If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box.
þ
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
¨
* The address of the additional
registrant guarantor’s principal executive office is 9805 Northcross Center Court, Suite A Huntersville, North Carolina
28078 and the phone number is (704) 997-5735.
The information in this prospectus
is not complete and may be changed. The selling security holders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and the
selling security holders are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PROSPECTUS
SUMMARY
The following summary highlights information
contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that should be
considered before investing in our Securities. Potential investors should read the entire prospectus carefully, including the more
detailed information regarding our business provided in our Annual Report on Form 10-K for the fiscal year ended June 30, 2017
incorporated herein by reference, the risks of purchasing our Securities discussed under the “Risk Factors” section,
and our financial statements and the accompanying notes to the financial statements incorporated herein by reference.
Unless the context indicates or requires
otherwise, all references in this registration statement to “Akoustis Technologies,” “Akoustis,” the “Company,”
“we,” “us” and “our” refer to Akoustis Technologies, Inc. and its wholly owned consolidated
subsidiary, Akoustis, Inc., each a Delaware corporation.
This prospectus includes the trademarks
of Akoustis, Inc., Akoustis
™
and XBAW
™
, See “Description of Business − Intellectual
Property.” All references to Akoustis and XBAW in this prospectus are intended to include reference to such trademarks.
Overview
Akoustis is an early stage company focused
on developing, designing and manufacturing innovative radio frequency (“RF”) filter products for the mobile wireless
device industry. We use a patented fundamentally new piezoelectric resonator technology that we call XBAW
™
in
the manufacturing of bulk acoustic wave (“BAW”) resonators, the building blocks of high selectivity RF filters required
to route signals in a smartphone or other mobile or wearable device, cellular infrastructure and WiFi routers. Filters are a critical
component of the RF front-end (“RFFE”), and their use has multiplied with the launch and licensing of 4G/LTE, emerging
5G and WiFi frequency bands. They are used to define the range of frequencies of radio signals that are transmitted (the “passband”)
and simultaneously reject unwanted signals.
We plan to use single-crystal piezoelectric
materials to develop a new class of BAW RF filters with a fundamental advantage to reduce losses over existing thin film RF filter
technologies. We believe our technology will be disruptive to the RFFE market through the following expected advantages:
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Wider bandwidth coverage,
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Smaller filters support higher level of integration
and lower manufacturing costs,
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Improved power compression and linearity,
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Reduced power amplifier cost,
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Reduced heat generation and reduced battery loading,
and
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Reduced guard band between adjacent frequency bands.
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Once our technology is qualified for mass
production, we expect to design and sell single-crystal BAW RF filter products using our XBAW
™
technology. Our
product focus is on innovative single-band filter products for the growing smartphone and RFFE module market, which can be used
to make duplexer or multiplexer filter products necessary for the mobile market. These products present the greatest near-term
potential for commercialization of our technology. According to a Mobile Experts May 2017 report, the mobile filter market is expected
to grow from $8.2 billion in 2017 to greater than $12 billion by 2021.
Recent Developments
Purchase Orders for RF Filters
On May 10, 2018, we received two purchase
orders for 4G/LTE BAW RF filters from a new tier-one infrastructure customer. The first purchase order covers development and delivery
of pre-production units for evaluation and testing. The second purchase order is a placeholder order, containing the pricing terms
for the first 500,000 production RF filters for future orders, assuming successful qualification and testing of the pre-production
units. Assuming successful qualification by the customer, the Company expects to receive a production order from the customer’s
contract manufacturer(s) to deliver the pre-production units in the fourth quarter of 2018, with production shipments expected
to begin in early 2019.
Acquisition of Manufacturing Facility
On March
23, 2017, we entered into an Asset Purchase Agreement and a Real Property Purchase Agreement (collectively, the “STC-MEMS
Agreements”) with The Research Foundation for the State University of New York (“RF-SUNY”) and Fuller Road Management
Corporation (“FRMC”), an affiliate of RF-SUNY, respectively, to acquire certain specified assets, including STC-MEMS,
a semiconductor wafer-manufacturing and microelectromechanical systems (“MEMS”) operation with associated wafer-manufacturing
tools, and the associated real estate and improvements located in Canandaigua, New York used in the operation of STC-MEMS (the
assets and real estate and improvements referred to together herein as the “STC-MEMS Business”). Pursuant to the STC-MEMS
Agreements, the Company also agreed to assume substantially all of the ongoing obligations of the STC-MEMS Business incurred in
the ordinary course of business.
We completed
the acquisition of the STC-MEMS Business on June 26, 2017 for an aggregate purchase price of $2.8 million in cash. The Company
recorded net assets acquired of $6.3 million for purchase consideration of $4.6 million (includes $2.85 million of cash paid at
closing plus $1.7 million real estate contingent liability), which resulted in the recording of a bargain purchase gain of $1.7
million.
The STC-MEMS
acquisition allows the Company to internalize manufacturing, increase capacity and control its wafer supply chain for single crystal
BAW RF filters. We have now successfully transferred our R&D resonator filter process flow into the facility, which recently
received ISO 9001:2015 certification. We plan to utilize the facility to optimize our XBAW
™
technology and to
consolidate all aspects of wafer manufacturing for our disruptive and patented high band BAW RF filters targeting the multi-billion
dollar mobile and other wireless markets. This planned consolidation of the Company’s supply chain into the STC-MEMS Business
is expected to shorten time-to-market for our RF products, greatly enhancing our ability to service customers upon completion of
development and design specifications. Furthermore, we believe that shorter time-to-market cycles provide us with the opportunity
to increase the number of our potential customers.
About This Offering
This prospectus relates to the public offering,
which is not being underwritten, (i) by the Selling Noteholders listed in this prospectus of up to $15,000,000 of 6.5% Convertible
Senior Secured Notes due 2023, including the Guarantees of the Notes, and up to 4,444,217 shares of Common Stock issuable upon
conversion or in respect of the Notes, and (ii) by the Selling Stockholders listed in this prospectus of up to 4,146,529 previously
issued shares of our Common Stock. The Securities offered by this prospectus may be sold by the Selling Security
Holders from time to time in the open market, through negotiated transactions or otherwise at market prices prevailing at the time
of sale or at negotiated prices. We will receive no proceeds from the sale of the Securities by the Selling Security Holders or
from the issuance of Common Stock in respect of the Notes. We will bear all expenses of registration incurred in connection with
this offering, but all selling and other expenses incurred by the Selling Security Holders will be borne by them.
Selected Risks Associated with an
Investment in the Securities
An investment in the Securities is highly
speculative and is subject to numerous risks described in the section entitled “Risk Factors” and elsewhere in this
prospectus. You should carefully consider these risks before making an investment. Some of these risks include:
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We have a limited operating history upon which investors can evaluate our business and future prospects.
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We have a history of losses (we have incurred net losses of approximately $31.5 million for the
period from May 12, 2014 (inception) to March 31, 2018), will need substantial additional funding to continue our operations and
may not achieve or sustain profitability in the future.
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Servicing the debt represented by the Notes requires a significant amount of cash, and we may not
have sufficient cash flow from our business to pay our substantial debt.
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If we are unable to obtain additional financing on acceptable terms, we may have to curtail our
growth or cease our development plans and operations.
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You could lose all of your investment.
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You may experience dilution of your ownership interests because of the future issuance of additional
shares of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred
stock. Furthermore, the conversion price of the Notes may not be adjusted for all dilutive events, including third-party tender
or exchange offers, that may adversely affect the trading price of the notes or the shares of our common stock issuable upon conversion
of the notes.
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We may not generate revenues or achieve profitability.
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Our products may not be able to be commercialized or accepted in the market.
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If we are unable to establish effective marketing and sales capabilities or enter into agreements
with third parties to market and sell our RF filters, we may not be able to effectively generate product revenues.
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If we fail to obtain, maintain and enforce our intellectual property rights, we may not be able
to prevent third parties from using our proprietary technologies and may lose access to technologies critical to our products.
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Proceeds from any sale of the collateral upon foreclosure may be insufficient to repay the Notes
in full.
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Corporate Information
Our principal executive offices are located
at 9805 Northcross Center Court, Suite A, Huntersville, North Carolina 28078. Our telephone number is (704) 997-5735. Our website
address is
www.akoustis.com
. The information on, or that can be accessed through, our website is not part of this prospectus.
Implications of Being an Emerging
Growth Company
We are an “emerging growth company,”
as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earliest of
(i) June 30, 2019, the last day of the fiscal year following the fifth anniversary of the date of the first sale of our Common
Stock pursuant to an effective registration statement under the Securities Act; (ii) the last day of the fiscal year in which we
have total annual gross revenues of $1.07 billion or more; (iii) the date on which we have issued more than $1 billion in nonconvertible
debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under applicable
SEC rules. We cannot retain our emerging growth company status indefinitely and will no longer qualify as an emerging growth company
after June 30, 2019. We refer to the Jumpstart Our Business Startups Act of 2012 herein as the “JOBS Act,” and references
herein to “emerging growth company” have the meaning associated with it in the JOBS Act. For so long as we remain an
emerging growth company, we are permitted and intend to rely on exemptions from specified disclosure requirements that are applicable
to other public companies that are not emerging growth companies.
These exemptions include:
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not being required to comply with the requirement of auditor attestation of our internal control
over financial reporting,
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not being required to comply with any requirement that may be adopted by the Public Company Accounting
Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information
about the audit and the financial statements,
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reduced disclosure obligations regarding executive compensation, and
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not being required to hold a nonbinding advisory vote on executive compensation and stockholder
approval of any golden parachute payments not previously approved.
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For as long as we continue to be an emerging
growth company, we expect that we will take advantage of the reduced disclosure obligations available to us as a result of that
classification. We have taken advantage of certain of those reduced reporting burdens in this prospectus. Accordingly, the information
contained or incorporated by reference herein may be different than the information you receive from other public companies in
which you hold stock.
An emerging growth company can take advantage
of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting
standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would
otherwise apply to private companies. We have irrevocably elected to avail ourselves of this extended transition period, and as
a result, we will not be required to adopt new or revised accounting standards on the dates on which adoption of such standards
is required for other public reporting companies.
We are also a “smaller reporting
company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and
have elected to take advantage of certain of the scaled disclosure requirements available for smaller reporting companies.
THE OFFERING
Common stock currently outstanding
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22,197,200 shares. (1)
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Common stock offered by the Company
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None.
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Common stock offered by the Selling Stockholders
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Up to 4,146,529 shares.
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Notes currently outstanding
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$15,000,000 aggregate principal amount.
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Notes offered by the Company
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None.
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Notes offered by the Selling Noteholders
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Up to $15,000,000 aggregate principal amount.
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Common stock offered by the Selling Noteholders
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Up to 4,444,217 shares.
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Use of proceeds
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We will not receive any of the proceeds from the sales of the Securities by the Selling Noteholders or Selling Stockholders or upon the issuance of Common Stock in respect of the Notes.
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NASDAQ symbol for Common Stock
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AKTS.
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Risk factors
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You should carefully consider the information set forth in this
prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 7
of this prospectus before deciding whether or not to invest in the Notes or shares of our Common Stock.
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(1) As of June 1, 2018.
This number excludes:
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warrants to purchase 754,809 shares of Common Stock (including warrants currently exercisable to
purchase up to 600,632 shares of Common Stock),
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options to purchase 1,331,859 shares of Common Stock (including options currently exercisable to
purchase up to 120,000 shares of Common Stock),
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unvested restricted stock units for 991,494 shares of Common Stock, and
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246,809 shares of Common Stock that may become issuable pursuant to the price-protected anti-dilution
provision applicable to 2,468,094 outstanding shares that were sold in a private placement offering in December 2017.
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See “Description
of Capital Stock” and “Description of Notes” below.
NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus and documents incorporated
herein by reference contain forward-looking statements, including, without limitation, in the section of this prospectus captioned
“Risk Factors.” Any and all statements contained in this prospectus that are not statements of historical fact may
be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,”
“could,” “project,” “estimate,” “predict,” “potential,” “strategy,”
“anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,”
“continue,” “intend,” “expect,” “future,” and terms of similar import (including
the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking
statements may contain one or more of these identifying terms. Forward-looking statements in this prospectus may include, without
limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives
relating to the development of commercially viable RF filters, (ii) a projection of income (including income/loss), earnings (including
earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial
performance, including any such statement contained in a discussion and analysis of financial condition by management or in the
results of operations included pursuant to the rules and regulations of the SEC, and (iv) the assumptions underlying or relating
to any statement described in items (i), (ii) or (iii) above.
The forward-looking statements are not
meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based
upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of
risks and uncertainties and other influences, many of which are beyond our control. Actual results and the timing of certain events
and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties.
Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ
materially from expected or desired results may include, without limitation:
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our inability to obtain adequate financing,
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our limited operating history,
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our inability to generate significant revenues or achieve profitability,
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our inability to service the debt represented by the Notes,
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the results of our research and development (R&D) activities,
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our inability to achieve acceptance of our products in the market,
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general economic conditions, including upturns and downturns in the industry,
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our limited number of patents,
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our failure to obtain, maintain and enforce our intellectual property rights,
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our inability to attract and retain qualified personnel,
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our reliance on third parties to complete certain processes in connection with the manufacture
of our products,
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product quality and defects,
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existing or increased competition,
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our ability to market and sell our products,
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our inability to successfully integrate our New York fabrication facility and related operations
into our business,
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our failure to innovate or adapt to new or emerging technologies,
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our failure to comply with regulatory requirements,
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results of any arbitration or litigation that may arise,
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stock volatility and illiquidity,
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our failure to implement our business plans or strategies,
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our failure to remediate the material weakness in our internal control over financial reporting,
and
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our failure to maintain the Trusted Foundry accreditation of our New York fabrication facility.
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A description of some of the risks and
uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in
this prospectus appears in the section captioned “Risk Factors” and elsewhere in this prospectus. Readers are cautioned
not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk
factors. Except as may be required by law, we do not undertake any obligation to update the forward-looking statements contained
in this prospectus to reflect any new information or future events or circumstances or otherwise.
RISK FACTORS
An investment in the Securities is highly
speculative and involves a high degree of risk. We face a variety of risks that may affect our operations or financial results
and many of those risks are driven by factors that we cannot control or predict. Before investing in any Securities, you should
carefully consider the following risks, together with the financial and other information contained in this prospectus as well
as the risks described in our annual report on Form 10-K for the fiscal year ended June 30, 2017 and our subsequently filed quarterly
reports on Form 10-Q, which are incorporated by reference herein. If any of the risks described herein or incorporated by reference
actually occur, our business, prospects, financial condition and results of operations could be materially adversely affected.
In that case, the value of the Securities would likely decline and you may lose all or a part of your investment. Only those investors
who can bear the risk of loss of their entire investment should invest in the Securities.
Risks Related to the Notes
Servicing our debt requires a significant
amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.
Our ability to make scheduled payments
of the principal of the Notes depends on our future performance, which is subject to economic, financial, competitive and other
factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt
and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives,
such as selling assets or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to repay
our debt will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these
activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
Our ability to pay interest on, and
make certain other payments with respect to, the Notes with our common stock is subject to a maximum number of shares unless we
obtain shareholder approval in accordance with the listing requirements of the NASDAQ Capital Market or such other national securities
exchange on which our common stock is listed.
Unless we obtain the requisite approval
of our shareholders pursuant to the applicable NASDAQ Marketplace rule or listing requirements of the relevant stock exchange,
the number of shares we may deliver in respect of the Notes, including those delivered in lieu of cash interest, in connection
with an interest make-whole payment, or as a qualifying fundamental change payment, will not exceed 19.99% of our Common Stock
outstanding (as adjusted for stock splits, reverse stock splits, stock combinations, reclassifications and reorganizations) as
of the close of the trading day immediately preceding the date of the indenture that governs the Notes. The number of shares of
Common Stock issued to pay any portion of interest or certain other payments in respect of the Notes will be based on the average
trading price of our Common Stock over the ten consecutive trading days preceding payment. Therefore, if the trading price of our
Common Stock decreases, we would need to issue a greater number of shares of Common Stock in payment of a particular dollar amount.
However, since the maximum number of shares we may issue in respect of the Notes without obtaining stockholder approval is limited,
we may lose the ability to make these payments in shares of our Common Stock and may not have sufficient cash to service the debt
in cash, which could result in a default on our debt obligations.
We may incur additional debt which
could affect our ability to make payments on the Notes when due.
Subject to certain conditions and limitations
in the indenture governing the Notes, we and our subsidiaries may be able to incur substantial additional debt in the future, some
of which may be secured debt. Except for the limitation described under “Description of Notes—Limitation on Incurrence
of Additional Indebtedness” with respect the incurrence of additional indebtedness, we and our subsidiaries will not be restricted
under the terms of the indenture governing the Notes from incurring additional debt, securing existing or future debt, recapitalizing
our debt or taking a number of other actions that are not limited by the terms of the indenture governing the Notes that could
have the effect of diminishing our ability to make payments on the Notes when due.
Recent and future regulatory actions
and other events may adversely affect the trading price and liquidity of the Notes.
We expect that many investors in, and potential
purchasers of, the Notes will employ, or seek to employ, a convertible arbitrage strategy with respect to the Notes. Investors
would typically implement such a strategy by selling short our Common Stock underlying the Notes and dynamically adjusting their
short position while continuing to hold the Notes. Investors may also implement this type of strategy by entering into swaps on
our Common Stock in lieu of or in addition to short selling the Common Stock.
The Securities Exchange Commission (the
“SEC”) and other regulatory and self-regulatory authorities have implemented various rules and taken certain actions,
and may in the future adopt additional rules and take other actions, that may impact those engaging in short selling activity involving
equity securities (including our Common Stock). Such rules and actions include Rule 201 of SEC Regulation SHO, the adoption by
the Financial Industry Regulatory Authority, Inc. and the national securities exchanges of a “Limit Up-Limit Down”
program, the imposition of market-wide circuit breakers that halt trading of securities for certain periods following specific
market declines, and the implementation of certain regulatory reforms required by the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010. Any governmental or regulatory action that restricts the ability of investors in, or potential purchasers
of, the Notes to effect short sales of our Common Stock, borrow our Common Stock or enter into swaps on our Common Stock could
adversely affect the trading price and the liquidity of the Notes.
We cannot assure you that an active
trading market will develop for the Notes.
There is no active trading market for the
Notes, and we do not intend to apply to list the Notes on any securities exchange or to arrange for quotation on any automated
dealer quotation system. Any market-making activities relating to the Notes may cease at any time without notice. In addition,
the liquidity of the trading market in the Notes, and the market price quoted for the Notes, may be adversely affected by changes
in the overall market for this type of security and by changes in our financial performance or prospects or in the prospects for
companies in our industry generally. As a result, we cannot assure you that an active trading market will develop for the Notes.
If an active trading market does not develop or is not maintained, the market price and liquidity of the Notes may be adversely
affected. In that case you may not be able to sell your Notes at a particular time or you may not be able to sell your Notes at
a favorable price.
Because the Notes are held in book-entry
form, holders must rely on DTC’s procedures to receive communications relating to the notes and exercise their rights and
remedies.
We initially issued the notes in the form
of one or more global notes registered in the name of Cede & Co., as nominee of the Depository Trust Company (“DTC”). As a result, beneficial interests in global
notes are shown on, and transfers of global notes will be effected only through, the records maintained by DTC. Except in limited
circumstances, we will not issue certificated notes. See “Description of Notes—Book-Entry; Settlement and Clearance.”
Accordingly, if you own a beneficial interest in a global note, then you will not be considered a record owner or holder of the
Notes. Instead, DTC or its nominee will be the sole holder of the Notes. Unlike persons who have certificated Notes registered
in their names, owners of beneficial interests in global notes will not have the direct right to act on our solicitations for consents
or requests for waivers or other actions from holders. Instead, those beneficial owners will be permitted to act only to the extent
that they have received appropriate proxies to do so from DTC or, if applicable, a DTC participant. The applicable procedures for
the granting of these proxies may not be sufficient to enable owners of beneficial interests in global notes to vote on any requested
actions on a timely basis. In addition, notices and other communications relating to the notes will be sent to DTC. We expect DTC
to forward any such communications to DTC participants, which in turn would forward such communications to indirect DTC participants.
But we can make no assurances that you timely receive any such communications.
Volatility in the market price and
trading volume of our Common Stock could adversely impact the trading price of the Notes.
The stock market in recent years has experienced
significant price and volume fluctuations that have often been unrelated to the operating performance of companies. In addition,
the market price of our Common Stock historically has been volatile. The market price of our Common Stock could fluctuate significantly
for many reasons, including in response to the risks described in this section or our most recent annual report on Form 10-K or
subsequently filed quarterly reports on Form 10-Q or elsewhere in this prospectus for reasons unrelated to our operations, such
as reports by industry analysts, investor perceptions or negative announcements by our customers, competitors or suppliers regarding
their own performance, as well as industry conditions and general financial, economic and political instability. A decrease in
the market price of our Common Stock would likely adversely impact the trading price of the Notes. The market price of our Common
Stock could also be affected by possible sales of our Common Stock by investors who view the Notes as a more attractive means of
equity participation in us and by hedging or arbitrage trading activity that may develop involving our Common Stock. This trading
activity could, in turn, affect the trading price of the Notes. This volatility in the market price of our Common Stock may affect
the price at which you could sell the shares of our Common Stock you receive upon conversion of your Notes, if any, and the sale
of substantial amounts of our Common Stock could adversely affect the price of our Common Stock and the value of your Notes.
Any adverse rating of the Notes may
cause their market price to fall.
We do not intend to seek a rating on the
Notes. However, if a rating service were to rate the Notes and if such rating service were to lower its rating on the Notes below
the rating initially assigned to the Notes or otherwise announce its intention to put the Notes on credit watch, the trading price
of the Notes could decline.
You may be subject to tax attributable
to interest paid on the Notes even though you do not receive a corresponding cash payment.
The Notes permit us, at our option, to
make certain payments in freely tradable shares of Common Stock in lieu of cash. You may be subject to tax attributable to such
payments even if they are not paid in cash.
You may be subject to tax if we make
or fail to make certain adjustments to the conversion rate of the Notes even though you do not receive a corresponding cash distribution
.
The conversion rate of the Notes is subject
to adjustment in certain circumstances, including the payment of cash dividends. If the conversion rate is adjusted as a result
of a cash dividend paid to our common stockholders, you may be deemed to have received a dividend subject to U.S. federal income
tax without the receipt of any cash. In addition, a failure to adjust (or to adjust adequately) the conversion rate after an event
that increases your proportionate interest in us could be treated as a deemed taxable dividend to you. If you are a non-U.S. holder
(as defined in “Material U.S. Federal Income Tax Considerations”), any deemed dividend would be subject to U.S. federal
withholding tax at a 30% rate, or such lower rate as may be specified by an applicable treaty, and if you are a U.S. holder (as
defined in “Material U.S. Federal Income Tax Considerations”), any deemed dividend may be subject to federal backup
withholding tax at a 24% rate, which, in each case, may be withheld from subsequent payments on the notes or other amounts received
by you. See “Material U.S. Federal Income Tax Considerations.”
We intend to take the position that
the Notes are not contingent payment debt instruments, which position is not free from doubt.
We may be required to make additional payments
on Notes that are converted in certain circumstances, including settlement of the interest make-whole payment described in “Description
of Notes—Conversion Rights—Interest Make-Whole Payment upon Certain Conversions.” Due to a lack of relevant authority
regarding certain of these payments, the applicability to the Notes of Treasury Regulations governing contingent payment debt instruments
is uncertain. In particular, the effect of the interest make-whole payment on the tax treatment of the Notes is unclear. Although
the matter is not free from doubt, we intend to take the position for U.S. federal income tax purposes that the Notes are not contingent
payment debt instruments. Our position that the Notes should not be treated as contingent payment debt instruments is binding on
the holders of the Notes unless a contrary position is disclosed to the Internal Revenue Service (the “IRS”) (but is
not binding on the IRS). If the IRS were to successfully challenge our position, and the Notes were treated as contingent payment
debt instruments, U.S. noteholders would be required, among other potential adverse consequences, to accrue interest income at
a rate substantially higher than the stated interest rate on the Notes (regardless of such U.S. holder’s regular method of
accounting for U.S. federal income tax purposes), and to treat as ordinary income, rather than capital gain, any gain recognized
on a sale, exchange or redemption of a Note. In addition, conversion of the Notes would be a taxable event, and any gain realized
upon conversion would be required to be treated as ordinary income.
Investors are urged to consult with their
own tax advisors regarding the tax consequences of purchasing, owning and disposing of the Notes and the Common Stock that may
be received upon conversion of the notes. See “Material U.S. Federal Income Tax Considerations.”
Future sales of our Common Stock in the public market
could lower the market price for our Common Stock and adversely impact the trading price of the Notes.
In the future, we may sell additional shares
of our Common Stock to raise capital. In addition, a substantial number of shares of our Common Stock are reserved for issuance
upon the exercise of stock options and upon conversion of the Notes. We cannot predict the size of future issuances or the effect,
if any, that they may have on the market price for our Common Stock. The issuance and sale of substantial amounts of Common Stock,
or the perception that such issuances and sales may occur, could adversely affect the trading price of the Notes and the market
price of our Common Stock and impair our ability to raise capital through the sale of additional equity securities.
Holders of Notes are not entitled
to any rights with respect to our Common Stock, but they will be subject to all changes made with respect to our Common Stock to
the extent our conversion obligation includes shares of our Common Stock.
Holders of Notes are not entitled to any
rights with respect to our Common Stock (including, without limitation, voting rights and rights to receive any dividends or other
distributions on our Common Stock) prior to the conversion date relating to such Notes, but holders of Notes will be subject to
all changes affecting our Common Stock. For example, if an amendment is proposed to our certificate of incorporation or bylaws
requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment
occurs prior to the conversion date related to a holder’s conversion of its Notes, such holder will not be entitled to vote
on the amendment, although such holder will nevertheless be subject to any changes affecting our Common Stock.
Upon conversion of the Notes, you
may receive less valuable consideration than expected because the value of our Common Stock may decline after you exercise your
conversion right but before we settle our conversion obligation.
Under the Notes, a converting holder will
be exposed to fluctuations in the value of our Common Stock during the period from the date such holder surrenders Notes for conversion
until the date we settle our conversion obligation, which may be two trading days following the relevant conversion date. Accordingly,
if the price of our Common Stock decreases during this period, the value of the shares that you receive will be adversely affected
and would be less than the conversion value of the Notes on the conversion date.
The qualifying fundamental change
payment for Notes converted in connection with a qualifying fundamental change may not adequately compensate you for any lost value
of your Notes as a result of such transaction.
Following the occurrence of a
qualifying fundamental change, as described in “Description of Notes—Conversion Rights—Qualifying
Fundamental Change Payment Upon Conversion in Connection With a Qualifying Fundamental Change,” we will, under certain
circumstances, make a payment to a holder who elects to convert its Notes in connection with such qualifying fundamental
change equal to $130 per $1,000 of aggregate principal amount of Notes surrendered for conversion (a “qualifying
fundamental change payment”). The qualifying fundamental change payment for Notes converted in connection with a
qualifying fundamental change may not adequately compensate you for any lost value of your Notes as a result of such
transaction.
Our obligation to make a qualifying fundamental
change payment for Notes converted in connection with a qualifying fundamental change could be considered a penalty, in which case
the enforceability thereof would be subject to general principles of reasonableness and equitable remedies.
Bankruptcy laws may limit your ability
to realize value from the collateral.
The right of the collateral agent to repossess
and dispose of the collateral upon the occurrence of an event of default under the indenture governing the Notes is likely to be
significantly impaired by applicable bankruptcy law if a bankruptcy case were to be commenced by or against us prior to the collateral
agent having repossessed and disposed of, or otherwise exercised remedies in respect of, the collateral. Under the bankruptcy code,
a secured creditor is prohibited from repossessing its security from a debtor in a bankruptcy case, or from disposing of security
repossessed from such debtor, without bankruptcy court approval. Moreover, the bankruptcy code permits the debtor to continue to
retain and to use collateral even though the debtor is in default under the applicable debt instrument, provided that the secured
creditor is given “adequate protection.” The meaning of the term “adequate protection” may vary according
to circumstances, but it is intended in general to protect the value of the secured creditor’s interest in the collateral
and may include cash payments or the granting of additional security, if and at such times as the court in its discretion determines
that the value of the secured creditor’s interest in the collateral is declining during the pendency of the bankruptcy case.
In view of the lack of a precise definition of the term “adequate protection” and the broad discretionary powers of
a bankruptcy court, it is impossible to predict (1) how long payments under the Notes could be delayed following the commencement
of a bankruptcy case, (2) whether or when the collateral agent could repossess or dispose of the collateral and (3) whether or
to what extent holders of the Notes would be compensated for any delay in payment or loss of value of the collateral through the
requirement of “adequate protection.”
In the event a bankruptcy court determines
the value of the collateral is not sufficient to repay all amounts due on the Notes and any other obligations secured by such collateral
then the holders of the Notes and such other obligations would hold secured claims to the extent of the value of the collateral
securing such claims, and would hold unsecured claims with respect to any shortfall. Applicable federal bankruptcy laws do not
permit the payment and/or accrual of post-petition interest, costs and attorneys’ fees during a debtor’s bankruptcy
case unless the claims are oversecured or the debtor is solvent at the time of reorganization. In addition, if we were to become
the subject of a bankruptcy case, the bankruptcy court, among other things, may avoid certain pre-petition transfers made by us,
including transfers held to be preferences or fraudulent conveyances.
Any future pledges of collateral
may be avoidable.
Any further pledge of collateral in favor
of the collateral agent might be avoidable by the pledgor (as debtor in possession) or by its trustee in bankruptcy or other third
parties if certain events or circumstances exist or occur, including, among others, if the pledge or granting of the security interest
is deemed a fraudulent conveyance or the pledgor is insolvent at the time of the pledge or granting of the security interest, the
pledge permits the holders of the notes to receive a greater recovery than if the pledge had not been given and a bankruptcy proceeding
in respect of the pledgor is commenced within 90 days following the pledge, or, in certain circumstances, a longer period.
The collateral agent’s ability
to exercise remedies with respect to collateral is limited.
The collateral documents provide the collateral
agent on behalf of the holders of the Notes with significant remedies, including foreclosures and sale of all or parts of the collateral.
However, the rights of the collateral agent to exercise remedies upon a specific event of default may be limited by the terms of
the collateral documents and applicable law. Accordingly, remedies for a specific event of default may be inadequate to protect
the interests of the holders.
Proceeds from any sale of the collateral
upon foreclosure may be insufficient to repay the Notes in full.
We cannot assure you that the net proceeds
from a sale of the collateral securing the Notes would be sufficient to repay all of the Notes following a foreclosure upon the
collateral or a liquidation of our assets.
The value of the collateral and the amount
to be received upon a sale of the collateral will depend upon many factors including, among others, the condition of the collateral,
the ability to sell the collateral in an orderly sale, the condition of the international, national and local economies, the availability
of buyers and similar factors. The book value of the collateral should not be relied on as a measure of realizable value for these
assets. By their nature, portions of the collateral may be illiquid and may have no readily ascertainable market value. In addition,
a significant portion of the collateral includes assets that may only be usable, and thus retain value, as part of our existing
business operations. Accordingly, any sale of the collateral separate from the sale of our business operations may not be feasible
or of significant value.
Additionally, applicable law requires that
every aspect of any foreclosure or other disposition of collateral be “commercially reasonable.” If a court were to
determine that any aspect of the collateral agent’s exercise of remedies was not commercially reasonable, the ability of
the trustee and the noteholders to recover the difference between the amount realized through such exercise of remedies and the
amount owed on the Notes may be adversely affected and, in the worst case, the noteholders could lose all claims for such deficiency
amount.
Rights of noteholders in the collateral
may be adversely affected by the failure to perfect security interest in certain collateral acquired in the future.
The collateral securing the Notes includes
certain assets that we may acquire in the future. Applicable law requires that certain property and rights acquired after the grant
of a general security interest can only be perfected at the time such property and rights are acquired and identified. There can
be no assurance that we will inform the trustee of the future acquisition of property and rights that constitute collateral, or
that the necessary action will be taken to properly perfect the security interest in such after-acquired collateral. The trustee
and collateral agent have no obligation to monitor the acquisition of, or the perfection of any security interests in, additional
property or rights that constitute collateral. Such failure may result in the loss of the security interest in the collateral or
the priority of the security interest in favor of the Notes against third parties.
Federal and state statutes allow
courts, under specific circumstances, to void subsidiary guarantees and require holders of the Notes to return payments received
from guarantors.
Our wholly-owned subsidiary guarantees
our obligations under the Notes. Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws,
a subsidiary guarantee could be voided or claims in respect of a subsidiary guarantee could be subordinated to all other debts
of that subsidiary guarantor. A court might do so if it found that when the subsidiary entered into its guarantee or, in some states,
when payments became due under the guarantee, the subsidiary received less than reasonably equivalent value or fair consideration
and either:
|
·
|
was insolvent or rendered insolvent by reason of the incurrence;
|
|
·
|
was engaged in a business or transaction for which its remaining assets constituted unreasonably
small capital; or
|
|
·
|
intended to incur, or believed that it would incur, debts beyond its ability to pay such debts
as they mature.
|
The court might also void a subsidiary
guarantee, without regard to the above factors, if the court found that the subsidiary entered into its guarantee with the actual
intent to hinder, delay or defraud its creditors.
A court would likely find that a subsidiary
guarantor did not receive reasonably equivalent value or fair consideration for its guarantee if the subsidiary guarantor did not
substantially benefit directly or indirectly from the issuance of the Notes. If a court were to void a subsidiary guarantee, holders
of the Notes would no longer have a claim against the guarantor. Sufficient funds to repay the Notes may not be available from
other sources, including the remaining subsidiary guarantor, if any. In addition, the court might direct holders of the Notes to
repay any amounts that they already received from the guarantor.
The measures of insolvency for purposes
of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent
transfer has occurred. Generally, however, a subsidiary guarantor would be considered insolvent if:
|
·
|
the sum of its debts, including contingent liabilities, were greater than the fair saleable value
of all of its assets;
|
|
·
|
the present fair saleable value of its assets were less than the amount that would be required
to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or
|
|
·
|
it could not pay its debts as they become due.
|
The subsidiary guarantee contains a provision
intended to limit the guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations
under its subsidiary guarantee to be a fraudulent transfer. This provision may not be effective to protect the subsidiary guarantee
from being voided under fraudulent transfer law.
Some significant restructuring transactions
may not constitute a fundamental change, in which case we would not be obligated to offer to repurchase the Notes.
If a fundamental change occurs at any time
prior to the maturity date, subject to certain conditions, holders of the Notes will have the right, at their option, to require
us to repurchase for cash all or part of each holder’s Notes. However, the fundamental change provisions will not afford
protection to holders of Notes in the event of other transactions that could adversely affect the Notes. For example, transactions
such as leveraged recapitalizations, refinancings, restructurings, or acquisitions initiated by us may not constitute a fundamental
change requiring us to repurchase the Notes. In the event of any such transaction, the holders would not have the right to require
us to repurchase the Notes, even though each of these transactions could increase the amount of our indebtedness, or otherwise
adversely affect our capital structure or any credit ratings, thereby adversely affecting the holders of Notes.
The conversion price of the Notes
may not be adjusted for all dilutive events, including third-party tender or exchange offers, that may adversely affect the trading
price of the Notes or the shares of our Common Stock issuable upon conversion of the Notes.
The conversion price of the Notes is subject
to adjustment upon specified events, including the issuance of stock dividends on our Common Stock, the issuance of rights or warrants,
subdivisions, combination, distributions of capital stock, indebtedness or assets, cash dividends and issuer tender or exchange
offers. The conversion price will not be adjusted for other events, such as third-party tender or exchange offers or the sale of
our equity securities or equity-related securities to third parties or so-called price protection provisions (other than to a limited
extent under certain circumstances), that may adversely affect the trading price of the Notes or Common Stock issuable upon conversion
of the Notes.
The terms of the Notes contain limited
covenants and other protections.
The indenture governing the Notes contains
covenants restricting our ability to take certain actions. However, each of these covenants contains specified exceptions. In addition,
these covenants do not protect holders of the Notes and Common Stock issuable upon conversion of the Notes from all events that
could have a negative effect on the creditworthiness of the Notes and the secondary market value of the Notes and Common Stock
issuable upon conversion of the Notes.
We face several risks regarding holders’
potential rights to require us to repurchase the Notes on the put date or upon a fundamental change.
Holders of the Notes will have the right,
at their option, to require us to repurchase for cash all (but not less than all) of each holder’s Notes on the put date
or all or part of each holder’s Notes upon a fundamental change prior to maturity. We may not have sufficient future cash
flow from operations to make any required repurchase in cash at any later time or the ability to arrange additional financing,
if necessary, on acceptable terms. In addition, our ability to repurchase the Notes in cash may be limited by law or the terms
of other agreements relating to our debt outstanding at the time. If we fail to repurchase the Notes in cash as required by the
indenture governing the Notes, it would constitute an event of default under the indenture, which, in turn, could also constitute
an event of default under our then existing debt instruments.
If you do not properly exercise your
one-time right to require us to repurchase your Notes on the put date, you will not be entitled to require us to repurchase your
Notes at any other time.
As described under “Description of
Notes—Holders’ Put Right,” your right to require us to repurchase your Notes is a one-time right that is only
exercisable effective on May 31, 2021. If you do not properly exercise your right to require us to repurchase your Notes by delivering
a proper notice as described under “Description of Notes—Holders’ Put Right” prior to the put date, you
will not be entitled to require us to repurchase your Notes at any other time (except in connection with a fundamental change).
You will bear the risk of any defective notice and we do not have any obligation to notify holders of the Notes of any defect in
their put notices.
If you hold Notes, you are not entitled
to any rights with respect to our common stock, but you are subject to all changes made with respect to our Common Stock.
If you hold Notes, you are not entitled
to any rights with respect to our Common Stock (including, without limitation, voting rights and rights to receive any dividends
or other distributions on our Common Stock), but you are subject to all changes affecting the Common Stock. You will only be entitled
to rights on the Common Stock if and when we deliver shares of Common Stock to you in exchange for your Notes and in limited cases
under the anti-dilution adjustments of the Notes. For example, in the event that an amendment is proposed to our certificate of
incorporation or by-laws requiring securityholder approval and the record date for determining the securityholders of record entitled
to vote on the amendment occurs prior to delivery of the Common Stock, you will not be entitled to vote on the amendment, although
you will nevertheless be subject to any changes in the powers, preferences or special rights of our Common Stock.
Certain provisions in the Notes and
the indenture could delay or prevent an otherwise beneficial takeover or takeover attempt of us and, therefore, the ability of
holders to exercise their rights associated with a fundamental change.
Certain provisions in the Notes and the
indenture could make it more difficult or more expensive for a third party to acquire us. For example, if an acquisition event
constitutes a fundamental change, we are required to offer to repurchase each holder’s Notes in cash. In addition, if an
acquisition event constitutes a qualifying fundamental change, we may be required to make a qualifying fundamental change payment
to holders who convert their Notes in connection with such qualifying fundamental change. Accordingly, our obligations under the
Notes and the indenture as well as provisions of our organizational documents and other agreements could increase the cost of acquiring
us or otherwise discourage a third party from acquiring us or removing incumbent management.
SELLING
SECURITY HOLDERS
This prospectus covers the resale from
time to time (i) by the Selling Noteholders identified in the first table below of up to $15,000,000 aggregate principal amount
of our 6.5% Convertible Senior Secured Notes due 2023, including the Guarantees of the Notes, as well as up to 3,000,000 shares
of Common Stock that may be issued upon conversion of the Notes and up to an additional 1,444,217 shares of Common Stock that may
be issued, at our election, as payment of accrued interest on the Notes, as make-whole payments made in connection with certain
conversions of the Notes or as payments made in connection with certain qualifying fundamental changes of the Company, and (ii)
by the Selling Stockholders identified in the second table below of up to 4,146,529 shares of Common Stock previously issued by
the Company (a) in connection with the merger of a subsidiary of the Company with and into Akoustis, Inc. on May 22, 2015 and (b)
to a service provider in a private offering in August 2016.
The Selling Noteholders identified in the
first table below may from time to time offer and sell under this prospectus any or all of the Notes, including the Guarantees
issuable in respect thereof, described under the column “Principal Amount of Notes Registered Hereby” as well as any
or all of the shares of Common Stock issuable upon conversion or in respect thereof, described under the column “Shares of
Common Stock Registered Hereby” in such first table below. The Selling Stockholders identified in the second table below
may from time to time offer and sell under this prospectus any or all of the shares of Common Stock described under the column
“Shares of Common Stock Registered Hereby” in such second table below.
Certain Selling Security Holders may be
deemed to be “underwriters” as defined in the Securities Act. Any profits realized by such Selling Security Holders
may be deemed to be underwriting discounts and commissions under the Securities Act.
The tables below have been prepared
based upon the information furnished to us by the Selling Security Holders and/or our transfer agent as of the date of this
prospectus. The Selling Security Holders identified below may have converted, sold, transferred or otherwise disposed of some
or all of their Notes or shares of Common Stock since the date on which the information in the following tables is presented
in transactions exempt from or not subject to the registration requirements of the Securities Act. Information concerning the
Selling Security Holders may change from time to time and, if necessary, we will amend or supplement this prospectus
accordingly. We cannot give an estimate as to the principal amount of Notes or number of shares of Common Stock that will
actually be held by the Selling Security Holders upon termination of this offering because the Selling Security Holders may
offer some or all of their Notes or Common Stock, as applicable, under the offering contemplated by this prospectus or may
acquire additional shares of Common Stock. The aggregate principal amount of Notes and total number of shares of Common Stock
that may be sold hereunder will not exceed the aggregate principal amount of Notes or number of shares of Common Stock
offered hereby. Please read the section entitled “Plan of Distribution” in this prospectus.
The following tables set forth the name
of each Selling Security Holder, the aggregate principal amount of Notes and number of shares of our Common Stock beneficially
owned by such noteholder or stockholder, as applicable, before this offering, the aggregate principal amount of Notes and number
of shares of Common Stock to be offered for such noteholder’s or stockholder’s account and the principal amount or
number and (if one percent or more) the percentage of the class of stock to be beneficially owned by such noteholder or stockholder
after completion of the offering. The principal amount of Notes and number of shares of Common Stock owned are those beneficially
owned, as determined under the rules of the SEC, and such information is not necessarily indicative of beneficial ownership for
any other purpose. Under such rules, the Selling Security Holders’ beneficial ownership includes any shares of our Common Stock
as to which a person has sole or shared voting power or investment power and any shares of Common Stock which the person has the
right to acquire within 60 days after June 1, 2018 (as used in this section, the “Determination Date”), through the
exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power
of attorney or revocation of a trust, discretionary account or similar arrangement, and such shares are deemed to be beneficially
owned and outstanding for computing the share ownership and percentage of the person holding such options, warrants or other rights,
but are not deemed outstanding for computing the percentage of any other person.
Unless otherwise set forth below, based
upon the information furnished to us, (a) the persons and entities named in the tables have sole voting and sole investment power
with respect to the Notes or shares set forth opposite the Selling Security Holder’s name, subject to community property
laws, where applicable, (b) no Selling Security Holder had any position, office or other material relationship within the past
three years with us or with any of our predecessors or affiliates, and (c) no Selling Security Holder is a broker-dealer or an
affiliate of a broker-dealer. Based on information provided to us, no Selling Security Holders are broker-dealers or affiliates
of broker-dealers. The principal amount of Notes or number of shares of Common Stock shown as beneficially owned before the offering
is based on information furnished to us or otherwise based on information available to us at the timing of the filing of the registration
statement of which this prospectus forms a part.
Selling Noteholders
Selling
Noteholder
|
|
Principal
Amount of
Notes
Beneficially
Owned Prior
to this
Offering
|
|
Percentage
of
Outstanding
Notes
|
|
Principal
Amount of Notes
Registered
Hereby
|
|
Principal
Amount of
Notes
Beneficially
Owned upon
Completion of
this
Offering
(1)
|
|
Shares of
Common
Stock
Beneficially
Owned
Prior to
this
Offering
(2)
|
|
Shares of
Common
Stock
Registered
Hereby
(3)
|
|
Shares of
Common
Stock
Beneficially
Owned
upon
Completion
of this
Offering
(4)
|
|
Percentage
of
Common
Stock
Beneficially
Owned
upon
Completion
of this
Offering
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nineteen 77 Global Multi-Strategy Alpha Master Limited (6)
|
|
$7,500,000
|
|
50%
|
|
$7,500,000
|
|
$0
|
|
1,145,038
|
|
2,222,109
|
|
0
|
|
*
|
Blackwell Partners LLC - Series B (7)
|
|
$3,000,000
|
|
20%
|
|
$3,000,000
|
|
$0
|
|
458,015
|
|
888,843
|
|
0
|
|
*
|
LMAP Kappa Limited (8)
|
|
$3,000,000
|
|
20%
|
|
$3,000,000
|
|
$0
|
|
458,015
|
|
888,843
|
|
0
|
|
*
|
Silverback Opportunities Credit Master Fund Limited (9)
|
|
$1,500,000
|
|
10%
|
|
$1,500,000
|
|
$0
|
|
229,007
|
|
444,422
|
|
0
|
|
*
|
|
(1)
|
Assumes all of the Notes to be registered on the registration statement of which this prospectus
is a part are sold in the offering and that no additional Notes are purchased or otherwise acquired.
|
|
(2)
|
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes
voting or investment power with respect to securities. Shares of Common Stock underlying options or warrants currently exercisable,
or exercisable within 60 days of the Determination Date, are deemed outstanding for purposes of computing the beneficial ownership
of the person holding such options or warrants but are not deemed outstanding for computing the beneficial ownership of any other
person. Except where we had knowledge of such ownership, the number presented in this column may not include shares held in street
name or through other entities over which the selling stockholder has voting and dispositive power. Includes shares issuable upon
conversion of the Notes.
|
|
(3)
|
Assumes (i) the issuance of the maximum number of shares issuable upon conversion of or in respect
of the Notes and (ii) no fractional shares of our Common Stock will be issued upon conversion of Notes.
|
|
(4)
|
Assumes all of the shares of Common Stock to be registered on the registration statement of which
this prospectus is a part are sold in the offering, that shares of Common Stock beneficially owned by the Selling Noteholders but
not being offered pursuant to this prospectus (if any) are not sold, and that no additional shares of Common Stock are purchased
or otherwise acquired.
|
|
(5)
|
Percentages are based on the 22,197,200 shares of Common Stock issued and outstanding as of the
Determination Date. Shares of our Common Stock subject to options, warrants or conversion rights that are currently exercisable
or convertible, or exercisable or convertible within 60 days of the Determination Date, are deemed to be outstanding for the purpose
of computing the percentage ownership of the person holding those options, warrants or conversion rights, but are not treated as
outstanding for the purpose of computing the percentage ownership of any other person.
|
|
(6)
|
UBS O’Connor LLC (“O’Connor”) is the investment manager of Nineteen77 Global
Multi-Strategy Alpha Master Limited (“Nineteen77”) and accordingly has voting control and investment discretion over
the securities described herein held by Nineteen77. Kevin Russell (“Mr. Russell”), the Chief Investment Officer of
O’Connor, and Andrew Martin (“Mr. Martin”), a Portfolio Manager for O’Connor, each also have voting control
and investment discretion over the securities described herein held by Nineteen77. As a result, each of O’Connor, Mr.
Russell and Mr. Martin may be deemed to have beneficial ownership (as determined under Section 13(d) of the Securities Exchange
Act of 1934, as amended) of the securities described herein held by Nineteen77
|
|
(7)
|
Voting or investment control over the securities held by Blackwell Partners LLC - Series B is held
by Elliot Bossen (“Mr. Bossen”), CEO of Silverback Asset Management, trading advisor of Blackwell Partners LLC - Series
B.
|
|
(8)
|
Voting or investment control over the securities held by LMAP Kappa Limited is held by Mr. Bossen,
CEO of Silverback Asset Management, trading advisor of LMAP Kappa Limited.
|
|
(9)
|
Voting or investment control over the securities held by Silverback Opportunities Credit Master
Fund Limited is held by Mr. Bossen, CEO of Silverback Asset Management, trading advisor of Silverback Opportunities Credit Master
Fund Limited.
|
Selling Stockholders
Selling Stockholder
|
|
Shares of
Common
Stock
Beneficially
Owned
Prior to
this
Offering
(1)
|
|
|
Shares of
Common
Stock
Registered
Hereby
|
|
|
Shares of
Common
Stock
Beneficially
Owned upon
Completion
of this
Offering (2)
|
|
|
Percentage of
Common
Stock
Beneficially
Owned upon
Completion
of this
Offering (3)
|
|
Steven P. DenBaars (4)
|
|
|
281,058
|
|
|
|
162,041
|
|
|
|
119,017
|
|
|
|
*
|
|
Greenstone, LLC (5)
|
|
|
310,968
|
|
|
|
301,339
|
|
|
|
9,629
|
|
|
|
*
|
|
Jeffrey K. McMahon (6)
|
|
|
567,342
|
|
|
|
330,888
|
|
|
|
236,454
|
|
|
|
1.1
|
%
|
Richard T. Ogawa (7)
|
|
|
165,837
|
|
|
|
91,020
|
|
|
|
74,817
|
|
|
|
*
|
|
James R. Shealy (8)
|
|
|
447,082
|
|
|
|
259,266
|
|
|
|
187,816
|
|
|
|
*
|
|
Jeffrey B. Shealy (9)
|
|
|
3,182,762
|
|
|
|
3,001,975
|
|
|
|
180,787
|
|
|
|
*
|
|
Total
|
|
|
4,955,049
|
|
|
|
4,146,529
|
|
|
|
808,520
|
|
|
|
3.6
|
%
|
|
(1)
|
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes
voting or investment power with respect to securities. Shares of Common Stock underlying options or warrants currently exercisable,
or exercisable within 60 days of the Determination Date, are deemed outstanding for purposes of computing the beneficial ownership
of the person holding such options or warrants but are not deemed outstanding for computing the beneficial ownership of any other
person. Except where we had knowledge of such ownership, the number presented in this column may not include shares held in street
name or through other entities over which the selling stockholder has voting and dispositive power.
|
|
(2)
|
Assumes all of the shares of Common Stock to be registered on the registration statement of which
this prospectus is a part are sold in the offering, that shares of Common Stock beneficially owned by the Selling Stockholders
but not being offered pursuant to this prospectus (if any) are not sold, and that no additional shares of Common Stock are purchased
or otherwise acquired. Some Selling Stockholders may have other shares of Common Stock registered pursuant to another registration
statement. See “Description of Securities – Registration Rights” below.
|
|
(3)
|
Percentages are based on the 22,197,200 shares of Common Stock issued and outstanding as of the
Determination Date. Shares of our Common Stock subject to options or warrants that are currently exercisable, or exercisable within
60 days of the Determination Date, are deemed to be outstanding for the purpose of computing the percentage ownership of the person
holding those options or warrants, but are not treated as outstanding for the purpose of computing the percentage ownership of
any other person.
|
|
(4)
|
Steven P. DenBaars is a director of the Company and has held such position since May 22, 2015.
Prior to becoming a director, Mr. DenBaars provided consulting services to Akoustis, Inc. Includes (i) 38,205 restricted shares
that are subject to a repurchase option by the Company and (ii) 30,000 shares of Common Stock issuable upon the exercise of vested
options that are exercisable until May 22, 2025
|
|
(5)
|
Voting or investment control over the securities held by Greenstone, LLC is held by David Ngo,
Managing Member of Greenstone, LLC.
|
|
(6)
|
Jeffrey K. McMahon is a director of the Company. Includes (i) 22,000 restricted shares that are
subject to a repurchase option by the Company and (ii) 30,000 shares of Common Stock issuable upon the exercise of vested options
that are exercisable until May 22, 2025.
|
|
(7)
|
Richard T. Ogawa is our Special Legal Counsel. Includes 26,204 restricted shares that are subject
to a repurchase option by the Company, 10,000 of which are held by Ogawa Professional Corp, over which Mr. Ogawa holds voting and
investment control.
|
|
(8)
|
James R. Shealy is the brother of Jeffrey B. Shealy, the Company’s Chief Executive Officer
and a director. James R. Shealy has provided consulting services to the Company. Includes 23,205 restricted shares that are subject
to a repurchase option by the Company.
|
|
(9)
|
Jeffrey B. Shealy is the Company’s President, Chief Executive Officer and a director. Includes
(i) 4,000 shares owned by his spouse Lora Shealy and (ii) 40,000 restricted shares that are subject to a repurchase option.
|
USE OF PROCEEDS
We will not receive proceeds from sales
of Notes or Common Stock made under this prospectus by the Selling Security Holders, or any proceeds from the issuance of Common
Stock in respect of the Notes.
DETERMINATION
OF OFFERING PRICE
There is no public market for our Notes
and currently a limited public market for our Common Stock. The conversion price of the Notes was negotiated with the initial purchasers
of the Notes and factors considered in connection therewith included, in addition to prevailing market conditions and the trading
price of our common stock as traded on the NASDAQ, our historical financial and operating performance, estimates of our business
potential and earnings prospects and those of our industry in general, an assessment of our management and the consideration of
the above factors in relation to market valuation of companies in related businesses.
The Selling Security Holders will determine
at what price they may sell the offered Securities, and such sales may be made at prevailing market prices or at privately negotiated
prices. See “Plan of Distribution” below for more information.
MARKET FOR
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information and Holders
Our Common Stock is currently traded on
the NASDAQ Capital Market under the symbol “AKTS.” Prior to March 13, 2017, our Common Stock was quoted on the OTC
Market (OTCQB) under the same symbol. There has been limited trading in our Common Stock to date.
There is no public market for the Notes
and we do not intend to list or quote the Notes on any securities exchange or quotation system.
As of June 1, 2018, 22,197,200 shares of
our Common Stock were issued and outstanding and were held by approximately 200 stockholders of record.
The following table sets forth the high
and low sales prices (or closing bid prices with respect to periods prior to March 13, 2017) for our Common Stock for the fiscal
quarters indicated, as reported on NASDAQ (or on OTC Markets with respect to closing bids for periods prior to March 13, 2017).
OTC Market quotations for periods prior to March 13, 2017 reflect inter-dealer prices, without retail mark-up, mark-down or commission
and may not represent actual transactions.
Period
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
Fiscal year ended June 30, 2016
|
|
|
|
|
|
|
|
|
Quarter ended September 30, 2015
|
|
$
|
5.25
|
|
|
$
|
3.50
|
|
Quarter ended December 31, 2015
|
|
|
3.70
|
|
|
|
1.60
|
|
Quarter ended March 31, 2016
|
|
|
2.14
|
|
|
|
1.51
|
|
Quarter ended June 30, 2016
|
|
|
4.90
|
|
|
|
1.85
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended June 30, 2017
|
|
|
|
|
|
|
|
|
Quarter ended September 30, 2016
|
|
|
4.50
|
|
|
|
3.49
|
|
Quarter ended December 31, 2016
|
|
|
6.30
|
|
|
|
3.91
|
|
Quarter ended March 31, 2017
|
|
|
14.00
|
|
|
|
5.25
|
|
Quarter ended June 30, 2017
|
|
|
13.01
|
|
|
|
8.35
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended June 30, 2018
|
|
|
|
|
|
|
|
|
Quarter ended September 30, 2017
|
|
|
8.77
|
|
|
|
5.11
|
|
Quarter ended December 31, 2017
|
|
|
7.30
|
|
|
|
4.91
|
|
Quarter ended March 31, 2018
|
|
|
7.13
|
|
|
|
5.43
|
|
Quarter ending June 30, 2018 (through June 22, 2018)
|
|
|
8.64
|
|
|
|
4.86
|
|
Dividends
We have never paid any dividends on our
capital stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. We intend to retain
future earnings to fund ongoing operations and future capital requirements. Any future determination to pay dividends will be at
the discretion of our Board of Directors and will be dependent upon financial condition, results of operations, capital requirements
and such other factors as the Board of Directors deems relevant.
Warrants, Options and Restricted Stock
Units
As of June 1, 2018, there were warrants
and options to purchase 754,809 shares of our Common Stock and 1,331,859 shares of our Common Stock, respectively, at prices ranging
from $1.50 per share to $7.12 per share. The warrants had a weighted average exercise price of $3.93 as of June 1, 2018, and all
such warrants are currently exercisable. Options for 120,000 shares of Common Stock are currently exercisable, with the remainder
scheduled to vest at various times through May 18, 2022. The options had a weighted average exercise price of $6.04 as of June
1, 2018. In addition, there were unvested restricted stock units for 991,494 shares of Common Stock scheduled to vest between September
27, 2018 and May 18, 2022.
Except for the Notes, there are no other
outstanding convertible securities of the Company.
Securities Authorized for Issuance
under Equity Compensation Plans
The following table provides information
as of our June 30, 2017 fiscal year end, relating to our equity compensation plans, under which grants of options, restricted stock,
and other equity awards may be made from time to time:
Equity Compensation Plan Information
|
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
|
|
|
Weighted-average
exercise price of
outstanding
options, warrants
and rights
|
|
|
Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity compensation plans approved by security holders
|
|
|
160,000
|
(1)
|
|
$
|
1.50
|
|
|
|
2,728,000
|
(2)
|
Equity compensation plans not approved by security holders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
160,000
|
(1)
|
|
|
-
|
|
|
|
2,728,000
|
(2)
|
|
(1)
|
The 160,000 shares of Common Stock to be issued upon the exercise of outstanding options are issuable
under the 2015 Equity Incentive Plan (the “2015 Plan”).
|
|
(2)
|
As of June 30, 2017, 2,728,000 additional shares of Common Stock remained available for future
issuance under the Company’s 2016 Stock Incentive Plan (the “2016 Plan”). No additional grants will be made under
the Company’s 2014 Stock Plan (the “2014 Plan”) or the 2015 Plan.
|
As of June 1, 2018, we had issued 111,000
shares of restricted stock, 1,056,994 restricted stock units, and 1,214,859 options under the 2016 Plan.
DESCRIPTION
OF CAPITAL STOCK
We have authorized capital stock consisting
of 45,000,000 shares of Common Stock and 5,000,000 shares of preferred stock. As of the date of this prospectus, we had 22,197,200
shares of Common Stock issued and outstanding, and no shares of preferred stock issued and outstanding.
Common Stock
The holders of outstanding shares of Common
Stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends at such times and
in such amounts as the board from time to time may determine. Holders of Common Stock are entitled to one vote for each share held
on all matters submitted to a vote of stockholders. There is no cumulative voting of the election of directors then standing for
election. The Common Stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation,
dissolution or winding up of our company, the assets legally available for distribution to stockholders are distributable ratably
among the holders of the Common Stock after payment of liquidation preferences, if any, on any outstanding payment of other claims
of creditors. Each outstanding share of Common Stock is duly and validly issued, fully paid and non-assessable.
Preferred Stock
Shares of preferred stock may be issued
from time to time in one or more series, each of which will have such distinctive designation or title as shall be determined by
our Board of Directors prior to the issuance of any shares thereof. Preferred stock will have such voting powers, whole or limited,
or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class
or series of preferred stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares
thereof. The number of authorized shares of preferred stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of the voting power of all the then outstanding shares of
our capital stock entitled to vote generally in the election of the directors, voting together as a single class, without a separate
vote of the holders of the preferred stock, or any series thereof, unless a vote of any such holders is required pursuant to any
preferred stock designation.
While we do not currently have any plans
for the issuance of additional preferred stock, the issuance of such preferred stock could adversely affect the rights of the holders
of Common Stock and, therefore, reduce the value of the Common Stock. It is not possible to state the actual effect of the issuance
of any shares of preferred stock on the rights of holders of the Common Stock until the Board of Directors determines the specific
rights of the holders of the preferred stock; however, these effects may include:
|
·
|
Restricting dividends on the Common Stock;
|
|
·
|
Diluting the voting power of the Common Stock;
|
|
·
|
Impairing the liquidation rights of the Common Stock; or
|
|
·
|
Delaying or preventing a change in control of the Company without further action by the stockholders.
|
Other than in connection with shares of
preferred stock (as explained above), which preferred stock is not currently designated nor contemplated by us, we do not believe
that any provision of our charter or bylaws would delay, defer or prevent a change in control.
Warrants
Warrants granted to the placement agents
in a private placement offering with closings in May and June 2015 pursuant to which we issued 3,792,104 shares of Common Stock
to accredited investors at a purchase price of $1.50 per share (the “2015 Offering”) entitled their holders to purchase
324,650 shares of Common Stock, with a term until June 2020 and an exercise price of $1.50 per share, and have a “cashless”
net exercise option. Of these warrants, warrants to purchase 256,478 shares of Common Stock remain outstanding as of June 1, 2018.
Warrants granted to the placement agents
in a private placement offering with closings in March and April 2016 pursuant to which we issued 2,235,310 shares of Common Stock
to accredited investors at a purchase price of $1.60 per share (the “2016 Offering”) entitled their holders to purchase
153,713 shares of Common Stock, with a term until April 2021 and an exercise price of $1.60 per share, and have a “cashless”
net exercise option. Of these warrants, warrants to purchase 102,151 shares of Common Stock remain outstanding as of June 1, 2018.
Warrants granted to the placement agents
in a private placement offering with closings in November and December 2016 and January and February 2017 pursuant to which we
issued 2,142,000 shares of Common Stock to accredited investors at a purchase price of $5.00 per share (the “2016-2017 Offering”)
entitled their holders to purchase 205,126 shares of Common Stock, with a five-year term expiring between December 2021 and February
2022, and have an exercise price of $5.00 per share, and have a “cashless” net exercise option. Of these warrants,
warrants to purchase 195,593 shares of Common Stock remain outstanding as of June 1, 2018.
Warrants granted to the placement agents
in a private placement offering in May 2017 pursuant to which we issued 663,000 shares of Common Stock to accredited investors
at a purchase price of $9.00 per share (the “First 2017 Offering”) entitled their holders to purchase 46,410 shares
of Common Stock, with a five-year term expiring in May 2022 and an exercise price of $9.00 per shares, and have a “cashless”
net exercise option. Of these warrants, warrants to purchase 46,410 shares of Common Stock remain outstanding as of June 1, 2018.
Warrants granted to the placement agents
in a private placement offering in December 2017 pursuant to which we issued 2,640,819 shares of common stock to accredited investors
at a purchase price of $5.50 per share, for aggregate gross proceeds of $14,524,504 (the “Second 2017 Offering”), entitle
their holders to purchase an aggregate of (i) 88,507 shares of Common Stock at a purchase price of $5.50 per share and (ii) 65,670
shares of Common Stock at a purchase price of $8.16 per share. These warrants are exercisable after six months and have a five
and a half-year term.
See “Registration Rights” below
for a description of the registration rights granted to (among others) the holders of the placement agent warrants, which description
is incorporated herein by reference.
Copies of the forms of placement agent
warrants are filed as exhibits to the registration statement of which this prospectus is a part.
Options
Options to purchase an aggregate of 160,000
shares of our Common Stock were granted under our 2015 Equity Incentive Plan in May 2015 to four non-employee directors, with an
exercise price of $1.50 per share, vesting in equal annual installments over four years and exercisable until May 22, 2025.
Options to purchase an aggregate of 1,171,859
shares of our Common Stock have been granted under the 2016 Plan, to our officers, employees, and directors, with exercise prices
ranging from $6.24 to $7.12 per share and vesting periods ranging from one to four years. The options expire between September
2024 and September 2027.
Restricted Stock Units
Restricted stock units for 991,494 shares
of Common Stock have been granted under the 2016 Plan. These restricted stock units vest between one and four years.
Price-Protected Anti-Dilution Rights
The Company granted price-protection anti-dilution
rights to investors in the First 2017 Offering, which were triggered by the Second 2017 Offering. Accordingly, in December 2017,
the Company issued an additional 542,450 shares of Common Stock, for no additional consideration, to investors in the First 2017
Offering.
The Company granted price-protection anti-dilution
rights to investors (other than directors, officers, employees, or other affiliates of the Company) in the Second 2017 Offering.
Pursuant to these price-protection rights, if the Company issues additional shares of Common Stock or Common Stock equivalents
(subject to certain customary exceptions, including but not limited to issuances of awards under Company employee stock incentive
programs and certain issuances in connection with credit arrangements, equipment financings, lease arrangements, or similar transactions)
prior to September 30, 2018 for a consideration per share less than $5.50 (as adjusted for any subsequent stock dividend, stock
split, distribution, recapitalization, reclassification, reorganization, or similar event) (the “Lower Price”), each
investor will be entitled to receive from the Company additional shares of Common Stock such that, when added to the number of
shares of Common Stock initially purchased by such investor, will equal the number of shares of Common Stock that such investor’s
investment would have purchased at the greater of (i) the Lower Price and (ii) $5.00 (or $4.40 in the case of one investor).
Other Convertible Securities
As of the date hereof, other than the securities
described above and the Notes, the Company does not have any outstanding convertible securities.
Registration Rights
The 2015 Offering
In connection with the 2015 Offering, we
entered into a Registration Rights Agreement pursuant to which we agreed to file a registration statement with the SEC (the “2015
Registration Statement”) covering (a) the shares of Common Stock issued in the 2015 Offering, (b) the shares of Common Stock
issuable upon exercise of placement agent warrants, (c) any shares of Common Stock issuable to investors in the 2015 Offering pursuant
to anti-dilution rights, and (d) 1,863,504 additional shares of Common Stock held by certain other stockholders (the “2015
Registrable Shares”). The 2015 Registration Statement was declared effective by the SEC on October 20, 2015. The 2015 Registration
Statement must be maintained until the earlier of two years from its effective date or until Rule 144 is available to the holders
of all 2015 Registrable Shares without volume limitations. We have continued to maintain the 2015 Registration Statement.
The 2016 Offering
In connection with the 2016 Offering, we
entered into a Registration Rights Agreement, pursuant to which we agreed that promptly, but no later than 90 calendar days from
the final closing of the First 2016 Offering, held April 16, 2016, the Company would file a registration statement with the SEC
(the “2016 Registration Statement”) covering the resale of (a) the shares of Common Stock issued in the 2016 Offering
and (b) any shares of Common Stock issuable to investors in the 2016 Offering pursuant to applicable price-protected anti-dilution
rights (the “2016 Registrable Shares”). The 2016 Registration Statement was declared effective by the SEC on July 22,
2016. The anti-dilution rights expired 90 days after the 2016 Registration Statement was declared effective by the SEC.
If (a) the 2016 Registration Statement
ceases for any reason to remain effective or the holders of 2016 Registrable Shares are otherwise not permitted to utilize the
prospectus therein to resell the 2016 Registrable Shares for a period of more than fifteen consecutive trading days; or (b) the
2016 Registrable Shares are not listed or included for quotation on OTC Markets, NASDAQ, the New York Stock Exchange or NYSE MKT,
or trading of the Common Stock is suspended or halted for more than three consecutive trading days, the Company may be required
make payments to each holder of 2016 Registrable Shares as monetary penalties at a rate equal to 12% of the First 2016 Offering
Price per annum for each share affected during the period of such failure; provided, however, that in no event will the aggregate
of any such penalties exceed 8% of the First 2016 Offering Price per share. No liquidated damages shall accrue with respect to
any 2016 Registrable Shares after the shares may be resold under Rule 144 under the Securities Act or another exemption from registration
under the Securities Act.
The Company must keep the 2016 Registration
Statement effective until the earlier of (i) two years from the date it was declared effective by the SEC or (ii) the date Rule
144 is available to the holders of 2016 Registrable Shares with respect to all of their 2016 Registrable Shares without volume
or other limitations.
The holders of 2016 Registrable Shares
have “piggyback” registration rights for such 2016 Registrable Shares with respect to up to two registration statements
filed by the Company following the effectiveness of the 2016 Registration Statement that would permit the inclusion of such shares,
subject to customary cutback pro rata in an underwritten offering. The piggyback registration rights are not applicable to certain
shares, including shares that may be sold pursuant to Rule 144 of the Securities Act without volume limitations and shares that
are subject to an effective registration statement.
We are required to pay all expenses in
connection with any registration obligation provided in the 2016 Registration Rights Agreement, including, without limitation,
all registration, filing, stock exchange fees, printing expenses, all fees and expenses of complying with applicable securities
laws, and the fees and disbursements of our counsel and of our independent accountants. Each investor will be responsible for its
own sales commissions, if any, transfer taxes and the expenses of any attorney or other advisor such investor decides to employ.
The 2016-2017 Offering
In connection with the 2016-2017 Offering,
we entered into a Registration Rights Agreement, pursuant to which we agreed that within 90 calendar days from the final closing
of the 2016-2017 Offering, the Company would file a registration statement with the SEC (the “First 2017 Registration Statement”)
covering the resale of (a) the shares of Common Stock issued in the 2016-2017 Offering, (b) the shares of Common Stock issuable
pursuant to warrants issued to the placement agents in the 2016-2017 Offering, and (c) any shares of Common Stock issuable to investors
in the 2016-2017 Offering pursuant to applicable price-protected anti-dilution rights (the “2016-2017 Registrable Shares”).
The First 2017 Registration Statement was declared effective by the SEC on June 5, 2017 and must be maintained until the earlier
of (i) two years from the date it was declared effective by the SEC or (ii) the date Rule 144 is available to the holders of the
2016-2017 Registrable Shares with respect to all of the 2016-2017 Registrable Shares without volume or other limitations. The anti-dilution
rights expired 90 days after the 2016 Registration Statement was declared effective by the SEC.
If the First 2017 Registration Statement
ceases for any reason to remain effective, the holders of 2016-2017 Registrable Shares are otherwise not permitted to utilize the
prospectus therein to resell the 2016-2017 Registrable Shares for a period of more than fifteen consecutive trading days, or the
2016-2017 Registrable Shares are not listed or included for quotation on OTC Markets, NASDAQ, the New York Stock Exchange or NYSE
MKT, or trading of the Common Stock is suspended or halted for more than three consecutive trading days, the Company will make
payments to each holder of 2016-2017 Registrable Shares as monetary penalties at a rate equal to 12% of the 2016-2017 Offering
price per annum for each share affected during the period of such failure; provided, however, that in no event will the aggregate
of any such penalties exceed 8% of the 2016-2017 Offering price per share. No liquidated damages shall accrue with respect to any
2016-2017 Registrable Shares removed from the First 2017 Registration Statement in response to a comment from the staff of the
SEC limiting the number of shares of Common Stock which may be included in the First 2017 Registration Statement or after the shares
may be resold under Rule 144 under the Securities Act or another exemption from registration under the Securities Act.
The holders of 2016-2017 Registrable Shares
will have “piggyback” registration rights for such 2016-2017 Registrable Shares with respect to up to two registration
statements filed by the Company following the effectiveness of the First 2017 Registration Statement that would permit the inclusion
of such shares, subject to customary cutback pro rata in an underwritten offering. The piggyback registration rights are not applicable
to certain shares, including shares that may be sold pursuant to Rule 144 of the Securities Act without volume limitations and
shares that are subject to an effective registration statement.
We are required to pay all expenses in
connection with any registration obligation provided in the 2016-2017 Registration Rights Agreement, including, without limitation,
all registration, filing, stock exchange fees, printing expenses, all fees and expenses of complying with applicable securities
laws, and the fees and disbursements of our counsel and of our independent accountants. Each investor will be responsible for its
own sales commissions, if any, transfer taxes and the expenses of any attorney or other advisor such investor decides to employ.
The First 2017 Offering
In connection with the First 2017 Offering,
we entered into a Registration Rights Agreement, pursuant to which we agreed that within 90 calendar days from the final closing
of the First 2017 Offering, the Company would file the First 2017 Registration Statement covering the resale of (a) the shares
of Common Stock issued in the First 2017 Offering, (b) any shares of Common Stock issuable to investors in the First 2017 Offering
pursuant to the price-protected anti-dilution rights granted in the First 2017 Offering, and (c) the shares of Common Stock issuable
pursuant to warrants issued to the placement agents in the First 2017 Offering (the “First 2017 Registrable Shares”).
As noted above, the First 2017 Registration Statement was declared effective by the SEC on June 5, 2017 and must be maintained
until the earlier of (i) two years from the date it was declared effective by the SEC or (ii) the date Rule 144 is available to
the holders of the First 2017 Registrable Shares with respect to all of the First 2017 Registrable Shares without volume or other
limitations.
If (a) the First 2017 Registration Statement
ceases for any reason to remain effective, (b) the holders of First 2017 Registrable Shares are otherwise not permitted to utilize
the prospectus therein to resell the First 2017 Registrable Shares for a period of more than 15 consecutive trading days, or (c)
the First 2017 Registrable Shares are not listed or included for quotation on OTC Markets, NASDAQ, the New York Stock Exchange
or NYSE MKT, or trading of the Common Stock is suspended or halted for more than three consecutive trading days, the Company will
make payments to each holder of First 2017 Registrable Shares as monetary penalties at a rate equal to 12% of the First 2017 Offering
price per annum for each share affected during the period of such failure; provided, however, that in no event will the aggregate
of any such penalties exceed 8% of the First 2017 Offering price per share. No liquidated damages shall accrue with respect to
any First 2017 Registrable Shares removed from the First 2017 Registration Statement in response to a comment from the staff of
the SEC limiting the number of shares of Common Stock which may be included in the First 2017 Registration Statement or after the
shares may be resold under Rule 144 under the Securities Act or another exemption from registration under the Securities Act.
The holders of First 2017 Registrable Shares
will have “piggyback” registration rights for such First 2017 Registrable Shares with respect to up to two registration
statements filed by the Company following the effectiveness of the First 2017 Registration Statement that would permit the inclusion
of such shares, subject to customary cutback pro rata in an underwritten offering. The piggyback registration rights are not applicable
to certain shares, including shares that may be sold pursuant to Rule 144 of the Securities Act without volume limitations and
shares that are subject to an effective registration statement.
We are required to pay all expenses in
connection with any registration obligation provided in the First 2017 Registration Rights Agreement, including, without limitation,
all registration, filing, stock exchange fees, printing expenses, all fees and expenses of complying with applicable securities
laws, and the fees and disbursements of our counsel and of our independent accountants. Each investor will be responsible for its
own sales commissions, if any, transfer taxes and the expenses of any attorney or other advisor such investor decides to employ.
The Second 2017 Offering
In connection with the Second 2017 Offering,
we entered into a Registration Rights Agreement, pursuant to which we agreed that within 90 calendar days from the final closing
of the Second 2017 Offering, the Company would file a registration statement with the SEC (the “Second 2017 Registration
Statement”) covering the resale of (a) the shares of Common Stock issued in the Second 2017 Offering, (b) any shares of Common
Stock issuable to investors in the Second 2017 Offering pursuant to the price-protection rights granted in the Second 2017 Offering,
and (c) the shares of Common Stock issuable pursuant to the Common Stock purchase warrants issued to the placement agents in the
Second 2017 Offering (the “Second 2017 Registrable Shares”). The Second 2017 Registration Statement was declared effective
by the SEC on January 26, 2018 and must be maintained until the earlier of (i) two years from the date it was declared effective
by the SEC or (ii) the date Rule 144 is available to the holders of the Second 2017 Registrable Shares with respect to all of their
Second 2017 Registrable Shares without volume or other limitations.
If (a) the Second 2017 Registration Statement
ceases for any reason to remain effective, (b) the holders of Second 2017 Registrable Shares are otherwise not permitted to utilize
the prospectus therein to resell the First 2017 Registrable Shares for a period of more than 15 consecutive trading days, or (c)
the Second 2017 Registrable Shares are not listed or included for quotation on OTC Markets, NASDAQ, the New York Stock Exchange
or NYSE MKT, or trading of the Common Stock is suspended or halted for more than three consecutive trading days, the Company will
make payments to each holder of Second 2017 Registrable Shares as monetary penalties at a rate equal to 12% of the Second 2017
Offering price per annum for each share affected during the period of such failure; provided, however, that in no event will the
aggregate of any such penalties exceed 8% of the Second 2017 Offering price per share. No liquidated damages shall accrue with
respect to any Second 2017 Registrable Shares removed from the Second 2017 Registration Statement in response to a comment from
the staff of the SEC limiting the number of shares of Common Stock which may be included in the Second 2017 Registration Statement
(the “Second 2017 Cutback Comment”) or after the shares may be resold under Rule 144 under the Securities Act or another
exemption from registration under the Securities Act.
The holders of Second 2017 Registrable
Shares (including any shares of Common Stock removed from the Second 2017 Registration Statement as a result of a Second 2017 Cutback
Comment) will have “piggyback” registration rights for such Second 2017 Registrable Shares with respect to up to two
registration statements filed by the Company following the effectiveness of the Second 2017 Registration Statement that would permit
the inclusion of such shares, subject to customary cutback pro rata in an underwritten offering.
We are required to pay all expenses in
connection with any registration obligation provided in the Second 2017 Registration Rights Agreement, including, without limitation,
all registration, filing, stock exchange fees, printing expenses, all fees and expenses of complying with applicable securities
laws, and the fees and disbursements of our counsel and of our independent accountants. Each investor will be responsible for its
own sales commissions, if any, transfer taxes and the expenses of any attorney or other advisor such investor decides to employ.
The Registration
Rights Agreements referred to above are filed as exhibits to the registration statement of which this prospectus is a part.
Transfer Agent
The transfer agent for our Common Stock
is Globex Transfer, LLC. The transfer agent’s address is 780 Deltona Blvd., Suite 202, Deltona, FL 32725 and its telephone
number is 813-344-4490.
Anti-Takeover Effects of Provisions
of Our Certificate of Incorporation and By-Laws and Delaware State Law
The provisions of the General Corporation
Law of the State of Delaware, or DGCL, and our Certificate of Incorporation and By-Laws could have the effect of discouraging others
from attempting an unsolicited offer to acquire our company. Such provisions may also have the effect of preventing changes in
our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders
may otherwise deem to be in their best interests.
Authorized but unissued shares.
The
authorized but unissued shares of our Common Stock and our preferred stock are available for future issuance without any further
vote or action by our stockholders. These additional shares may be utilized for a variety of corporate purposes, including future
public or private offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized
but unissued shares of our Common Stock and our preferred stock could render more difficult or discourage an attempt to obtain
control over us by means of a proxy contest, tender offer, merger or otherwise.
Special meeting of stockholders and
advance notice requirements for stockholder proposals.
Our By-Laws require that special meetings of stockholders be called
only by a majority of our board of directors, by the chairman of the board, the Chief Executive Officer, the President, or the
Secretary. In addition, our By-Laws provide that candidates for director may be nominated and other business brought before an
annual meeting only by the board of directors or by a stockholder who gives written notice to us not less than 90 days, nor more
than 120 days, prior to the one year anniversary of the date of the annual meeting of the previous year. These provisions may have
the effect of deterring unsolicited offers to acquire our company or delaying stockholder actions, even if they are favored by
the holders of a majority of our outstanding voting securities.
Business combinations
. The DGCL
generally prohibits a corporation from engaging in any business combination with any interested stockholder for a three-year period
following the time that the stockholder became an interested stockholder, unless:
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prior to such time, our board of directors approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder;
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upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder,
the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding
certain shares; or
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at or subsequent to that time, the business combination is approved by our board of directors and
by the affirmative vote of holders of at least 66
2
⁄
3
% of the outstanding voting stock that is
not owned by the interested stockholder.
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Generally, a “business combination”
includes a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. Subject
to certain exceptions, an “interested stockholder” is a person who, together with that person’s affiliates and
associates, owns, or within the previous three years owned, 15% or more of our voting stock.
Under certain circumstances, this provision
could make it more difficult for a person who would be an “interested stockholder” to effect various business combinations
with a corporation for a three-year period. However, this provision generally does not apply to a corporation that does not have
a class of voting stock that is listed on a national securities exchange or held of record by more than 2,000 stockholders. Accordingly,
this provision does not currently apply to us.
DESCRIPTION
OF NOTES
The Notes and the guarantees were issued
under an indenture dated as of May 14, 2018 among us, Akoustis, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee.
The following description is a summary of the material provisions of the Notes, the guarantees, the indenture and collateral documents
and does not purport to be complete. This summary is subject to and is qualified by reference to all of the provisions of the Notes,
the guarantees, the indenture and collateral documents, including the definitions of certain terms used in the Notes, the guarantees,
the indenture and the collateral documents. We urge you to read these documents because they, and not this description, define
your rights as a holder of the notes. The indenture is not qualified under the Trust Indenture Act of 1939 (the “TIA”)
and we are not required to comply with the provisions of the TIA.
For purposes of this description, references
to “we,” “our” and “us” refer only to Akoustis Technologies, Inc. and not to its subsidiary,
Akoustis, Inc.
General
The Notes:
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are our senior secured obligations secured by a perfected first priority lien, subject to permitted
liens, on substantially all of our and our subsidiaries’ assets, including the Canandaigua, New York manufacturing facility
of our subsidiary, Akoustis, Inc. (together with any other guarantors, from time to time, under the indenture, the “guarantors”),
our and our subsidiaries’ U.S. patents and trademarks, and a pledge of our equity interest in the guarantors, subject to
certain exceptions described below under “—Ranking and Security;”
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bear interest payable from the date of issuance at an annual rate of 6.5% payable at our option
in cash and/or freely tradable shares of our Common Stock, subject to certain limitations, on February 28, May 31, August 31 and
November 30 of each year, beginning on August 31, 2018;
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mature on May 31, 2023 (the “maturity date”), unless earlier converted or repurchased;
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are subject to repurchase by us for cash at the option of a holder effective on May 31, 2021 (the
“put date”) and exercisable in the manner described in the indenture at a repurchase price equal to 100% of the principal
amount of the Notes to be repurchased, plus accrued and unpaid interest to, and including, the put date as described
below under “Holders’ Put Right”;
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are subject to repurchase by us at the option of a holder following a fundamental change (as defined
below under “—Fundamental Change Permits Holders to Require Us to Repurchase Notes”), at a repurchase price equal
to 100% of the principal amount of the Notes to be repurchased,
plus
accrued and unpaid interest to, but excluding,
the fundamental change repurchase date;
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are redeemable by us after May 31, 2019, if the closing sale price per share of our Common Stock
is greater than 175% of the then-effective conversion price for each of 20 days of any 30 consecutive trading day period immediately
preceding our optional redemption notice, as described below under “—Optional Redemption”;
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include a limitation on our ability and the ability of our subsidiaries to incur additional indebtedness,
other than permitted debt (as defined below under “—Limitation on Incurrence of Additional Indebtedness”);
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include a limitation on our ability and the ability of our subsidiaries to make certain payments,
including the repurchase of our securities and the payment of dividends as described below under “—Limitation on Certain
Payments;”
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include a limitation on our ability to restrict our subsidiaries from making dividend and other
payments as described below under “—Limitation on Dividend and Other Payment Restrictions;”
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include a limitation on our ability and the ability of our subsidiaries to sell assets as described
below under “—Limitation on Asset Sales;”
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include a limitation on our ability and the ability of our subsidiaries to engage in certain transactions
with our affiliates as described under “—Limitation on Transactions with Affiliates;”
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include a limitation on liens, other than permitted liens as described under “—Limitation
on Liens;”
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require us and our subsidiaries to maintain our properties and insurance to the extent described
under “—Maintenance of Properties and Insurance;”
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include a limitation on the issuance or sale of our subsidiaries’ capital stock as described
under “—Issuance or Sale of Subsidiary Stock;”
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require us and the guarantors to take certain actions with respect to the collateral as described
under “—Impairment of Security;”
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include a limitation on the businesses in which we and our subsidiaries engage other than permitted
businesses and require us and our subsidiaries to keep our existence, licenses and franchises to the extent described under “—Line
of Business; Corporate Existence;”
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were issued in denominations of $1,000 and integral multiples of $1,000; and
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are represented by one or more registered notes in global form, but in certain limited circumstances
may be represented by Notes in definitive form. See “Book-Entry, Settlement and Clearance.”
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Subject to satisfaction of certain conditions,
the Notes may be converted at an initial conversion rate of 152.6718 into shares of Common Stock per $1,000 principal amount of
Notes (equivalent to an initial conversion price of approximately $6.55 per share of Common Stock). The conversion rate is subject
to adjustment if certain events occur as described under “—Conversion Rights—Conversion Rate Adjustments.”
In the event that we issue, or are deemed
to issue, shares of Common Stock other than “excluded securities” (as defined under “—Conversion Rights—Adjustment
to Conversion Rate Adjustment to Conversion Rate Upon Dilutive Issuances of Common Stock”) for a consideration per share
less than the conversion price then in effect (the “trigger price”), then the conversion rate shall be adjusted to
reduce the conversion price to the greater of (i) the trigger price and (ii) $5.00 (as adjusted for any stock dividend, stock split,
stock combination, reclassification or other similar transaction).
Upon conversion of a Note, we will deliver
shares of our Common Stock, together with a cash payment in lieu of delivering any fractional share, as described under “Conversion
Rights—Settlement upon Conversion” and an interest make-whole payment, if applicable. Holders will not receive any
separate cash payment for interest, if any, accrued and unpaid to the conversion date except under the limited circumstances described
below under “—Conversion Rights—General.”
If a holder surrenders its Notes for conversion
at any time on or after the date that is one year after the last date of original issuance of the Notes and prior to May 31, 2021,
we will in certain circumstances make an interest make-whole payment equal to the remaining scheduled interest payments that would
have been made on the notes converted had such notes remained outstanding through the put date to the converting holder as described
under “—Conversion Rights—Interest Make-Whole Payment upon Certain Conversions.” At our option, make-whole
payments may be paid in cash and/or freely tradable shares of our Common Stock, subject to certain limitations described under
“—Conversion Rights—Share Limitation,” valued at 95% of the volume weighted average price of the common
stock for the ten trading days ending on and including the trading day immediately preceding the conversion date. See “—Conversion
Rights—Interest Make-Whole Payment upon Certain Conversions.”
The indenture limits the amount of debt
that may be issued or incurred by us or our subsidiaries under the indenture or otherwise, except as described under “—Limitation
on Incurrence of Additional Indebtedness.” The indenture also restricts us from making certain payments, including the repurchase
of our securities and the payment of dividends, as described under “—Limitation on Certain Payments.” The indenture
does not contain any financial covenants. Other than the restrictions described under “—Limitation on Incurrence of
Additional Indebtedness,” “—Limitation on Certain Payments,” “—Limitation on Dividend and Other
Payment Restrictions,” “—Fundamental Change Permits Holders to Require Us to Repurchase Notes” and “—Consolidation,
Merger and Sale of Assets” below and except for the provisions set forth under “—Conversion Rights—Qualifying
Fundamental Change Payment Upon Conversion in Connection With a Qualifying Fundamental Change,” the indenture does not contain
any covenants or other provisions designed to afford holders of the Notes protection in the event of a highly leveraged transaction
involving us or in the event of a decline in our credit rating as the result of a takeover, recapitalization, highly leveraged
transaction or similar restructuring involving us that could adversely affect such holders.
The Notes are not listed on any securities
exchange or quoted on any automated dealer quotation system.
Except to the extent the context otherwise
requires, we use the term “Notes” in this prospectus to refer to each $1,000 principal amount of Notes. References
in this prospectus to a “holder” or “holders” of Notes that are held through The Depository Trust Company
(“DTC”) are references to owners of beneficial interests in such Notes, unless the context otherwise requires. However,
we and the trustee treat the person in whose name the Notes are registered (Cede & Co., in the case of notes held
through DTC) as the owner of such Notes for all purposes. References herein to the “close of business” refer to 5:00 p.m.,
New York City time, and to the “open of business” refer to 9:00 a.m., New York City time.
Purchase and Cancellation
We will cause all Notes surrendered for
payment, repurchase (but excluding Notes repurchased pursuant to cash-settled swaps or other derivatives), including as described
immediately below and in “—Fundamental Change Permits Holders to Require Us to Repurchase Notes,” registration
of transfer or exchange or conversion, if surrendered to any person that we control other than the trustee, to be delivered to
the trustee for cancellation and they will no longer be considered “outstanding” under the indenture upon their payment,
repurchase, registration of transfer or exchange or conversion. All Notes delivered to the trustee shall be cancelled promptly
by the trustee. Except for Notes surrendered for registration of transfer or exchange, no Notes shall be authenticated in exchange
for any Notes cancelled as provided in the indenture.
We may, to the extent permitted by law,
and directly or indirectly (regardless of whether such notes are surrendered to us), repurchase Notes in the open market or otherwise,
whether by us or our subsidiaries or through a privately negotiated transaction or public tender or exchange offer or through counterparties
to private agreements, including by cash-settled swaps or other derivatives, in each case, without prior notice to the holders
of the notes.
Payments on the Notes; Paying Agent
and Registrar; Transfer and Exchange
We will pay or cause the paying agent to
pay the principal of, and interest on, Notes in global form registered in the name of or held by DTC or its nominee by wire transfer
in immediately available funds to DTC or its nominee, as the case may be, as the registered holder of such global note.
We will pay or cause the paying agent to
pay the principal of any certificated Notes at the office or agency designated by us for that purpose. We have initially designated
the trustee as our paying agent and registrar and its office described under “—Maintenance of Office or Agency”
below as a place where Notes may be presented for payment or for registration of transfer. We may, however, change the paying agent
or registrar without giving prior notice to the holders of the Notes, and we may act as paying agent or registrar. Interest on
certificated Notes will be payable (i) to holders holding certificated Notes having an aggregate principal amount of $2,000,000
or less, by check mailed to the holders of these Notes and (ii) to holders holding certificated Notes having an aggregate
principal amount of more than $2,000,000, either by check mailed to each such holder or, upon written application by such a holder
to the registrar not later than the relevant regular record date, by wire transfer in immediately available funds to that holder’s
account within the United States if such holder has provided us, the trustee or the paying agent with the requisite information
necessary to make such wire transfer, which application shall remain in effect until the holder notifies, in writing, the registrar
to the contrary.
A holder of Notes may transfer or exchange
Notes at the office of the registrar in accordance with the indenture. The registrar and the trustee may require a holder, among
other things, to furnish appropriate endorsements and transfer documents. No service charge will be imposed by us, the trustee
or the registrar for any registration of transfer or exchange of Notes, but we may require a holder to pay a sum sufficient to
cover any transfer tax or other similar governmental charge required by law or permitted by the indenture. We are not required
to transfer or exchange any Notes surrendered for conversion or required repurchase. A holder of a beneficial interest in a Note
in global form may transfer or exchange such beneficial interest in accordance with the indenture and the applicable procedures
of DTC. See “—Book-Entry, Settlement and Clearance.”
The registered holder of a Note is treated
as its owner for all purposes.
Interest
The Notes bear interest at a rate of 6.5%
per year until maturity. Interest on the notes accrue from the date of issuance or from the most recent date on which interest
has been paid or duly provided for. Interest is payable quarterly in arrears on February 28, May 31, August 31 and November 30
of each year, beginning on August 31, 2018, in cash and/or freely tradable shares of our Common Stock, at our option, subject to
certain limitations described under “—Conversion Rights—Share Limitation.” If we elect to pay any portion
of the interest payment in freely tradable shares of our Common Stock, the number of shares will equal the amount of the payment
(or portion thereof) to be paid in shares divided by 95% of the simple average of the daily VWAP (as defined below under the heading
“—Conversion Rights—Interest Make-Whole Payment upon Certain Conversions”) of our shares for the ten consecutive
trading days ending on and including the trading day immediately preceding the interest payment date.
Interest will be paid to the person in
whose name a Note is registered at the close of business on February 15, May 15, August 15 or November 15 (whether or not a business
day), as the case may be, immediately preceding the relevant interest payment date (each, a “regular record date”).
Interest on the Notes will be computed on the basis of a 360-day year composed of 12 30-day months and, for partial months, on
the basis of the number of days actually elapsed in a 30-day month.
If any interest payment date, the maturity
date, the put date or any earlier required repurchase date upon a fundamental change of a Note falls on a day that is not a business
day, the required payment will be made on the next succeeding business day with the same force and effect as if made on such scheduled
payment date, and no interest on such payment will accrue in respect of the delay. The term “business day” means, with
respect to any note, any day other than a Saturday, a Sunday or a day on which the Federal Reserve Bank of New York is authorized
or required by law or executive order to close or be closed or a day when the corporate trust office of the trustee or the depository
is closed.
Unless the context otherwise requires,
all references to interest in this prospectus include (i) special interest, if any, payable as the sole remedy during certain periods
for an event of default relating to the failure to comply with our reporting obligations as described under “—Events
of Default” and (ii) additional interest, if any, payable under the registration rights agreement as a result of our failure
to comply with certain obligations thereunder as described under “Transfer Restrictions—Registration Rights Agreement.”
Holders’ Put Right
The holders of the Notes have a one-time
right, exercisable prior to May 31, 2021 (the “put date”) in the manner described in the indenture, to require us to
repurchase for cash all (but not less than all) of their notes on the put date at a purchase price equal to 100% of the principal
amount of the notes to be repurchased, plus accrued and unpaid interest to, and including, the put date.
We will notify all holders of the notes,
the trustee, the conversion agent (if other than the trustee) and paying agent (if other than the trustee), not more than 60 days
and not less than 20 business days prior to the put date, of the holders’ right to require us to repurchase their notes,
the repurchase price, the last date on which a holder may exercise the repurchase right, the name and address of the paying agent,
and the repurchase procedures that holders must follow to require us to repurchase their notes.
We may not have sufficient future cash
flow from operations to make any required repurchase in cash or the ability to arrange additional financing, if necessary, on acceptable
terms. See “Risk Factors—We face several risks regarding holders’ potential rights to require us to repurchase
the notes on the put date or upon a fundamental change.” If we fail to repurchase the notes when required following the exercise
of the holders’ put right, we will be in default under the indenture.
Ranking and Security
The notes are secured by a perfected first
priority lien (subject to permitted liens) on substantially all of our and our subsidiaries’ assets, including the Canandaigua,
New York manufacturing facility of our subsidiary, Akoustis, Inc., our and our subsidiaries’ U.S. patents and trademarks,
and a pledge of our equity interests of Akoustis, Inc. (the assets subject to a lien securing the notes being referred to as the
“collateral” in this prospectus). Certain of our and our subsidiaries’ assets and property are excluded from
the collateral, including the following:
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any rights or interest in any lease, contract, license or license agreement covering our or any
guarantor’s assets, so long as under the terms of such lease, contract, license or license agreement, or applicable law with
respect thereto, the grant of a security interest or lien therein is prohibited or would render such lease, contract, license or
license agreement cancelled, invalid or unenforceable; and
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assets owned by us or any guarantor on the date of issuance of the notes or thereafter acquired
and any proceeds thereof that are subject to a lien securing a purchase money obligation or capital lease obligation permitted
to be incurred pursuant to the provisions of the indenture to the extent and for so long as the contract or other agreement in
which such lien is granted (or the documentation providing for such purchase money obligation or capital lease obligation) prohibits
the creation of any other lien on such assets and proceeds.
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We and the guarantors are required to use
our commercially reasonable efforts following the issuance of the notes to obtain and cause the collateral agent and our depository
institutions to enter into and deliver deposit account control agreements with respect to our deposit accounts in order to perfect
the collateral agent’s lien in such deposit accounts. Under U.S. bankruptcy law, if a security interest in certain collateral
is created or perfected within 90 days (or, in certain circumstances, a period longer than 90 days) prior to a bankruptcy filing,
then such security interest is at risk of avoidance as a preferential transfer in bankruptcy. Therefore, creation or perfection
of the security interests in any collateral after the closing date of this offering increases the risk that the liens granted therein
become avoided or subject to the liens of intervening creditors.
The notes are our senior secured obligations.
The notes rank senior to all of our existing and future unsecured indebtedness to the extent of the value of the collateral. We
have the right to incur capital lease obligations and purchase money indebtedness for the purpose of financing the purchase price
or cost of equipment used in our and our subsidiaries’ production lines and up to an additional $1 million of such indebtedness
for other purposes. The notes rank junior to that indebtedness to the extent of the assets acquired with the proceeds thereof.
We may not be able to pay cash for the
repurchase price at the put date or upon a fundamental change if a holder requires us to repurchase notes as described under “—Holders’
Put Right” or “—Fundamental Change Permits Holders to Require Us to Repurchase Notes.” See “Risk
Factors—We face several risks regarding holders’ potential rights to require us to repurchase the notes on the put
date or upon a fundamental change.”
Guarantees
The guarantors and any successor of any
guarantor under the indenture, jointly and severally with any other guarantors, have irrevocably and unconditionally guaranteed,
on a senior basis, the following:
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the due and punctual payment of the principal of, premium, if any, and interest on the notes, whether
at maturity of the notes, by acceleration or otherwise; the due and punctual payment of interest on any overdue principal or interest,
if any, on the notes, to the extent lawful; and the due and punctual performance of all other obligations of the guarantors and
any successor of the guarantor to the holders or to the trustee; and
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in case of any extension of time of payment or renewal of any notes or any such other obligations,
that the obligations will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal,
whether at maturity of the notes, by acceleration or otherwise.
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All of our now owned and hereafter acquired
direct and indirect subsidiaries are and will be guarantors under the indenture.
The indenture provides that the guarantors
will automatically and unconditionally be released:
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in the event of a sale or other transfer (including by way of merger or consolidation) of the capital
stock of such guarantor in compliance with the terms of the indenture following which such guarantor ceases to be our direct or
indirect subsidiary; or
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in connection with the satisfaction and discharge of the indenture.
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Upon any release of a guarantor, such guarantor
shall also be automatically and unconditionally released from its obligations under the security agreement and any other collateral
documents.
Limitation on Incurrence of Additional
Indebtedness
We will not and will not permit any of
our subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to any indebtedness (including acquired debt which, for the purposes of the indenture,
means indebtedness of any other entity existing at the time the other entity is merged with or into or became a subsidiary of the
specified entity and the indebtedness secured by a lien encumbering any real property or fixed assets acquired by the specified
entity). Additionally, although we may issue shares of preferred stock, we will not issue any disqualified stock and will not permit
any of our subsidiaries to issue any shares of preferred stock. However, the following indebtedness will be permitted (the “permitted
debt”):
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the incurrence by us and our subsidiaries of existing indebtedness;
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the incurrence by us, the guarantee thereof by the guarantors, of indebtedness represented by Notes
issued on the date of the indenture;
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the incurrence by us or any of our subsidiaries of (x) indebtedness represented by capital lease
obligations or purchase money obligations, in each case incurred for the purpose of financing the purchase price or cost of equipment
used in our and our subsidiaries’ production lines and (y) additional indebtedness represented by capital lease obligations,
mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase
price or cost of design, construction, installation or improvement of property, plant or equipment used in our or our subsidiaries
permitted businesses (other than as described in clause (x)), in an aggregate principal amount, not to exceed $1.0 million in the
aggregate outstanding at any time outstanding;
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the incurrence by us or any of our subsidiaries of permitted refinancing indebtedness in exchange
for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge certain indebtedness (other
than indebtedness owed by one credit party to another credit party) permitted by the indenture;
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the incurrence by us or any of our subsidiaries of indebtedness not to exceed in the aggregate
at any time outstanding $5.0 million; provided, however, that the indebtedness is expressly subordinated to the prior payment in
full in cash of all obligations with respect to this indenture, the Notes and the Note guarantees and matures no less than 181
days following the maturity of the Notes;
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the incurrence by us or any of our subsidiaries of hedging obligations in the ordinary course of
business (other than for speculative purposes);
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the incurrence by us or any of our subsidiaries of indebtedness in respect of workers’ compensation
claims, self-insurance obligations, bankers’ acceptances, performance and surety bonds in the ordinary course of business;
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the incurrence by us or any of our subsidiaries of unsecured indebtedness not to exceed in the
aggregate at any time outstanding $1.0 million;
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guarantees by us or our subsidiaries of indebtedness otherwise permitted under the indenture;
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the incurrence of indebtedness by us or our subsidiaries arising from agreements providing for
indemnification, contribution, earnout, adjustment of purchase price or similar obligations, in each case, incurred or assumed
in connection with the acquisition or disposition of any business, assets or capital stock of a subsidiary otherwise permitted
under the indenture;
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the incurrence of intercompany indebtedness among us and our subsidiaries; and
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the incurrence by us or any of our subsidiaries of indebtedness arising from the honoring by a
bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds, so
long as such indebtedness is covered within five business days.
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We will not incur and will not permit any
guarantor to incur any indebtedness (including permitted debt) that is contractually subordinated in right of payment to any of
our or our guarantor’s other indebtedness unless such indebtedness is also contractually subordinated in right of payment
to the notes and the note guarantees on substantially identical terms. However, no indebtedness will be deemed to be contractually
subordinated in right of payment to any of our other indebtedness solely by virtue of being unsecured or by virtue of being secured
on a first or junior lien basis.
For purposes of determining compliance
with the provisions regarding permitted debt, if an item of proposed indebtedness meets the criteria of multiple permitted debt
categories, we will be permitted to classify the indebtedness on the date of its incurrence, or later reclassify all or a portion
of such item of indebtedness, in any manner that complies with this covenant.
The accrual of interest, the accretion
or amortization of original issue discount, the payment of interest on any indebtedness in the form of additional indebtedness
with the same terms, the reclassification of preferred stock as indebtedness due to a change in accounting principles and the payment
of dividends on disqualified stock in the form of additional shares of the same class of disqualified stock will not be deemed
to be an incurrence of indebtedness or an issuance of disqualified stock.
The amount of any indebtedness outstanding
as of any date will be the accreted value of the indebtedness, in the case of any indebtedness issued with original issue discount;
the principal amount of the indebtedness, in the case of any other indebtedness; and in respect of indebtedness of another individual
or entity secured by a lien on the assets of the specified individual or entity, the lesser of the fair market value of such assets
at the date of determination and the amount of the indebtedness of the other individual or entity.
Limitation on Liens
We will not, and will not permit any of
our subsidiaries, directly or indirectly, to enter into, create, incur, assume or suffer to exist any liens of any kind, on or
with respect to the collateral except permitted liens.
Limitation on Certain Payments
We will not and will not permit any of
our subsidiaries to, directly or indirectly:
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declare or pay any dividend or make any other payment or distribution on account of its equity
interests (as defined below), including any payment in connection with any merger or consolidation involving us or any of our subsidiaries,
or to the direct or indirect holders of its equity interests in their capacity as such, other than dividends or distributions payable
in our or our subsidiaries’ equity interests other than disqualified stock (as defined below), to us or any of our subsidiaries,
or, in the case of dividends or distributions payable by any of our subsidiaries, pro rata to the holders of that subsidiary’s
equity interests;
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purchase, redeem or otherwise acquire or retire for value (including without limitation, in connection
with any merger or consolidation involving us) any of our equity interests;
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make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire
for value any indebtedness of us or any of our subsidiaries that are contractually subordinated to the notes or any note guarantee
(excluding any intercompany indebtedness between or among us and any of our subsidiaries), except a payment of interest or principal
at the maturity date; or
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make any restricted investment (as defined below).
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All of the payments and other actions set
forth above are collectively referred to as “restricted payments.” Notwithstanding the foregoing, restricted payments
shall be permitted if at the time of and after giving effect to such restricted payment:
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no default or event of default has occurred and is continuing or would occur as a consequence of
such restricted payment; and
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the restricted payment, together with the aggregate amount of all other restricted payments made
by us and our subsidiaries since the date of the indenture (excluding certain permitted restricted payments described below), is
less than the sum, without duplication, of:
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50% of our consolidated net income (as defined below) for the period, taken as one accounting period,
from the beginning of the first fiscal quarter commencing after the date of the indenture to the end of our most recently ended
fiscal quarter for which internal financial statements are available at the time of the restricted payment (or, if such consolidated
net income for such period is a deficit, less 100% of such deficit);
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100% of the aggregate net cash proceeds received by us since the date of the indenture as a contribution
to our common equity capital or from the issue or sale of our equity interests other than disqualified stock or from the issue
or sale of convertible or exchangeable disqualified stock or our convertible or exchangeable debt securities that have been converted
into or exchanged for such equity interests, other than equity interests or disqualified stock or debt securities sold to one of
our subsidiaries; and
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to the extent that any restricted investment that was made after the date of the indenture is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash return of capital with respect to such restricted
investment (less the cost of disposition, if any) and (ii) the initial amount of such restricted investment.
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For purposes of the indenture, “consolidated
net income” means, with respect to any specified individual or entity for any period, the aggregate of the net income of
the person and its subsidiaries for the period, on a consolidated basis, determined in accordance with GAAP; provided that:
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the net income (but not loss) of any person that is not a subsidiary or that is accounted for by
the equity method of accounting will be included only to the extent of the amount of dividends or similar distributions paid in
cash to the specified individual or entity or a subsidiary of the individual or entity;
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the net income of any subsidiary will be excluded to the extent that the declaration or payment
of dividends or similar distributions by that subsidiary of that net income is not at the date of determination permitted without
any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter
or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that subsidiary or
its securityholders;
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the cumulative effect of a change in accounting principles will be excluded; and
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the net income of any person acquired during the specified period for any period prior to the date
of acquisition will be excluded.
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As long as no event of default has occurred
and is continuing or would occur as a result of the payment, the provisions described above will not prohibit:
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the payment of any dividend or the consummation of any irrevocable redemption within 60 days after
the date of declaration of the dividend or giving of the redemption notice, as the case may be, if at the date of declaration or
notice, the dividend or redemption payment would have complied with the provisions of the indenture;
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the making of any restricted payment (other than certain restricted payments involving making payment
to purchase, redeem, defease or otherwise acquire or retire for value certain indebtedness or securities) in exchange for, or out
of the net cash proceeds of the substantially concurrent sale (other than to one of our subsidiaries) of, our equity interests
(other than disqualified stock) or from the substantially concurrent contribution of common equity capital to us;
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the redemption, repurchase, defeasance or other acquisition or retirement for value of indebtedness
of us or one of our subsidiaries that is contractually subordinated or subordinated with respect to security interests to the notes
or any note guarantee with the net cash proceeds from a substantially concurrent incurrence of certain permitted refinancing indebtedness;
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the repurchase, redemption or other acquisition or retirement for value of any equity interests
of us or any of our subsidiaries held by any of our or any of our subsidiaries’ current or former officer, director, employee
or contractor in order to pay or satisfy the officer’s, director’s, employee’s or contractor’s aggregate
exercise price or withholding tax payment obligations or otherwise upon death, disability, retirement or termination of employment
or engagement, pursuant to awards granted under our equity incentive, stock option, restricted stock or other long-term equity
compensation plans; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired equity interests
may not exceed $500,000 in the aggregate in any calendar year, provided, that any unused amounts in any calendar year may be carried
forward to one or more future periods;
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the repurchase of our equity interests deemed to occur upon the exercise of stock options, warrants
or other convertible or exchangeable securities to the extent the equity interests represent a portion of the exercise price of
the stock options, warrants or other convertible or exchangeable securities; and
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restricted investments by us and our subsidiaries not otherwise permitted under the indenture,
in an aggregate amount not to exceed $2 million at any time outstanding.
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For purposes of the indenture, “restricted
investments” means, with respect to any individual or entity, all direct or indirect investments by such individual or entity
in other individuals or entities (including affiliates) in the forms of loans (including guarantees or other obligations), advances
or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course
of business), purchases or other acquisitions for consideration of indebtedness, equity interests or other securities, together
with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. However, restricted
investments will not include any “permitted investments,” which under the indenture will mean the following:
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any investment by us in ourselves or our subsidiaries;
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any investment in cash equivalents;
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any investment by us or a subsidiary in an individual or entity, if as a result of such investment
such individual or entity becomes our subsidiary or such individual or entity is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is liquidated into, us or a subsidiary;
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any investment made as a result of the receipt of non-cash consideration from an asset sale that
was made pursuant to and in compliance with the terms of the indenture;
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any acquisition of assets or capital stock solely in exchange for the issuance of our equity interests
(other than disqualified stock);
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any investments received in compromise or resolution of litigation, arbitration or other disputes;
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investments represented by hedging obligations; and
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repurchases of the notes, including the related note guarantees, in accordance with the terms of
the indenture.
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The amount of all restricted payments (other
than cash) will be the fair market value on the date of the restricted payment of the assets or securities to be transferred or
issued by us or our subsidiaries. The fair market value of any non-cash restricted payment will be determined by the Board of Directors
and their resolution with respect to the restricted payment will be delivered to the trustee in an officer’s certificate.
For purposes of the indenture, “equity
interests” means capital stock and all warrants, options or other rights to acquire capital stock (but excluding any debt
security that is convertible into, or exchangeable for, capital stock).
For purposes of the indenture, “disqualified
stock” means any capital stock that, by its terms (or by the terms of any security into which it is convertible or for which
it is exchangeable, in each case, at the option of the holder of the capital stock), or upon the happening of any event, matures
or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof,
in whole or in part, on or prior to the date that is 91 days after the date on which the notes mature. Any capital stock that would
constitute disqualified stock solely because the holders of the capital stock have the right to require us to repurchase the capital
stock upon the occurrence of a fundamental change or an asset sale will not constitute disqualified stock if the terms of the capital
stock provide that we may not repurchase or redeem any of the capital stock pursuant to those provisions unless the repurchase
or redemption complies with the indenture. The amount of disqualified stock deemed to be outstanding at any time for purposes hereof
shall be the maximum amount that we and our subsidiaries may become obligated to pay upon the maturity of, or pursuant to any mandatory
redemption provisions of, such disqualified stock, exclusive of accrued dividends.
Limitation on Dividend and Other Payment
Restrictions
We will not and we will not permit our
subsidiaries to, directly or indirectly, create or otherwise permit, cause or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any subsidiary to pay dividends or to make any other distributions on its capital
stock us or any of our subsidiaries or with respect to any other interest or participation in, or measured by, its profits or pay
any indebtedness owed to us or any of our subsidiaries; make loans or advances to us or any of our subsidiaries; or sell, lease
or transfer any of its properties or assets to us or any of our subsidiaries. However, the indenture permits such encumbrances
or restrictions existing under or by reason of:
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the indenture, the notes and the note guarantees;
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agreements governing existing indebtedness and credit facilities as in effect on the date of the
indenture and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those
agreements; provided that the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings
are not materially more restrictive with respect to such dividend and other payment restrictions than the agreements existing on
the date of the indenture;
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any instrument governing indebtedness or capital stock of a person acquired by us or any of our
subsidiaries as in effect at the time of such acquisition (except to the extent the indebtedness or capital stock was incurred
in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any entity,
or the properties or assets of any entity, other than the entity, or the property or assets of the entity, so acquired; provided
that, in the case of indebtedness, the indebtedness was permitted by the terms of the indenture;
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certain purchase money obligations for property acquired in the ordinary course of business and
capital lease obligations that impose restrictions on the property purchased or leased;
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certain permitted refinancing indebtedness; provided that the restrictions contained in the agreements
governing such permitted refinancing indebtedness are not materially more restrictive, taken as a whole, than those in the agreements
governing the indebtedness being refinanced;
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applicable law, rule, regulation or order;
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customary non-assignment provisions in contracts and licenses entered into in the ordinary course
of business;
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any agreement for the sale or other disposition of a subsidiary that restricts distributions by
that subsidiary pending the sale or other disposition
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certain liens permitted to be incurred under the indenture provisions that limit the right of the
debtor to dispose of the assets subject to such liens;
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provisions limiting the disposition or distribution of assets or property in joint venture agreements,
asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements entered into with the approval
of the our Board of Directors, which limitation is applicable only to the assets that are the subject of such agreements; and
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restrictions on cash or other deposits or net worth imposed by customers under contracts entered
into in the ordinary course of business.
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Limitation on Asset Sales
We will not and will not permit any of
our subsidiaries to sell, lease, convey or otherwise dispose of any assets or rights other than the sale, lease, conveyance or
other disposition of all or substantially all of the assets of us and our subsidiaries taken as a whole or to issue equity interests
in any of the subsidiaries or sell equity interests in any of its subsidiaries (each an “asset sale”). However, certain
asset sales will be permitted (each a “permitted asset sale”) as set forth below. It will be a permitted asset sale
if we or our subsidiary, as the case may be, receives consideration at the time of the asset sale at least equal to the fair market
value of the assets or equity interests issued or sold or otherwise disposed of; and at least 75% of the consideration received
is in cash; provided, however, that the amounts of the following will be deemed to be cash for purposes of this provision: (i)
any liabilities shown on our most recent consolidated balance sheet or in the notes thereto, for us or any of our subsidiaries
(other than contingent liabilities or liabilities that are by their terms subordinated in right of payment or as to security interests
to the notes or any note guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement
that releases us or our subsidiary from further liability, (ii) any securities, notes or other obligations received by us or any
of our subsidiaries from such transferee that are contemporaneously, subject to ordinary settlement periods, converted by us or
the subsidiary into cash (to the extent of the cash received in that conversion) and (iii) any stock or assets received by us or
any subsidiary used to acquire all or substantially all of the assets of, or any capital stock of, another permitted business if,
after giving effect to any such acquisition of capital stock, the permitted business is or becomes our subsidiary and a guarantor
or other assets that are not classified as current assets under GAAP and that are used or useful in a permitted business.
Additionally, the following transactions
will be considered permitted asset sales: any single or series of related transactions that involves assets having an aggregate
fair market value less than $1.0 million; the transfer, sale or lease of products, services or accounts receivable by us or any
subsidiary in the ordinary course of business and any sale or other disposition of damaged, worn-out, replaced, retired or obsolete
assets by us or any subsidiary in the ordinary course of business; the sale or other disposition by us or any subsidiary of cash
or cash equivalents; a transfer of assets by us to a subsidiary or by a subsidiary to us or another subsidiary; an issuance of
equity interests by a subsidiary to us or to another of our subsidiaries; and any restricted payment, permitted investment or permitted
lien that is permitted under the indenture; leases or subleases in the ordinary course of business to third persons not interfering
in any material respect with our business and otherwise not prohibited by the indenture; dispositions of accounts receivable in
connection with the collection or compromise thereof in the ordinary course of business; licensing of intellectual property in
accordance with industry practice in the ordinary course of business.
We or our subsidiaries may apply the net
cash proceeds from the permitted asset sale for the following purposes: to repay indebtedness and other obligations under a credit
facility, and if the indebtedness repaid is revolving credit indebtedness, to correspondingly reduce facility commitments; to repay
indebtedness and correspondingly permanently reduce commitments with respect thereto; to acquire all or substantially all of the
assets of, or any capital stock of, another permitted business if, after giving effect to any such acquisition of capital stock,
the permitted business is or becomes a subsidiary and a guarantor; to make capital expenditures in a permitted business of a subsidiary;
or to acquire other assets that are not classified as current assets under GAAP and that are used or useful in a permitted business
of us or a subsidiary.
From an event of loss, we or our subsidiaries
may apply the net cash proceeds for the following purposes: to repay secured indebtedness and to correspondingly reduce commitments
with respect thereto; to acquire all or substantially all of the assets of, or any capital stock of, another permitted business,
if, after giving effect to any such acquisition of capital stock, the permitted business is or becomes our subsidiary and a guarantor;
to make capital expenditures in a permitted business of a subsidiary; or to acquire other assets that are not classified as current
assets under GAAP and that are used or useful in a permitted business.
Pending the application of any net cash
proceeds from an asset sale or event of loss, we may temporarily invest such net proceeds in cash or cash equivalents.
Limitation on Transactions with Affiliates
We will not and will not permit any of
our subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to,
or purchase any property or assets from, or enter into or make or amend any contract, agreement, understanding, loan, advance,
transaction or guarantee with, or for the benefit of, any of our affiliates (each of the foregoing, an “affiliate transaction”),
unless the affiliate transaction is on terms that are not materially less favorable to us or our subsidiary than those that could
reasonably have been obtained in a comparable transaction by us or our subsidiary with an unrelated individual or entity and we
deliver to the trustee with respect to any affiliate transaction or series of related affiliate transactions involving aggregate
consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an officers’ certificate certifying
that such affiliate transaction complies with the above requirements and that such affiliate transaction has been approved by a
majority of the disinterested members of our Board of Directors; with respect to any affiliate transaction or series of related
affiliate transactions involving aggregate consideration in excess of $1.0 million; provided, however, that we will not be required
to comply with requirements in certain circumstances set forth below.
The following circumstances are excluded
from the application of the preceding paragraph: any employment agreement, employee benefit plan, officer or director indemnification
agreement or any similar arrangement entered into by us or any of our subsidiaries in the ordinary course of business and payments
made pursuant thereto; transactions between or among us and/or our subsidiaries; restricted payments other than permitted investments
that do not violate certain provisions of the indenture; transactions with an individual or entity that is our affiliate solely
because we own, directly or through a subsidiary, an equity interest in, or controls, such individual or entity; payment of reasonable
directors’ fees to an individual who is not otherwise our affiliate; loans or advances to employees for expenses incurred
or to be incurred in connection with the permitted business and such employee’s employment in the ordinary course of business
not to exceed $250,000 in the aggregate at any time outstanding, in each case. As used in the indenture, “permitted business”
means any business similar in nature to any business conducted by us or our subsidiaries on the date of the indenture and any business
reasonably ancillary, incidental, complementary or related thereto or a reasonable extension, development or expansion thereof,
in each case, as determined in good faith by our Board of Directors.
Optional Redemption
We may not redeem the Notes before May
31, 2019. At any time on or after May 31, 2019, we may redeem the notes, in whole or in part, at 100% of the principal amount plus
accrued and unpaid interest on such principal, if any, up to the redemption date; provided that the closing sale price of the Common
Stock is greater than 175% of the then-effective conversion price for each of 20 of any 30 consecutive trading days immediately
preceding the optional redemption notice, as defined below.
Notices to Trustee and Notice of
Redemption
If we elect to exercise our optional redemption
right, we will notify the trustee in writing of the optional redemption date and the principal amount of the Notes to be redeemed
and will deliver an officers’ certificate stating that all conditions precedent for the redemption have been satisfied and
the redemption will comply with the provisions of the indenture.
We will give such notice to each of the
trustee and the registrar at least 5 days prior to the date that any optional redemption notice is to be sent to holders unless
the trustee consents to a shorter period.
At least 30 days but not more than 60 days
before an optional redemption date, we will deliver a notice of redemption (an “optional redemption notice”) to each
holder of the Notes that we intend to redeem at the holder’s registered address. We will also deliver a copy of the optional
redemption notice to the trustee prior to delivery to the holders of the Notes. At our request, the trustee will give the optional
redemption notice in our name and at our expense and, in that case, we will provide the trustee with the information required to
be in that notice.
The optional redemption notice will identify
the Notes to be redeemed and will state:
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each date when we elect to redeem the Notes in whole or in part (the “optional redemption
date”);
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the optional redemption price;
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the name and address of the paying agent where the Notes are to be surrendered;
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that Notes called for redemption may be converted at any time before the close of business on the
business day immediately preceding the optional redemption date;
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that Notes called for redemption must be surrendered to the paying agent to collect the optional
redemption price:
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if fewer than all the outstanding Notes are to be redeemed, the identification and principal amounts
of the particular Notes to be redeemed;
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that, unless we default in making a redemption payment, the interest on the Notes or the portion
thereof called for redemption will cease to accrue on and after the optional redemption date; an
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the CUSIP number or ISIN number, if any, printed on the Notes being redeemed.
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Effect of Notice of Redemption
Once an optional redemption notice is delivered
to the holders, the Notes or portions thereof called for redemption will become irrevocably due and payable on the optional redemption
date and at the optional redemption price stated in the optional redemption notice. The optional redemption notice may not be conditional
and will be irrevocable. Upon surrender to the paying agent, the Notes will be paid at the optional redemption price stated in
the optional redemption notice. Even if the Notes are surrendered, if the optional redemption date is on or after a regular record
date and on or prior to the interest payment date, the accrued and unpaid interest will be payable to the holder of the redeemed
Notes registered on the relevant record date. Failure to give notice or the existence of any defect in the notice to any holder
will not affect the validity of the notice to any other holder.
Deposit of Redemption Price
We will deposit with the paying agent money
sufficient to pay the redemption price on all Notes to be redeemed on the applicable redemption date other than Notes or portions
of the Notes called for redemption that are owned by us or one of our subsidiaries and have been delivered by us or one of our
subsidiaries to the trustee for cancellation no later than 11:00 a.m., New York City time, on the business day prior to the date
on which any redemption price on any Note is due and payable. If we or our subsidiary is the paying agent, we will segregate the
money to pay the redemption price and hold it in trust. If we comply with the foregoing requirements, then on and after the applicable
redemption date, interest will cease to accrue on the Notes or portions of the Note called for redemption.
Notes Redeemed in Part
Upon cancellation of a Note that is redeemed
in part, at our expense, we will issue and the trustee will authenticate for the holder a new Note equal in principal amount to
the unredeemed portion of the Note surrendered. The trustee will notify the registrar of the issuance of such new Note.
If less than all of the outstanding Notes
are to be redeemed, Notes shall be selected, with respect to global notes, in accordance with DTC’s applicable policies and
procedures and, with respect to certificated Notes, by lot, pro rata or by such other method as the trustee deems fair and reasonable.
The Notes or portions of them selected will be redeemed in principal amounts of $1,000 or whole multiples of $1,000. If a portion
of a holder’s Notes is selected for partial redemption and such holder converts a portion of its Notes before termination
of the conversion right in respect to the portion of the Note selected, the converted portion will be deemed to be of the portion
selected for redemption and the amount designated for partial redemption will be reduced by the converted amount.
We may not redeem the Notes if we have
failed to pay any interest or premium on the Notes and such failure to pay is continuing. We will issue a press release if we redeem
the Notes.
Conversion Rights
General
Holders may convert all or any portion
of their Notes at their option at any time prior to the close of business on the business day immediately preceding the maturity
date.
The conversion rate is initially 152.6718
shares of common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $6.55 per
share of Common Stock). The conversion rate is subject to adjustment if certain events occur. The conversion price at any given
time will be computed by dividing $1,000 by the applicable conversion rate at such time. Accordingly, an adjustment to the conversion
rate will result in a corresponding (but inverse) adjustment to the conversion price.
Upon conversion of a Note, we will satisfy
our conversion obligation by delivering shares of our Common stock, together with a cash payment in lieu of delivering any fractional
share, as set forth below under “—Settlement upon Conversion” and an interest make-whole payment, if applicable.
We will settle our conversion obligation on the second business day immediately following the relevant conversion date. The trustee
will initially act as the conversion agent.
A holder may convert fewer than all of
such holder’s Notes so long as the Notes converted are an integral multiple of $1,000 principal amount.
Upon conversion, a holder will not receive
any separate cash payment for accrued and unpaid interest, if any, except as described below and under “—Interest Make-Whole
Payment upon Certain Conversions.” We will not issue fractional shares of our Common Stock upon conversion of Notes. Instead,
we will pay cash in lieu of delivering any fractional share as described under “—Settlement upon Conversion.”
Our delivery to the holder of the full number of shares, together with a cash payment for any fractional share, into which a Note
is convertible will be deemed to satisfy in full our obligation to pay:
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the principal amount of the Note; and
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accrued and unpaid interest, if any, to, but not including, the relevant conversion date.
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As a result, accrued and unpaid interest,
if any, to, but not including, the relevant conversion date will be deemed to be paid in full rather than cancelled, extinguished
or forfeited.
Notwithstanding the immediately preceding
paragraph, if Notes are converted after the close of business on a regular record date for the payment of interest, but prior to
the open of business on the immediately following interest payment date, holders of such Notes at the close of business on such
regular record date will receive the full amount of interest payable on such Notes on the corresponding interest payment date notwithstanding
the conversion. However, Notes surrendered for conversion during the period from the close of business on any regular record date
to the open of business on the immediately following interest payment date must be accompanied by funds equal to the amount of
interest payable on the Notes so converted on the corresponding interest payment date (regardless of whether the holder was the
holder of record on the corresponding regular record date);
provided
that no such payment need be made:
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for conversions following the regular record date immediately preceding the maturity date;
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for conversions in respect of which an interest make-whole payment is payable upon conversion;
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if we have specified a fundamental change repurchase date that is after a regular record date and
on or prior to the business day immediately following the corresponding interest payment date, in respect of Notes converted; or
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to the extent of any overdue interest, if any overdue interest exists at the time of conversion
with respect to such Note.
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Therefore, for the avoidance of doubt,
all record holders on the regular record date immediately preceding the maturity date, any record holders entitled to receive an
interest make-whole payment upon conversion described in the second bullet in the immediately preceding paragraph and any fundamental
change repurchase date described in the third bullet in the immediately preceding paragraph will receive the full interest payment
due on the maturity date or other applicable interest payment date in cash regardless of whether their Notes have been converted
or repurchased following such regular record date.
“Trading day” means a day on
which (i) trading in our common stock (or other security for which a closing sale price must be determined) generally occurs
on the NASDAQ Capital Market or, if our common stock (or such other security) is not then listed on the NASDAQ Capital Market,
on the principal other U.S. national or regional securities exchange on which our Common Stock (or such other security) is then
listed or, if our common stock (or such other security) is not then listed on a U.S. national or regional securities exchange,
on the principal other market on which our common stock (or such other security) is then traded, and (ii) a last reported
sale price for our Common Stock (or closing sale price for such other security) is available on such securities exchange or market.
If our Common Stock (or such other security) is not so listed or traded, “trading day” means a “business day.”
Notwithstanding anything to the contrary
in the indenture, unless we have obtained the requisite approval of our stockholders pursuant to the applicable NASDAQ Marketplace
rule or listing requirements of the relevant stock exchange, the number of shares we may deliver in respect of the Notes, including
those delivered in lieu of cash interest, in connection with an interest make-whole payment, or as a qualifying fundamental change
payment, will not exceed 19.99% of our Common Stock outstanding (as adjusted for stock splits, reverse stock splits, stock combinations,
reclassifications and reorganizations) as of the close of the trading day immediately preceding the date of the indenture that
governs the Notes without shareholder approval or as otherwise required pursuant to the listing requirements of the NASDAQ Capital
Market or such other national securities exchange on which the Common Stock is then listed.
Conversion Procedures
If you hold a beneficial interest in a
global note, to convert you must comply with DTC’s procedures for converting a beneficial interest in a global note and,
if required, pay funds equal to interest payable on the next interest payment date to which you are not entitled and, if required,
pay all transfer or similar taxes, if any. As such, if you are a beneficial owner of the notes, you must allow for sufficient time
to comply with DTC’s procedures if you wish to exercise your conversion rights. Your exercise of such conversion rights shall
be irrevocable.
If you hold a certificated note, to convert
you must:
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·
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complete and manually sign the conversion notice on the back of the note, or a facsimile of the
conversion notice;
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·
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deliver the conversion notice, which is irrevocable, and the note to the conversion agent;
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·
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if required, furnish appropriate endorsements and transfer documents;
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·
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if required, pay funds equal to the interest payable on the next interest payment date to which
you are not entitled; and
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·
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if required, pay all transfer or similar taxes, if any.
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We will pay any documentary, stamp or similar
issue or transfer tax on the issuance of the shares of our Common Stock upon conversion of the Notes, unless the tax is due because
the holder requests such shares to be issued in a name other than the holder’s name, in which case the holder must pay the
tax.
We refer to the date you comply with the
relevant procedures for conversion described above as the “conversion date.”
If a holder has already delivered a repurchase
notice as described under “—Fundamental Change Permits Holders to Require Us to Repurchase Notes” with respect
to a Note, the holder may not surrender that Note for conversion until the holder has withdrawn the repurchase notice in accordance
with the relevant provisions of the indenture. If a holder submits its Notes for required repurchase, the holder’s right
to withdraw the repurchase notice and convert the Notes that are subject to repurchase will terminate at the close of business
on the business day immediately preceding the relevant fundamental change repurchase date.
Settlement upon Conversion
Upon conversion, we will deliver to holders
in respect of each $1,000 principal amount of Notes being converted a number of shares of our Common Stock equal to the conversion
rate, together with a cash payment, if applicable, in lieu of delivering any fractional share of Common Stock issuable upon conversion
based on the last reported sale price of our Common Stock on the relevant conversion date and an interest make-whole payment or
a qualifying fundamental change payment, if applicable. We will deliver the consideration due in respect of conversion on the second
business day immediately following the relevant conversion date.
Each conversion will be deemed to have
been effected as to any Notes surrendered for conversion on the conversion date, and the person in whose name the shares of our
common stock shall be issuable upon such conversion will become the holder of record of such shares as of the close of business
on such conversion date.
The “last reported sale price”
of our Common Stock on any date means, as determined by us, the closing sale price per share (or if no closing sale price is reported,
the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices)
on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which our
Common Stock is traded. If our Common Stock is not listed for trading on a U.S. national or regional securities exchange on the
relevant date, the “last reported sale price” will be the last quoted bid price for our Common Stock in the over-the-counter
market on the relevant date as reported by OTC Markets Group Inc. or a similar organization. If our Common Stock is not so
quoted, the “last reported sale price” will be the average of the mid-point of the last bid and ask prices for our
Common Stock on the relevant date from each of at least three nationally recognized independent investment banking firms selected
by us for this purpose.
Conversion Limitation
We will not effect any conversion of a
Note and no holder will have the right to convert any portion of a Note to the extent that after giving effect to such conversion,
the holder (together with the holder’s affiliates) would beneficially own in excess of 4.99% of the number of shares of our
Common Stock outstanding immediately after giving effect to such conversion (the “conversion limitation”). The number
of shares of Common Stock beneficially owned by a holder and its affiliates will include the number of shares of Common Stock issuable
upon the conversion of a Note with respect to which the determination is being made. The number of shares of Common Stock beneficially
owned by a holder and its affiliates will exclude the number of shares of Common Stock which would be issuable upon (i) conversion
of the remaining, nonconverted portion of any Note beneficially owned by the holder or any of its affiliates and (ii) exercise
or conversion of the unexercised or nonconverted portion of any of our other securities subject to a limitation on conversion or
exercise analogous to the conversion limitation beneficially owned by such holder or any of its affiliates. For purposes of the
indenture, beneficial ownership will be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended.
In determining the number of outstanding
shares of our Common Stock, the holder may rely on the number of outstanding shares of Common Stock reflected in our most recent
annual, quarterly or current report on Form 10- K, Form 10-Q or Form 8-K, respectively, as the case may be; a more recent public
announcement by us or any other notice by us setting forth the number of shares of our Common Stock outstanding. For any reason
at any time, upon the written or oral request of a holder, we will within two business days confirm orally and in writing to the
holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock will
be determined after giving effect to the conversion or exercise of our securities, including the Note, by the holder or its affiliates
since the date as of which such number of outstanding shares of Common Stock was reported. By written notice to us, any holder
may increase or decrease the conversion limitation to any other percentage not in excess of 9.99% specified in such notice; provided
that any such increase will not be effective until the 61st day after the notice of the change in the conversion limitation is
delivered to us and any such increase or decrease will apply only to the holder sending such notice and not to any other holder
of the notes. The conversion limitation will not be applicable on any of the ten trading days up to and including the maturity
date on May 31, 2023, or on any of the ten trading days up to and including the effective date of a fundamental change or during
the period between the date that the fundamental change notice is sent and the fundamental change repurchase date.
Interest Make-Whole Payment upon
Certain Conversions
If a holder surrenders its Notes for conversion
at any time on or after the date that is one year after the last date of original issuance of the Notes and prior to May 31, 2021
(other than a conversion in connection with a qualifying fundamental change), we will make an interest make-whole payment to the
holder of such Notes equal to the sum of the remaining scheduled payments of interest that would have been made on the Notes to
be converted had such Notes remained outstanding from the conversion date through, and including, the put date (the “interest
make-whole payment”).
If a conversion date occurs after the close
of business on a regular record date but prior to the open of business on the interest payment date corresponding to such regular
record date, the interest make-whole payment will not include the accrued interest to any converting holder and instead we will
pay the full amount of the relevant interest payment on such interest payment date to the holder of record on such regular record
date. In such case, the interest make-whole payment to such converting holders will equal the value of all remaining interest payments,
starting with the next interest payment date for which interest has not been provided for through May 31, 2021.
We will have the option to pay any interest
make-whole payment in cash and/or by delivering freely tradable shares of our common stock, subject to certain limitations described
under “Share Limitation.” The number of shares a converting holder will receive will be the number of shares equal
to the amount of the interest make-whole payment to be paid in Common Stock to such holder, divided by the product of (x) 95%
and (y) the simple average of the daily VWAP (as defined below) of the shares for the ten consecutive trading days ending
on and including the trading day immediately preceding the conversion date.
The “daily VWAP” means, for
each of the ten consecutive trading days for the calculation of the interest make-whole payment, the per share volume-weighted
average price as displayed under the heading “Bloomberg VWAP” on Bloomberg page “AKTS <equity> AQR”
(or its equivalent successor if such page is not available) in respect of the period from the scheduled open of trading until the
scheduled close of trading of the primary trading session on such trading day (or if such volume-weighted average price is unavailable,
the market value of one share of our common stock on such trading day determined, using a volume-weighted average method, by a
nationally recognized independent investment banking firm retained for this purpose by us). The “daily VWAP” will be
determined without regard to after-hours trading or any other trading outside of the regular trading session trading hours.
For the purposes of determining the number
of shares deliverable in respect of the interest make-whole payment only, “trading day” means a scheduled trading day
on which (i) there is no “market disruption event” (as defined below) and (ii) trading in our Common Stock
generally occurs on the relevant stock exchange on which our Common Stock is then listed or, if our Common Stock is not then listed
on a U.S. national or regional securities exchange, on the principal other market on which our Common Stock is then listed or admitted
for trading. If our Common Stock is not so listed or admitted for trading, “trading day” means a “business day.”
“Relevant stock exchange” means the NASDAQ Capital Market or, if our Common Stock is not then listed on the NASDAQ
Capital Market, the principal other U.S. national or regional securities exchange or market on which our Common Stock is listed
or admitted for trading.
“Scheduled trading day” means
a day that is scheduled to be a trading day on the relevant stock exchange. If our Common Stock is not listed or admitted for trading
on any U.S. national or regional securities exchange, “scheduled trading day” means a “business day.”
“Market disruption event” means
(i) a failure by the relevant stock exchange to open for trading during its regular trading session or (ii) the occurrence
or existence prior to 1:00 p.m., New York City time, on any scheduled trading day for our Common Stock for more than one half-hour
period in the aggregate during regular trading hours of any suspension or limitation imposed on trading (by reason of movements
in price exceeding limits permitted by the relevant stock exchange or otherwise) in our Common Stock or in any options contracts
or futures contracts relating to our Common Stock.
Conversion Rate Adjustments
The conversion rate will be adjusted by
us as described below, except that we will not make any adjustments to the conversion rate if holders of the notes participate
(other than in the case of (x) a share split or share combination or (y) a tender or exchange offer), at the same time
and upon the same terms as holders of our Common Stock and solely as a result of holding the Notes, in any of the transactions
described below without having to convert their Notes as if they held a number of shares of our Common Stock equal to the conversion
rate,
multiplied by
the principal amount (expressed in thousands) of Notes held by such holder.
(1) If
we exclusively issue shares of our Common Stock as a dividend or distribution on shares of our Common Stock, or if we effect a
share split or share combination, the conversion rate will be adjusted based on the following formula:
where,
CR
0
|
=
|
the conversion rate in effect immediately prior to the close of business on the record date (as defined below) of such dividend or distribution, or immediately prior to the open of business on the effective date of such share split or share combination, as applicable;
|
|
|
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CR
1
|
=
|
the conversion rate in effect immediately after the close of business on such record date or immediately after the open of business on such effective date, as applicable;
|
|
|
|
OS
0
|
=
|
the number of shares of our Common Stock outstanding immediately prior to the close of business on such record date or immediately prior to the open of business on such effective date, as applicable (before giving effect to any such dividend, distribution, share split or share combination); and
|
OS
1
|
=
|
the number of shares of our Common Stock outstanding immediately after giving effect to such dividend, distribution, share split or share combination.
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Any adjustment made under this clause (1)
shall become effective immediately after the close of business on the record date for such dividend or distribution, or immediately
after the open of business on the effective date for such share split or share combination, as applicable. If any dividend or distribution
of the type described in this clause (1) is declared but not so paid or made, the conversion rate shall be immediately readjusted,
effective as of the date our board of directors or a committee thereof determines not to pay such dividend or distribution, to
the conversion rate that would then be in effect if such dividend or distribution had not been declared.
(2) If
we distribute to all or substantially all holders of our Common Stock any rights, options or warrants (other than pursuant to a
stockholder rights plan) entitling them, for a period of not more than 45 calendar days after the announcement date of such distribution,
to subscribe for or purchase shares of our Common Stock at a price per share that is less than the average of the last reported
sale prices of our Common Stock for the 10 consecutive trading day period ending on, and including, the trading day immediately
preceding the date of announcement of such distribution, the conversion rate will be increased based on the following formula:
where,
CR
0
|
=
|
the conversion rate in effect immediately prior to the close of business on the record date for such distribution;
|
|
|
|
CR
1
|
=
|
the conversion rate in effect immediately after the close of business on such record date;
|
|
|
|
OS
0
|
=
|
the number of shares of our Common Stock outstanding immediately prior to the close of business on such record date;
|
|
|
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X
|
=
|
the total number of shares of our Common Stock distributable pursuant to such rights, options or warrants; and
|
|
|
|
Y
|
=
|
the number of shares of our Common Stock equal to the aggregate price payable to exercise such rights, options or warrants,
divided by
the average of the last reported sale prices of our common stock over the 10 consecutive trading day period ending on, and including, the trading day immediately preceding the date of announcement of the distribution of such rights, options or warrants.
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Any increase made under this clause (2)
will be made successively whenever any such rights, options or warrants are distributed and shall become effective immediately
after the close of business on such record date for such distribution. To the extent that such rights, options or warrants are
not exercised prior to their expiration or shares of our Common Stock are not delivered after the expiration of such rights, options
or warrants, the conversion rate shall be decreased to the conversion rate that would then be in effect had the increase with respect
to the distribution of such rights, options or warrants been made on the basis of delivery of only the number of shares of Common
Stock actually delivered. If such rights, options or warrants are not so distributed or if no such rights, options or warrants
are not exercised prior to their expiration, the conversion rate shall be decreased to the conversion rate that would then be in
effect if such record date for such distribution had not occurred.
For the purpose of this clause (2),
in determining whether any rights, options or warrants entitle the holders to subscribe for or purchase shares of our common stock
at less than such average of the last reported sale prices for the 10 consecutive trading day period ending on, and including,
the trading day immediately preceding the date of announcement of such distribution, and in determining the aggregate offering
price of such shares of our Common Stock, there shall be taken into account any consideration received by us for such rights, options
or warrants and any amount payable on exercise or conversion thereof, the value of such consideration, if other than cash, to be
determined by us in good faith and in a commercially reasonable manner.
(3) If
we distribute shares of our capital stock, evidences of our indebtedness, other assets or property of ours or rights, options or
warrants to acquire our capital stock or other securities, to all or substantially all holders of our Common Stock, excluding:
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dividends, distributions or issuances as to which an adjustment was effected or will be so effected
in accordance with the 1% provision (as defined below) pursuant to clause (1) or (2) above;
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·
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except as otherwise described below, rights issued pursuant to any stockholder rights plan of ours
then in effect;
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·
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dividends or distributions paid exclusively in cash as to which the provisions set forth in clause (4)
below shall apply;
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·
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any dividends or distributions of reference property issued in exchange for our common stock as
described under “—Recapitalizations, Reclassifications and Changes of Our Common Stock;” and
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·
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spin-offs as to which the provisions set forth below in this clause (3) shall apply;
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then the conversion rate will be increased
based on the following formula:
where,
CR
0
|
=
|
the conversion rate in effect immediately prior to the close of business on such record date for the distribution;
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|
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CR
1
|
=
|
the conversion rate in effect immediately after the close of business on such record date;
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|
|
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SP
0
|
=
|
the average of the last reported sale prices of our Common Stock over the 10 consecutive trading day period ending on, and including, the trading day immediately preceding the ex-dividend date for such distribution; and
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|
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FMV
|
=
|
the fair market value (as determined by us in good faith and in a commercially reasonable manner) of the shares of capital stock, evidences of indebtedness, assets, property, rights, options or warrants distributed with respect to each outstanding share of our Common Stock on the record date for such distribution.
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Any increase made under the portion of
this clause (3) above will become effective immediately after the close of business on the record date for such distribution.
If such distribution is not so paid or made, the conversion rate shall be decreased to be the conversion rate that would then be
in effect if such distribution had not been declared. In the case of any distribution of rights, options or warrants, to the extent
such rights options or warrants expire unexercised, the applicable conversion rate shall be immediately readjusted to the applicable
conversion rate that would then be in effect had the increase made for the distribution of such rights, options or warrants been
made on the basis of delivery of only the number of shares of our common stock actually delivered upon exercise of such rights,
options or warrants. Notwithstanding the foregoing, if “FMV” (as defined above) is equal to or greater than “SP
0
”
(as defined above), in lieu of the foregoing increase, each holder of a note shall receive, in respect of each $1,000 principal
amount thereof, at the same time and upon the same terms as holders of our common stock, the amount and kind of our capital stock,
evidences of our indebtedness, other assets or property of ours or rights, options or warrants to acquire our capital stock or
other securities that such holder would have received if such holder owned a number of shares of Common Stock equal to the conversion
rate in effect on the record date for the distribution.
With respect to an adjustment pursuant
to this clause (3) where there has been a payment of a dividend or other distribution on our Common Stock of shares of capital
stock of any class or series, or similar equity interest, of or relating to a subsidiary or other business unit, that are, or,
when issued, will be, listed or admitted for trading on a U.S. national securities exchange, which we refer to as a “spin-off,”
the conversion rate will be increased based on the following formula:
where,
CR
0
|
=
|
the conversion rate in effect immediately prior to the end of the valuation period (as defined below);
|
|
|
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CR
1
|
=
|
the conversion rate in effect immediately after the end of the valuation period;
|
|
|
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FMV
0
|
=
|
the average of the last reported sale prices of the capital stock or similar equity interest distributed to holders of our common stock applicable to one share of our common stock (determined by reference to the definition of last reported sale price set forth under “—Settlement Upon Conversion” as if references therein to our common stock were to such capital stock or similar equity interest) over the first 10 consecutive trading day period after, and including, the ex-dividend date of the spin-off (the “valuation period”); and
|
|
|
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MP
0
|
=
|
the average of the last reported sale prices of our Common Stock over the valuation period.
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The increase to the conversion rate under
the preceding paragraph will occur at the close of business on the last trading day of the valuation period;
provided
that
in respect of any conversion of Notes, if the relevant conversion date occurs during the valuation period, the reference to “10”
in the preceding paragraph shall be deemed replaced with such lesser number of trading days as have elapsed between the ex-dividend
date for such spin-off and such conversion date in determining the conversion rate. If any dividend or distribution that constitutes
a spin-off is declared but not so paid or made, the conversion rate shall be immediately decreased, effective as of the date our
board of directors or a committee thereof determines not to pay or make such dividend or distribution, to the conversion rate that
would then be in effect if such dividend or distribution had not been declared or announced.
(4) If
we pay or make any cash dividend or distribution to all or substantially all holders of our Common Stock, the conversion rate will
be adjusted based on the following formula:
where,
CR
0
|
=
|
the conversion rate in effect immediately prior to the close of business on the record date for such dividend or distribution;
|
|
|
|
CR
1
|
=
|
the conversion rate in effect immediately after the close of business on such record date for such dividend or distribution;
|
|
|
|
SP
0
|
=
|
the last reported sale price of our Common Stock on the trading day immediately preceding the ex-dividend date for such dividend or distribution; and
|
|
|
|
C
|
=
|
the amount in cash per share we distribute to all or substantially all holders of our Common Stock.
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Any increase to the conversion rate made
under this clause (4) shall become effective immediately after the close of business on the record date for such dividend
or distribution. If such dividend or distribution is not so paid, the conversion rate shall be decreased, effective as of the date
our board of directors or a committee thereof determines not to make or pay such dividend or distribution, to be the conversion
rate that would then be in effect if such dividend or distribution had not been declared. Notwithstanding the foregoing, if “C”
(as defined above) is equal to or greater than “SP
0
” (as defined above), in lieu of the foregoing increase,
each holder of a Note shall receive, for each $1,000 principal amount of Notes, at the same time and upon the same terms as holders
of shares of our Common Stock, the amount of cash that such holder would have received if such holder owned a number of shares
of our Common Stock equal to the conversion rate on the record date for such cash dividend or distribution.
(5) If
we or any of our subsidiaries make a payment pursuant to a tender or exchange offer for our Common Stock that is subject to the
then-applicable tender offer rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other
than any odd-lot tender offer), to the extent that the cash and value of any other consideration included in the payment per share
of our Common Stock exceeds the average of the last reported sale prices of our Common Stock over the 10 consecutive trading day
period commencing on, and including, the trading day next succeeding the last date on which tenders or exchanges may be made pursuant
to such tender or exchange offer (the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer,
the “expiration date”), the conversion rate will be increased based on the following formula:
where,
CR
0
|
=
|
the conversion rate in effect immediately prior to the close of business on the 10th trading day immediately following, and including, the trading day next succeeding the expiration date;
|
|
|
|
CR
1
|
=
|
the conversion rate in effect immediately after the close of business on the 10th trading day immediately following, and including, the trading day next succeeding the expiration date;
|
|
|
|
AC
|
=
|
the aggregate value of all cash and any other consideration (as determined by us in good faith and in a commercially reasonable manner) paid or payable for shares purchased or exchanged in such tender or exchange offer;
|
|
|
|
OS
0
|
=
|
the number of shares of our Common Stock outstanding immediately prior to the expiration date (prior to giving effect to the purchase or exchange of all shares accepted for purchase or exchange in such tender or exchange offer);
|
|
|
|
OS
1
|
=
|
the number of shares of our common stock outstanding immediately after the expiration date (after giving effect to the purchase or exchange of all shares accepted for purchase or exchange in such tender or exchange offer); and
|
|
|
|
SP
1
|
=
|
the average of the last reported sale prices of our Common Stock over the 10 consecutive trading day period commencing on, and including, the trading day next succeeding the expiration date.
|
The increase to the conversion rate under
the preceding paragraph will occur at the close of business on the 10th trading day immediately following, and including,
the trading day next succeeding the date such tender or exchange offer expires;
provided
that in respect of any
conversion of Notes, if the relevant conversion date occurs during the 10 trading days immediately following, and including, the
trading day next succeeding the expiration date of any tender or exchange offer, references to “10” or “10th”
in the preceding paragraph shall be deemed replaced with such lesser number of trading days as have elapsed between the expiration
date of such tender or exchange offer and such conversion date in determining the conversion rate.
In the event that we or one of our subsidiaries
is obligated to purchase shares of our Common Stock pursuant to any such tender offer or exchange offer described in clause (5),
but we are, or such subsidiary is, permanently prevented by applicable law from effecting any such purchase or all such purchases
are rescinded, then the conversion rate shall again be adjusted to be the conversion rate that would then be in effect if such
tender offer or exchange offer had not been made or had been made only in respect of the purchases that have been effected.
Except as stated herein, we will not adjust
the conversion rate for the issuance of shares of our Common Stock or any securities convertible into or exchangeable for shares
of our Common Stock or the right to purchase shares of our Common Stock or such convertible or exchangeable securities.
As used in this section, “ex-dividend
date” means the first date on which the shares of our Common Stock trade on the applicable exchange or in the applicable
market, regular way, without the right to receive the issuance, dividend or distribution in question, from us or, if applicable,
from the seller of our Common Stock on such exchange or market (in the form of due bills or otherwise) as determined by such exchange
or market, and “effective date” means the first date on which the shares of our Common Stock trade on the applicable
exchange or in the applicable market, regular way, reflecting the relevant share split or share combination, as applicable. For
the avoidance of doubt, any alternative trading convention on the applicable exchange or market in respect of shares of our Common
Stock under a separate ticker symbol or CUSIP number will not be considered “regular way” for this purpose.
As used in this section, “record
date” means, with respect to any dividend, distribution or other transaction or event in which the holders of our Common
Stock (or other applicable security) have the right to receive any cash, securities or other property or in which our common stock
(or such other security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed
for determination of holders of our Common Stock (or such other security) entitled to receive such cash, securities or other property
(whether such date is fixed by our board of directors or a duly authorized committee thereof, statute, contract or otherwise).
We are permitted to increase the conversion
rate of the notes by any amount for a period of at least 20 business days if we determine that such increase would be in our best
interest. We may also (but are not required to) increase the conversion rate to avoid or diminish income tax to holders of our
common stock or rights to purchase shares of our Common Stock in connection with a dividend or distribution of shares (or rights
to acquire shares) or similar event.
A holder may, in some circumstances, including
a distribution of cash dividends to holders of our shares of Common Stock, be deemed to have received a distribution subject to
U.S. federal income tax as a result of an adjustment or the nonoccurrence of an adjustment to the conversion rate. For a discussion
of the U.S. federal income tax treatment of an adjustment to the conversion rate, see “Certain U.S. Federal Income Tax Considerations.”
If we have a rights plan in effect upon
conversion of the notes into Common Stock, you will receive, in addition to the shares of Common Stock received in connection with
such conversion, the rights under the rights plan. However, if, prior to any conversion, the rights have separated from the shares
of common stock in accordance with the provisions of the applicable rights plan, the conversion rate will be adjusted at the time
of separation as if we distributed to all or substantially all holders of our common stock, shares of our capital stock, evidences
of indebtedness, assets, property, rights, options or warrants as described in clause (3) above, subject to readjustment in
the event of the expiration, termination or redemption of such rights.
Notwithstanding any of the foregoing, the
conversion rate will not be adjusted:
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·
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upon the issuance of shares of our Common Stock at a price below the conversion price or otherwise,
other than any such issuance described in clause (1), (2) or (3) above;
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upon the issuance of any shares of our Common Stock pursuant to any present or future plan providing
for the reinvestment of dividends or interest payable on our securities and the investment of additional optional amounts in shares
of our common stock under any plan;
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upon the issuance of any shares of our Common Stock or options or rights to purchase those shares
pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by us or any of our subsidiaries;
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upon the issuance of any shares of our Common Stock pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security not described in the preceding bullet and outstanding as of the date the notes were first
issued;
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for a third-party tender offer by any party other than a tender offer by one or more of our subsidiaries
as described in clause (5) above;
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upon the repurchase of any of shares of our Common Stock pursuant to an open market share purchase
program or other buy-back transaction, including structured or derivative transactions such as accelerated share repurchase transactions
or similar forward derivatives, or other buy-back transaction, that is not a tender offer or exchange offer of the kind described
under clause (5) above;
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solely for a change in the par value of our Common Stock; or
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for accrued and unpaid interest, if any.
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If an adjustment to the conversion rate
otherwise required by the provisions described above would result in a change of less than 1% to the conversion rate, then, notwithstanding
the foregoing, we may, at our election, defer and carry forward such adjustment, except that all such deferred adjustments must
be given effect immediately upon the earliest to occur of the following: (i) when all such deferred adjustments would result
in an aggregate change of at least 1% to the conversion rate, and (ii) on the conversion date for any notes, in each case,
unless the adjustment has already been made. The provisions described in the preceding sentence are referred to herein as the “1%
provision.”
Adjustments to the conversion rate will
be calculated by us to the nearest 1/10,000th of a share.
Adjustment to Conversion Rate upon
Dilutive Issuances of Common Stock
In the event that we issue, or are deemed
to issue, shares of Common Stock, other than excluded securities (as defined below) for a consideration per share (the “trigger
price”) less than the conversion price in effect immediately prior to such issuance or deemed issuance (a “dilutive
issuance”), then immediately after such dilutive issuance, the conversion rate then in effect shall be adjusted to reduce
the conversion price to an amount equal to the higher of (i) the trigger price or (ii) $5.00 (appropriately adjusted for any stock
dividend, stock split, stock combination, reclassification or other similar transaction occurring after the issuance date of the
Notes). As used herein, “excluded securities” means (i) capital stock, rights, warrants or options to subscribe for
or purchase Common Stock or convertible securities (as defined below) (“options”) issued to our or a guarantor’s
directors, officers, employees or consultants in connection with their service as our or a guarantor’s directors, their employment
by us or a guarantor or their retention as consultants by us or a guarantor pursuant to an employee benefit plan approved by our
Board of Directors or the Compensation Committee of our Board of Directors, (ii) shares of Common Stock issued upon the conversion
or exercise of options or any stock or securities (other than options) directly or indirectly convertible into or exercisable or
exchangeable for shares of common stock (“convertible securities”) that were issued and outstanding immediately preceding
the execution and delivery of the Purchase Agreement (the “effective time”), provided such securities are not amended
after the effective time to increase the number of shares of common stock issuable thereunder, lower the exercise or conversion
price thereof or extend the term thereof, (iii) securities issued pursuant to the Purchase Agreement and shares of Common Stock
issued in respect of such securities, (iv) shares of Common Stock issued or issuable by reason of a dividend, stock split or other
distribution on shares of Common Stock (but only to the extent that such a dividend, stock split or distribution results in an
adjustment in the conversion rate pursuant to the other provisions of the notes), and (v) capital stock, options or convertible
securities issued as consideration for an acquisition or strategic transaction (including a joint venture, technology license agreement
or other similar strategic arrangement relating to our business and operations) approved by a majority of our disinterested directors,
provided that any such issuance shall only be a person or entity (or to the equityholders of an entity) which is, itself or through
its subsidiaries, an operating company in a business which our Board of Directors in the good faith exercise of its business judgement
believes is synergistic with our business and shall provide to us additional benefits in addition to the investment of funds, but
shall not, for the purposes of this clause (v), include a transaction in which we are issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is investing in securities.
Recapitalizations, Reclassifications
and Changes of Our Common Stock
In the case of:
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any recapitalization, reclassification or change of our Common Stock (other than a change to par
value, or from par value to no par value, or changes resulting from a share split or share combination),
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any consolidation, merger or combination involving us,
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any sale, lease or other transfer to a third party of all or substantially all of our and our subsidiaries'
consolidated assets, taken as a whole, or
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any statutory share exchange,
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in each case, as a result of which our
Common Stock would be converted into, or exchanged for, stock, other securities, other property or assets (including cash or any
combination thereof) (any such event, a “share exchange event”), then we or the successor or acquiring company, as
the case may be, will execute with the trustee, without the consent of the holders, a supplemental indenture providing that, at
and after the effective time of the share exchange event, the right to convert each $1,000 principal amount of Notes will be changed
into a right to convert such principal amount of Notes into the kind and amount of shares of stock, other securities or other property
or assets (including cash or any combination thereof) that a holder of a number of shares of Common Stock equal to the conversion
rate immediately prior to such share exchange event would have owned or been entitled to receive (the “reference property”)
upon such share exchange event. However, at and after the effective time of the share exchange event, the number of shares of our
Common Stock otherwise deliverable upon conversion of the Notes as set forth under “—Settlement upon Conversion”
and “—Conversion Rights—Interest Make-Whole Payment upon Certain Conversions” above will be deliverable
in the amount and type of reference property that a holder of that number of shares of our Common Stock would have received in
such transaction. If the share exchange event causes our Common Stock to be converted into, or exchanged for, the right to receive
more than a single type of consideration (determined based in part upon any form of stockholder election), the reference property
into which the Notes will be convertible will be deemed to be (i) the weighted average of the types and amounts of consideration
received by the holders of our Common Stock that affirmatively make such an election or (ii) if no holders of our Common Stock
affirmatively make such an election, the types and amounts of consideration actually received by the holders of our Common Stock.
We will notify holders, the trustee and the conversion agent (if other than the trustee) in writing of the weighted average as
soon as practicable after such determination is made.
If the reference property in respect of
any share exchange event includes, in whole or in part, shares of common equity, the supplemental indenture providing that the
Notes will be convertible into reference property will also provide for anti-dilution and other adjustments that are as nearly
equivalent as possible to the adjustments described under “—Conversion Rate Adjustments” above with respect to
the portion of the reference property consisting of such common equity. If the reference property in respect of any such share
exchange event includes shares of stock, securities or other property or assets (other than cash and/or cash equivalents) of a
company other than us or the successor or purchasing company, as the case may be, in such share exchange event, such other company,
if an affiliate of us or the successor or acquiring company, will also execute such supplemental indenture, and such supplemental
indenture will contain such additional provisions to protect the interests of the holders, including the right of holders to require
us to repurchase their notes upon a fundamental change as described under “—Fundamental Change Permits Holders to Require
Us to Repurchase Notes” below, as we in good faith reasonably consider necessary by reason of the foregoing. We agree in
the indenture not to become a party to any such share exchange event unless its terms are consistent with the foregoing.
Adjustments of Prices
Whenever any provision of the indenture
requires us to calculate the last reported sale prices over a span of multiple days (including, without limitation, the period,
if any, for determining “stock price” for purposes of a qualifying fundamental change), we will make appropriate adjustments
in good faith and in a commercially reasonable manner (to the extent no corresponding adjustment is otherwise made pursuant to
the provisions described under “—Conversion Rate Adjustments” above) to each to account for any adjustment to
the conversion rate that becomes effective, or any event requiring an adjustment to the conversion rate where the ex-dividend date,
effective date or expiration date of the event occurs, at any time during the period when the last reported sale prices are to
be calculated.
For the avoidance of doubt, the adjustments
made pursuant to the foregoing paragraph will be made, solely to the extent we determine in good faith and in a commercially reasonable
manner that any such adjustment is appropriate, without duplication of any adjustment made pursuant to the provision set forth
under “—Conversion Rate Adjustments.”
Qualifying Fundamental Change Payment
Upon Conversion in Connection With a Qualifying Fundamental Change
If the “effective date” (as
hereinafter defined) of a “qualifying fundamental change” (as hereinafter defined) occurs prior to the maturity date
of the Notes and a holder elects to convert its notes in connection with such qualifying fundamental change, we will, under certain
circumstances, make a payment to the holder of the Notes so surrendered for conversion equal to $130 per $1,000 of aggregate principal
of notes surrendered for conversion (a “qualifying fundamental change payment”). A “qualifying fundamental change”
means any transaction or event that constitutes a fundamental change defined below in clause (1), (2) or (4) of the definition
of “fundamental change” under “—Fundamental Change Permits Holders to Require Us to Repurchase Notes”,
after giving effect to any exceptions or exclusions from such definition, but without regard to the proviso in clause (2) of the
definition thereof. A conversion of Notes will be deemed for these purposes to be “in connection with” such qualifying
fundamental change if the relevant conversion date occurs during the period from, and including, the effective date of the qualifying
fundamental change up to, and including, the business day immediately prior to the related fundamental change repurchase date (or,
in the case of a qualifying fundamental change that would have been a fundamental change but for the proviso in clause (2) of the
definition thereof, the 35th trading day immediately following the effective date of such qualifying fundamental change) (such
period, the “qualifying fundamental change period”).
Upon surrender of Notes for conversion
in connection with a qualifying fundamental change we will deliver shares of common stock as described under “—Settlement
upon Conversion.” However, for any conversion of Notes following the effective date of such qualifying fundamental change,
the conversion obligation will be calculated by us based solely on the “stock price” (as defined below) for the transaction
and will be deemed to be an amount of cash per $1,000 principal amount of converted Notes equal to the conversion rate, multiplied
by such stock price. We will notify the trustee, the conversion agent (if other than the trustee) and holders, in writing, of the
effective date of any qualifying fundamental change no later than five business days after such effective date. If the holders
of our Common Stock receive in exchange for their Common Stock only cash in a qualifying fundamental change described in clause
(2) of the definition of fundamental change, the stock price shall be the cash amount paid per share. Otherwise, the stock price
shall be the average of the closing sale prices of our Common Stock over the five consecutive trading day period ending on, and
including, the trading day immediately preceding the relevant effective date.
The Company will have the option to pay
any qualifying fundamental change payment in cash and/or freely tradable shares of Common Stock, valued at 95% of the stock price
determined as described above. Subject to the limitation described below above under “—Share Limitation,” any
fundamental change interest payments will be made all in shares of Common Stock unless the Company gives written notice to the
holders that it intends to make future qualifying fundamental change payments either all or partially in cash. Such notice will
not be effective until the end of the 15th trading day after such notice is given.
Notwithstanding the foregoing, if a holder
of Notes converted in connection with a qualifying fundamental change receives a qualifying fundamental change payment, then the
holder of such converted Notes will not receive the interest make-whole payment with respect to such Notes.
Our obligation to make a qualifying fundamental
change payment for Notes converted in connection with a qualifying fundamental change could be considered a penalty, in which case
the enforceability thereof would be subject to general principles of reasonableness and equitable remedies.
Share
Limitation
Notwithstanding the foregoing or anything
to the contrary in the indenture, unless we have obtained the requisite approval of our stockholders pursuant to the applicable
NASDAQ Marketplace rule or listing requirements of the relevant stock exchange, the number of shares we may deliver in respect
of the Notes, including those delivered in lieu of cash interest, in connection with an interest make-whole payment, or as a qualifying
fundamental change payment will not exceed 19.99% of our Common Stock outstanding (as adjusted for stock splits, reverse stock
splits, stock combinations, reclassifications and reorganizations) as of the close of the trading day immediately preceding the
date of the indenture that governs the Notes (the “maximum share reserve”).
We will keep available at all times an
amount of authorized and unissued shares of Common Stock to provide for issuance upon conversion of the Notes from time to time.
No such shares shall be issued to the extent that the shares of Common Stock remaining in the maximum share reserve would, after
giving effect to such issuance, be less than the remaining shares that could be issued upon the conversion of then outstanding
Notes (assuming the maximum increase to the conversion rate upon a dilutive issuance described in “—Adjustment to Conversion
Rate upon Dilutive Issuances of Common Stock”). We may increase the maximum share reserve to the extent that we obtain the
requisite approval of our stockholders pursuant to the applicable NASDAQ Marketplace rule or listing requirements of the relevant
stock exchange.
We will not be required to make any cash
payments in lieu of any fractional shares or have any further obligation to deliver any shares of our Common Stock in excess of
the threshold described above; provided, however, that we will make a cash payment in lieu of any whole shares of Common Stock
that are not able to be delivered in excess of such threshold, calculated based upon the simple average of the daily VWAP (as defined
above under the heading “—Conversion Rights—Interest Make-Whole Payment upon Certain Conversions”) of our
shares for the ten consecutive trading days ending on and including the trading day immediately preceding relevant payment date.
Neither the trustee nor paying agent shall
be responsible for determining or calculating the number of shares issuable in lieu of cash interest on the Notes, the amount of
the interest make-whole payment, the daily VWAP, or the stock price.
Fundamental Change Permits Holders to
Require Us to Repurchase Notes
If a “fundamental change” (as
defined below in this section) occurs at any time prior to the maturity date, holders will have the right, at their option, to
require us to repurchase for cash all of their Notes, or any portion of the principal amount thereof that is equal to $1,000 or
an integral multiple of $1,000. The fundamental change repurchase date will be a date specified by us that is not less than 20
or more than 35 business days following the date of our fundamental change notice as described below.
The fundamental change repurchase price
we are required to pay will be equal to 100% of the principal amount of the Notes to be repurchased,
plus
accrued
and unpaid interest to, but excluding, the fundamental change repurchase date (unless the fundamental change repurchase date falls
after a regular record date but on or prior to the interest payment date to which such regular record date relates, in which case
we will instead pay the full amount of accrued and unpaid interest (to, but not including, such interest payment date) to the holder
of record on such regular record date, and the fundamental change repurchase price will be equal to 100% of the principal amount
of the Notes to be repurchased).
A “fundamental change” will
be deemed to have occurred at the time after the Notes are originally issued if any of the following occurs:
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(1)
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a “person” or “group” within the meaning of Section 13(d) of the Exchange
Act, other than us, our wholly owned subsidiaries and our and their employee benefit plans, files a Schedule TO (or any
successor schedule, form or report) or any schedule, form or report under the Exchange Act that discloses that such person or group
has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of our
Common Stock representing more than 50% of the voting power of our Common Stock, unless such beneficial ownership arises solely
as a result of a revocable proxy delivered in response to a public proxy or consent solicitation made pursuant to the applicable
rules and regulations under the Exchange Act;
provided
that no person or group shall be deemed to be the beneficial
owner of any securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or group until such
tendered securities are accepted for purchase or exchange under such offer;
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(2)
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the consummation of (A) any recapitalization, reclassification or change of our Common Stock
(other than changes resulting from a subdivision or combination or solely a change in par value) as a result of which our Common
Stock would be converted into, or exchanged for, stock, other securities, other property or assets; (B) any share exchange,
consolidation or merger of us pursuant to which our common stock will be converted into cash, securities or other property or assets;
or (C) any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the
consolidated assets of us and our subsidiaries, taken as a whole, to any person other than one or more of our direct or indirect
wholly owned subsidiaries;
provided
,
however
, that a transaction described in clauses (A) or (B) in
which the holders of all classes of our common equity immediately prior to such transaction own, directly or indirectly, more than
50% of all classes of common equity of the continuing or surviving company or transferee or the parent thereof immediately after
such transaction in substantially the same proportions (relative to each other) as such ownership immediately prior to such transaction
shall not be a fundamental change pursuant to this clause (2);
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(3)
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our stockholders approve any plan or proposal for our liquidation or dissolution; or
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(4)
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our Common Stock (or other Common Stock, American depositary receipts, ordinary shares or other
common equity interests underlying the notes) ceases to be listed or quoted on any of the NASDAQ Capital Market, the NYSE American,
The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective successors)
or an established over-the-counter trading market in the United States.
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A transaction or transactions described
in clause (1) or clause (2) above will not constitute a fundamental change, however, if at least 90% of the consideration
received or to be received by our common stockholders, excluding cash payments for fractional shares and cash payments made pursuant
to dissenters’ appraisal rights, in connection with such transaction or transactions consists of shares of Common Stock,
American depositary receipts, ordinary shares or other common equity interests, in each case, that are listed or quoted on any
of the NASDAQ Capital Market, the NYSE American, The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global
Market (or any of their respective successors) or an established over-the-counter trading market in the United States or will be
so listed or quoted when issued or exchanged in connection with such transaction or transactions and as a result of such transaction
or transactions such consideration becomes reference property for the notes, excluding cash payments for fractional shares and
cash payments made pursuant to dissenters’ appraisal rights (subject to the provisions set forth above under “—Conversion
Rights—Settlement upon Conversion”).
Any event, transaction or series of related
transactions that constitute a fundamental change under both clause (1) and clause (2) above (determined without regard
to the proviso in clause (2) above) will be deemed to be a fundamental change solely under clause (2) above.
If any transaction in which our Common
Stock is replaced by the securities of another entity occurs, following completion of any related qualifying fundamental change
period (or, in the case of a transaction that would have been a fundamental change or a qualifying fundamental change but for the
immediately preceding paragraph, following the effective date of such transaction), references to us in the definition of “fundamental
change” above shall instead be references to such other entity.
On or before the 20th business day
after the occurrence of a fundamental change, we will provide to all holders of the notes, the trustee, the conversion agent (if
other than the trustee) and paying agent (if other than the trustee) a notice of the occurrence of the fundamental change and of
the resulting repurchase right. Such notice shall state, among other things:
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the events causing a fundamental change;
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the effective date of the fundamental change;
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the last date on which a holder may exercise the repurchase right;
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the fundamental change repurchase price;
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the fundamental change repurchase date;
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the name and address of the paying agent and the conversion agent, if applicable;
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if applicable, the conversion rate and any adjustments to the conversion rate;
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that the notes with respect to which a fundamental change repurchase notice has been delivered
by a holder may be converted only if the holder withdraws the fundamental change repurchase notice in accordance with the terms
of the indenture; and
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the procedures that holders must follow to require us to repurchase their Notes.
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If Notes are held in certificated form,
to exercise the fundamental change repurchase right, holders of certificated Notes must deliver, prior to the close of business
on the 2
nd
business day immediately preceding the fundamental change repurchase date, the notes to be repurchased, duly
endorsed for transfer, together with a written repurchase notice, to the paying agent. Each repurchase notice must state:
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if certificated, the certificate numbers of the Notes to be delivered for repurchase;
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the portion of the principal amount of Notes to be repurchased, which must be $1,000 or an integral
multiple thereof; and
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that the Notes are to be repurchased by us pursuant to the applicable provisions of the notes and
the indenture.
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If the Notes are not in certificated form,
such repurchase notice must comply with applicable DTC procedures.
Holders of certificated Notes may withdraw
any repurchase notice (in whole or in part) by a written notice of withdrawal delivered to the paying agent prior to the close
of business on the 2
nd
business day immediately preceding the fundamental change repurchase date. The notice of withdrawal
shall state:
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the principal amount of the withdrawn Notes, which must be $1,000 aggregate principal amount or
an integral multiple thereof;
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if certificated Notes have been issued, the certificate numbers of the withdrawn Notes; and
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the principal amount, if any, which remains subject to the repurchase notice, which must be $1,000
aggregate principal amount or an integral multiple thereof.
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If the Notes are not in certificated form,
such notice of withdrawal must comply with applicable DTC procedures.
We will be required to repurchase the Notes
on the fundamental change repurchase date, subject to postponement to comply with applicable law. Holders who have exercised the
repurchase right will receive payment of the fundamental change repurchase price on the later of (i) the fundamental change
repurchase date and (ii) the time of book-entry transfer or the delivery of the Notes. If the paying agent holds money sufficient
to pay the fundamental change repurchase price of the Notes on the fundamental change repurchase date, then, with respect to the
Notes that have been properly surrendered for repurchase and have not been validly withdrawn:
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the Notes will cease to be outstanding and interest will cease to accrue (whether or not book-entry
transfer of the Notes is made or whether or not the Notes are delivered to the paying agent); and
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all other rights of the holder will terminate (other than the right to receive the fundamental
change repurchase price).
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In connection with any repurchase offer
pursuant to a fundamental change repurchase notice, we will, if required:
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comply with the tender offer rules under the Exchange Act that may then be applicable;
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file a Schedule TO or any other required schedule under the Exchange Act; and
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otherwise comply in all material respects with all federal and state securities laws in connection
with any offer by us to repurchase the Notes;
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in each case, so as to permit the rights
and obligations under this “—Fundamental Change Permits Holders to Require Us to Repurchase Notes” to be exercised
in the time and in the manner specified in the indenture.
No Notes may be repurchased by us on any
date at the option of holders upon a fundamental change if the principal amount of the notes has been accelerated, and such acceleration
has not been rescinded, on or prior to such date (except in the case of an acceleration resulting from a default by us in the payment
of the fundamental change repurchase price with respect to such Notes).
The repurchase rights of the holders upon
a fundamental change could discourage a potential acquirer of us. The fundamental change repurchase feature, however, is not the
result of management's knowledge of any specific effort to obtain control of us by any means or part of a plan by management to
adopt a series of anti-takeover provisions.
Notwithstanding anything to the contrary
in the foregoing, we will not be required to repurchase or make an offer to repurchase the Notes upon a fundamental change if a
third party makes such an offer in the same manner, at the same time and otherwise in compliance with the requirements for an offer
made by us as set forth in the indenture and such third party purchases all Notes properly surrendered and not validly withdrawn
under its offer in the same manner, at the same time and otherwise in compliance with the requirements for an offer made by us
as set forth in the indenture.
To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the indenture relating to our obligations to repurchase the Notes
upon a fundamental change, we will comply with the applicable securities laws and regulations and will not be deemed to have breached
our obligations under such provisions of the indenture by virtue of such conflict.
The term fundamental change is limited
to specified transactions and may not include other events that might adversely affect our financial condition. In addition, the
requirement that we offer to repurchase the Notes upon a fundamental change may not protect holders in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving us.
Furthermore, holders may not be entitled
to require us to repurchase their Notes upon a fundamental change or entitled to a qualifying fundamental change payment upon conversion
as described under “—Qualifying Fundamental Change Payment Upon Conversion in Connection With a Qualifying Fundamental
Change” in circumstances involving a significant change in the composition of our board, unless such change is in connection
with a fundamental change or qualifying fundamental change, as the case may be, as described herein.
The definition of fundamental change includes
a phrase relating to the sale, lease or other transfer of “all or substantially all” of the consolidated assets of
us and our subsidiaries, taken as a whole. There is no precise, established definition of the phrase “substantially all”
under applicable law. Accordingly, the ability of a holder of the notes to require us to repurchase its notes as a result of the
sale, lease or other transfer of less than all of the consolidated assets of us and our subsidiaries, taken as a whole may be uncertain.
We may not have sufficient future cash
flow from operations to make any required repurchase in cash or the ability to arrange additional financing, if necessary, on acceptable
terms. See “Risk Factors—We face several risks regarding holders’ potential rights to require us to repurchase
the Notes on the put date or upon a fundamental change.” If we fail to repurchase the Notes when required following a fundamental
change, we will be in default under the indenture.
Consolidation,
Merger and Sale of Assets
The indenture provides that we shall not
consolidate with or merge with or into, or sell, convey, transfer or lease all or substantially all of the consolidated properties
and assets of us and our direct or indirect subsidiaries, taken as a whole, to another person (other than one or more of our direct
or indirect wholly owned subsidiaries), unless (i) the resulting, surviving or transferee person (if not us) is a corporation
organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and such
corporation (if not us) expressly assumes by supplemental indenture all of our obligations under the notes and the indenture; and
(ii) immediately after giving effect to such transaction, no default or event of default has occurred and is continuing under
the indenture. Upon any such consolidation, merger or sale, conveyance, transfer or lease, the resulting, surviving or transferee
person (if not us or any of our direct or indirect wholly owned subsidiaries) shall succeed to, and may exercise every right and
power of, ours under the notes and the indenture, and we shall be discharged from our obligations under the notes and the indenture
except in the case of any such lease.
Although these types of transactions are
permitted under the indenture, certain of the foregoing transactions could constitute a fundamental change permitting each holder
to require us to repurchase the Notes of such holder as described above.
This covenant includes a phrase relating
to the sale, conveyance, transfer and lease of “all or substantially all” of the consolidated assets of us and our
subsidiaries. There is no precise, established definition of the phrase “all or substantially all” under applicable
law. Accordingly, whether a sale, conveyance, transfer or lease of less than all of the consolidated assets of us and our subsidiaries,
taken as a whole, constitutes a sale or other disposition of “all or substantially all” may be uncertain.
Additional Covenants
Maintenance of Properties and Insurance
We will and will cause each of our subsidiaries
to maintain all material properties in good working order and condition in all material respects (subject to ordinary wear and
tear) and make all necessary repairs, renewals, replacements, additions, betterments and improvements thereto and actively conduct
and carry on its business. However, this will not prevent us or our subsidiaries from discontinuing the operation and maintenance
of any of its properties if discontinuance is, in the good faith judgment of our Board of Directors or other governing body of
us or the subsidiary concerned desirable in the conduct of our business and is not disadvantageous in any material respect to the
holders.
We have agreed to maintain insurance (including
appropriate self-insurance) against loss or damage of the kinds that, in our good faith judgment, are adequate and appropriate
for the conduct of our and our subsidiaries’ business in a prudent manner, with reputable insurers or with the U.S. government
or an agency or instrumentality thereof, in amounts, with deductibles, and by such methods as will be customary, in our good faith
judgment, for companies similarly situated in the industry.
Issuance or Sale of Subsidiary Stock
We will not and will not permit any of
our subsidiaries to sell any capital stock of a subsidiary, except to us or to one of our wholly owned subsidiaries, unless we
and our subsidiaries, as the case may be, sell 100% of the capital stock of the subsidiary that we own in accordance with the applicable
indenture requirements. In addition, none of our subsidiaries will issue any capital stock, other than to us or one of our subsidiaries.
Impairment of Security
Neither we nor any of our guarantors will
take or omit to take any action that would adversely affect or impair the liens in favor of the collateral agent, on behalf of
itself, the trustee and the holders of the notes, with respect to the collateral and neither we nor any of our subsidiaries will
grant to any individual or entity, or permit any individual or entity to retain (other than the collateral agent), any interest
whatsoever in the collateral other than permitted liens. Neither we nor any of our subsidiaries will enter into any agreement that
requires the proceeds received from any sale of collateral to be applied to repay, redeem, defease or otherwise acquire or retire
any indebtedness of any individual or entity, other than as permitted or required by the indenture, the notes or the collateral
documents. We will and will cause each guarantor to at our sole cost and expense, execute and deliver all such agreements and instruments
as the collateral agent or the trustee will reasonably request to more fully or accurately describe the property intended to be
collateral or the obligations intended to be secured by the collateral documents. We will and will cause each guarantor to at our
sole cost and expense, file any notice filings or other agreements or instruments as may be reasonably necessary or desirable under
applicable law to perfect the liens created by the collateral documents at such times and at such places as shall be necessary
to perfect such liens.
Line of Business; Corporate Existence
We will not and will not permit any of
our subsidiaries to, engage in any business other than permitted businesses, except to such extent as would not be material to
us or our subsidiaries taken as a whole. As used in the indenture, “permitted business” means any business similar
in nature to any business conducted by us and our subsidiaries on the date of the indenture and any business reasonably ancillary,
incidental, complementary or related thereto or a reasonable extension, development or expansion thereof, in each case, as determined
in good faith by our Board of Directors.
We will do or cause to be done all things
necessary to preserve and keep in full force and effect our corporate existence, and the corporate, partnership or other existence
of each of our subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to
time) of us and each subsidiary and our and our subsidiaries’ rights (charter and statutory), licenses and franchises. However,
we will not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any
of our subsidiaries, if the preservation thereof is no longer desirable in the conduct of the business, taken as a whole, and that
the loss thereof would not reasonably be expected to have a material adverse effect.
Taxes
We will pay and will cause each of our
subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested
in good faith and by appropriate proceedings or where the failure to effect such payment would not reasonably be expected to have
a material adverse effect.
Events of Default
An “event of default” means
any of the following events:
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our failure to comply with our obligation to convert the Notes in accordance with the indenture
upon exercise of a holder’s conversion right, including the payment of any interest make-whole payment or qualifying fundamental
change payment, and such failure continues for a period of five (5) business days;
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our Common Stock is not listed on an eligible market;
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we default in the payment when due of interest (whether in cash or shares, as determined by us)
on the Notes and such default continues for a period of 30 days;
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we default in the payment when due of principal of or premium, if any, on the Notes when the same
becomes due and payable at maturity, upon redemption or repurchase or otherwise;
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we or any of our subsidiaries fail to comply with certain provisions regarding restricted payments,
incurrence of indebtedness and issuance of preferred stock, asset sales and events of loss, liens, offers to repurchase upon a
change of control and merger, consolidation or sale of assets;
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our failure to give a fundamental change notice as described under “—Fundamental Change
Permits Holders to Require Us to Repurchase Notes” or notice of a qualifying fundamental change as described under “Qualifying
Fundamental Change Payment Upon Conversion in Connection With a Qualifying Fundamental Change,” in each case, when due and
such failure continues for three (3) business days after the due date for such notice;
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we or any guarantor fail to observe or perform any covenant, representation, warranty or other
agreement in the indenture (other than a default specified above), the notes, the note guarantees or the collateral documents for
30 days after notice to us by the trustee or the holders of at least 25% in aggregate principal amount of the notes then outstanding
voting as a single class;
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a default occurs under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any indebtedness for money borrowed by us or any of our subsidiaries (or the payment
of which is guaranteed by us or any of our subsidiaries), whether such indebtedness or guarantee now exists, or is created after
the date of the indenture, which default is caused by a failure to pay principal of, or interest or premium, if any, on such indebtedness
prior to the expiration of the grace period provided in such indebtedness on the date of such default (a “payment default”)
or results in the acceleration of the indebtedness prior to its express maturity and, in each case, the principal amount of the
indebtedness, together with the principal amount of any other such indebtedness under which there has been a payment default or
the maturity of which has been so accelerated, aggregates $1 million or more, in any such case, after notice to us by the trustee
or the holders of at least 25% in aggregate principal amount of the notes then outstanding voting as a single class;
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a final judgment or final judgments for the payment of money are entered by a court or courts of
competent jurisdiction against us or any of our subsidiaries and the judgment or judgments remain undischarged, unpaid or unstayed
for a period (during which execution will not be effectively stayed) of 60 days, provided that the aggregate of all such undischarged
judgments exceeds $1 million (excluding amounts covered by insurance), after notice to us by the trustee or the holders of at least
25% in aggregate principal amount of the notes then outstanding voting as a single class;
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except as otherwise permitted by the indenture, any note guarantee is held in any judicial proceeding
to be unenforceable or invalid or ceases for any reason to be in full force and effect, or any guarantor, or any person acting
on behalf of any guarantor, denies or disaffirms its obligations under its note guarantee;
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except as otherwise permitted by the indenture, any lien purported to be granted under any collateral
document on any collateral having a fair market value, individually or in the aggregate, in excess of $1.0 million is held in any
judicial proceeding not to be an enforceable and perfected first priority lien or ceases for any reason to be in full force and
effect (other than as a result of any action or inaction by the trustee, collateral agent or the holders of the notes), subject
only to permitted liens;
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we, any of our significant subsidiaries (as defined in Rule 1-02 of Regulation S-X under the Securities
Act and Exchange Act or any successor rule) or any group of subsidiaries that, taken as a whole, would constitute a significant
subsidiary, under bankruptcy law commences a voluntary case, consents to the entry of an order for relief against it in an involuntary
case, consents to the appointment of a custodian, receiver, trustee, assignee, liquidator or similar official under bankruptcy
law of it or for all or substantially all of its property, makes a general assignment for the benefit of its creditors, or generally
is not paying its debts as they become due; or a court of competent jurisdiction enters an order or decree under any bankruptcy
law that is for relief against any of the aforementioned entities in an involuntary case; appoints a custodian, receiver, trustee,
assignee, liquidator or similar official under bankruptcy law of any of the aforementioned entities or for all or substantially
all of the property of any of the aforementioned entities; or orders the liquidation of any of the aforementioned entities and
the order or decree remains unstayed and in effect for 60 consecutive days;
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any provision of any collateral document, at any time after the execution and delivery thereof,
ceases to be in full force and effect, which adversely affects the validity, enforceability, perfection or priority of the liens
purported to be granted pursuant to the collateral documents in any material respect, for any reason other than (x) as expressly
permitted under the indenture or such collateral documents, (y) as a result of any action or inaction by the trustee, the collateral
agent or the holders of the notes or (z) as a result of the satisfaction and discharge in full of the indenture;
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any collateral document, at any time after the execution and delivery thereof, ceases to create
a valid and perfected lien, with the priority required by the collateral documents, on and security interest in any material portion
of the collateral purported to be covered thereby, for any reason other than (x) as expressly permitted hereunder or thereunder,
(y) as a result of any action or inaction by the trustee, the collateral agent or the holders of the notes, or (z) as a result
of the satisfaction and discharge in full of the indenture; or
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any credit party (as defined in the indenture) contests in writing the validity, enforceability,
perfection or priority of any liens on a material portion of the collateral.
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Acceleration and Other Remedies
If any event of default (other than an
event of default relating to bankruptcy law specified above), occurs and is continuing, the trustee or the holders of at least
25% in principal amount of the then outstanding Notes may declare all the notes to be due and payable immediately (the “event
of default redemption price”). Upon any such declaration, the Notes will become due and payable immediately. Notwithstanding
the foregoing, if an event of default relating to bankruptcy law specified above occurs with respect to us, any of our significant
subsidiaries or any group of our subsidiaries that, taken as a whole, would constitute a significant subsidiary, all outstanding
Notes will be due and payable immediately without further action or notice.
The majority holders (which mean the holders
of a majority in aggregate principal amount of notes outstanding at any time) by written notice to the trustee and the collateral
agent may, on behalf of all of the holders, rescind an acceleration and its consequences if the rescission would not conflict with
any judgment or decree and if all existing events of default (except nonpayment of principal, interest or premium that has become
due solely because of the acceleration) have been cured or waived.
In the event of a declaration of acceleration
of the Notes solely because an event of default described in the eight bullet point above has occurred and is continuing, the declaration
of acceleration of the Notes shall be automatically rescinded and annulled if the payment default or acceleration triggering such
event of default pursuant to such eight bullet point shall be remedied or cured or waived by the holders of the relevant debt within
20 business days after the declaration of acceleration with respect thereto and if the rescission and annulment of the acceleration
of the Notes would not conflict with any judgment or decree of a court of competent jurisdiction obtained by the trustee for the
payment of amounts due on the notes.
If an event of default occurs and is continuing,
the trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the notes then
due or to enforce the performance of any provision of the notes or the indenture. The trustee may maintain a proceeding even if
it does not possess any of the notes or does not produce any of them in the proceeding. A delay or omission by the trustee or any
holder in exercising any right or remedy accruing upon an event of default will not impair the right or remedy or constitute a
waiver of or acquiescence in the event of default and all remedies will be cumulative to the extent permitted by law.
However, the sole remedy for an event of
default relating to any failure by us to comply with the indenture reporting requirements will, for the first 180 days after the
occurrence of the event of default, consist exclusively of the right to receive special interest (“special interest”)
on the Notes at an annual rate equal to 0.50% of the principal amount of the Notes. Such special interest will be paid quarterly
in arrears on each interest payment date, with the first quarterly payment due on the first interest payment date following the
date on which such special interest began to accrue on the Notes and shall cease to accrue upon the cure or waiver of such event
of default. Special interest will accrue on all outstanding Notes from and including the date on which an event of default relating
to any failure by us to comply with the indenture reporting requirements first occurs to but not including the 180th day thereafter
(or such earlier date on which such event of default will have been cured or waived). On the 180th day (or earlier, if such event
of default is earlier cured or waived), the special interest will cease to accrue and, if the event of default relating to the
reporting failure shall not have been cured or waived prior to such 180th day, the Notes will be subject to acceleration. The limitation
on remedies related to reporting requirements will not affect the rights of holders in the event of the occurrence of any other
event of default. Upon the occurrence of an event of default giving rise to the obligation to pay special interest, all references
herein to interest accrued or payable on any date will include any special interest accrued or payable.
Waiver of Past Defaults
The majority holders by notice to the trustee
and the collateral agent may on behalf of the holders of all of the notes waive an existing default and its consequences, except
a default or event of default relating to bankruptcy or in respect of a covenant or provision of the indenture that cannot be modified
or amended without the consent of the holder of each outstanding note affected (in which case such notice to waive such existing
default and its consequences under the indenture shall be given to the trustee by all holders of affected notes). Upon any such
waiver, the default will cease to exist, and any event of default arising therefrom will be deemed to have been cured for every
purpose of the indenture but the waiver will not extend to any subsequent or other default or impair any right consequent thereon.
Control by Majority
Subject to the rights of the trustee to
abstain from exercising certain of its rights under the indenture, the majority holders will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred
on the trustee, provided that such direction is not in conflict with any rule of law, the indenture or the collateral documents,
the trustee may take any other action deemed proper by the trustee which is not inconsistent with such direction. The trustee may
refuse to follow any direction that conflicts with law or that the trustee determines may involve the trustee in personal liability
or may be prejudicial to the rights of the holders of Notes.
Limitation on Suits
No holder will have any right to institute
any proceeding, judicial or otherwise with respect to the indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder (other than in the case of an event of default relating to bankruptcy law), unless such holder gives the
trustee written notice of a continuing event of default; the holders of at least 25% in principal amount of the then outstanding
Notes make a written request to the trustee to pursue the remedy; the holder or holders of the Notes offer and, if requested, provide
the trustee indemnity reasonably satisfactory to the trustee against any loss, liability or expense; the trustee does not comply
with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and during
such 60-day period the majority holders do not give the trustee a direction inconsistent with the request.
No holders will have any right to avail
itself of any provision of the indenture in a manner that will affect, disturb or prejudice the rights of any other holders, or
to obtain or to seek to obtain priority or preference over any other holders or to enforce any right under the indenture, except
in the manner herein provided and for the equal and ratable benefit of all the holders.
Unconditional Rights of Holders of
Notes to Receive Payment
The right of any holder to receive payment
of the principal, the redemption price, or interest, in respect of the Notes held by the holder, on or after the respective due
dates expressed in the Notes or any redemption date, as applicable, and to convert the Notes, or to bring suit for the enforcement
of any payment on or after such respective dates or the right to convert, will not be impaired or affected adversely without the
consent of such holder.
Collection Suit and Proofs of Claim
filed by Trustee
If an event of default relating to our
failure to make certain payments of interest, principal, premium or other payments occurs and is continuing, the trustee is authorized
to recover judgment in its own name and as trustee of an express trust against us and our subsidiaries for the whole amount of
principal of, premium, if any, redemption price, interest and any other amounts remaining unpaid on the notes and interest on overdue
principal and, to the extent lawful, interest and such further amount as will be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and advances of the trustee, its agents and counsel.
The trustee is authorized to file such
proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the trustee (including
any claim for the reasonable compensation, expenses, disbursements and advances of the trustee, its agents and counsel), the collateral
agent and the holders of the notes allowed in any judicial proceedings relative to us (or any other obligor upon the notes and
the note guarantees, including the guarantors), its creditors or its property and will be entitled and empowered to collect, receive
and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding
is authorized by each holder to make such payments to the trustee, and in the event that the trustee will consent to the making
of such payments directly to the holders, to pay to the trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the trustee, its agents and counsel, and any other amounts due the trustee. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the trustee, the collateral agent, the respective agents
and counsel of either one, and any other amounts due the trustee or the collateral agent out of the estate in any such proceeding,
is denied for any reason, payment of the same will be secured by a lien on, and will be paid out of, any and all distributions,
dividends, money, securities and other properties that the holders may be entitled to receive in such proceeding whether in liquidation
or under any plan of reorganization or arrangement or otherwise. The trustee is not authorized to authorize or consent to or accept
or adopt on behalf of any holder any plan of reorganization, arrangement, adjustment or composition affecting the notes or the
rights of any holder, or to vote in respect of the claim of any holder in any such proceeding.
Priorities
If the trustee collects any money with
respect to an event of default, it will pay out the money first to the trustee, the collateral agent, and their respective agents
and attorneys for amounts due to each under the indenture, including payment of all compensation, expense and liabilities incurred,
and all advances made, by the trustee or the collateral agent and the costs and expenses of collection. Second, the money will
be paid to holders of notes for amounts due and unpaid on the notes for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and payable on the notes for principal, premium, if any, interest
and any other amounts due, respectively. Finally, the remainder will be paid to us or to another party as a court of competent
jurisdiction will direct. The trustee may fix a record date and payment date for any payment to holders of notes.
Undertaking for Costs
In any suit for the enforcement of any
right or remedy under the indenture or in any suit against the trustee for any action taken or omitted by it as trustee, in either
case in respect of the Notes, a court may require any party litigant in such suit to file an undertaking to pay the costs of the
suit. The court may also assess reasonable costs, including reasonable attorney’s fees, and expenses, against any party litigant
in the suit having due regard to the merits and good faith of the claims or defenses made by the party litigant. However, the undertaking
allowance will not apply to any suit instituted by us, to any suit instituted by the trustee, to any suit instituted by any holder,
or group of holders, holding in the aggregate more than 10% in aggregate principal amount of the outstanding Notes, or to any suit
instituted by any holder for the enforcement of the payment of the principal amount or interest, on any Note on or after the stated
maturity of such Note or applicable redemption price on or after the applicable redemption date.
Waiver of Stay or Extension of Laws
We covenant (to the extent that we may
lawfully do so) that we will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, or extension law that may affect the covenants or the performance of the indenture. We, to the extent that we may
lawfully do so, expressly waive all benefit or advantage of any such law and we covenant that we will not hinder, delay or impede
the execution of any power granted to the trustee by the indenture.
Modification and Amendment
We and the trustee or, with respect to
the collateral documents, we and the collateral agent may amend or supplement the indenture, the Note guarantees, the Notes and
any collateral document with the consent of the majority holders voting as a single class, any existing default or event of default
(other than in the payment of the principal of, premium, if any, interest or any other amounts due on the Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance with any provision of this indenture, the Note guarantees,
the Notes and any collateral document may be waived with the consent of the majority holders voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or purchase of, the notes), subject to certain conditions.
We will send a notice to the affected holders
briefly describing the amendment, supplement or waiver. If we fail to send the notice or the notice is deficient, it will not impair
or affect the validity of any amended or supplemented document or waiver. The majority holders may also waive compliance in a particular
instance with any provision of the indenture or the notes, the note guarantees or any collateral document. Without the consent
of each holder affected, an amendment or waiver may not with respect a non-consenting holder’s Notes:
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reduce the principal amount of Notes whose holders must consent to an amendment, supplement or
waiver;
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reduce the principal of, redemption price of, interest, premium, or any other amounts due under
the indenture or change the fixed maturity of any note or alter or waive any of the provisions with respect to the redemption of
the notes except as otherwise provided in the indenture;
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reduce the rate of or change the time for payment of interest on any Note;
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waive a default or event of default in the payment of principal of or premium, if any, interest
or any other amounts due on the Notes (except a rescission of acceleration of the notes by the majority holders and a waiver of
the payment default that resulted from such acceleration);
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make any Note payable in money or currency other than that stated in the Notes;
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make any change in the provisions of this indenture relating to waivers of past defaults or the
rights of holders of Notes to receive payments of principal or interest or premium, if any, or any other amounts due on the Notes;
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make any change in certain provisions relating to events of default and the amendment and waiver
provisions;
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impair the right to institute suit for the enforcement of any payment on or conversion of any Note;
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modify our obligation to purchase Notes at the option of holders or our right to redeem the Notes,
in a manner adverse to the holders;
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make any change that adversely affects the repurchase option of holders upon a fundamental change;
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reduce the percentage in aggregate principal amount of Notes outstanding necessary to modify or
amend this indenture or to waive any past default;
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modify the provisions requiring notice to the trustee in any manner adverse to holders;
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reduce the quorum or voting requirements under this indenture;
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modify in any manner the calculation of the interest make-whole or qualifying fundamental change
payment;
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change the ranking of the Notes in a manner adverse to the holders;
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release any collateral from the liens of any collateral documents except as contemplated by the
collateral documents;
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adversely affect the conversion rights of the holders of the Notes; or
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release any guarantor from any of its obligations under its Note guarantee or the indenture, except
in accordance with the terms of the indenture.
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Upon the satisfaction of and subject to
certain conditions, the trustee and/or collateral agent, as applicable, will join us in the execution of such amended or supplemental
indenture, the Notes, Note guarantees or collateral document.
We are permitted to modify certain provisions
of the indenture without the consent of the holders of the Notes.
Neither we nor any of our subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any holder of the Notes for or
as an inducement to any consent, waiver or amendment of any of the terms or provisions of the indenture or the Notes unless such
consideration is offered to be paid or is paid to all holders of the Notes that consent, waive or agree to amend in the time frame
in solicitation documents relating to the consent, waiver or agreement.
Discharge
We may satisfy and discharge our obligations
under the Notes and the indenture by delivering to the securities registrar for cancellation all outstanding notes or by depositing
with the trustee or delivering to the holders, as applicable, after the Notes have become due and payable, whether at maturity,
at any fundamental change repurchase date, upon conversion or otherwise, cash and/or (in the case of conversion) shares of Common
Stock sufficient to pay all of the outstanding Notes and paying all other sums payable under the indenture by us. Such discharge
is subject to terms contained in the indenture.
Calculations in Respect of Notes
Except as otherwise provided above, we
will be responsible for making all calculations called for under the Notes. These calculations include, but are not limited to,
determinations of the stock price, the last reported sale prices of our common stock, accrued interest payable on the notes, the
interest make-whole payment, the daily VWAP and the conversion rate of the notes (including any adjustments thereof). We will make
all these calculations in good faith and, absent manifest error, our calculations will be final and binding on holders of notes.
We will provide a schedule of our calculations to each of the trustee and the conversion agent, and each of the trustee and the
conversion agent is entitled to rely conclusively upon the accuracy of our calculations without independent verification. The trustee
will forward our calculations to any holder of notes upon the written request of that holder.
Reports
The indenture provides that any annual
or quarterly reports (on Form 10-K or Form 10-Q or any respective successor form) that we are required to file with the
SEC pursuant to Section 13 or 15(d) of the Exchange Act (excluding, for the avoidance of doubt, any such information, documents
or reports, or portions thereof, subject to confidential treatment and any correspondence with the SEC) must be filed by us with
the trustee within 15 days after the same are required to be filed with the SEC (giving effect to any grace period provided
by Rule 12b-25 under the Exchange Act (or any successor rule)). Documents filed by us with the SEC via the EDGAR system (or
any successor thereto) will be deemed to be delivered and filed with the trustee as of the time such documents are filed via EDGAR
(or any successor thereto) it being understood that the trustee shall have no responsibility to determine if such filings have
been made. Notwithstanding the foregoing, at any time we are otherwise not required to file documents or reports with the SEC pursuant
to Section 13 or 15(d) of the Exchange Act and the conversion obligation for the notes may be satisfied by the delivery of
reference property consisting of, in whole or in part, another entity’s common stock, American depositary receipts, ordinary
shares or other common equity, as the case may be, we may satisfy our obligations under this covenant by delivering or filing the
financial information of such entity within the same time periods and in the same manner described above. Delivery of reports to
the trustee is for information purposes only, and the trustee’s receipt thereof shall not constitute actual or constructive
notice of any information contained therein including our compliance with any covenants under the indenture (as to which the trustee
is entitled to certificates).
Compliance Certificate
We and each guarantor will deliver to the
trustee, within 90 days after the end of each fiscal year, an officers’ certificate, one of the signatories of which will
be our chief executive officer, chief financial officer or chief accounting officer, stating that a review of our activities and
the activities of our subsidiaries during the preceding fiscal year has been made under the supervision of the signing officers
with a view to determining whether we and each obligor under the Notes and the indenture has kept, observed, performed and fulfilled
its obligations under the indenture, the Note guarantee and the collateral documents. The officers’ certificate will also
state, as to each such officer signing the certificate, that to the best of his or her knowledge we and each other obligor has
kept, observed, performed and fulfilled each and every covenant contained in the indenture, the Notes, the Note guarantees and
the collateral documents and is not in default in the performance or observance of any of the terms, provisions and conditions
of this indenture, the Notes, the note guarantees and the collateral documents (or, if a default or event of default will have
occurred, describing all such defaults or events of default of which he or she may have knowledge and what action we or such obligor
is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains
in existence by reason of which payments on account of the principal of, interest or any other amounts due, if any, on the Notes
is prohibited or if such event has occurred, a description of the event and what action we or the other obligor is taking or proposes
to take with respect thereto.
As long as any of the Notes are outstanding,
we will deliver to the trustee, an officers’ certificate specifying any event of default of which the officer becomes aware
and specifying the event of default and what action we are taking or we propose to take with respect to the event of default.
Trustee
We have appointed The Bank of New York
Mellon Trust Company, N.A., the trustee under the indenture, as paying agent, conversion agent, note registrar, collateral agent
and custodian for the notes. The trustee or its affiliates may provide banking and other services to us in the ordinary course
of their business. The indenture contains certain limitations on the rights of the trustee, as long as it or any of its affiliates
remains our creditor, to obtain payment of claims in certain cases or to realize on certain property received on any claim as security
or otherwise. The trustee and its affiliates will be permitted to engage in other transactions with us. However, if the trustee
or any affiliate continues to have any conflicting interest and a default occurs with respect to the notes, the trustee must eliminate
such conflict or resign.
Maintenance of Office or Agency
We will maintain in the Borough of Manhattan,
The City of New York, an office or agency (which may be an office of the trustee or an affiliate of the trustee, registrar or co-registrar)
where the Notes may be surrendered for registration of transfer or for exchange. Notices and demands to or upon us in respect of
the notes or the indenture may also be served at that office or agency. We will give prompt written notice to the trustee of the
location, and any change in the location, of the office or agency in the Borough of Manhattan and any other designation or rescission
of any other office or agency. If we fail to maintain the required office or agency or we fail to furnish the trustee with the
address of that office or agency, such presentations, surrenders, notices and demands may be made or served at the corporate trust
office of the trustee. We may also designate one or more other offices or agencies where the Notes may be presented or surrendered
for any or all such purposes and may from time to time rescind such designations. However, no additional designation or rescission
will relieve us of our obligation to maintain an office or agency in the Borough of Manhattan, The City of New York. We have initially
designated the office of the trustee, presently located at 101 Barclay Street, New York, NY 10286, as one such office or agency.
Notices
Any notice or communication by us, any
guarantor or the trustee to the others is duly given if in writing and delivered in person or mailed by first class mail (registered
or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the addresses set
forth in the indenture or as otherwise later designated.
All notices and communications (other than
those sent to holders) will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next business
day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice of communication to a holder
will be with respect to global notes, sent in accordance with DTC’s customary policies and procedures and, with respect to
certificated Notes, mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier
guaranteeing next day delivery to its address shown in the registrar’s records. Failure to mail a notice or communication
to a holder or any defect in it shall not affect its sufficiency with respect to other holders.
If we or a guarantor mails a notice or
communication to holders, we or our guarantor will mail a copy to the trustee and each agent at the same time.
Governing Law
The indenture provides that it and the
Notes, and any claim, controversy or dispute arising under or related to the indenture or the Notes, will be governed by and construed
in accordance with the laws of the State of New York.
Book-Entry, Settlement and Clearance
The Global Notes
The Notes will be initially issued in the
form of one or more registered notes in global form, without interest coupons (the “global notes”). Upon issuance,
each of the global notes will be deposited with the trustee as custodian for DTC and registered in the name of Cede & Co.,
as nominee of DTC.
Ownership of beneficial interests in a
global note will be limited to persons who have accounts with DTC (“DTC participants”) or persons who hold interests
through DTC participants. We expect that under procedures established by DTC:
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upon deposit of a global note with DTC's custodian, DTC will credit portions of the principal amount
of the global note to the accounts of the DTC participants designated by the underwriter; and
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ownership of beneficial interests in a global note will be shown on, and transfer of ownership
of those interests will be effected only through, records maintained by DTC (with respect to interests of DTC participants) and
the records of DTC participants (with respect to other owners of beneficial interests in the global note).
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Beneficial interests in global notes may
not be exchanged for Notes in physical, certificated form except in the limited circumstances described below.
Book-Entry Procedures for the Global
Notes
All interests in the global notes will
be subject to the operations and procedures of DTC and, therefore, you must allow for sufficient time in order to comply with these
procedures if you wish to exercise any of your rights with respect to the Notes. We provide the following summary of those operations
and procedures solely for the convenience of investors. The operations and procedures of DTC are controlled by that settlement
system and may be changed at any time. Neither we nor the underwriter are responsible for those operations or procedures.
DTC has advised us that it is:
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a limited purpose trust company organized under the laws of the State of New York;
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a “banking organization” within the meaning of the New York State Banking Law;
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a member of the Federal Reserve System;
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a “clearing corporation” within the meaning of the Uniform Commercial Code; and
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a “clearing agency” registered under Section 17A of the Exchange Act.
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DTC was created to hold securities for
its participants and to facilitate the clearance and settlement of securities transactions between its participants through electronic
book-entry changes to the accounts of its participants. DTC's participants include securities brokers and dealers, including the
underwriter; banks and trust companies; clearing corporations and other organizations. Indirect access to DTC’s system is
also available to others such as banks, brokers, dealers and trust companies; these indirect participants clear through or maintain
a custodial relationship with a DTC participant, either directly or indirectly. Investors who are not DTC participants may beneficially
own securities held by or on behalf of DTC only through DTC participants or indirect participants in DTC.
So long as DTC's nominee is the registered
owner of a global note, that nominee will be considered the sole owner or holder of the Notes represented by that global note for
all purposes under the indenture. Except as provided below, owners of beneficial interests in a global note:
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will not be entitled to have notes represented by the global note registered in their names;
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will not receive or be entitled to receive physical, certificated Notes; and
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will not be considered the owners or holders of the Notes under the indenture for any purpose,
including with respect to the giving of any direction, instruction or approval to the trustee under the indenture.
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As a result, each investor who owns a beneficial
interest in a global note must rely on the procedures of DTC to exercise any rights of a holder of Notes under the indenture (and,
if the investor is not a participant or an indirect participant in DTC, on the procedures of the DTC participant through which
the investor owns its interest). Neither we nor the trustee, paying agent or conversion agent has any responsibility or liability
for any act or omission of DTC.
Payments of principal and interest with
respect to the Notes represented by a global note will be made by the trustee to DTC's nominee as the registered holder of the
global note. Neither we nor the trustee will have any responsibility or liability for the payment of amounts to owners of beneficial
interests in a global note, for any aspect of the records relating to or payments made on account of those interests by DTC, or
for maintaining, supervising or reviewing any records of DTC relating to those interests.
Payments by participants and indirect participants
in DTC to the owners of beneficial interests in a global note will be governed by standing instructions and customary industry
practice and will be the responsibility of those participants or indirect participants and DTC.
Transfers between participants in DTC will
be effected under DTC's procedures and will be settled in same-day funds.
Certificated Notes
Notes in physical, certificated form will
be issued and delivered to each person that DTC identifies as a beneficial owner of the related notes only if:
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DTC notifies us at any time that it is unwilling or unable to continue as depositary for the global
notes and a successor depositary is not appointed within 90 days;
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DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary
is not appointed within 90 days; or
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an event of default with respect to the Notes has occurred and is continuing and such beneficial
owner requests that its Notes be issued in physical, certificated form.
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MATERIAL
U.S. FEDERAL INCOME TAX CONSIDERATIONS
This section is a summary of certain material
U.S. federal income tax considerations relating to the ownership and disposition of the Notes and any shares of our Common Stock
into which the Notes may be converted. This summary does not provide a complete analysis of all potential tax considerations. The
information provided below is based on existing U.S. federal income tax authorities, all of which are subject to change or differing
interpretations, possibly with retroactive effect. There can be no assurance that the Internal Revenue Service (the “IRS”)
will not challenge one or more of the tax consequences described herein, and we have not obtained, and do not intend to obtain,
a ruling from the IRS with respect to the U.S. federal income tax consequences of owning or disposing of the Notes or Common Stock.
The summary generally applies only to beneficial owners of the Notes that purchase their Notes for an amount equal to the “issue
price” of the Notes, which is the first price at which a substantial amount of the Notes is sold for money to the public
(not including sales to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, initial
purchasers, placement agents or wholesalers), and that hold the Notes and Common Stock as “capital assets” (generally,
for investment). This discussion does not purport to deal with all aspects of U.S. federal income taxation that may be relevant
to a particular beneficial owner in light of the beneficial owner’s circumstances (for example, persons subject to the alternative
minimum tax provisions of the Internal Revenue Code of 1986, as amended (the “Code”), a U.S. holder (as defined below)
whose “functional currency” is not the U.S. dollar or purchasers of Notes in this offering whose shares of common stock
we are repurchasing in certain privately negotiated transactions). Also, this discussion is not intended to be wholly applicable
to all categories of investors, some of which may be subject to special rules (such as dealers in securities, traders in securities
that elect to use a mark-to-market method of accounting, banks, thrifts, regulated investment companies, real estate investment
trusts, insurance companies, tax-exempt entities, tax-deferred or other retirement accounts, certain former citizens or residents
of the United States, persons holding Notes or Common Stock as part of a conversion or integrated transaction or straddle, or persons
deemed to sell Notes or Common Stock under the constructive sale provisions of the Code). Finally, the summary does not address
the potential application of the Medicare contribution tax, the effects of the U.S. federal estate and gift tax laws or the effects
of any applicable non-U.S., state or local laws.
INVESTORS CONSIDERING THE PURCHASE OF NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS
AND THE CONSEQUENCES OF U.S. FEDERAL ESTATE OR GIFT TAX LAWS, NON-U.S., STATE AND LOCAL LAWS, AND TAX TREATIES.
As used herein, the term “U.S. holder”
means a beneficial owner of Notes or the common stock into which the Notes may be converted that, for U.S. federal income tax purposes,
is (1) a citizen or individual resident of the United States, (2) a corporation created or organized in or under the laws of the
United States or any state of the United States, including the District of Columbia, (3) an estate the income of which is subject
to U.S. federal income taxation regardless of its source, or (4) a trust if it (x) is subject to the primary supervision of a U.S.
court and the control of one of more U.S. persons or (y) has a valid election in effect under applicable U.S. Treasury regulations
to be treated as a U.S. person.
A “non-U.S. holder” is a beneficial
owner (other than a partnership for U.S. federal income tax purposes) of Notes or the Common Stock into which the Notes may be
converted that is not a U.S. holder.
If a partnership for U.S. federal income
tax purposes is a beneficial owner of a note or shares of our Common Stock acquired upon conversion of a Note, the tax treatment
of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. A beneficial
owner of Notes or shares of our Common Stock acquired upon conversion of a note that is a partnership, and partners in such a partnership,
should consult their own tax advisors about the U.S. federal income tax consequences of owning and disposing of the Notes and the
shares of our Common Stock into which the Notes may be converted.
U.S. Holders
The following discussion is limited to
the U.S. federal income tax consequences relevant to a U.S. holder (as defined above).
Issue Price and Basis in the Notes
The “issue price” of a Note
is generally the first price at which a substantial portion of the Notes are sold to persons other than bond houses, brokers, or
similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. In general, if the stated
principal amount of a debt instrument exceeds its issue price by at least a statutorily defined
de minimis
amount, a U.S.
holder will be required to include such excess in income as “original issue discount” over the term of the instrument
in accordance with a constant-yield method, irrespective of the holder’s regular method of tax accounting. Generally, original
issue discount is considered to be
de minimis
if it is less than 0.25% of the instrument’s stated principal amount
multiplied by the number of complete years from the issue date to maturity. We believe, and therefore this discussion assumes,
that the Notes were not issued with original issue discount for U.S. federal income tax purposes.
If the IRS were to successfully challenge
our determination of the issue price for the Notes, the income tax consequences for a U.S. holder might be materially different
than as described below. For example, the Notes may be considered to have original issue discount (or a greater amount of original
issue discount) which may adversely affect the market value of the Notes. U.S. holders should consult their own tax advisors as
to the income tax consequences to them of such a successful challenge under the circumstances of this offering.
A U.S. holder’s initial tax basis
in the Notes should be equal to the price paid by the holder (excluding any amounts attributable to pre-purchase accrued interest
(as defined below)).
Interest
A U.S. holder will be required to recognize
as ordinary income any stated interest paid or accrued on the Notes and should be required to recognize as ordinary income any
interest make-whole payment as described above under “Description of Notes—Conversion Rights—Interest Make-Whole
Payment upon Certain Conversions” and any payment made upon a conversion in connection with a qualifying fundamental change
as described above under “Description of Notes—Conversion Rights—Qualifying Fundamental Change Payment Upon Conversion
in Connection With a Qualifying Fundamental Change,” whether in cash or shares of Common Stock, in accordance with such holder’s
regular method of tax accounting.
We may be required to make payments of
additional interest to holders of the Notes if we do not make certain filings, as described under “Description of Notes—Events
of Default—Acceleration and Other Remedies,” or upon certain conversions of the Notes, as described under “Description
of Notes—Conversion Rights—Interest Make-Whole Payment upon Certain Conversions” and “Description of Notes—Conversion
Rights—Qualifying Fundamental Change Payment Upon Conversion in Connection With a Qualifying Fundamental Change,” above.
Due to a lack of relevant authority regarding certain of these payments, the applicability to the Notes of Treasury Regulations
governing contingent payment debt instruments is uncertain. In particular, the effect of the interest make-whole payment described
in “Description of Notes—Conversion Rights—Interest Make-Whole Payment upon Certain Conversions” on the
tax treatment of the Notes is unclear. Although not free from doubt, we believe that there is only a remote possibility that we
would be required to pay such additional interest, and we do not intend to treat the Notes as subject to the special rules governing
certain “contingent payment debt instruments” (which, if applicable, would affect the timing, amount and character
of income with respect to a Note). Our determination in this regard, while not binding on the IRS, is binding on U.S. holders unless
they disclose their contrary position in the manner prescribed under applicable U.S. Treasury regulations. If the IRS successfully
challenged this position, and the Notes were treated as contingent payment debt instruments, U.S. holders would, among other things,
be required to accrue interest income at a higher rate than the stated interest rate on the Notes and to treat any gain recognized
on the sale or other disposition of a Note (including gain realized on the conversion of a note) as ordinary income rather than
as capital gain. In the event we pay additional interest on the Notes, U.S. holders should consult their own tax advisors regarding
the treatment of such amounts. The remainder of this discussion assumes that the Notes are not treated as contingent payment debt
instruments.
For investors who purchase their Notes
after the date of original issuance of the Notes, a portion of the first stated interest payment received on the Notes will be
allocable to interest that accrued prior to the date acquired by such holder (“pre-purchase accrued interest”). A U.S.
holder may treat this portion as a non-taxable return of capital. All references to interest in the remainder of this discussion
excludes pre-purchase accrued interest except where explicitly stated.
Sale, Exchange, Redemption or Other
Taxable Disposition of the Notes
A U.S. holder generally will recognize
capital gain or loss if such holder disposes of a Note in a sale, exchange, redemption or other taxable disposition (other than
conversion of a note, the U.S. federal income tax consequences of which are described under “—Conversion of Notes”
below). The U.S. holder’s gain or loss generally will equal the difference between the amount realized by it (other than
amounts attributable to accrued and unpaid interest) and its tax basis in the Note. The U.S. holder’s tax basis in the Note
generally will equal the amount it paid for the Note. The portion of any amount realized that is attributable to accrued interest
will not be taken into account in computing the U.S. holder’s capital gain or loss. Instead, the portion attributable to
accrued and unpaid interest will be recognized as ordinary interest income to the extent that the U.S. holder has not previously
included the accrued interest in income. The gain or loss recognized by the U.S. holder on the disposition of the Note will be
long-term capital gain or loss if it has held the Note for more than one year, or short-term capital gain or loss if it has held
the Note for one year or less, at the time of the disposition. Long-term capital gains of non-corporate taxpayers currently are
taxed at preferential rates. Short-term capital gains are taxed at ordinary income rates. The deductibility of capital losses is
subject to limitations.
Conversion of Notes
A U.S. holder generally should not recognize
any gain or loss on the conversion of a Note solely into shares of Common Stock, except with respect to the fair market value of
any cash or Common Stock attributable to (i) accrued and unpaid interest, (ii) any interest make-whole payment in connection with
the conversion of a Note into shares of Common Stock as described in “Description of Notes—Conversion Rights—Interest
Make-Whole Payment upon Certain Conversions,” and/or (iii) any payment made upon a conversion in connection with a qualifying
fundamental change as described in “Description of Notes—Conversion Rights—Qualifying Fundamental Change Payment
Upon Conversion in Connection With a Qualifying Fundamental Change.” The U.S. holder’s tax basis in the Common Stock
received (excluding shares attributable to accrued and unpaid interest, any interest make-whole payment, or any payment made upon
a conversion in connection with a qualifying fundamental change) generally will equal its tax basis in the converted Note. The
U.S. holder’s holding period in the Common Stock (other than shares attributable to accrued and unpaid interest, any interest
make-whole payment, or any payment made upon a conversion in connection with a qualifying fundamental change) will include the
holding period in the converted Note.
Any portion of Common Stock that is attributable
to accrued and unpaid interest on the Notes not yet included in income by a U.S. holder will be taxed as ordinary income, and any
portion of Common Stock that is attributable to any interest make-whole payment in connection with the conversion of a Note into
shares of Common Stock or any payment made upon a conversion in connection with a qualifying fundamental change should be taxed
to such U.S. holder as ordinary income. A U.S. holder’s basis in any shares of Common Stock attributable to accrued and unpaid
interest, any interest make-whole payment, or any payment made upon conversion in connection with a qualifying fundamental change
will equal the fair market value of such shares when received. A U.S. holder’s holding period in any shares of Common Stock
attributable to accrued and unpaid interest, any interest make-whole payment, or any payment made upon conversion in connection
with a qualifying fundamental change will begin on the day after they are received.
If we undergo a transaction of the type
described under “Description of Notes—Conversion Rights—Recapitalizations, Reclassifications and Changes of our
Common Stock,” the conversion obligation may be adjusted so that holders would be entitled to convert the Notes into the
type of consideration that they would have been entitled to receive upon such transaction had the Notes been converted into shares
of Common Stock immediately prior to such transaction. Depending on the facts and circumstances at the time of such transaction,
such adjustment may result in a deemed exchange of the outstanding Notes, which may be a taxable event for U.S. federal income
tax purposes. U.S. holders are urged to consult their tax advisors regarding the U.S. federal income tax consequences of such an
adjustment.
Distributions
If, after a U.S. holder acquires shares
of Common Stock upon a conversion of a Note, we make a distribution in respect of such Common Stock from our current or accumulated
earnings and profits (as determined for U.S. federal income tax purposes), the distribution will be treated as a dividend and will
be includible in a U.S. holder’s income as ordinary income when received. If the distribution exceeds our current and accumulated
earnings and profits, the excess will be treated first as a tax-free return of the U.S. holder’s tax basis in its shares
of Common Stock and any remaining excess will be treated as capital gain from the sale or exchange of the Common Stock. If the
U.S. holder is a U.S. corporation, it generally will be able to claim a dividends-received deduction on a portion of any distribution
taxed as a dividend, provided that certain holding period requirements are satisfied. Subject to certain exceptions, dividends
received by certain non-corporate U.S. holders currently are taxed at the preferential rates applicable to long-term capital gains,
provided that certain holding period requirements are met.
Constructive Distributions
The terms of the Notes allow for changes
in the conversion rate of the Notes under certain circumstances. A change in conversion rate that allows beneficial owners of Notes
to receive more shares of Common Stock on conversion may increase such beneficial owners’ proportionate interests in our
earnings and profits or assets. In that case, the beneficial owners of Notes may be treated as though they received a taxable distribution
in the form of Common Stock or additional rights to acquire Common Stock. A taxable constructive distribution would result, for
example, if the conversion rate is adjusted to compensate beneficial owners of Notes for distributions of cash or property to our
stockholders. If an event occurs that dilutes the interests of stockholders or increases the interests of beneficial owners of
the Notes and the conversion rate of the Notes is not adjusted (or not adequately adjusted), this also could be treated as a taxable
stock distribution to beneficial owners of the Notes. Conversely, if an event occurs that dilutes the interests of beneficial owners
of the Notes and the conversion rate is not adjusted (or not adequately adjusted), the resulting increase in the proportionate
interests of our stockholders could be treated as a taxable stock distribution to the stockholders. Not all changes in the conversion
rate that result in beneficial owners of Notes receiving more Common Stock on conversion, however, increase such beneficial owners’
proportionate interests in us. For instance, a change in conversion rate could simply prevent the dilution of the beneficial owners’
interests upon a stock split or other change in capital structure. Changes to the conversion rate made pursuant to a
bona fide
reasonable adjustment formula are not treated as constructive distributions. Any taxable constructive distribution would be
treated for U.S. federal income tax purposes in the same manner as an actual distribution on Common Stock as described in “—Distributions”
above. It would result in a taxable dividend to the beneficial owners to the extent of our current or accumulated earnings and
profits (with the beneficial owner’s tax basis in its Note or Common Stock (as the case may be) being increased by the amount
of such dividend), with any excess treated first as a tax-free return of the beneficial owner’s tax basis in its Note or
Common Stock (as the case may be) and then as capital gain. Non-corporate U.S. holders should consult their tax advisors regarding
whether any taxable constructive dividend would be eligible for the preferential rates and corporate holders should consult their
tax advisors regarding the dividends-received deduction, both described in “—Distributions” above.
On April 12, 2016, the IRS issued proposed
regulations that address the amount and timing of constructive distributions, obligations of withholding agents and filing and
notice obligations of issuers. The proposed regulations, if adopted as proposed, would provide generally that (1) the amount of
a constructive distribution is the excess of (a) the fair market value of the right to acquire shares immediately after an “applicable
adjustment,” over (b) the fair market value of the right to acquire shares without the adjustment, (2) the constructive distribution
occurs at the earlier of (a) the date the adjustment occurs under the terms of the Notes, or (b) the date of the actual distribution
of cash or property that results in the constructive distribution, and (3) information reporting is required regarding the amount
of any constructive distribution. Although the regulations would be effective for constructive distributions occurring on or after
the date on which the regulations are adopted as final regulations, investors and withholding agents may rely on them prior to
that date under certain circumstances. Any backup withholding required with respect to such a constructive distribution may be
satisfied by withholding such amounts from shares or current or subsequent payments of cash payable to such U.S. holder.
Sale,
Exchange or Other Disposition of Common Stock
A U.S. holder generally will recognize
capital gain or loss on a sale, exchange or other disposition of shares of Common Stock. The U.S. holder’s gain or loss will
equal the difference between the amount realized by the holder and its tax basis in the shares of Common Stock. The amount realized
by the U.S. holder will include the amount of any cash and the fair market value of any other property received for the shares
of Common Stock. The gain or loss recognized by a U.S. holder on a sale, exchange or other disposition of shares of Common Stock
will be long-term capital gain or loss if its holding period in the shares of Common Stock is more than one year, or short-term
capital gain or loss if its holding period in the shares of Common Stock is one year or less, at the time of the transaction. Long-term
capital gains of non-corporate taxpayers are currently taxed at preferential rates. Short-term capital gains are taxed at ordinary
income rates. The deductibility of capital losses is subject to limitations.
Non-U.S. Holders
The following discussion is limited to
the U.S. federal income tax consequences relevant to a non-U.S. holder (as defined above).
Interest
Subject to the discussions below regarding
FATCA and under “—Income or Gains Effectively Connected with a U.S. Trade or Business,” payments of interest
on the Notes to non-U.S. holders generally will qualify as “portfolio interest,” and thus will be exempt from U.S.
federal income tax, including withholding of such tax, if the non-U.S. holder certifies its non-U.S. status as described below.
The portfolio interest exemption will not
apply to payments of interest to a non-U.S. holder that:
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owns, actually or constructively, shares of our stock representing at least 10% of the total combined
voting power of all classes of our stock entitled to vote; or
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is a “controlled foreign corporation” that is related, directly or indirectly, to us
through sufficient actual or constructive stock ownership.
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The portfolio interest exemption applies
only if the non-U.S. holder certifies its non-U.S. status. A non-U.S. holder can meet this certification requirement by providing
a properly completed and executed IRS Form W-8BEN or W-8BEN-E or appropriate substitute form prior to the payment. If the non-U.S.
holder holds the Note through a financial institution or other agent acting on its behalf, it will be required to provide appropriate
documentation to the agent. Special certification rules apply to non-U.S. holders that are pass-through entities.
Dividends
Subject to the discussion below under “—Income
or Gains Effectively Connected with a U.S. Trade or Business” and the discussions below regarding backup withholding and
FATCA, dividends paid to a non-U.S. holder on shares of our common stock received on conversion of a note, as well as any taxable
constructive dividends resulting from certain adjustments (or failures to make adjustments) to the number of shares of common stock
to be issued on conversion of a note (as described under “—U.S. Holders—Constructive Distributions” above),
generally will be subject to U.S. withholding tax at a 30% rate. The withholding tax on dividends (including any taxable constructive
dividends), however, may be reduced under the terms of an applicable income tax treaty between the United States and the non-U.S.
holder’s country of residence. A non-U.S. holder should demonstrate its eligibility for a reduced rate of withholding under
an applicable income tax treaty by timely delivering a properly completed and executed IRS Form W-8BEN or W-8BEN-E or appropriate
substitute form. A non-U.S. holder that is eligible for a reduced rate of withholding under the terms of an applicable income tax
treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Because
a taxable constructive dividend received by a non-U.S. holder would not give rise to any cash from which any applicable withholding
tax could be satisfied, if a withholding agent pays withholding taxes on the non-U.S. holder’s behalf with respect to amounts
which are includible in the non-U.S. holder’s income but which are not paid in cash, the withholding agent may set off any
such withholding tax against any other payments owed to the non-U.S. holder, including cash payments of interest payable on the
Notes, shares of Common Stock upon conversion, or proceeds from a sale subsequently paid or credited to the non-U.S. holder. Non-U.S.
holders should consult their tax advisors as to whether they can obtain a refund for all or a portion of any tax withheld.
Sale, Exchange, Redemption, Conversion
or Other Taxable Dispositions of Notes or Common Stock
Subject to the discussions below regarding
backup withholding and FATCA, non-U.S. holders generally will not be subject to U.S. federal income or withholding tax on any gain
realized on the sale, exchange, redemption, conversion or other disposition of Notes or shares of Common Stock (other than with
respect to payments attributable to accrued interest, any interest make-whole payment, or any payment made upon conversion in connection
with a qualifying fundamental change which will be taxed as described under “—Interest” above) unless:
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the gain is effectively connected with the conduct by the non-U.S. holder of a U.S. trade or business
(and, generally, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment or fixed base
maintained by the non-U.S. holder), in which case the gain would be subject to tax as described below under “—Income
or Gains Effectively Connected with a U.S. Trade or Business”;
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the non-U.S. holder is an individual who is present in the United States for 183 days or more in
the year of disposition and certain other conditions apply, in which case, except as otherwise provided by an applicable income
tax treaty, the gain, which may be offset by certain U.S.-source capital losses, would be subject to a flat 30% tax, even though
the individual is not considered a resident of the United States; or
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the rules of the Foreign Investment in Real Property Tax Act (or “FIRPTA”) (described
below) treat the gain as effectively connected with a U.S. trade or business.
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The FIRPTA rules may apply to a sale, exchange
or other disposition of Notes or shares of Common Stock by a non-U.S. holder if, at any time during the five-year period ending
on the date of the sale, exchange or other disposition (or, if shorter, the non-U.S. holder’s holding period for the Notes
or Common Stock disposed of), we are or were a “U.S. real property holding corporation” (or “USRPHC”) for
U.S. federal income tax purposes. In general, we would be a USRPHC if interests in U.S. real estate composed at least 50% of the
fair market value of our worldwide real property interests and assets used or held for use in a trade or business. We believe that
we currently are not, and will not become in the future, a USRPHC.
Income or Gains Effectively Connected
with a U.S. Trade or Business
If any interest or constructive dividends
on the Notes, dividends on shares of Common Stock, or gain from the sale, exchange, redemption, conversion or other disposition
of the Notes or shares of Common Stock is effectively connected with a U.S. trade or business conducted by a non-U.S. holder, then
the income or gain will be subject to U.S. federal income tax on a net-income basis at the regular graduated rates and generally
in the same manner applicable to U.S. holders. If the non-U.S. holder is eligible for the benefits of a tax treaty between the
United States and its country of residence, any “effectively connected” income or gain generally will be subject to
U.S. federal income tax on a net-income basis only if it is also attributable to a permanent establishment or fixed base maintained
by it in the United States. Payments of interest or dividends that are effectively connected with a U.S. trade or business conducted
by the non-U.S. holder (and, if an applicable tax treaty requires, attributable to a U.S. permanent establishment or fixed base),
and therefore included in the gross income of a non-U.S. holder, will not be subject to 30% withholding, provided that it claims
exemption from withholding by timely filing a properly completed and executed IRS Form W-8ECI, or any appropriate substitute or
successor form as the IRS designates, as applicable, prior to payment. If the non-U.S. holder is a corporation for U.S. federal
income tax purposes, that portion of its earnings and profits that is effectively connected with its U.S. trade or business generally
will also be subject to a “branch profits tax.” The branch profits tax rate is generally 30%, although an applicable
income tax treaty might provide for a lower rate.
Backup Withholding and Information Reporting
The Code and the U.S. Treasury regulations
generally require persons who make specified payments to report the payments to the IRS. Among the specified payments are interest,
dividends, and proceeds paid by brokers to their customers. This reporting regime is reinforced by “backup withholding”
rules, which generally require the payor to withhold from payments subject to information reporting if the recipient has failed
to provide a taxpayer identification number to the payor, furnished an incorrect identification number, failed to comply with applicable
certification requirements or been repeatedly notified by the IRS that it has failed to report interest or dividends on its U.S.
federal income tax returns. The backup withholding rate is currently 24%.
Payments of interest or dividends (including
constructive dividends) to U.S. holders of Notes or shares of Common Stock and payments made to U.S. holders by a broker upon a
sale of Notes or Common Stock generally will be subject to information reporting and backup withholding, unless the U.S. holder
(1) is an exempt recipient, or (2) in the case of backup withholding, provides the payor with a correct taxpayer identification
number and complies with applicable certification requirements. If a sale is made through a foreign office of a foreign broker,
however, the sale generally will not be subject to either information reporting or backup withholding. This exception may not apply
if the foreign broker is owned or controlled by U.S. persons, or is engaged in a U.S. trade or business.
The applicable withholding agent must report
annually to the IRS the interest and/or dividends (including constructive dividends) paid to each non-U.S. holder and the amount
of tax withheld, if any, with respect to such interest and/or dividends, including any tax withheld pursuant to the rules described
under “—Non-U.S. Holders—Interest” and “—Non-U.S. Holders—Dividends” above and
“—FATCA” below. Copies of these reports may be made available to tax authorities in the country where the non-U.S.
holder resides. Payments to non-U.S. holders of dividends on our common stock or interest or constructive dividends on the Notes
may be subject to backup withholding unless the non-U.S. holder certifies its non-U.S. status on a properly completed and executed
IRS Form W-8BEN or W-8BEN-E or appropriate substitute form. Payments made to non-U.S. holders by a broker upon a sale of the Notes
or Common Stock will not be subject to information reporting (except to the extent such payments are subject to withholding under
FATCA, discussed below) or backup withholding as long as the non-U.S. holder certifies its non-U.S. status or otherwise establishes
an exemption.
Any amounts withheld from a payment to
a U.S. holder or non-U.S. holder with respect to the Notes or shares of Common Stock under the backup withholding rules generally
will be allowed as a refund or can be credited against any U.S. federal income tax liability of the holder, provided the required
information is timely furnished to the IRS.
FATCA
Provisions commonly referred to as FATCA
generally impose a 30% U.S. withholding tax on certain U.S.- source payments, including interest (including original issue discount),
dividends and other fixed or determinable annual or periodical gain, profits, and income, and on the gross proceeds from a sale
or other disposition after December 31, 2018 of property of a type which can produce U.S.-source interest or dividends (“Withholdable
Payments”), if paid to a foreign financial institution (whether as a beneficial owner or intermediary), unless such institution
(i) enters into an agreement with the Treasury Department to collect and provide to the Treasury Department substantial information
regarding its U.S. account holders, including certain account holders that are foreign entities with U.S. owners, (ii) satisfies
the requirements of an intergovernmental agreement entered into by such institution’s country of residence and the United
States or (iii) qualifies for an exemption. The legislation also generally imposes a withholding tax of 30% on Withholdable Payments
made to a non-financial foreign entity unless such entity provides the withholding agent with a certification that it does not
have any substantial U.S. owners or a certification identifying the direct and indirect substantial U.S. owners of the entity,
or unless an exemption applies. An intergovernmental agreement between the United States and the non-U.S. entity’s jurisdiction
may modify these requirements.
These withholding requirements generally
currently apply to payments of interest and dividends (including constructive dividends) on the Notes or shares of Common Stock.
They will apply to payments of gross proceeds from a sale or other disposition of Notes or shares of Common Stock after December
31, 2018. If FATCA withholding is imposed, a beneficial owner (other than certain foreign financial institutions) generally will
be entitled to a refund of any amounts withheld by filing a U.S. federal income tax return and, in the case of a non-financial
foreign entity, providing the IRS with certain information regarding its substantial U.S. owners (unless an exception applies).
Holders are urged to consult their tax advisors regarding the possible implications of FATCA on their ownership and disposition
of the Notes and any shares of Common Stock.
Dividend Equivalents
Section 871(m) of the Code requires withholding
(of up to 30%, depending on whether a treaty applies) on certain financial instruments to the extent that the payments or deemed
payments on the financial instruments are treated as being contingent upon or determined by reference to U.S.-source dividends.
Under Treasury Regulations and other guidance issued in connection with Section 871(m), Section 871(m) will apply to financial
instruments issued in 2018 only if they are “delta-one.” A “delta-one” instrument is one in which, the
ratio of the change in the fair market value of the instrument to a small change in the fair market value of the property referenced
by the instrument is equal to 1.00. We do not believe that the Notes should be treated as delta-one instruments. Accordingly, non-U.S.
holders of the Notes should not be subject to tax under Section 871(m). Non-U.S. holders should consult with their tax advisors
regarding the application of Section 871(m) and the regulations thereunder in respect of their acquisition and ownership of the
Notes.
PLAN OF
DISTRIBUTION
The Selling Security Holders may, from
time to time, sell any or all of their Securities on any stock exchange, market or trading facility on which the Securities are
traded or in private transactions; however, there is no public market for the Notes or Guarantees and we do not intend to list
or quote the Notes or Guarantees on any securities exchange or quotation system. If the Securities are sold through underwriters,
the Selling Security Holders will be responsible for underwriting discounts or commissions or agent’s commissions. Any Selling
Security Holders who are broker-dealers are deemed to be underwriters. These sales may be at fixed prices, at prevailing market
prices at the time of the sale (with respect to Common Stock), at varying prices determined at the time of sale or at negotiated
prices. The Selling Security Holders may use any one or more of the following methods when selling Securities:
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any national securities exchange or quotation service on which the Securities may be listed or
quoted at the time of sale;
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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block trades in which the broker-dealer will attempt to sell the Securities as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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transactions other than on these exchanges or systems or in the over-the-counter market;
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through the writing of options, whether such options are listed on an options exchange or otherwise;
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an exchange distribution in accordance with the rules of the applicable exchange;
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privately negotiated transactions;
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broker-dealers may agree with the Selling Security Holders to sell a specified number of such Securities
at a stipulated price;
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a combination of any such methods of sale; and
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any other method permitted pursuant to applicable law.
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The Selling Security Holders may also sell
Securities under Rule 144 under the Securities Act, if available, rather than under this prospectus, or they may engage in short
sales against the box, puts and calls and other transactions in our securities or derivatives of our securities and may sell or
deliver shares in connection with these trades.
Broker-dealers engaged by the Selling Security
Holders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Security Holders (or, if any broker-dealer acts as agent for the purchaser of Securities, from the purchaser) in amounts
to be negotiated. The Selling Security Holders do not expect these commissions and discounts to exceed what is customary in the
types of transactions involved. Any profits on the resale of Securities by a broker-dealer acting as principal might be deemed
to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses,
if any, attributable to the sale of Securities will be borne by a Selling Security Holders. Any Selling Security Holder may agree
to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities
are imposed on that person under the Securities Act.
In connection with the sale of the Securities
or otherwise, the Selling Security Holders may enter into hedging transactions with broker-dealers, which may in turn engage in
short sales of the Securities in the course of hedging in positions they assume. The Selling Security Holders may also sell Securities
short and deliver Securities covered by this prospectus to close out short positions and to return borrowed Securities in connection
with such short sales. The Selling Security Holders may also loan or pledge Securities to broker-dealers that in turn may sell
such Securities.
The Selling Security Holders may from time
to time pledge or grant a security interest in some or all of the Securities owned by them and, if they default in the performance
of their secured obligations, the pledgees or secured parties may offer and sell the Securities from time to time under this prospectus
after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending
the list of selling security holders to include the pledgee, transferee or other successors in interest as a Selling Security Holder
under this prospectus.
The Selling Security Holders also may transfer
the Securities in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus and may sell the Securities from time to time under this prospectus after we
have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the
list of selling security holders to include the pledgees, transferees or other successors in interest as a Security Holder under
this prospectus. The Selling Security Holders also may transfer and donate the Securities in other circumstances in which case
the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
The Selling Security Holders and any broker-dealers
or agents that are involved in selling the Securities may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions paid, or any discounts or concessions allowed to,
such broker-dealers or agents and any profit realized on the resale of the Securities purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular offering of the Securities is made, a prospectus supplement,
if required, will be distributed, which will set forth the aggregate amount of Securities being offered and the terms of the offering,
including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation
from the Selling Security Holders, as applicable, and any discounts, commissions or concessions allowed or re-allowed or paid to
broker-dealers. Under the securities laws of some states, the Securities may be sold in such states only through registered or
licensed brokers or dealers. In addition, in some states the Securities may not be sold unless such securities have been registered
or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. There
can be no assurance that any Selling Security Holders will sell any or all of the Securities registered pursuant to the registration
statement of which this prospectus forms a part.
Each Selling Security Holder has informed
us that it does not have any agreement or understanding, directly or indirectly, with any person to distribute the Securities.
Based on information provided to us, none of the Selling Security Holders are broker-dealers or affiliates of broker-dealers.
We are paying all fees and expenses incident
to the registration of the Securities. Except with respect to indemnification of the Selling Noteholders pursuant to the Registration
Rights Agreement entered into in connection with the Notes offering, we are not obligated to pay any of the expenses of any attorney
or other advisor engaged by a Selling Security Holder. We have agreed to indemnify the Selling Noteholders against certain losses,
claims, damages and liabilities, including liabilities under the Securities Act.
If we are notified by any Selling Security
Holder that any material arrangement has been entered into with a broker-dealer for the sale of Securities, we will file a post-effective
amendment to the registration statement. If the Selling Security Holders use this prospectus for any sale of the Securities, they
will be subject to the prospectus delivery requirements of the Securities Act.
The anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of the Securities and activities of the Selling Security Holders, which may limit the
timing of purchases and sales of any of the Securities by the Selling Security Holders and any other participating person. Regulation
M may also restrict the ability of any person engaged in the distribution of the Securities to engage in passive market-making
activities with respect to the Securities. Passive market making involves transactions in which a market maker acts as both our
underwriter and as a purchaser of the Securities in the secondary market. All of the foregoing may affect the marketability of
the Securities and the ability of any person or entity to engage in market-making activities with respect to the Securities.
Once sold under the registration statement
of which this prospectus forms a part, the Securities will be freely tradable in the hands of persons other than our affiliates.
LEGAL MATTERS
The validity of the Securities offered
hereby will be passed upon for us by K&L Gates LLP, Charlotte, North Carolina.
EXPERTS
The consolidated financial statements of
Akoustis Technologies, Inc. as of June 30, 2017 and 2016 and for the years then ended incorporated by reference in this prospectus and the registration
statement of which this prospectus forms a part, have been audited by Marcum LLP, independent registered public accounting firm,
as set forth in its report thereon (which contains an explanatory paragraph relating to substantial doubt about the ability of
Akoustis Technologies, Inc. to continue as a going concern as described in Note 2 to the consolidated financial statements incorporated
by reference herein) appearing in our annual report on Form 10-K for the fiscal year ended June 30, 2017, and are incorporated by reference in reliance
on such report given upon such firm’s authority as an expert in auditing and accounting.
The special purpose combined financial
statements of The Research Foundation for the State University of New York and Fuller Road Management Corporation, which comprise
the special purpose statement of assets acquired and liabilities assumed as of June 26, 2017, and the related special purpose combined
statements of revenues and direct expenses for the years ended June 30, 2016 and 2015, incorporated by reference in this prospectus
and the registration statement of which this prospectus forms a part, have been audited by Marcum LLP, independent registered public
accounting firm, as set forth in its report thereon incorporated herein by reference, and are incorporated by reference in reliance on such report
given upon such firm’s authority as an expert in auditing and accounting.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual reports, quarterly reports,
current reports and other information with the SEC. You may read or obtain a copy of these reports at our website address, www.akoustis.com,
or at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation
of the public reference room and their copy charges by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains
registration statements, reports, proxy information statements and other information regarding registrants that file electronically
with the SEC. The address of the website is
http://www.sec.gov
.
We have filed with the SEC a Registration
Statement on Form S-1 under the Securities Act to register the Securities offered by this prospectus. The term “registration
statement” means the original registration statement and any and all amendments thereto, including the schedules and exhibits
to the original registration statement or any amendment. This prospectus is part of that registration statement. This prospectus
does not contain all of the information set forth in the registration statement or the exhibits to the registration statement.
For further information with respect to us and the Securities being offered pursuant to this prospectus, you should refer to the
registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete, and you should refer to the copy of that contract or other documents
filed as an exhibit to the registration statement. You may read or obtain a copy of the registration statement at the SEC’s
public reference facilities and Internet sites referred to above.
The information found on, or otherwise
accessible through, any website referenced in this prospectus is not incorporated into, and does not form a part of, this prospectus.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate
by reference” information from other documents that we file with it, which means that we can disclose important information
to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus.
Information in this prospectus supersedes information incorporated by reference that we filed with the SEC prior to the date of
this prospectus.
We incorporate by reference into this prospectus
and the registration statement of which this prospectus is a part the information or documents listed below that we have filed
with the SEC:
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our annual report on Form 10-K for the fiscal year ended June 30, 2017 filed with the SEC on September
20, 2017 (as amended by Form 10-K/A filed with the SEC on September 26, 2017);
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our quarterly reports on Form 10-Q for the fiscal quarter ended September 30, 2017 filed with the
SEC on November 14, 2017, for the fiscal quarter ended December 31, 2017 filed with the SEC on February 14, 2018 and for the fiscal
quarter ended March 31, 2018 filed with the SEC on May 15, 2018;
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our Current Reports on Form 8-K filed with the SEC on July 17, 2017, July 18, 2017, July 20, 2017,
August 10, 2017, September 6, 2017, September 12, 2017, September 29, 2017, October 6, 2017, November 17, 2017, December 7, 2017,
December 15, 2017, December 21, 2017 (as amended by Form 8-K/A filed on January 10, 2018), March 5, 2018, and May 15, 2018; and
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the description of our Common Stock contained in our Registration Statement on Form 8-A (File No.
001-38029) filed with the SEC on March 10, 2017, including any amendment or report filed for the purpose of updating such description.
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All documents we file with the SEC pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, except as to any portion of any report or documents that is not deemed
filed under such provisions, (1) on or after the date of filing of the registration statement containing this prospectus and prior
to the effectiveness of the registration statement and (2) on or after the date of this prospectus until the earlier of the date
on which all of the securities registered hereunder have been sold or the registration statement of which this prospectus is a
part has been withdrawn, shall be deemed incorporated by reference in this prospectus and to be a part of this prospectus from
the date of filing of those documents.
We will furnish without charge to you,
on written or oral request, a copy of any or all of the documents incorporated by reference, including exhibits to these documents.
You should direct any requests for documents to Akoustis Technologies, Inc., 9805 Northcross Center Court, Suite A, Huntersville,
North Carolina 28078, Attention: Corporate Secretary; Telephone: (704) 997-5735. Copies of the above reports may also be accessed
from our web site at
www.akoustis.com
. We have authorized no one to provide you with any information that differs from that
contained in this prospectus. Accordingly, you should not rely on any information that is not contained in this prospectus. You
should not assume that the information in this prospectus is accurate as of any date other than the date of the front cover of
this prospectus.
Any statement contained in a document incorporated
or deemed to be incorporated by reference in this prospectus will be deemed modified, superseded or replaced for purposes of this
prospectus to the extent that a statement contained in this prospectus modifies, supersedes or replaces such statement.
AKOUSTIS TECHNOLOGIES, INC.
AKOUSTIS, INC.
$15,000,000 of 6.5% Convertible Senior
Secured Notes due 2023 for sale by the Selling Noteholders
(fully and unconditionally guaranteed
by Akoustis, Inc.)
4,444,217 Shares of Common Stock issuable
in respect of the Notes for sale by the Selling Noteholders
4,146,529 Shares of Common Stock for
sale by the Selling Stockholders
PROSPECTUS
, 2018
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance
and Distribution.
Set forth below is an estimate (except
for registration fees, which are actual) of the approximate amount of the fees and expenses payable by us in connection with the
issuance and distribution of the Notes and shares of our Common Stock. The selling security holders will not be responsible for
any of the expenses of this offering.
SEC registration fee
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$
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6,340
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Accounting fees and expenses
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$
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12,000
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Legal fees and expenses
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$
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35,000
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Miscellaneous
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$
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3,660
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Total
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$
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57,000
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Item 14. Indemnification of Directors
and Officers.
Section 102(b)(7) of the DGCL allows a
corporation to provide in its certificate of incorporation that a director of the corporation will not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except where the director
breached the duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized
the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal
benefit. The Company’s certificate of incorporation provides for this limitation of liability.
Section 145 of the DGCL, or Section 145,
provides that a Delaware corporation may indemnify any person who was, is or is threatened to be made, party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action
by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent
of such corporation or is or was serving at the request of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best
interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was
illegal. A Delaware corporation may indemnify any persons who were or are a party to any threatened, pending or completed action
or suit by or in the right of the corporation by reason of the fact that such person is or was a director, officer, employee or
agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests, provided
that no indemnification is permitted without judicial approval if the officer, director, employee or agent is adjudged to be liable
to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred
to above, the corporation must indemnify him against the expenses which such officer or director has actually and reasonably incurred.
Section 145 further authorizes a corporation
to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation
or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such capacity, or arising out of his or her status as such,
whether or not the corporation would otherwise have the power to indemnify him under Section 145.
The Company’s Certificate of Incorporation
provides that the liability of directors for monetary damages shall be eliminated to the fullest extent under applicable law. The
Company’s By-Laws state that the Company shall indemnify every present or former director, officer, employee, or agent of
the Company or person who is or was serving at the Company’s request as a director, officer, member, manager, partner, trustee,
fiduciary, employee or agent of another corporation, limited liability company, partnership, joint venture, trust, employee benefit
plan or other enterprise (each an “Indemnitee”).
The Company’s By-Laws provide that
the Company shall indemnify an Indemnitee against all judgments, fines, amounts paid in settlement and reasonable expenses actually
and reasonably incurred by the Indemnitee in connection with any proceeding in which he was, or is threatened to be made, a party
by reason of his serving or having served, if it is determined that the Indemnitee (a) acted in good faith, (b) reasonably believed
that such action was in, or not opposed to, the Company’s best interests and (c) in the case of any criminal proceeding,
had no reasonable cause to believe that his conduct was unlawful; provided, however, that the Company shall not be obligated to
indemnify an Indemnitee that was threatened to be made a party but does not become a party unless the incurring of such expenses
was authorized by or under the authority of the Board of Directors, and the Company shall not be obligated to indemnify against
any amount paid in settlement unless the Board of Directors has consented to such settlement. In any action brought by or in the
right of the Company to procure a judgment in its favor, no indemnification shall be made in respect of any proceeding if a final
adjudication establishes that the Indemnitee is liable to the Company, unless the court determines that such person is fairly and
reasonably entitled to indemnity. The Company may indemnify an Indemnitee who has served, or prepared to serve, as a witness in,
but is not a party to, any action, suit, or proceeding. The termination of any proceeding by judgment, order, settlement or conviction,
or on a plea of nolo contendere or its equivalent, is not of itself determinative that the Indemnitee did not meet the requirements
set forth in clauses (a) through (c) above.
Expenses incurred by any present or former
director or officer of the Company in defending any civil, criminal, administrative, or investigative action, suit, or proceeding,
shall be paid by the Company in advance of the final disposition of such action, suit, or proceeding upon receipt of an undertaking
in writing by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled
to indemnification. Expenses and costs incurred by other Indemnitees may be paid by the Company in advance of the final disposition
of such action, suit, or proceeding upon a similar undertaking.
Other than discussed above, neither the
Company’s By-Laws nor its Certificate of Incorporation includes any specific indemnification provisions for the Company’s
officers or directors against liability under the Securities Act. The Company has also purchased insurance providing for indemnification
of its directors and officers. Additionally, insofar as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
Item 15. Recent Sales of Unregistered
Securities.
The Private Placements
The 2015 Offering
We sold 3,792,104 shares of our Common
Stock (including shares issued on conversion of convertible notes of Akoustis, Inc.) in the 2015 Offering to accredited investors
at a purchase price of $1.50 per share, for gross proceeds of $5.7 million (before deducting expenses of the 2015 Offering).
In connection with the 2015 Offering, we
paid Northland Securities, Inc. and Katalyst Securities LLC, each a U.S. registered broker-dealer, and their sub-agents a cash
commission of $486,976. We also issued to the placement agents and their sub-agents warrants to purchase an aggregate of 324,650
shares of Common Stock with a term of five years and an exercise price of $1.50 per share.
The 2016 Offering
We sold 2,235,310 shares of Common Stock
in the 2016 Offering to accredited investors at a purchase price of $1.60 per share, for gross proceeds of $3.6 million (before
deducting expenses of the 2016 Offering).
In connection with the 2016 Offering, we
paid Northland Securities, Inc. and Katalyst Securities LLC and their sub-agents an aggregate cash commission of $196,752. We also
issued to the placement agents and their sub-agents warrants to purchase an aggregate of 153,713 shares of Common Stock with a
term of five years and an exercise price of $1.60 per share. In partial satisfaction of legal expenses owed to the placement agents,
we also issued to them 4,690 shares of Common Stock (valued at the 2016 Offering price).
The 2016-2017 Offering
We sold 2,142,000 shares of Common Stock
in the 2016-2017 Offering to accredited investors at a purchase price of $5.00 per share, for gross proceeds of $10.7 million (before
deducting expenses of the 2016-2017 Offering).
In connection with the 2016-2017 Offering,
we paid Northland Securities, Inc., Katalyst Securities LLC, Drexel Hamilton, LLC, and Joseph Gunnar & Co, LLC, each a U.S.
registered broker-dealer, and their sub-agents an aggregate cash commission of $854,010. We also issued to the placement agents
and their sub-agents warrants to purchase an aggregate 205,126 shares of Common Stock with a term of five years and an exercise
price of $5.00 per share.
The First 2017 Offering
We sold 663,000 shares of Common Stock
in the First 2017 Offering to accredited investors at a purchase price of $9.00 per share, for gross proceeds of $6 million (before
deducting expenses of the 2017 Offering). In addition, pursuant to the price-protection provisions discussed below, which provisions
were triggered by the Second 2017 Offering, we issued an additional 542,455 shares of Common Stock, for no additional consideration,
to investors in the First 2017 Offering.
In connection with the First 2017 Offering,
we paid Katalyst Securities LLC and Drexel Hamilton LLC and their sub-agents an aggregate cash commission of $418,000. We also
issued to the placement agents and their sub-agents warrants to purchase an aggregate 46,410 shares of Common Stock with a term
of five years and an exercise price of $9.00 per share.
Investors in the 2017 Offering were given
price-protected anti-dilution rights such that if, prior to May 1, 2019, the Company shall issue additional shares of Common Stock
or Common Stock equivalents (subject to customary exceptions, including but not limited to issuances of awards under the 2016 Plan
and certain other issuances of securities in connection with credit arrangements, equipment financings, lease arrangements or similar
transactions) for a consideration per share less than the 2017 Offering price per share (as adjusted for any subsequent stock dividend,
stock split, distribution, recapitalization, reclassification, reorganization or similar event) (the “2017 Lower Price”),
each such investor would be entitled to receive from the Company additional shares of Common Stock in an amount such that, when
added to the number of shares of Common Stock initially purchased by such investor, would equal (i)(a) the total purchase price
paid for the shares in the First 2017 Offering that are then held by the investors, divided by (b) 90% of the 2017 Lower price
minus (ii) the number of shares in the First 2017 Offering that are then held by the investors. In December 2017, these price protection
provisions were amended such that, upon trigger, investors in the First 2017 Offering would receive additional shares of Common
Stock in an amount such that, when added to the number of shares of Common Stock initially purchased by such investor, would equal
(i)(a) the total purchase price paid for the shares in the First 2017 Offering that are then held by the investors, divided by
(b) 90% of the greater of (A) the 2017 Lower price and (B) $5.50 minus (ii) the number of shares in the First 2017 Offering that
are then held by the investors. These price-protected anti-dilution rights were triggered by the Second 2017 Offering, and as a
result, in December 2017, the Company issued an additional 542,450 shares to investors in the First 2017 Offering for no additional
consideration.
The Second 2017 Offering
The description of the Second 2017 Offering
set forth above under “Selling Stockholders—The Second 2017 Offering” is incorporated by reference herein.
Each of the 2015 Offering, the 2016
Offering, the 2016-2017 Offering the First 2017 Offering, and the Second 2017 Offering were made in reliance on Rule 506(b) of
Regulation D and Section 4(a)(2) of the Securities Act.
Restricted Share Awards under the
2015 Plan
Since our merger with Akoustis, Inc. on
May 22, 2015, we have issued 487,000 shares of our Common Stock to our directors and executive officers, 356,200 shares of our
Common Stock to several employees, and 365,000 shares of our Common Stock to independent contractors under the 2015 Plan. Each
of these issuances was exempt from registration under Section 4(a)(2) of the Securities Act, in reliance upon the exemption provided
by Regulation D promulgated by the SEC thereunder, and/or in reliance on a “no sale” theory. These issuances constituted
transactions by an issuer not involving any public offering, were made only to persons with access to information about the Company
and, with respect to certain issuances made to employees, as bonuses in exchange for no consideration. None of the securities were
sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved.
Shares Issued to Consultants
On December 9, 2015, pursuant to the terms
of an Independent Consulting Agreement between the Company, The Del Mar Consulting Group, Inc. (“Del Mar”) and Alex
Partners, LLC (“Alex Partners”), we issued 138,000 restricted shares of our Common Stock to Del Mar and 92,000 restricted
shares of Common Stock to Alex Partners. In March 2016, the above consulting agreements originally executed in December 2015 were
amended so that the consultants would receive shares of Common Stock over the remaining term of the agreement in lieu of the monthly
cash retainer. Pursuant to the amended agreement, the Company granted an aggregate of 60,000 restricted shares to the two consultants
with a fair value of $126,600 at March 31, 2016.
In August 2016, pursuant to the terms of
a consulting agreement between the Company and Integra Consulting Group, LLC (“Integra”), we issued 40,000 shares of
our Common Stock to Integra Consulting in partial consideration for consulting services provided by Integra to the Company.
In January, 2017, pursuant to the terms
of a second Independent Consulting Agreement between the Company and Del Mar, we issued 30,000 restricted shares of our Common
Stock to Del Mar in partial consideration for consulting services provided by Del Mar to the Company.
In January, 2017, pursuant to the terms
of a second Independent Consulting Agreement between the Company and Alex Partners, we issued 20,000 restricted shares of Common
Stock to Alex Partners in partial consideration for consulting services provided by Alex Partners to the Company.
These issuances were exempt from registration
pursuant to Section 4(a)(2) of the Securities Act as not involving any public offering and were only made after the consultants
made certain representations and warranties to the Company and had an opportunity to ask questions of our officers. None of the
securities were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved.
Convertible
Notes
On May 14, 2018, the Company issued $15
million aggregate principal amount of its 6.5% Convertible Senior Secured Notes due 2023, guaranteed by Akoustis, Inc. (the “Initial
Guarantor”) and any other future subsidiaries of the Company, which Notes and guarantees (collectively, the “Securities”)
are included in this registration statement. The Securities were sold pursuant to a Purchase Agreement dated May 10, 2018 to Oppenheimer
& Co. Inc., as representative of the initial purchasers named therein. The Company sold the Securities to the initial purchasers
at a purchase price of 93.75% of the principal amount thereof. Additionally, the Company reimbursed expenses of the initial purchasers
of $322,500 pursuant to the Purchase Agreement. The net proceeds of the offering, after deducting the initial purchasers’
discounts and commissions and the offering expenses payable by the Company, were approximately $13.5 million.
Under the Indenture, the Notes are fully,
unconditionally and irrevocably guaranteed on a senior secured basis by the Initial Guarantor and any future subsidiaries of the
Company, jointly and severally. The Notes are the Company’s senior secured obligations and, subject to certain exceptions,
rank senior to all of its existing and future unsecured indebtedness to the extent of the value of the collateral.
The issuance of the Securities was exempt
from registration under Section 4(a)(2) of the Securities Act, and/or in reliance upon the exemption provided by Regulation D promulgated
by the SEC thereunder, as transactions by an issuer not involving any public offering.
Item 16. Exhibits and Financial Statement
Schedules.
(a) Exhibits.
The exhibits
to the registration statement are listed in the Exhibit Index to this registration statement and are incorporated by reference
herein.
(b) Financial
Statement Schedules
Financial
statement schedules have been omitted, as the information required to be set forth therein is included in the consolidated financial
statements or notes thereto incorporated by reference into the prospectus forming part of this registration statement.
Item 17. Undertakings.
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(a)
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Each of the undersigned registrants hereby undertakes:
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1. To file, during any period in which offers or sales are being made, a post-effective amendment to this
registration statement:
i. To
include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
ii. To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price
set forth in the “Calculation of Registration Fee” table in the effective registration statement;
iii. To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
2. That,
for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
3. To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering.
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(b)
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Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted
to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities, other than
the payment by the registrant of expenses incurred and paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding, is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
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(c)
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The undersigned registrant hereby undertakes that, for purposes of determining any liability under
the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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(d)
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Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an
offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall
be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness; provided,
however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in
a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately
prior to such date of first use.
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EXHIBIT INDEX
Exhibit
Number
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Description
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3.1
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Articles of Conversion of the Company, as filed with the Nevada Secretary of State on December 15, 2016
(incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 16, 2016)
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3.2
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Certificate of Conversion of the Company, as filed with the Delaware Secretary of State on December 15, 2016
(incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on December 15, 2016)
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3.3
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Certificate of Incorporation, as filed with the Delaware Secretary of State on December 15, 2016
(incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed with the SEC on December 15, 2016)
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3.4
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Bylaws of the Company
(incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K filed with the SEC on December 15, 2016)
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3.5*
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Restated Certificate of Incorporation of Akoustis, Inc., as filed with the Delaware Secretary of State on June 13, 2014, as amended
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3.6*
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Bylaws of Akoustis, Inc., as amended
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4.1
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Indenture, dated as of May 14, 2018, by and among the Company, the Initial Guarantor and The Bank of New York Mellon Trust Company, N.A.
(incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 15, 2018)
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5.1*
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Legal Opinion of K&L Gates LLP
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10.1.1†
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Akoustis, Inc. 2014 Stock Plan
(incorporated by reference to Exhibit 10.10 to the Company’s Transition Report on Form 10-K filed with the SEC on October 31, 2016)
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10.1.2†
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Form of Restricted Stock Purchase Agreement under the 2014 Stock Plan between the Company (as assignee of Akoustis, Inc.) and each of Steve DenBaars, Mark Boomgarden and Arthur Geiss
(incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.1.3†
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Form of Amendment to Restricted Stock Purchase Agreement under the 2014 Stock Plan between the Company and each of Steve DenBaars and Mark Boomgarden
(incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K filed with the SEC on June 29, 2016)
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10.1.4†
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Declaration of Amendment to the Akoustis, Inc. 2014 Stock Plan
(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2017)
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10.2
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Joint Development Agreement, dated February 27, 2015, between Akoustis, Inc. and Global Communication Semiconductors, LLC
(incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.3
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Foundry Agreement, dated February 27, 2015, between Akoustis, Inc. and Global Communication Semiconductors, LLC
(incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.4
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Form of 2015 Placement Agent Warrant for Common Stock of the Company in connection with the Company’s 2015 private placement offering
(incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.5
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Form of 2015 Registration Rights Agreement
(incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.6.1†
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Akoustis Technologies, Inc. 2015 Equity Incentive Plan
(incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.6.2†
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Form of Stock Option Agreement under the Akoustis Technologies, Inc. 2015 Equity Incentive Plan
(incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015)
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10.6.3†
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Form of Restricted Stock Agreement, under the Akoustis Technologies, Inc. 2015 Equity Incentive Plan, between the Company and each of Mark Boomgarden, Dave Aichele and Cindy Payne
(incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K filed with the SEC on June 29, 2016)
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10.6.4†
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Declaration of Amendment to the Akoustis Technologies, Inc. 2015 Equity Incentive Plan
(incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2017)
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10.7†
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Employment Agreement between the Company and Jeffrey Shealy dated as of June 15, 2015
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 19, 2015)
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10.7.1†
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Amendment No. 1 to the Employment Agreement between the Company and Jeffrey Shealy, effective as of September 6, 2017
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2017)
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10.8.1†
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Employment Agreement between the Company and David M. Aichele dated as of June 15, 2015
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 19, 2015)
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10.9.2†
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Offer Letter from the Company to Mark D. Boomgarden
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on May 30, 2017)
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10.9.3†
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Separation Agreement and General Release, dated as of September 25, 2017, by and between Akoustis Technologies, Inc. and Mark D. Boomgarden
(incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2017)
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10.10.1†
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Employment Agreement between the Company and Cindy C. Payne dated as of June 15, 2015
(incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on June 19, 2015)
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10.10.2†
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Offer Letter from the Company to Cindy C. Payne
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 26, 2017)
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10.11
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Form of 2016 Subscription Agreement between the Company and the investors party thereto
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 20, 2016)
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10.12
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Form of 2016 Placement Agent Warrant for Common Stock of the Company in connection with the Company’s 2016 private placement offering
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 20, 2016)
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10.13
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Form of 2016 Registration Rights Agreement
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 11, 2016)
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10.14.1
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Form of Registration Rights Agreement by and among the Company and the investors in the 2016-2017 Offering
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 25, 2016)
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10.14.2
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Amendment No. 1 to Registration Rights Agreement by and among the Company and the investors in the 2016-2017 Offering
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2016)
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10.15
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Form of Placement Agent Warrant in the 2016-2017 Offering
(incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2016)
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10.16.1
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Form of Subscription Agreement by and among the Company and the investors in the 2016-2017 Offering
(incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 14, 2017)
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10.16.2
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Form of Amended Subscription Agreement by and among the Company and the investors in the 2016-2017 Offering
(incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 14, 2017)
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10.17.1
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Placement Agent Agreement, dated December 8, 2016, by and between the Company and Katalyst Securities LLC in connection with the 2016-2017 Offering
(incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 14, 2017)
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10.17.2
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Amendment to Placement Agent Agreement, dated May 8, 2017, by and between the Company and Katalyst Securities LLC
(incorporated by reference to Exhibit 10.40 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-218245) filed with the SEC on May 25, 2017)
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10.18.1
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Placement Agent Agreement, dated December 12, 2016, by and between the Company and Drexel Hamilton, LLC in connection with the 2016-2017 Offering
(incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 14, 2017)
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10.18.2
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Amendment to Placement Agent Agreement by and between the Company and Drexel Hamilton LLC
(incorporated by reference to Exhibit 10.39 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-218245) filed with the SEC on May 25, 2017)
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10.19
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Placement Agent Agreement, dated December 14, 2016, by and between the Company and Joseph Gunnar & Co., LLC in connection with the 2016-2017 Offering
(incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 14, 2017)
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10.20
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Placement Agent Agreement, dated December 19, 2016, by and between the Company and Northland Securities, Inc. in connection with the 2016-2017 Offering
(incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 14, 2017)
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10.21
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Form of Amended and Restated Placement Agent Warrant for Common Stock of the Company in connection with the Company’s 2015 private placement offering and 2016 private placement offering
(incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 14, 2017)
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10.22.1†
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Akoustis Technologies, Inc. 2016 Stock Incentive Plan
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 16, 2016)
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10.22.2†
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Form of Restricted Stock Award Agreement under the Akoustis Technologies, Inc. 2016 Stock Incentive Plan
(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 14, 2017)
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10.22.3†
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Revised Form of Restricted Stock Award Agreement under the Akoustis Technologies, Inc. 2016 Stock Incentive Plan
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 23, 2017)
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10.22.4†
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Form of Nonqualified Stock Option Agreement for Employees under the Akoustis Technologies, Inc. 2016 Stock Incentive Plan
(incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2017)
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10.22.5†
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Form of Restricted Stock Unit Agreement for Employees under the Akoustis Technologies, Inc. 2016 Stock Incentive Plan
(incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2017)
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10.22.6†
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Form of Nonqualified Stock Option Agreement for Directors under the Akoustis Technologies, Inc. 2016 Stock Incentive Plan
(incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2017)
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10.22.7†
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Form of Restricted Stock Unit Agreement for Directors under the Akoustis Technologies, Inc. 2016 Stock Incentive Plan
(incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2017)
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10.23.1
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Form of Subscription Agreement by and among the Company and the investors in the First 2017 Offering
(incorporated by reference to Exhibit 10.35 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-218245) filed with the SEC on May 25, 2017)
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10.23.2
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Form of Amended Subscription Agreement by and among the Company and the investors in the First 2017 Offering
(incorporated by reference to Exhibit 10.36 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-218245) filed with the SEC on May 25, 2017)
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10.23.3
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Form of Amendment No. 1 to Amended Subscription Agreement by and among the Company and the investors in the First 2017 Offering
(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on December 15, 2017)
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10.24
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Form of Registration Rights Agreement by and among the Company and the investors in the First 2017 Offering
(incorporated by reference to Exhibit 10.37 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-218245) filed with the SEC on May 25, 2017)
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10.25
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Form of Placement Agent Warrant in the First 2017 Offering
(incorporated by reference to Exhibit 10.38 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-218245) filed with the SEC on May 25, 2017)
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10.26
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Purchase Order for Deposition Tool
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 20, 2017)
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10.27.1†
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Employment Agreement by and between John T. Kurtzweil and the Company, dated July 14, 2017
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 17, 2017)
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10.27.2†
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Restricted Stock Award Agreement under the Akoustis Technologies, Inc. 2016 Stock Incentive Plan by and between the Company and John T. Kurtzweil, entered into in connection with Mr. Kurtzweil’s employment
(incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2017)
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10.27.3†
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Stock Option Agreement under the Akoustis Technologies, Inc. 2016 Stock Incentive Plan by and between Akoustis Technologies, Inc. and John T. Kurtzweil, entered into in connection with Mr. Kurtzweil’s employment
(incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2017)
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10.28†
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Summary of Akoustis Technologies, Inc. Director Compensation Program, effective October 3, 2017
(incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2017)
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10.29.1
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Form of Subscription Agreement by and among the Company and the director investors in the first round of the Second 2017 Offering
(incorporated by reference to Exhibit 10.29.1 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-222552) filed with the SEC on January 16, 2018)
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10.29.2
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Form of Subscription Agreement by and among the Company and the non-director investors in the first round of the Second 2017 Offering
(incorporated by reference to Exhibit 10.29.2 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-222552) filed with the SEC on January 16, 2018)
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10.29.3
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Form of Subscription Agreement by and among the Company and certain investors in the second round of the Second 2017 Offering
(incorporated by reference to Exhibit 10.29.3 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-222552) filed with the SEC on January 16, 2018)
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10.29.4
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Form of Subscription Agreement by and among the Company and the certain investors in the second round of the Second 2017 Offering
(incorporated by reference to Exhibit 10.29.4 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-222552) filed with the SEC on January 16, 2018)
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10.29.5
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Form of Subscription Agreement by and among the Company and the investors in the third round of the Second 2017 Offering
(incorporated by reference to Exhibit 10.29.5 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-222552) filed with the SEC on January 16, 2018)
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10.29.6
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Form of Subscription Agreement by and among the Company and the director investors in the fourth round of the Second 2017 Offering
(incorporated by reference to Exhibit 10.29.6 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-222552) filed with the SEC on January 16, 2018)
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10.30
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Form of Registration Rights Agreement by and among the Company
and the investors in the Second 2017 Offering
(incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed with the SEC on November 17, 2017)
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10.31
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Placement Agent Agreement by and between the Company and Katalyst Securities, LLC in connection with the Second 2017 Offering
(incorporated by reference to Exhibit 10.31 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-222552) filed with the SEC on January 16, 2018)
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10.32
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Placement Agent Agreement by and between the Company and Drexel Hamilton, LLC in connection with the Second 2017 Offering
(incorporated by reference to Exhibit 10.32 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-222552) filed with the SEC on January 16, 2018)
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10.33
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Placement Agent Agreement by and between the Company and Joseph Gunnar in connection with the Second 2017 Offering
(incorporated by reference to Exhibit 10.33 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-222552) filed with the SEC on January 16, 2018)
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10.34
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Form of Placement Agent Warrant in the Second 2017 Offering
(incorporated by reference to Exhibit 10.34 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-222552) filed with the SEC on January 16, 2018)
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10.35
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Purchase Agreement, dated as of May 10, 2018, by and among the Company, the Initial Guarantor and Oppenheimer & Co. Inc., as representative of the several Initial Purchasers named in Schedule 1 thereto
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 15, 2018)
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10.36
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|
Registration Rights Agreement, dated as of May 14, 2018, by and among the Company, the Initial Guarantor and Oppenheimer & Co. Inc., as representative of the several Initial Purchasers named in Schedule 1 thereto
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 15, 2018)
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10.37
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Pledge and Security Agreement, dated as of May 14, 2018, by and among the Company, the Initial Guarantor and The Bank of New York Mellon Trust Company, N.A., as Collateral Agent
(incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on May 15, 2018)
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21.1
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Subsidiaries of the Company
(incorporated by reference to Exhibit 21.1 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-218245) filed with the SEC on May 25, 2017)
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23.1*
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Consent of Marcum LLP
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23.2*
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Consent of K&L Gates LLP
(included in Exhibit 5.1)
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24.1*
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Power of Attorney
(included on Signature Page)
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* Filed
herewith
† Management
contract or compensatory plan or arrangement
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Huntersville, State of North Carolina, on June 25, 2018.
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AKOUSTIS TECHNOLOGIES, INC.
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By:
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/s/ Jeffrey B. Shealy
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Name:
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Jeffrey B. Shealy
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|
Title:
|
President and Chief Executive Officer (Principal Executive Officer)
|
KNOW ALL PERSONS BY THESE PRESENTS, that
each person whose signature appears below hereby constitutes and appoints Jeffrey B. Shealy, John T. Kurtzweil, and Andrew Wright,
or any of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for
such person and in his or her name, place and stead, in any and all capacities, to sign any or all amendments or supplements to
this registration statement and to file the same, with all exhibits thereto, and other documents in connection therewith, with
the SEC, granting unto said attorneys-in-fact and agents or any one of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises, as fully as to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents, or any
of them, or his or her substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on June 25, 2018.
/s/Jeffrey B. Shealy
|
|
/s/ John T. Kurtzweil
|
Jeffrey B. Shealy
|
|
John T. Kurtzweil
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President, Chief Executive Officer, and Director (Principal Executive Officer)
|
|
Chief Financial Officer (Principal Financial and Accounting Officer)
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|
|
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/s/ Arthur E. Geiss
|
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/s/ Jerry D. Neal
|
Arthur E. Geiss
|
|
Jerry D. Neal
|
Co-Chairman of the Board
|
|
Co-Chairman of the Board
|
|
|
|
/s/ Steven P. DenBaars
|
|
/s/ Jeffrey K. McMahon
|
Steven P. DenBaars
|
|
Jeffrey K. McMahon
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Director
|
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Director
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|
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/s/ Steven P. Miller
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/s/ Suzanne B. Rudy
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Steven P. Miller
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Suzanne B. Rudy
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Director
|
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Director
|
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Huntersville, State of North Carolina, on June 25, 2018.
|
AKOUSTIS, INC.
|
|
|
|
|
By:
|
/s/ Jeffrey B. Shealy
|
|
Name:
|
Jeffrey B. Shealy
|
|
Title:
|
President and Chief Executive Officer (Principal Executive Officer)
|
KNOW ALL PERSONS BY THESE PRESENTS, that
each person whose signature appears below hereby constitutes and appoints Jeffrey B. Shealy, John T. Kurtzweil, and Andrew Wright,
or any of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for
such person and in his or her name, place and stead, in any and all capacities, to sign any or all amendments or supplements to
this registration statement and to file the same, with all exhibits thereto, and other documents in connection therewith, with
the SEC, granting unto said attorneys-in-fact and agents or any one of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises, as fully as to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents, or any
of them, or his or her substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on June 25, 2018.
/s/Jeffrey B. Shealy
|
|
/s/ John T. Kurtzweil
|
Jeffrey B. Shealy
|
|
John T. Kurtzweil
|
President, Chief Executive Officer, and Director (Principal Executive Officer)
|
|
Chief Financial Officer and Director (Principal Financial and Accounting Officer)
|
|
|
|
/s/ Andrew Wright
|
|
|
Andrew Wright
|
|
|
Secretary and Director
|
|
|
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