereof incurred by such Holder prior to such withdrawal, unless such withdrawal was due to a material adverse change to the Company. The Company may withdraw a Piggyback Registration at any time prior to the time it becomes effective.

(d) If (i) a Piggyback Registration involves an underwritten offering of the securities being registered, whether or not for sale for the account of the Company, to be distributed (on a firm commitment basis) by or through one or more underwriters under underwriting terms appropriate for such a transaction, and (ii) the managing underwriter of such underwritten offering shall inform the Company and Holders requesting such registration by letter of its belief that the distribution of all or a specified number of such Registrable Securities concurrently with the securities being distributed by such underwriters would interfere with the successful marketing of the securities being distributed by such underwriters (such writing to state the basis of such belief and the approximate number of such Registrable Securities which may be distributed without such effect), then the Company will be required to include in such registration only the amount of securities which it is so advised should be included in such registration. In such event: (x) in cases initially involving the registration for sale of securities for the Company’s own account, securities shall be registered in such offering in the following order of priority: (i) first, the securities which the Company proposes to register, and (ii) second, Registrable Securities and securities which have been requested to be included in such registration by Persons entitled to exercise “piggy-back” registration rights pursuant to contractual commitments of the Company (pro rata based on the amount of securities sought to be registered by Holders and such other Persons); and (y) in cases not initially involving the registration for sale of securities for the Company’s own account, securities shall be registered in such offering in the following order of priority: (i) first, the securities of any Person whose exercise of a “demand” registration right pursuant to a contractual commitment of the Company is the basis for the registration, (ii) second, Registrable Securities and securities which have been requested to be included in such registration by Persons entitled to exercise “piggy-back” registration rights pursuant to contractual commitments of the Company (pro rata based on the amount of securities sought to be registered by Holders and such other Persons), and (iii) third, the securities which the Company proposes to register.

(e) If, as a result of the proration provisions of this Section 2.3, any Holder shall not be entitled to include all Registrable Securities in a Piggyback Registration that such Holder has requested to be included, such holder may elect to withdraw his request to include Registrable Securities in such registration.

(f) The right of the Holders to register Registrable Securities pursuant to this Section 2.3 is only exercisable with respect to Registrable Securities not then covered by an effective Registration Statement.

 

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2.4           Underwriting; Holdback Agreements.

(a) In the event that one or more Holders elect to dispose of Registrable Securities under a Registration Statement pursuant to an underwritten offering or a requested registration pursuant to Section 2.2 involves an underwritten offering, the managing underwriter or underwriters shall be selected by the holders of a majority (by number of shares) of the Registrable Securities to be sold in the underwritten offering or requested to be included in such Registration Statement and shall be reasonably acceptable to the Company. In connection with any such underwritten offering, the Company shall take all such reasonable actions as are required by the managing underwriters in order to expedite and facilitate the registration and disposition of the Registrable Securities, including the Company causing appropriate officers of the Company or its Affiliates to participate in a “road show” or similar marketing effort being conducted by such managing underwriters with respect to such underwritten offering.

(b) All Holders proposing to distribute their Registrable Securities through an underwritten offering shall enter into an underwriting agreement in customary form with the managing underwriters selected for such underwritten offering.

(c) To the extent not inconsistent with applicable law, in connection with a public offering of securities of the Company, upon the request of the Company or, in the case of an underwritten public offering of the Company’s securities, the managing underwriters, each Holder who beneficially owns (as defined in Rule 13d-3 adopted by the SEC under the Exchange Act) at least 5% of the outstanding capital stock of the Company will not effect any sale or distribution (other than those included in the registration statement being filed with respect to such public offering) of, or any short sale of, or any grant of option to purchase, or any hedging or similar transaction with respect to, any securities of the Company, or any securities, options or rights convertible into or exchangeable or exercisable for such securities during the 14 days prior to and the 90-day period beginning on the effective date of such public offering, unless the Company, or in the case of an underwritten public offering, the managing underwriters otherwise agree to a shorter period of time. At the request of the Company or the managing underwriters, each such Holder shall execute a customary “lock-up” agreement consistent with the provisions of this Section 2.4; provided, however, that no Holder shall be required to enter into any such “lock up” agreement unless and until all of the Company’s executive officers and directors execute substantially similar “lock up” agreements and the Company uses commercially reasonable efforts to cause each holder of more than 5% of its outstanding capital stock to execute substantially similar “lock up” agreements. Neither the Company nor the underwriter shall terminate, materially amend or waive the enforcement of any material provision under a “lock up” agreement unless each “lock up” agreement with a Holder is also amended or waived in a similar manner or terminated, as the case may be. The Company may impose stop-transfer instructions to enforce the restrictions imposed by this Section 2.4.

2.5           Registration Procedures. The Company will use its reasonable best efforts to effect the registration of Registrable Securities pursuant to this Agreement in accordance with the intended methods of disposition thereof, and pursuant thereto the Company will as expeditiously as possible:

 

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(a) before filing the Registration Statement, the Company will furnish to any counsel selected by the holders of a majority of the Registrable Securities a copy of such Registration Statement, and will provide such counsel with all written correspondence with the SEC regarding the Registration Statement;

(b) prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for the periods provided for in Section 2.2, or the periods contemplated by the Company or the Persons requesting any Registration Statement filed pursuant to Section 2.3;

(c) furnish to each Holder selling such Registrable Securities such number of copies of such Registration Statement, each amendment and supplement thereto, the prospectus included in the Registration Statement (including each preliminary prospectus) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holder;

(d) use its reasonable best efforts to register or qualify such Registrable Securities under such other state securities or blue sky laws as the selling Holders selling such Registrable Securities reasonably requests and do any and all other acts and things which may be reasonably necessary or reasonably advisable to enable such Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Holder and to keep each such registration or qualification (or exemption therefrom) effective during the period which the Registration Statement is required to be kept effective (provided, that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction);

(e) notify each Holder selling such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in the Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and, at the request of any such Holder, the Company will as soon as possible prepare and furnish to such Holder a reasonable number of copies of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading in the light of the circumstances under which they were made;

(f) cause all such Registrable Securities to be listed or quoted on each securities exchange or quotation service on which similar securities issued by the Company are then listed or quoted and, if not so listed, to be approved for trading on any automated quotation system of a national securities association on which similar securities of the Company are quoted;

(g) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such Registration Statement;

 

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(h) enter into such customary agreements (including underwriting agreements containing customary representations and warranties) and take all other customary and appropriate actions as the holders of a majority of the Registrable Securities being sold or the managing underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities;

(i) notify each Holder of any stop order issued or threatened by the SEC;

(j) otherwise comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

(k) in the event of the issuance of any stop order suspending the effectiveness of a Registration Statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any securities included in such Registration Statement for sale in any jurisdiction, the Company will use its reasonable best efforts to promptly obtain the withdrawal of such order;

(l) with respect to an underwritten offering pursuant to any Registration Statement filed under Section 2.2, obtain one or more comfort letters, dated the effective date of the Registration Statement and, if required by the managing underwriters, dated the date of the closing under the underwriting agreement, signed by the Company’s independent public accountants in customary form and covering such matter of the type customarily covered by comfort letters in similar transactions;

(m) with respect to an underwritten offering pursuant to any Registration Statement filed under Section 2.2, obtain a legal opinion of the Company’s outside counsel, dated the effective date of such Registration Statement and, if required by the managing underwriters, dated the date of the closing under the underwriting agreement, with respect to the Registration Statement, each amendment and supplement thereto, the prospectus included therein (including the preliminary prospectus) and such other documents relating thereto in customary form and covering such matters of the type customarily covered by legal opinions in similar transactions;

(n) subject to execution and delivery of mutually satisfactory confidentiality agreements, make available at reasonable times for inspection by each Holder selling such Registrable Securities, any managing underwriter participating in any disposition of such Registrable Securities pursuant to the Registration Statement, and any attorney, accountant or other agent retained by such Holder or any such managing underwriter, during normal business hours of the Company at the Company’s corporate office in Phoenix, Arizona, and without unreasonable disruption of the Company’s business or unreasonable expense to Company and solely for the purpose of due diligence with respect to the Registration Statement, legally disclosable, financial and other records and pertinent corporate documents of the Company and its subsidiaries reasonable requested by such Persons, and cause the Company’s employees to, and request its independent accountants to, supply all similar information reasonably requested by any such Person, as shall be reasonably necessary to enable them to exercise their due diligence responsibility;

 

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(o) cooperate with each seller of Registrable Securities and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the Nasdaq Capital Market or the Financial Industry Regulatory Authority; and

(p) take all other steps reasonably necessary to effect the registration of the Registrable Securities contemplated hereby.

2.6           Conditions Precedent to Company’s Obligations Pursuant to this Agreement. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Article 2 with respect to the Registrable Securities of any Holder that such Holder shall timely furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of distribution of such securities as shall reasonably be required to effect the registration of such Holder’s Registrable Securities.

2.7           Fees and Expenses. With respect to any Registration Statement filed under Section 2.2, all expenses incident to the Company’s performance of or compliance with this Agreement including, without limitation, all registration and filing fees payable by the Company, fees and expenses of compliance by the Company with securities or blue sky laws, printing expenses of the Company, messenger and delivery expenses of the Company, and fees and disbursements of counsel for the Company and all independent certified public accountants of the Company, and other Persons retained by the Company (the “Direct Registration Expenses”) will be borne equally by the Company on the one hand and the Holders whose Registrable Securities are included in such Registration Statement on the other, and the Company will pay its internal expenses (including, without limitation, all salaries and expenses of the Company’s employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance of the Company and the expenses and fees for listing or approval for trading of the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed or on any automated quotation system of a national securities association on which similar securities of the Company are quoted. With respect to any Registration Statement filed under Section 2.3, the Company shall bear the Direct Registration Expenses. In connection with any Registration Statement filed hereunder, the Company will pay the reasonable fees and expenses of a single counsel retained by the Holders of a majority (by number of shares) of the Registrable Securities requested to be included in such Registration Statement. The Company shall have no obligation to pay any underwriting discounts or commissions attributable to the sale of Registrable Securities and any of the expenses incurred by any Holder which are not payable by the Company, such costs to be borne by such Holder or Holders, including, without limitation, underwriting fees, discounts and expenses, if any, applicable to any Holder’s Registrable Securities; fees and disbursements of counsel or other professionals that any Holder may choose to retain in connection with a Registration Statement filed pursuant to this Agreement (except as otherwise provided herein); selling commissions or stock transfer taxes applicable to the Registrable Securities registered on behalf of any Holder; any other expenses incurred by or on behalf of such Holder in connection with the offer and sale of such Holder’s Registrable Securities other than expenses which the Company is expressly obligated to pay pursuant to this Agreement.

 

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2.8           Indemnification.

(a) The Company agrees to indemnify and hold harmless, to the fullest extent permitted by law, each Holder and its general or limited partners, officers, directors, members, managers, employees, advisors, representatives, agents and Affiliates (collectively, the “Representatives”), and each underwriter, if any, and any Person who controls such underwriter (within the meaning of Section 15 of the Securities Act), from and against any loss, claim, damage, liability, reasonable attorney’s fees, cost or expense and costs and expenses of investigating and defending any such claim (collectively, the “Losses”), joint or several, and any action in respect thereof to which such Holder or its Representatives may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereto) arise out of or are based upon (i) any breach by the Company of any of its representations, warranties or covenants contained in this Agreement, (ii) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, prospectus or preliminary or summary prospectus or any amendment or supplement thereto or (iii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company shall reimburse each such Holder and its Representatives for any reasonable legal or any other expenses incurred by them in connection with investigating or defending or preparing to defend against any such Loss, action or proceeding; provided, however, that the Company shall not be liable to any such Holder or other indemnitee in any such case to the extent that any such Loss (or action or proceeding, whether commenced or threatened, in respect thereof) arises out of or is based upon (x) an untrue statement or alleged untrue statement or omission or alleged omission, made in such Registration Statement, any such prospectus or preliminary or summary prospectus or any amendment or supplement thereto, in reliance upon, and in conformity with, written information prepared and furnished to the Company by any Holder or its Representatives expressly for use therein and, with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to the Registration Statement, to the extent that a prospectus relating to the Registrable Securities was required to be delivered by such Holder under the Securities Act in connection with such purchase, there was not sent or given to such Person, at or prior to the written confirmation of the sale of such Registrable Securities to such Person, a copy of the final prospectus that corrects such untrue statement or alleged untrue statement or omission or alleged omission if the Company had previously furnished copies thereof to such Holder or (y) use of a Registration Statement or the related prospectus during a period when a stop order has been issued in respect of such Registration Statement or any proceedings for that purpose have been initiated or use of a prospectus when use of such prospectus has been suspended pursuant to Sections 2.51(e) or 2.5(i); provided that in each case, that such Holder received prior written notice of such stop order, initiation of proceedings or suspension from the Company. In no event, however, shall the Company be liable for indirect, incidental or consequential or special damages of any kind.

(b) In connection with the filing of the Registration Statement by the Company pursuant to this Agreement, the Holders will furnish to the Company in writing such information as the Company reasonably requests for use in connection with such Registration Statement and the related prospectus and, to the fullest extent permitted by law, each such Holder will indemnify and hold harmless the Company and its Representatives, and each underwriter, if any, and any Person who controls such underwriter (within the meaning of Section 15 of the Securities Act), from and against any Losses, severally but not jointly, and any action in respect thereof to which the Company and its Representatives may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) the purchase or sale of Registrable Securities during a suspension as set forth in Section 2.5(e) or Section 2.5(i) in each case after receipt of written notice of such suspension, (ii) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, prospectus or preliminary or summary prospectus or any amendment or supplement thereto, or (iii) any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but, with respect to clauses (ii) and (iii) above, only to the extent that such untrue statement or omission is made in such Registration Statement, any such prospectus or preliminary or summary prospectus or any amendment or supplement thereto, in reliance upon and in conformity with written information prepared and furnished to the Company by such Holder expressly for use therein or by failure of such Holder to deliver a copy of the Registration Statement or prospectus or any amendments or supplements thereto, and such Holder will reimburse the Company and each Representative for any reasonable legal or any other expenses incurred by them in connection with investigating or defending or preparing to defend against any such Loss, action or proceeding; provided, however, that such Holder shall not be liable in any such case to the extent that prior to the filing of any such Registration Statement or prospectus or amendment or supplement thereto, such Holder has furnished in writing to the Company information expressly for use in such Registration Statement or prospectus or any amendment or supplement thereto which corrected or made not misleading information previously furnished to the Company. In no event, however, shall any Holder be liable for indirect, incidental or consequential or special damages of any kind.

 

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(c) Promptly after receipt by any Person in respect of which indemnity may be sought pursuant to Section 2.8(a) or 2.8(b) (an “Indemnified Party”) of notice of any claim or the commencement of any action, the Indemnified Party shall, if a claim in respect thereof is to be made against the Person against whom such indemnity may be sought (an “Indemnifying Party”), promptly notify the Indemnifying Party in writing of the claim or the commencement of such action; provided, that the failure to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which it may have to an Indemnified Party under Section 2.8(a) or 2.8(b) except to the extent of any actual prejudice resulting therefrom. If any such claim or action shall be brought against an Indemnified Party, and it shall notify the Indemnifying Party thereof, the Indemnifying Party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified Indemnifying Party, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, that the Indemnified Party shall have the right to employ separate counsel to represent the Indemnified Party and its Representatives who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, but the fees and expenses of such counsel shall be for the account of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) in the written opinion of counsel to such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential conflicts of interest between them, it being understood, however, that the Indemnifying Party shall not, in connection with any one such claim or action or separate but substantially similar or related claims or actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all Indemnified Parties. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding other than the payment of monetary damages by the Indemnifying Party on behalf of the Indemnified Party. Whether or not the defense of any claim or action is assumed by the Indemnifying Party, such Indemnifying Party will not be subject to any liability for any settlement made without its written consent, which consent will not be unreasonably withheld.

 

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(d) If the indemnification provided for in this Section 2.8 is unavailable to the Indemnified Parties in respect of any Losses referred to herein notwithstanding that this Section 2.8 by its terms provides for indemnification in such case, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Holders on the other from the offering of the Registrable Securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company on the one hand and the Holders on the other in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of each Holder on the other shall be determined by reference to, among other things, whether any action taken, including any untrue or alleged untrue statement of a material fact, or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 2.8(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the Losses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 2.8, no Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such Holder were offered to the public exceeds the amount of any Losses which such Holder has otherwise paid by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Each Holder’s obligations to contribute pursuant to this Section 2.8 is several in the proportion that the proceeds of the offering received by such Holder bears to the total proceeds of the offering received by all the Holders. The indemnification provided by this Section 2.8 shall be a continuing right to indemnification with respect to sales of Registrable Securities and shall survive the registration and sale of any Registrable Securities by any Holder and the expiration or termination of this Agreement. The indemnity and contribution agreements contained herein are in addition to any liability that any Indemnifying Party might have to any Indemnified Party.

 

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2.9           Participation in Registrations.

(a) No Person may participate in any registration hereunder which is underwritten unless such Person (i) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and this Agreement.

(b) Each Person that is participating in any registration under this Agreement agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.5(e) or Section 2.5(i) above, such Person will forthwith discontinue the disposition of its Registrable Securities pursuant to the Registration Statement and all use of the Registration Statement or any prospectus or related document until such Person’s receipt of the copies of a supplemented or amended prospectus as contemplated by such Section 2.5(e) or Section 2.5(i) and, if so directed by the Company, will deliver to the Company (at the Company’s expense) all copies, other than permanent file copies, then in such Holder’s possession of such documents at the time of receipt of such notice. Furthermore, each Holder agrees that if such Holder uses a prospectus in connection with the offering and sale of any of the Registrable Securities, the Holder will use only the latest version of such prospectus provided by Company.

2.10           Compliance. With respect to any registration under this Agreement, each Holder shall comply in all material respects with all applicable securities and other laws, rules and regulations, including but not limited to all rules and regulations of the SEC, the National Association of Securities Dealers and any securities exchange or quotation service on which the Company’s securities are listed or quoted.

ARTICLE 3

Transfers of Certain Rights

3.1           Transfer. The rights granted to the Holders under this Agreement may be transferred, subject to the provisions of Sections 3.2 and 3.3; provided that nothing contained herein shall be deemed to permit an assignment, transfer or disposition of the Registrable Securities in violation of the terms and conditions of the Purchase Agreement or applicable law.

 

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3.2           Transferees. Any transferee to whom rights under this Agreement are transferred shall, before and as a condition to such transfer, deliver to the Company a written instrument (i) stating the name and address of the transferor and the transferee and the number of Registrable Securities with respect to which the rights are intended to be transferred, and (ii) by which such transferee agrees to be bound by the obligations imposed upon the Holders under this Agreement to the same extent as if such transferee were a Holder hereunder.

3.3           Subsequent Transferees. A transferee to whom rights are transferred pursuant to this Section 3 may not again transfer such rights to any other Person, other than as provided in Sections 3.1 or 3.2 above.

ARTICLE 4

Miscellaneous

4.1           Recapitalizations, Exchanges, etc. The provisions of this Agreement shall apply to the full extent set forth herein with respect to (i) the Registrable Securities, (ii) any and all shares of Common Stock into which the Registrable Securities are converted, exchanged or substituted in any recapitalization or other capital reorganization by the Company and (iii) any and all equity securities of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in conversion of, in exchange for or in substitution of, the Registrable Securities and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof. The Company shall cause any successor or assign (whether by merger, consolidation, sale of assets or otherwise) to enter into a new registration rights agreement with the Holders on terms substantially the same as this Agreement as a condition of any such transaction.

4.2           No Inconsistent Agreements. The Company has not and shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement. The parties acknowledge and agree that the Company may grant registration rights hereafter, which shall be pari passu with the registration rights of the Holders, and shall not be deemed to conflict with this covenant.

4.3           Amendments and Waivers. The provisions of this Agreement may be amended and the Company may take action herein prohibited, or omit to perform any act herein required to be performed by it, if, but only if, the Company has obtained the written consent of Holders of at least a majority of the Registrable Securities then in existence.

4.4           Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

4.5           Counterparts. This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

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4.6           Notices. Any notices required or permitted to be given under the terms of this Agreement shall be sent by certified or registered mail (return receipt requested) or delivered personally or by courier (including a recognized overnight delivery service) or by facsimile and shall be effective five days after being placed in the mail, if mailed by regular United States mail, or upon receipt, if delivered personally or by courier (including a recognized overnight delivery service) or by facsimile, in each case addressed to a party. The addresses for such communications shall be:

If to the Company:

Elio Motors, Inc.

2942 North 24th Street, Suite 114-700

Phoenix, Arizona 85016

Attention: Ms. Connie Grennan

Telephone: (480) 500-6800 ext. 5

Facsimile: (480) 207-2174

With copy to:

Dill Dill Carr Stonbraker & Hutchings, P.C.

455 Sherman Street, Suite 300

Denver, Colorado 80203

Telephone: (303) 777-3737

Facsimile: (303) 777-3823

Attention: Fay M. Matsukage, Esq.

If to the Holder:

Shreveport Business Park, LLC

_______________________________

______________________________

Attention: _________________

Telephone: _______________

Facsimile: _________________

With copy to:

Each party shall provide notice to the other party of any change in address.

4.7           Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to the conflicts of laws rules or provisions.

4.8           Forum; Service of Process. Any legal suit, action or proceeding brought by the Company, Holders, any Person entitled to indemnification or contribution hereunder, or any of their respective Affiliates arising out of or based upon this Agreement shall be instituted exclusively in any federal or state court in the State of California, and each such Person irrevocably waives any objection which it may now or hereafter have to the laying of venue or any such proceeding, and irrevocably submits to the jurisdiction of such courts in any such suit, action or proceeding.

 

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4.9           Captions. The captions, headings and arrangements used in this Agreement are for convenience only and do not in any way limit or amplify the terms and provisions hereof.

4.10         No Prejudice. The terms of this Agreement shall not be construed in favor of or against any party on account of its participation in the preparation hereof.

4.11         Words in Singular and Plural Form. Words used in the singular form in this Agreement shall be deemed to import the plural, and vice versa, as the sense may require.

4.12         Remedy for Breach. The Company hereby acknowledges that in the event of any breach or threatened breach by the Company of any of the provisions of this Agreement, the Holders would have no adequate remedy at law and could suffer substantial and irreparable damage. Accordingly, the Company hereby agrees that, in such event, the Holders shall be entitled, and notwithstanding any election by any Holder to claim damages, to obtain a temporary and/or permanent injunction to restrain any such breach or threatened breach or to obtain specific performance of any such provisions, all without prejudice to any and all other remedies which any Holders may have at law or in equity.

4.13         Successors and Assigns, Third Party Beneficiaries. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto, each assignee of the Holders pursuant to Article 3 and their respective successors and assigns and executors, administrators and heirs. Holders are intended third party beneficiaries of this Agreement and this Agreement may be enforced by such Holders.

4.14         Entire Agreement. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.

4.15         Attorneys’ Fees. In the event of any action or suit based upon or arising out of any actual or alleged breach by any party of any representation, warranty, covenant or agreement in this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and expenses of such action or suit from the other party in addition to any other relief ordered by any court.

4.16         Termination of Rights. All rights under this Agreement will terminate as to a Holder when that Holder no longer holds any Registrable Securities.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed as of the date and year first written above.

	 	
COMPANY:

	 	 	 	 
	 	
ELIO MOTORS, INC.

	 	 	 	 
	 	
By:

	
/s/ Paul Elio

	 	
Title:

	
CEO

	 	 	 	 
	 	
HOLDER:

	 	 	 	 
	 	
SHREVEPORT BUSINESS PARK, LLC

	 	 	 	 
	 	
By:

	
Holdings SPE Manager, LLC, its Manager

	 	 	 	 
	 	 	
By:

	
/s/ John A. Mase

	 	 	 	
John A. Mase,

	 	 	 	
Chief Financial OfficerExhibit 4.9

 

ELIO MOTORS, INC.

CERTIFICATE OF DESIGNATIONS,

PREFERENCES, RIGHTS AND LIMITATIONS OF

SERIES D CONVERTIBLE PREFERRED STOCK

Pursuant to Section 151 of the General

Corporation Law of the State of Delaware

The undersigned Chief Financial Officer and Secretary of Elio Motors, Inc., a corporation formed under the laws of the State of Delaware (the “Corporation”), hereby certifies that the board of directors of the Corporation (the “Board”) has duly approved and authorized the following resolutions creating a series of preferred stock designated as “Series D Convertible Preferred Stock”:

“BE IT RESOLVED, that, pursuant to authority expressly granted by the provisions of the Articles of Incorporation of this Corporation, as amended, and pursuant to Delaware General Corporation Law Section 151, the Board hereby creates and authorizes the issuance of a series of preferred stock, no par value per share, of this Corporation, to consist of 96,380 shares, and hereby fixes the designations, preferences, limitations, and relative rights of the shares of such series (in addition to any designations, preferences, limitations, and relative rights set forth in the Articles of Incorporation, as amended, that are applicable to preferred stock of all series) as follows:

1.             Designation and Ranking.

(a)           A total of ninety six thousand three hundred eighty (96,380) shares of the Corporation’s preferred stock, no par value per share, shall be designated the “Series D Convertible Preferred Stock” (the “Series D Preferred Stock”).

(b)           The Series D Preferred Stock shall, to the extent provided below, with respect to rights upon liquidation, winding up, or dissolution, rank senior and prior in right to (i) each class of common stock, no par value per share, of the Corporation (the “Common Stock”), and (ii) any other class of preferred stock, other than a class or series ranking on par with or senior to the Series D Preferred Stock (such non-par and non-senior preferred shares, collectively with the Common Stock, referred to as “Junior Stock”). The Corporation’s Series C Preferred Stock and Series D Preferred Stock shall rank on par with one another.

2.             Dividends. The holders of Series D Preferred Stock shall be entitled to participate pro rata in any dividends paid to the holders of the Common Stock on an as-converted basis.

3.             Liquidation, Dissolution or Winding Up.

(a)           Subject to the rights of the holders of any securities issued by the Corporation that are senior to (the “Senior Stock”) or at parity with (the “Parity Stock”) the Series D Preferred Stock, in the event of any liquidation, dissolution, or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of Junior Stock, as to the distribution of assets on any liquidation, dissolution, or winding up of the Corporation, each holder of the Series D Preferred Stock shall be entitled to receive cash equal to the greater of (i) the total Purchase Price of the Series D Preferred Stock held by such holder, plus cash equal to all accrued and unpaid dividends thereon to the date of final distribution to such holders or (ii) such amount per share as would have been payable had all shares of Series D Preferred Stock been converted into Common Stock pursuant to Section 5 hereof immediately prior to such liquidation, dissolution, or winding up. If, upon any liquidation, dissolution, or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the Series D Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Series D Preferred Stock and any such other Parity Stock ratably in accordance with the respective amounts that would be payable on such Series D Preferred Stock and any such other Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 3, (i) a consolidation or merger of the Corporation with one or more corporations or other entities, (ii) a sale, lease or transfer of all or substantially all of the Corporation’s assets, or (iii) a statutory share exchange, shall be deemed to be a liquidation, dissolution, or winding up, voluntary or involuntary, of the Corporation. Each holder of Series D Preferred Stock will stop participating once such holder has received a total liquidation amount per share equal to the holder’s Purchase Price, plus any declared but unpaid dividends. For the purposes of this Certificate of Designations, the “Purchase Price” is defined to be $25.00 per share.

 

Certificate of Designations – Series D Preferred Stock – Page 1 of 6

(b)           Subject to the rights of the holders of Senior Stock and Parity Stock upon liquidation, dissolution, or winding up of the Corporation, after payment shall have been made in full to the holders of the Series D Preferred Stock, as provided in this Section 3, any other series or class or classes of Junior Stock shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series D Preferred Stock shall not be entitled to share therein.

(c)           Whenever the distribution provided for in this Section 3 shall, at the discretion of the Board, be payable in property other than cash, the value of such distribution shall be the fair market value of the property as determined in good faith by the Board.

(d)           The amounts set forth above and throughout this Section 3 shall be subject to equitable adjustment whenever there shall occur a stock dividend, stock split, combination, reorganization, recapitalization, reclassification, or other similar event involving a change in the capital structure of the Corporation.

4.             Voting Power.

(a)           Each share of Series D Preferred Stock shall have a number of votes equal to the number of shares of Common Stock then issuable upon conversion of such share of Series D Preferred Stock. Each holder of the Series D Preferred Stock shall be entitled to vote on all matters and shall be entitled to that number of votes equal to the largest number of whole shares of Common Stock into which such holder’s shares of the Series D Preferred Stock could be converted, pursuant to the provisions of Section 5 hereof, at the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited. Except as otherwise expressly provided herein or in any agreement of the shareholders or as otherwise required by law, the holders of shares of the Series D Preferred Stock and Common Stock shall vote together (or render written consents in lieu of a vote) as a single class on all matters submitted to the shareholders of the Corporation.

 

Certificate of Designations – Series D Preferred Stock – Page 2 of 6

(b)           Notwithstanding anything contained herein to the contrary, so long as any shares of Series D Preferred Stock remain outstanding, the Corporation shall not, without first obtaining approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series D Preferred Stock:

(i)            amend, alter, or repeal any provisions of the Articles of Incorporation of this Corporation, this certificate of designation or the bylaws of the Corporation if such action would adversely alter or change the rights, preferences, privileges or powers of the holders of the Series D Preferred Stock; or

(ii)           create, reclassify, modify stock or securities into, authorize, or obligate itself to issue, any shares of stock or any securities convertible into or exercisable for any class or series of stock senior to or pari passu with the Series D Preferred Stock as to rights on liquidation, winding up, or dissolution or rights to any other distributions or payments.

5.             Conversion Rights. The Series D Preferred Stock shall be convertible into Common Stock of the Corporation as follows:

(a)           Right to Convert.

(i)            Subject to and in compliance with the provisions of this Section 5, each holder of Series D Preferred Stock may, at such holder’s option at any time and from time to time, convert each such share into one fully-paid and non-assessable share of Common Stock, as adjusted in accordance with Section 5(b) hereof.

(ii)           Before any holder of Series D Preferred Stock shall be entitled to convert the same into Common Stock, he shall surrender the certificate(s) therefor, duly endorsed, to the office of the Corporation or any transfer agent for such Series D Preferred Stock and shall give written notice to the Corporation at such office that he elects to convert the same. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series D Preferred Stock, or to his nominee(s), certificate(s) for the number of full shares of Common Stock to which he shall be entitled, together with cash in lieu of any fraction of a share as hereinafter provided, and, if less than all of the shares of Series D Preferred Stock represented by such certificate are converted, a certificate representing the shares of Series D Preferred Stock not converted. Such conversion shall be deemed to have been made as of the date of such surrender of the certificate for the Series D Preferred Stock to be converted (the “Conversion Date”), and the person(s) entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder(s) of such Common Stock on such date. If the conversion is in connection with an offer of securities registered pursuant to the Securities Act of 1933, as amended (the “Securities Act”), the conversion may, at the option of any holder tendering Series D Preferred Stock for conversion, be conditioned upon the closing of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the shares of Common Stock issuable upon such conversion of the Series D Preferred Stock shall not be deemed to have converted such shares of Series D Preferred Stock until immediately prior to the closing of such sale of securities.

 

Certificate of Designations – Series D Preferred Stock – Page 3 of 6

(b)           Adjustments to Conversion. In the event of a stock dividend, distribution or subdivision of the Common Stock; a stock combination or consolidation of the Common Stock; a reorganization; share exchange; sale; conveyance; or reclassification, in a transaction or series of related transactions, other than a change in par value, including where there is a shift in more than fifty percent of the voting power of the Corporation (a “Change of Control”), or a merger or consolidation to which the Corporation is a party which results in a Change of Control, each share of Series D Preferred Stock shall, after such transaction(s), be convertible at the option of the holder into the number of shares of Common Stock and/or other securities, cash, or property which the holder of such shares of Series D Preferred Stock would have been entitled to receive if the holder had held the Common Stock issuable upon conversion of such share of Series D Preferred Stock immediately prior to such transaction(s), plus all accrued and unpaid dividends on such shares of Series D Preferred Stock.

(c)           No Impairment. The Corporation will not, by amendment of its Articles of Incorporation or through any reorganization, recapitalization, 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 to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 5 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of Series D Preferred Stock against impairment.

(d)           No Fractional Shares. No fractional shares shall be issued upon conversion of shares of Series D Preferred Stock. The Corporation shall deliver cash to any holder of Series D Preferred Stock in lieu of any fraction of a share in an amount equal to the greater of (i) that fractional interest of the Market Price or (ii) that fractional interest of the Purchase Price, in each case on the effective time of such conversion. “Market Price” means, with respect to a security of the Corporation, the average of the “high” and “low” prices for shares of the security as reported in The Wall Street Journal listing for such day (corrected for obvious typographical errors), or if such shares are not reported in such listing, the average of the reported sales prices on the largest national securities exchange (based on the aggregate dollar value of securities listed) on which such shares are listed or traded, or if such shares are not listed or traded on any national securities exchange, then the average of the reported sales prices for such shares on the OTCMarket. Notwithstanding the foregoing, if the date for which Market Price is determined is the first day when trading for such security is reported on a national securities exchange, the Market Price shall be the “price to public” or equivalent set forth in the cover page for the final Prospectus relating to the initial public offering of such security. For purposes of determining the Market Price of non-securities and securities that are not publicly traded, the Board shall endeavor in good faith to agree unanimously to the Market Price of such item. If the Board is unable to do so within sixty (60) days after the occurrence of an event giving rise to a need to determine the Market Price, an investment banking firm or other appropriate appraiser chosen by a majority of the holders of the Series D Preferred Stock and an investment banking firm or other appropriate appraiser chosen by the Corporation shall each calculate such Market Price. In the event the difference between such valuations is less than 20% of the higher valuation, then the Market Price shall be deemed to be the average of such two valuations. In the event that the difference between such valuations is greater than 20% of the higher valuation, the two appraisers shall designate a third appraiser which shall select from the two valuations the valuation that such third firm determines to be closer to its own valuation, and the valuation so selected shall be considered the Market Price. In all events, the fees and expenses of any such appraisers shall be paid by the Corporation.

 

Certificate of Designations – Series D Preferred Stock – Page 4 of 6

(e)           Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the conversion rate pursuant to this Section 5, the Corporation, at its expense, shall compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series D Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series D Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustment and readjustment and (ii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of Series D Preferred Stock.

(f)           Reservation of Common Stock. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series D Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series D Preferred Stock, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all the then outstanding shares of Series D Preferred Stock, the Corporation shall take such action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

6.             Notices of Record Date. In the event of:

(a)           any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase, or otherwise acquire any shares of capital stock of any class or any other securities or property, or to receive any other right, or

(b)           any capital reorganization of the Corporation, any reclassification or recapitalization of the capital stock of the Corporation, any merger or consolidation of the Corporation, business combination, or any transfer of all or substantially all of the assets of the Corporation to any other corporation, or any other entity or person, or

 

Certificate of Designations – Series D Preferred Stock – Page 5 of 6

(c)           any voluntary or involuntary dissolution, liquidation, or winding up of the Corporation,

then and in each such event the Corporation shall mail or cause to be mailed to each holder of Series D Preferred Stock a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution, or right and a description of such dividend, distribution, or right, (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, business combination, dissolution, liquidation, or winding up is expected to become effective, and (iii) the time, if any, that is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, business combination, dissolution, liquidation, or winding up. Such notice shall be mailed by first class mail, postage prepaid, at least twenty (20) days prior to the date specified in such notice on which such action is to be taken.

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designations as of this 22nd day of May, 2017, and affirms that this Certificate of Designations is her act and deed and that the statements contained herein are true under penalties of perjury.

	 	
ELIO MOTORS, INC.

	 	 	 
	 	
By:

	
/s/ Connie Grennan

	 	 	
Connie Grennan, Chief Financial Officer

	 	 	
and Secretary

  

Certificate of Designations – Series D Preferred Stock – Page 6 of 6

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