Westwater Resources(WWR) - 2025 Q2 - Quarterly Results

Introduction to the Note Payments of Principal The Company must pay principal and installment amounts on due dates, with prepayment generally restricted, and payments prioritized towards charges, interest, then principal pro rata - The Company must pay the Outstanding Principal Value on the Maturity Date and Installment Amounts on Installment Dates[3] - Prepayment of Outstanding Value is generally restricted[3] - Payment priority: Late Charges, other Transaction Document amounts, accrued Interest, then Outstanding Principal Value, allocated pro rata[3] Interest; Interest Rate Interest accrues only upon an Event of Default at the Default Rate, compounding monthly and payable in arrears, with accrued interest remaining due even if the default is cured - Interest accrues only upon an Event of Default[4] - Interest is computed at the Default Rate (18% per annum), compounds monthly, and is payable in arrears on the first Trading Day of each month[4][165] - Curing an Event of Default stops future default interest but does not relieve the Company of accrued default interest[4] Conversion of Notes Conversion Right The Holder can convert any portion of the outstanding Conversion Amount into Common Stock at the Conversion Rate, with the Company covering associated taxes and rounding up fractional shares - Holder can convert any portion of the Conversion Amount into Common Stock after the Issuance Date[6] - Fractional shares are rounded up to the nearest whole share[6] - Company is responsible for all transfer, stamp, issuance, and similar taxes and expenses related to the issuance of Common Stock upon conversion[6] Conversion Rate The Conversion Rate is calculated by dividing the Conversion Amount by the Conversion Price, where the Conversion Amount includes principal, accrued interest, late charges, and other unpaid amounts - Conversion Rate = Conversion Amount / Conversion Price[8] Components of Conversion Amount | Component | Description | | :---------- | :---------- | | Outstanding Principal Value | Portion of the Note's principal to be converted | | Accrued and Unpaid Interest | Interest on the principal, if any | | Accrued and Unpaid Late Charges | Late charges on principal and interest, if any | | Other Unpaid Amounts | Any other unpaid amounts pursuant to Transaction Documents | Mechanics of Conversion This section details the procedures for converting the Note, including optional conversion by the Holder, consequences for the Company's failure to timely deliver shares, requirements for registration and book-entry, and rules for pro rata conversions and dispute resolution Optional Conversion The Holder initiates conversion by notice, requiring the Company to process and deliver shares by the Share Delivery Deadline, either to a DTC account or via certificate - Holder initiates conversion by delivering a Conversion Notice to the Company by 11:59 p.m. New York time on the Conversion Date[12] - Company must acknowledge receipt and instruct the Transfer Agent to process the conversion by the first Trading Day after receiving the notice[12] - Shares must be credited to the Holder's DTC account (if FAST participant) or delivered via certificate by the Share Delivery Deadline (first Trading Day after notice receipt)[12] Company's Failure to Timely Convert Failure by the Company to timely deliver shares results in penalties, allows the Holder to void the conversion, and may trigger a "Buy-In" obligation for the Company - If the Company fails to timely issue and deliver shares (Conversion Failure), it must pay the Holder 2% of the product of unissued shares and VWAP for each day of failure[14] - Holder may void the Conversion Notice and retain the unconverted Note portion, without affecting accrued payments[14] - In case of a 'Buy-In' by the Holder due to Conversion Failure, the Company must either pay the Buy-In Price or deliver shares and pay the Buy-In Payment Amount[14] Registration; Book-Entry The Company maintains a conclusive Register for Note holders, with assignments effective upon registration, and physical surrender of the Note generally not required for conversion - The Company maintains a Register for recording Note holders and principal amounts, which is conclusive for all purposes[16] - Assignments or sales of Registered Notes are effective upon registration in the Register, or automatically deemed updated if not recorded within two Business Days[16] - Physical surrender of the Note is generally not required for conversion unless the full Conversion Amount is converted or the Holder requests reissuance[16] Pro Rata Conversion; Disputes If the Company cannot convert all submitted notices, conversions are pro rata, disputes are resolved per Section 25, and conversions breaching beneficial ownership limits are held in abeyance - If multiple holders submit conversion notices for the same date and the Company cannot convert all, conversions will be pro rata based on principal amounts submitted[18] - In case of a dispute regarding the number of shares issuable, the Company issues undisputed shares and resolves the dispute per Section 25[18] - Conversion Notices that would breach beneficial ownership limitations (Section 3(d)(i)) are held in abeyance until they can be satisfied without violation[18] Limitations on Conversions Conversions are subject to limitations, primarily concerning beneficial ownership to prevent the Holder and Attribution Parties from exceeding a specified Maximum Percentage of outstanding Common Stock, and compliance with Principal Market regulations regarding share issuances Beneficial Ownership Conversions are void if they would cause the Holder and Attribution Parties to beneficially own more than 9.99% of outstanding Common Stock, with calculations based on Section 13(d) of the 1934 Act - Conversions are null and void to the extent that the Holder and Attribution Parties would beneficially own in excess of 9.99% (Maximum Percentage) of outstanding Common Stock[20] - Beneficial ownership is calculated per Section 13(d) of the 1934 Act, excluding non-converted portions of the Note and other securities subject to similar limitations[20] - The Holder can rely on the Company's Reported Outstanding Share Number, and the Company must confirm outstanding shares upon request[20] Principal Market Regulation The Company cannot issue shares upon conversion if it exceeds the "Exchange Cap" without stockholder approval, with each Buyer's issuance limited by their pro rata allocation - The Company cannot issue shares upon conversion if it would exceed the 'Exchange Cap' under Principal Market rules, unless stockholder approval is obtained[22] - Until stockholder approval, each Buyer's issuance is limited by their 'Exchange Cap Allocation', a pro rata portion of the total Exchange Cap[22] - Upon full conversion by a holder, any unused Exchange Cap Allocation is reallocated pro rata to remaining holders[22] Right of Alternate Conversion Upon an Event of Default During an Event of Default Redemption Right Period, the Holder may convert the Conversion Amount into Common Stock at the Alternate Conversion Price, regardless of the default's status - Holder may elect an 'Alternate Conversion' during an Event of Default Redemption Right Period[24] - The conversion uses the 'Alternate Conversion Price', which is the lowest of the current Conversion Price and 90% of the lowest VWAP during a 7-Trading Day measuring period[24][26][148] - Until shares are delivered, the Alternate Conversion Amount can still be converted under standard Section 3(c) terms[26] Mandatory Conversion The Company can mandate conversion of the Note into Common Stock under specific VWAP and Equity Conditions, subject to volume limitations and cancellation if conditions fail or an Event of Default occurs - Company can mandate conversion if VWAP exceeds the Mandatory Conversion Minimum Price for 20 consecutive Trading Days and no Equity Conditions Failure exists[28] - Mandatory Conversion is limited by the Holder Pro Rata Amount of the Mandatory Conversion Volume Limitation (12.5% of aggregate dollar trading volume over 20 days)[28][183] - Mandatory Conversion can be cancelled if a 'Mandatory Conversion Price Failure' or 'Equity Conditions Failure' occurs before the conversion date, or if an Event of Default exists[28] Rights Upon Event of Default Event of Default Definition An "Event of Default" includes trading suspensions, conversion failures, insufficient authorized shares, payment defaults, bankruptcy, significant judgments, and material breaches of agreements or covenants - Events of Default include: trading suspension for 5 consecutive days, failure to cure a Conversion Failure within 5 Trading Days, insufficient Authorized Share Allocation for 10 consecutive days, failure to pay Outstanding Value (2-5 Trading Day cure periods for interest/late charges and other amounts respectively)[31][32] - Bankruptcy Events of Default include: institution of bankruptcy proceedings not dismissed within 60 days, voluntary bankruptcy filings, or court decrees of bankruptcy unstayed for 60 days[31][32][33] - Other Events of Default: judgments exceeding $500,000 not bonded/discharged within 30 days, failure to pay other indebtedness over $500,000, material breaches of Transaction Documents (6 Trading Day cure period), false certifications, Material Adverse Effect, challenges to Transaction Document validity, insufficient shares for at-the-market offerings, Financial Covenant Failure (10-day grace period if Available Cash > $1.75 million), and any Event of Default under Other Notes[32][33][34][35][102] Notice of an Event of Default; Redemption Right Upon an Event of Default, the Company must notify the Holder, who, with Required Holders' consent, may demand redemption at the Event of Default Redemption Price - Company must deliver an 'Event of Default Notice' within one Business Day of an Event of Default[37] - Holder, with Required Holders' consent, can demand redemption during the 'Event of Default Redemption Right Period' (20 Trading Days after notice/cure)[37] Event of Default Redemption Price Calculation | Calculation Method | Description | | :----------------- | :---------- | | Method (i) | Conversion Amount to be redeemed × Redemption Premium (115%) | | Method (ii) | (Conversion Amount to be redeemed / Alternate Conversion Price) × (Redemption Premium (115%) × Greatest Closing Sale Price during default period) | Mandatory Redemption upon Bankruptcy Event of Default Upon a Bankruptcy Event of Default, the Company must immediately pay the Holder cash equal to the Outstanding Value multiplied by the Redemption Premium, unless waived by the Holder - Upon a Bankruptcy Event of Default, the Company must immediately pay the Holder cash[39] - Payment amount is the Outstanding Value of the Note multiplied by the Redemption Premium (115%)[39][201] - Holder has the sole discretion to waive this mandatory redemption right[39] Rights Upon Fundamental Transaction Assumption The Company cannot engage in a Fundamental Transaction unless the Successor Entity assumes all Note obligations and issues a substantially similar security, a requirement the Holder may waive - Company must ensure Successor Entity assumes all Note obligations in a Fundamental Transaction[40] - Successor Entity must issue a security substantially similar to the Note, maintaining principal, interest, conversion rights, ranking, and security[40] - Holder has the option to waive the assumption requirement[40] Notice of a Change of Control; Redemption Right The Company must provide notice of a Change of Control, after which the Holder can demand redemption of the Note at the Change of Control Redemption Price - Company must deliver a 'Change of Control Notice' 10-20 Trading Days prior to the Change of Control Date[42] - Holder can demand redemption during a 20-Trading Day period after receiving notice or becoming aware of the Change of Control[42] Change of Control Redemption Price Calculation | Calculation Method | Description | | :----------------- | :---------- | | Method (i) | Change of Control Redemption Premium (115%) × Conversion Amount being redeemed | | Method (ii) | Change of Control Redemption Premium (115%) × (Conversion Amount being redeemed × (Greatest Closing Sale Price / Conversion Price)) | | Method (iii) | Change of Control Redemption Premium (115%) × (Conversion Amount being redeemed × (Aggregate cash/non-cash consideration per share / Conversion Price)) | Rights Upon Issuance of Purchase Rights and Other Corporate Events Purchase Rights If the Company issues Purchase Rights, the Holder is entitled to equivalent rights as if the Note were fully converted, subject to beneficial ownership limitations - Holder is entitled to Purchase Rights as if the Note was fully converted, assuming conversion at the Alternate Conversion Price[43] - Participation in Purchase Rights is limited by the Maximum Percentage beneficial ownership restriction[43] - Excess Purchase Rights are held in abeyance until they would not cause the Holder to exceed the Maximum Percentage[43] Other Corporate Events For Corporate Events where Common Stock holders receive securities or assets, the Company must ensure the Holder can receive equivalent value upon conversion, either as Common Stock plus assets or directly as assets - Upon a Corporate Event, the Company must ensure the Holder can receive equivalent securities or assets upon conversion[44] - Holder has the option to receive either Common Stock plus additional assets, or the assets directly, at a conversion rate commensurate with the original Conversion Rate[44] - These provisions apply to successive Corporate Events and disregard conversion limitations[44] Rights Upon Issuance of Other Securities Adjustment of Conversion Price upon Issuance of Common Stock The Conversion Price is adjusted downward if the Company issues Common Stock, Options, or Convertible Securities at a price lower than the current Conversion Price, with specific rules for calculating deemed issuance prices - Conversion Price is reduced to the New Issuance Price if the Company issues Common Stock, Options, or Convertible Securities at a price lower than the current Conversion Price (Dilutive Issuance)[46] - For Options, the lowest price per share issuable upon exercise or conversion of related Convertible Securities determines the deemed issuance price[46] - For Convertible Securities, the lowest price per share issuable upon conversion, exercise, or exchange determines the deemed issuance price[48] - In integrated transactions involving Primary and Secondary Securities, the aggregate consideration per share is calculated by subtracting the Black Scholes Consideration Value or fair market value of Secondary Securities from the lowest price of the Primary Security[51] Adjustment of Conversion Price upon Subdivision or Combination of Common Stock The Conversion Price is proportionately adjusted for stock subdivisions (reduced) or combinations (increased), with adjustments effective immediately after the transaction date - Conversion Price is proportionately reduced upon a stock subdivision (e.g., stock split, stock dividend)[54] - Conversion Price is proportionately increased upon a stock combination[54] - Adjustments become effective immediately after the effective date of the subdivision or combination[54] Holder's Right of Adjusted Conversion Price If the Company issues Variable Price Securities, the Holder can elect to use the Variable Price instead of the Conversion Price for any conversion, at their sole discretion - If the Company issues 'Variable Price Securities', the Holder can elect to use the 'Variable Price' instead of the Conversion Price for conversion[55] - This election is made by designating it in the Conversion Notice and is at the Holder's sole discretion for each conversion[55] Stock Combination Event Adjustments Following a Stock Combination Event, if the Event Market Price is less than the Conversion Price, the Conversion Price will be reduced to the Event Market Price on the sixteenth Trading Day, with no adjustments resulting in an increase - After a Stock Combination Event, if the Event Market Price is lower than the Conversion Price, the Conversion Price is reduced to the Event Market Price[57] - This adjustment occurs on the sixteenth Trading Day following the Stock Combination Event Date[57] - No adjustment will be made if it would increase the Conversion Price[57] Other Events For unaddressed dilutive corporate actions, the Company's board will adjust the Conversion Price to protect Holder rights, with an independent investment bank making final determinations if disputed - Company's board will determine appropriate Conversion Price adjustments for unaddressed dilutive events to protect Holder's rights[58] - No adjustment under this section will increase the Conversion Price[58] - If Holder disputes the adjustment, an independent investment bank will make a final and binding determination, with fees paid by the Company[58] Calculations All calculations under Section 7 are rounded to the nearest cent or 1/100 of a share, excluding Company-held shares from outstanding Common Stock counts, and treating their disposition as an issuance - All calculations are rounded to the nearest cent or 1/100 of a share[59] - Shares held by the Company are not included in the number of outstanding Common Stock[59] - Disposition of Company-held shares is considered an issuance or sale of Common Stock[59] Voluntary Adjustment by Company The Company may voluntarily reduce the Conversion Price of the Notes at any time, subject to Principal Market rules and the prior written consent of the Required Holders - Company may voluntarily reduce the Conversion Price of the Notes[60] - This requires prior written consent of the Required Holders and compliance with Principal Market rules[60] Installment Conversion or Redemption General On each Installment Date, the Company must pay the Installment Amount via conversion or cash redemption, or a combination, provided no Equity Conditions Failure exists, and must deliver an irrevocable Installment Notice - Company pays Installment Amounts via Installment Conversion, Installment Redemption, or a combination, provided no Equity Conditions Failure[62] - Company must deliver an irrevocable 'Installment Notice' by the 8th Trading Day prior to each Installment Date[62] - Failure to deliver an Installment Notice results in a deemed Installment Conversion of the entire Installment Amount[62] Mechanics of Installment Conversion If the Company elects or is deemed to elect Installment Conversion, the amount converts to Common Stock at the Installment Conversion Price, subject to Equity Conditions, with Holder options for cash redemption or voiding if conditions fail - Installment Conversion Amount is converted on the Installment Date at the Installment Conversion Price, subject to Equity Conditions[64] - If Equity Conditions fail between the Installment Notice Date and Installment Date, the Holder can demand cash redemption of the 'Designated Redemption Amount' or void the conversion[64] - If conversion is voided, the Conversion Price for that amount is adjusted to the lesser of the original Installment Conversion Price or the price on a future conversion date[64] Mechanics of Installment Redemption If the Company elects or is required to redeem, the Installment Redemption Amount is paid in cash at 100% on the Installment Date, with the Holder having conversion options if payment fails or prior to the date - Installment Redemption Amount is paid in cash on the Installment Date at 100% of the amount (Installment Redemption Price)[66] - If the Company fails to pay, the Holder can convert the Installment Redemption Amount at the Installment Conversion Price[66] - Holder can convert the Installment Redemption Amount into Common Stock prior to the Installment Date[66] Deferred Installment Amount The Holder may defer payment of any Installment Amount to a subsequent Installment Date by providing written notice to the Company - Holder can defer payment of an Installment Amount to a subsequent Installment Date[67] - Deferral requires written notice to the Company by the Trading Day immediately prior to the applicable Installment Date[67] Acceleration of Installment Amounts During any Installment Period, the Holder can accelerate and convert deferred amounts, in whole or in part, at the Acceleration Conversion Price - Holder can accelerate and convert deferred Installment Amounts during an Installment Period[68] - Conversion is at the 'Acceleration Conversion Price', which is the lower of the Installment Conversion Price or 92% of the lowest VWAP during the 5-Trading Day period ending on the Acceleration Date[68][143] Reallocation of Installment Amounts The Holder can reallocate Installment Amounts to another date within the same Installment Period, with the reallocated amount automatically converting into Common Stock at the Reallocation Conversion Price - Holder can reallocate Installment Amounts to another date within the same Installment Period[70] - Reallocated amounts automatically convert on the 'Reallocation Date' at the 'Reallocation Conversion Price'[70] - Reallocation Conversion Price is the lower of the current Conversion Price or the lower of the Installment Conversion Price for the period and 92% of the lowest VWAP during the 5-Trading Day period ending on the Reallocation Date[70][199] Redemptions at the Company's Election Company Optional Redemption The Company has a limited, conditional right to redeem all outstanding Conversion Amount at 115% of the Conversion Amount, subject to market conditions and absence of default - Company can redeem all outstanding Conversion Amount at 115% of the Conversion Amount (Company Optional Redemption Price)[71] - Conditions for redemption: VWAP < Conversion Price, no material non-public information, no trading suspension, and no Event of Default during the 'Company Optional Redemption Notice Period' (20-30 Trading Days)[71] - The Company can only deliver one irrevocable 'Company Optional Redemption Notice', which is null and void if any 'Company Optional Redemption Condition Failure' occurs[71] Pro Rata Redemption Requirement If the Company elects a Company Optional Redemption for this Note, it must apply the same action pro rata to all Other Notes simultaneously - Company Optional Redemption must be applied pro rata to all Other Notes simultaneously[73] Subsequent Placement Optional Redemption General The Holder can require the Company to redeem a portion of the Note upon an Eligible Subsequent Placement, limited to their pro rata share of 30% of the net proceeds - Holder can demand 'Subsequent Placement Optional Redemption' upon an 'Eligible Subsequent Placement'[74] - Redemption amount is limited to the Holder's pro rata share of 30% of the net proceeds of the Eligible Subsequent Placement[74] Mechanics The Holder initiates redemption by notice, with the redemption date being the later of five Business Days after notice or the placement's consummation, and the price paid in cash - Holder delivers a 'Subsequent Placement Optional Redemption Notice' to initiate redemption[75] - The 'Subsequent Placement Optional Redemption Date' is the later of 5 Business Days after notice or the Eligible Subsequent Placement consummation[75] - The redemption price is the 'Subsequent Placement Optional Redemption Amount' paid in cash[75] Project Financing Optional Conversion or Redemption Mechanics of Project Financing Conversion Following a public announcement of Permitted Project Financing, the Holder can convert all or part of the Note's Outstanding Value into Common Stock at the Acceleration Conversion Price - Holder can convert Outstanding Value into Common Stock after public announcement of 'Permitted Project Financing'[76] - Conversion uses the 'Acceleration Conversion Price'[76] - This right expires on the fifteenth Trading Day after the consummation of the Permitted Project Financing[76] Mechanics of Project Financing Redemption On the Trading Day after the Project Finance Conversion Right Expiration Date, the Holder may demand cash redemption of the Note's Outstanding Value, which has priority over stockholder payments - Holder can demand redemption of Outstanding Value on the Trading Day after the 'Project Finance Conversion Right Expiration Date'[78] - The 'Project Finance Redemption Price' is the Outstanding Value being redeemed, paid in cash[78] - These redemptions have priority over payments to stockholders related to the Permitted Project Financing[78] Noncircumvention The Company covenants not to take actions that would circumvent Holder's rights, must ensure valid share issuance, and promptly remedy any conversion failures after 60 days - Company covenants not to circumvent Holder's rights under the Note through corporate actions[79] - Company must ensure valid and legal issuance of fully paid, nonassessable Common Stock upon conversion[79] - If Holder cannot convert in full after 60 days (excluding Section 3(d) limits), Company must use best efforts to remedy the failure[79] Reservation of Authorized Shares Reservation The Company must always reserve at least 150% of the maximum Common Stock shares issuable upon conversion of all outstanding Notes, allocated pro rata among holders - Company must reserve at least 150% of the maximum Common Stock shares issuable upon conversion of all outstanding Notes[80] - The 'Required Reserve Amount' is calculated assuming conversion at the Alternate Conversion Price and without regard to conversion limitations[80] - The reserve is allocated pro rata among Note holders based on original principal amount[80] Insufficient Authorized Shares If the Company lacks sufficient authorized shares, it must immediately act to increase them, including holding a stockholder meeting, and pay cash redemption plus Buy-In costs if shares cannot be issued - In case of 'Authorized Share Failure', Company must immediately act to increase authorized shares[82] - Company must hold a stockholder meeting within 60 days to approve an increase in authorized shares[82] - If shares cannot be issued due to Authorized Share Failure, Company must pay cash for redemption of the affected Conversion Amount, plus Holder's Buy-In costs[82] Redemptions Mechanics This section outlines payment timelines for various redemptions; if the Company fails to pay, the Holder can void the notice, have the Note returned with increased principal, and adjust the Conversion Price - Redemption payments are due within specific timeframes depending on the type of redemption (e.g., Event of Default: 5 Business Days; Change of Control: concurrently or 5 Business Days)[84] - Holder can elect to increase the Redemption Price by any cash payment owed under other Transaction Documents[84] - If Company fails to pay Redemption Price, Holder can void the redemption, have the Note returned (with increased principal), and the Conversion Price will be adjusted to a lower rate[84] Redemption by Other Holders If the Company receives multiple redemption notices within a five-Business Day window and cannot redeem all, it must redeem a pro rata amount from each holder - Company must forward 'Other Redemption Notices' to the Holder within one Business Day[86] - If multiple redemption notices are received within a 5-Business Day period and the Company cannot redeem all, redemptions will be pro rata among all holders[86] Voting Rights The Holder of this Note generally has no voting rights, except as required by law or explicitly provided within the Note itself - Holder has no voting rights as a Note holder, except as required by law or expressly provided in the Note[87] Covenants Rank Payments under this Note rank pari passu with Other Notes and June 2025 Notes, and are senior to all other Indebtedness except for Permitted Indebtedness secured by Permitted Liens and Permitted Project Financing - Payments under this Note rank pari passu with Other Notes and June 2025 Notes[87] - Payments are senior to all other Indebtedness, except Permitted Indebtedness secured by Permitted Liens and Permitted Project Financing[87] Incurrence of Indebtedness The Company and its Subsidiaries are restricted from incurring or guaranteeing any Indebtedness, with exceptions for this Note, Other Notes, Permitted Indebtedness, and Permitted Project Financing - Company and Subsidiaries are restricted from incurring new Indebtedness[88] - Exceptions include this Note, Other Notes, Permitted Indebtedness, and Permitted Project Financing[88] Existence of Liens The Company and its Subsidiaries are prohibited from allowing any Liens on their property or assets, other than Permitted Liens - Company and Subsidiaries are prohibited from creating or allowing Liens on their assets[89] - This restriction does not apply to Permitted Liens[89] Restricted Payments and Investments The Company and its Subsidiaries cannot make payments on Indebtedness (other than the Notes and June 2025 Notes) or Investments if an Event of Default exists or would result - Company and Subsidiaries cannot make payments on Indebtedness (other than Notes/June 2025 Notes) or Investments if an Event of Default exists or would result[90] Restriction on Redemption and Cash Dividends The Company and its Subsidiaries are prohibited from redeeming or repurchasing capital stock (except for June 2025 Notes) and from declaring or paying cash dividends or distributions - Company and Subsidiaries cannot redeem or repurchase capital stock (except for June 2025 Notes)[92] - Company and Subsidiaries cannot declare or pay cash dividends or distributions on capital stock[92] Restriction on Transfer of Assets The Company and its Subsidiaries are restricted from disposing of assets or rights, with exceptions for ordinary course of business transactions and sales of inventory/product - Company and Subsidiaries are restricted from disposing of assets or rights[93] - Exceptions include dispositions in the ordinary course of business and sales of inventory/product[93] Maturity of Indebtedness The Company and its Subsidiaries are prohibited from allowing any Indebtedness (other than the June 2025 Notes) to mature or accelerate prior to the Maturity Date of this Note - Company and Subsidiaries cannot permit any Indebtedness (except June 2025 Notes) to mature or accelerate before the Note's Maturity Date[94] Change in Nature of Business The Company and its Subsidiaries cannot materially change their lines of business from those on the Subscription Date, nor can they modify their corporate structure or purpose - Company and Subsidiaries cannot materially change their lines of business from those on the Subscription Date[95] - Company and Subsidiaries cannot modify their corporate structure or purpose[95] Preservation of Existence, Etc. The Company and its Subsidiaries must maintain their existence, rights, and privileges, and remain duly qualified and in good standing in all necessary jurisdictions - Company and Subsidiaries must maintain their existence, rights, privileges, and good standing in all relevant jurisdictions[96] Maintenance of Intellectual Property The Company and its Subsidiaries must take all necessary actions to maintain their material Intellectual Property Rights in full force and effect - Company and Subsidiaries must maintain all material Intellectual Property Rights in full force and effect[97] Maintenance of Insurance The Company and its Subsidiaries must maintain adequate insurance coverage for their properties and business, meeting governmental requirements or sound business practice standards - Company and Subsidiaries must maintain adequate insurance coverage for properties and business[98] - Coverage must meet governmental requirements or sound business practice standards[98] Transactions with Affiliates Transactions with Affiliates are restricted unless they are in the ordinary course of business, consistent with past practice, for fair consideration, and on arm's length terms - Transactions with Affiliates are restricted[99] - Permitted if in ordinary course of business, consistent with past practice, for fair consideration, and on arm's length terms[99] Restricted Issuances The Company cannot issue any Notes (other than as contemplated by existing agreements) or other securities that would cause an Event of Default without prior written consent from a majority of outstanding Note holders - Company cannot issue Notes (except as agreed) or other securities that would cause an Event of Default[100] - Requires prior written consent from holders of a majority of outstanding Notes[100] Financial Covenants; Announcement of Operating Results The Company must maintain an Available Cash balance of at least $2.25 million, and upon a Financial Covenant Failure, must notify the Holder and publicly disclose the failure if elected Financial Test Requirement | Metric | Requirement | | :----- | :---------- | | Available Cash | ≥ $2.25 million at all times | - Upon a 'Financial Covenant Failure', Company must notify Holder and, if elected, disclose material non-public information and the Event of Default publicly[103] PCAOB Registered Auditor While Notes are outstanding, the Company must engage an independent auditor registered with and compliant with the Public Company Accounting Oversight Board (PCAOB) to audit its financial statements - Company must engage a PCAOB-registered independent auditor for its financial statements while Notes are outstanding[104] Stay, Extension and Usury Laws The Company irrevocably waives the benefit of any stay, extension, or usury law that might affect the Note's covenants or performance, agreeing not to use such laws to hinder the Holder's rights - Company irrevocably waives the benefit of any stay, extension, or usury law[105] - Company agrees not to use such laws to impede the Holder's rights under the Note[105] Taxes The Company and its Subsidiaries must pay all due taxes and file personal property tax returns on time, with good faith contests permitted if adequate GAAP reserves are maintained - Company and Subsidiaries must pay all due taxes, fees, and charges, unless failure is not material[107] - Company and Subsidiaries must file personal property tax returns on time[107] - Taxes can be contested in good faith with adequate GAAP reserves[107] Independent Investigation Upon Holder's request due to a suspected breach or Event of Default, the Company must hire an independent investment bank to investigate, whose determination is binding and fees are borne by the Company - Company must hire an 'Independent Investigator' upon Holder's request if an Event of Default exists or is suspected[108] - Independent Investigator has broad access to Company records, personnel, and financial data[108] - The investigator's determination of a breach is binding, and the Company bears the fees and expenses[108] Distribution of Assets If the Company distributes assets to Common Stock holders, the Holder is entitled to equivalent distributions as if the Note were fully converted, subject to beneficial ownership limits - Holder is entitled to distributions of assets as if the Note was fully converted, assuming conversion at the Alternate Conversion Price[110] - Participation in distributions is limited by the Maximum Percentage beneficial ownership restriction[110] - Excess distributions are held in abeyance until they would not cause the Holder to exceed the Maximum Percentage[110] Amending the Terms of This Note Sections 3(d)(i) and 18 are unamendable, while other changes require prior written consent of the Required Holders and must not disproportionately affect any holder without their specific consent - Sections 3(d)(i) and 18 are unamendable, unmodifiable, and unwaivable[111] - Other amendments require prior written consent of the Required Holders[111] - Amendments are binding on all holders but cannot disproportionately and adversely affect a holder without their specific consent[111] Transfer This Note and any Common Stock shares issued upon its conversion are transferable by the Holder without the Company's consent, subject only to Section 9(g) of the Securities Purchase Agreement - Note and conversion shares are transferable by the Holder without Company consent[112] - Transfer is subject only to Section 9(g) of the Securities Purchase Agreement[112] Reissuance of This Note Transfer Upon transfer, the Holder surrenders the Note, and the Company issues new Notes to the transferee and original Holder (if partial transfer), acknowledging that outstanding principal may be less than the face amount - Holder surrenders Note upon transfer; Company issues new Notes to transferee and original Holder (if partial transfer)[113] - Holders acknowledge that outstanding principal may be less than the face amount due to prior conversions/redemptions[113] Lost, Stolen or Mutilated Note If the Note is lost, stolen, destroyed, or mutilated, the Company will issue a new Note upon satisfactory evidence and, for mutilation, surrender of the old Note - Company issues a new Note if the original is lost, stolen, destroyed, or mutilated[115] - Requires satisfactory evidence (e.g., written certification, indemnification) and, for mutilation, surrender of the old Note[115] Note Exchangeable for Different Denominations The Holder can exchange this Note for new Notes in different principal amounts (at least $1,000 each) by surrendering the original Note at the Company's principal office - Holder can exchange the Note for new Notes in different denominations (minimum $1,000)[116] - Exchange requires surrender of the original Note[116] Issuance of New Notes Any new Note issued must be of like tenor, represent the remaining outstanding principal, have the same Issuance Date, possess the same rights and conditions, and include accrued and unpaid Interest and Late Charges from the original Issuance Date - New Notes must be of like tenor, represent outstanding principal, and have the same Issuance Date[117] - New Notes must have the same rights and conditions as the original Note[117] - New Notes include accrued and unpaid Interest and Late Charges from the original Issuance Date[117] Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief The Note's remedies are cumulative, a breach causes irreparable harm entitling the Holder to specific performance and injunctive relief without bond, and the Company must provide compliance information - Remedies are cumulative and in addition to all other legal/equitable remedies[118] - Company acknowledges breach causes irreparable harm, entitling Holder to specific performance and injunctive relief without proving damages or posting bond[118] - Company must provide information to Holder to confirm compliance with Note terms[118] Payment of Collection, Enforcement and Other Costs The Company must pay all costs incurred by the Holder for collection, enforcement, or bankruptcy proceedings related to the Note, including attorneys' fees, and amounts due are not limited by the Note's purchase price - Company must pay Holder's costs for collection, enforcement, or bankruptcy proceedings related to the Note, including attorneys' fees[120] - Amounts due are not affected or limited by the Note's purchase price being less than its original principal[120] Construction; Headings This Note is jointly drafted and not construed against any party, with headings for convenience only, and terms like "including" construed broadly - Note is jointly drafted; not construed against any drafter[121] - Headings are for convenience and do not affect interpretation[121] - Terms like 'including' are construed broadly; 'herein' refers to the entire Note[121] Failure or Indulgence Not Waiver No failure or delay by the Holder in exercising any right constitutes a waiver, which is only effective if in writing and signed by an authorized representative, and Section 3(d) cannot be waived - No failure or delay by Holder in exercising rights constitutes a waiver[122] - Waivers must be in writing and signed by an authorized representative[122] - Section 3(d) (Limitations on Conversions) cannot be waived[122] Dispute Resolution Submission to Dispute Resolution Disputes regarding prices, rates, values, or calculations are submitted via email, and if unresolved, an independent investment bank's binding resolution is sought, with fees borne by the Company - Disputes regarding prices, rates, values, or arithmetic calculations are submitted via electronic mail[125] - If unresolved within two Business Days, Holder may select an independent investment bank for resolution[125] - Investment bank's resolution is final and binding, with fees borne by the Company[127] Miscellaneous This section confirms the dispute resolution process as an arbitration agreement under Delaware law, allowing either party to submit disputes to Delaware courts and seek injunctive relief - Section 25 constitutes an arbitration agreement under the Delaware Uniform Arbitration Act[128] - Either party can submit disputes to state or federal courts in Wilmington, Delaware, instead of using the arbitration procedures[128] - Nothing limits the Holder or Company from obtaining injunctive relief or other equitable remedies[128] Notices; Currency; Payments Notices Notices must follow the Securities Purchase Agreement, and the Company must promptly notify of all actions, including Conversion Price adjustments and record dates, ensuring public disclosure of such information - Notices must be given in accordance with Section 9(f) of the Securities Purchase Agreement[129] - Company must provide prompt written notice of all actions, including Conversion Price adjustments and record dates for corporate events[129] - Information in notices must be publicly disclosed prior to or concurrently with notice to Holder[129] Currency All dollar amounts and payments in the Note are in U.S. Dollars, with other currencies converted using the Wall Street Journal Exchange Rate on the calculation date - All dollar amounts and payments are in U.S. Dollars[130] - Other currencies are converted using the Wall Street Journal Exchange Rate on the calculation date[130] Payments Cash payments are made via certified check or wire transfer, due on the next Business Day if the due date falls on a non-Business Day, and unpaid amounts incur an 18% per annum Late Charge - Cash payments are made via certified check or, if elected by Holder, wire transfer[132] - Payments due on non-Business Days are due on the next Business Day[132] - Unpaid amounts (not accruing default interest) incur an 18% per annum 'Late Charge'[132] Cancellation This Note is automatically canceled, surrendered, and not reissued once all Outstanding Value and other owed amounts have been paid in full - Note is automatically canceled and surrendered upon full payment of all Outstanding Value and other owed amounts[133] - Canceled Note will not be reissued[133] Waiver of Notice To the extent permitted by law, the Company irrevocably waives various demands and notices related to the delivery, acceptance, performance, default, or enforcement of this Note and the Securities Purchase Agreement - Company irrevocably waives various demands and notices related to the Note and Securities Purchase Agreement, to the extent permitted by law[134] Governing Law This Note is governed by Delaware law, and the Company irrevocably submits to the exclusive jurisdiction of Delaware courts for disputes, waiving claims of inconvenient forum and the right to a jury trial - Note is governed by the internal laws of the State of Delaware[135] - Company irrevocably submits to the exclusive jurisdiction of Delaware state and federal courts for disputes[135] - Company irrevocably waives any right to a jury trial for disputes related to this Note[135] Judgment Currency Conversion of U.S. dollar amounts to a Judgment Currency for enforcement depends on the jurisdiction, using the Exchange Rate on the payment date for Delaware courts or the Judgment Conversion Date with adjustments for other jurisdictions - Conversion of U.S. dollar amounts to 'Judgment Currency' for judgment enforcement depends on the jurisdiction[137] - For Delaware courts, conversion uses the Exchange Rate on the actual payment date[137] - For other jurisdictions, conversion uses the rate on the 'Judgment Conversion Date', with adjustments for subsequent rate changes to ensure the original U.S. dollar amount is received[138] Severability If any Note provision is invalid, it will be amended to the broadest valid extent, and its invalidity will not affect other provisions if original intentions are maintained, with parties negotiating replacements - Prohibited, invalid, or unenforceable provisions will be amended to the broadest valid extent[140] - Invalidity of one provision does not affect the validity of remaining provisions, provided original intent and obligations are maintained[140] - Parties will negotiate to replace invalid provisions with valid ones that closely match the original effect[140] Maximum Payments Nothing in the Note requires interest or charges exceeding legal maximums, and any excess payments will be credited against amounts owed to the Company - Note does not establish or require interest or charges exceeding legal maximums[142] - Excess payments will be credited against amounts owed, effectively refunded to the Company[142] Certain Definitions This section provides definitions for key terms used throughout the Note, ensuring consistent interpretation of the agreement's provisions Key Definitions | Term | Definition | | :--- | :--- | | Acceleration Conversion Price | Lower of (i) Installment Conversion Price for Current Installment Date and (ii) 92% of lowest VWAP during 5 consecutive Trading Days ending on Acceleration Date | | Adjustment Excluded Securities | Common Stock/options issued to directors/employees (up to 20% of outstanding shares, with conditions), or shares from conversion/exercise of pre-Subscription Date securities (with conditions), or shares from Notes (with conditions) | | Alternate Conversion Price | Lowest of (i) Conversion Price on Alternate Conversion Date and (ii) 90% of lowest VWAP during 7 consecutive Trading Days ending on Conversion Notice delivery or immediately prior to Event of Default | | Available Cash | Aggregate unrestricted cash of Company and Subsidiaries in US bank accounts | | Black Scholes Consideration Value | Value of Option/Convertible Security/Adjustment Right calculated using Black Scholes Option Pricing Model | | Change of Control | Fundamental Transaction excluding certain mergers, reorganizations, or acquisitions below 20% market cap, and specifically including 'Going-Private Change of Control' | | Change of Control Redemption Premium | 115% | | Closing Bid Price / Closing Sale Price | Last closing bid/trade price on Principal Market (or other market), or average of market maker bids/asks if not reported | | Conversion Amount | Sum of Outstanding Principal Value to be converted, accrued unpaid Interest, accrued unpaid Late Charges, and other unpaid Transaction Document amounts | | Default Rate | 18% per annum | | Eligible Market | NYSE, NYSE American, Nasdaq Global Select, Nasdaq Global, or Nasdaq Capital Market | | Equity Conditions | A set of conditions related to Common Stock listing, timely share delivery, beneficial ownership limits, exchange cap compliance, absence of Fundamental Transactions, public information, non-public information, Company compliance, volume/price failures, authorized shares, and dispute absence | | Equity Conditions Failure | Equity Conditions not satisfied on any day during the 20 Trading Day period prior to determination date | | Event Market Price | Quotient of sum of 5 lowest VWAPs during 15 consecutive Trading Days ending immediately preceding 16th Trading Day after Stock Combination Event Date, divided by five | | Financial Test | Maintain Available Cash ≥ $2.25 million | | Fundamental Transaction | Broad definition covering mergers, asset sales, tender offers, stock purchases, reorganizations, or any transaction circumventing this definition, leading to a Subject Entity owning ≥ 50% of Common Stock or voting power | | Going-Private Change of Control | Transaction resulting in Company/Successor Entity not having Common Stock registered under 1934 Act and listed on an Eligible Market | | Holder Pro Rata Amount | Fraction of original Principal amount of this Note divided by aggregate original principal of all Notes issued on Initial Closing Date | | Installment Amount | Sum of (i) lesser of fixed amount or Outstanding Principal Value (or full Outstanding Principal Value on Maturity Date), (ii) Deferred Amounts, (iii) Acceleration Amounts, (iv) other unpaid Transaction Document amounts, and (v) accrued unpaid Interest and Late Charges | | Installment Conversion Price | Lower of (i) Conversion Price then in effect and (ii) 92% of lowest VWAP during 5 consecutive Trading Days ending on Installment Date | | Maturity Date | [______], subject to extensions under certain conditions | | Outstanding Principal Value | 115% of all outstanding Principal of this Note | | Outstanding Value | Sum of Outstanding Principal Value, accrued unpaid Interest, accrued unpaid Late Charges, and other unpaid Transaction Document amounts | | Permitted Indebtedness | Specific categories of debt including this Note, Other Notes, June 2025 Notes, capital leases, letters of credit, performance bonds, deferred purchase price, and other unsecured debt (up to $750,000 with subordination/maturity conditions) | | Permitted Liens | Specific categories of liens including taxes not due, statutory liens, purchase money liens, customs liens, judgment liens (not Event of Default), and Permitted Project Financing liens | | Permitted Project Financing | Debt/equity financing (min. $125 million) for development/operation of a Project, with recourse to Project assets | | Price Failure | VWAP of Common Stock on any Trading Day during 20 Trading Day period fails to exceed $0.20 | | Principal Market | The NYSE American | | Project | Battery-grade natural graphite material production through Company's Kellyton Graphite Plant or similar customer-commissioned project | | Reallocation Conversion Price | Lower of (i) Conversion Price then in effect and (ii) lower of (x) Installment Conversion Price for applicable Installment Period and (y) 92% of lowest VWAP during 5 consecutive Trading Days ending on Reallocation Date | | Redemption Premium | 115% | | Redemption Value | 115% | | Subscription Date | August 7, 2025 | | Trading Day | Day Common Stock is traded on Principal Market (or other market) for at least 4.5 hours, or not suspended during final hour, or any day NYSE is open for trading (for non-price determinations) | | Volume Failure | Aggregate daily dollar trading volume of Common Stock on Principal Market on any Trading Day during 20 Trading Day period is less than $150,000.00 | | VWAP | Dollar volume-weighted average price for security on Principal Market (or other market) during 9:30 a.m. to 4:00 p.m. New York time | Disclosure If any notice contains material non-public information, the Company must publicly disclose it by 9:00 am New York time on the next Business D