shmp_ex3-1
NATURALSHRIMP INCORPORATED
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES D CONVERTIBLE PREFERRED STOCK
The
undersigned, Gerald Easterling, does hereby certify
that:
1. He is the Chief Executive Officer, of
NaturalShrimp Incorporated., a Nevada corporation (the
“Corporation”
or the “Company”).
2.
The Corporation is authorized to issue up to 200,000,000 shares of
preferred stock.
3. The following resolutions were duly adopted by
the board of directors of the Corporation (the
“Board of
Directors”):
WHEREAS,
the Articles of Incorporation of the Corporation provides for a
class of its authorized stock known as preferred stock, consisting
of Two Hundred Million (200,000,000) shares, $0.0001 par value per
share, issuable from time to time in one or more
series;
WHEREAS,
the Board of Directors is authorized to fix the dividend rights,
dividend rate, voting rights, conversion rights, rights and terms
of redemption and liquidation preferences of any wholly unissued
series of preferred stock and the number of shares constituting any
series and the designation thereof, of any of them;
and
WHEREAS,
it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to Series D Preferred
Stock, a series of the preferred stock, which shall consist of,
except as otherwise set forth in the Purchase Agreement, up to
Twenty Thousand (20,000) shares of the preferred stock which the
Corporation has the authority to issue, as follows:
NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issuance of Series D Preferred Stock, a series of
preferred stock for cash or exchange of other securities, rights or
property and does hereby fix and determine the rights, preferences,
restrictions and other matters relating to such series of preferred
stock as follows:
TERMS OF PREFERRED STOCK
Section 1. Definitions.
For the purposes hereof, the following terms shall have the
following meanings:
“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act.
“Alternate
Consideration” shall have
the meaning set forth in Section 7(e).
“Bankruptcy
Event” means any of the
following events: (a) the Corporation or any Significant
Subsidiary (as such term is defined in Rule 1-02(w) of Regulation
S-X) thereof commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction relating to the Corporation or any Significant
Subsidiary thereof, (b) there is commenced against the
Corporation or any Significant Subsidiary thereof any such case or
proceeding that is not dismissed within sixty (60) days after
commencement, (c) the Corporation or any Significant
Subsidiary thereof is adjudicated insolvent or bankrupt or any
order of relief or other order approving any such case or
proceeding is entered, (d) the Corporation or any Significant
Subsidiary thereof suffers any appointment of any custodian or the
like for it or any substantial part of its property that is not
discharged or stayed within sixty (60) calendar days after such
appointment, (e) the Corporation or any Significant Subsidiary
thereof makes a general assignment for the benefit of creditors,
(f) the Corporation or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts, or
(g) the Corporation or any Significant Subsidiary thereof, by
any act or failure to act, expressly indicates its consent to,
approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the
foregoing.
“Beneficial Ownership
Limitation” shall have
the meaning set forth in Section 6(d).
“Business
Day” means any day except
any Saturday, any Sunday, any day which is a federal legal holiday
in the United States or any day on which banking institutions in
the State of New York are authorized or required by law or other
governmental action to close.
“Change of Control
Transaction” means the
occurrence after the date hereof of any of (a) an acquisition
after the date hereof by an individual or legal entity or
“group” (as described in Rule 13d-5(b)(1) promulgated
under the Exchange Act) of effective control (whether through legal
or beneficial ownership of capital stock of the Corporation, by
contract or otherwise) of in excess of 49% of the voting securities
of the Corporation (other than by means of conversion or exercise
of Preferred Stock and the Securities issued together with the
Preferred Stock), (b) the Corporation merges into or
consolidates with any other Person, or any Person merges into or
consolidates with the Corporation and, after giving effect to such
transaction, the stockholders of the Corporation immediately prior
to such transaction own less than 33% of the aggregate voting power
of the Corporation or the successor entity of such transaction,
(c) the Corporation sells or transfers all or substantially
all of its assets to another Person and the stockholders of the
Corporation immediately prior to such transaction own less than 33%
of the aggregate voting power of the acquiring entity immediately
after the transaction, (d) a replacement at one time or within
a one year period of more than one-half of the members of the Board
of Directors which is not approved by a majority of those
individuals who are members of the Board of Directors on the
Original Issue Date (or by those individuals who are serving as
members of the Board of Directors on any date whose nomination to
the Board of Directors was approved by a majority of the members of
the Board of Directors who are members on the Original Issue Date),
or (e) the execution by the Corporation of an agreement to
which the Corporation is a party or by which it is bound, providing
for any of the events set forth in clauses (a) through
(d) above.
“Closing”
means the closing of the purchase and sale of the Securities
pursuant to Section 2.1 of the respective Purchase
Agreements.
“Closing
Date” means the
applicable Trading Day on which all of the Transaction Documents
have been executed and delivered by the applicable parties thereto
and all conditions precedent to (i) each Holder’s
obligations to pay the Subscription Amount for a Closing and
(ii) the Corporation’s obligations to deliver the
Securities have been satisfied or waived.
“Commission”
or the “SEC” means the United States Securities and
Exchange Commission.
“Common
Stock” means the
Corporation’s common stock, par value $0.0001 per share, and
stock of any other class of securities into which such securities
may hereafter be reclassified or changed.
“Common Stock
Equivalents” means any
securities of the Corporation or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common
Stock.
“Conversion
Amount” means the sum of
the Stated Value at issue.
“Conversion
Date” shall have the
meaning set forth in Section 5(a).
“Conversion
Price” shall have the
meaning set forth in Section 5(b).
“Conversion
Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of the shares of Preferred Stock in accordance with the terms
hereof.
“Corporation
Redemption” has the
meaning set forth in Section 8.
“Corporation Redemption
Price” has the meaning
set forth in Section 8.
“Corporation Redemption
Payment Date” has the
meaning set forth in Section 8.
“Designation, Amount and Par
Value” The series of preferred stock shall be
designated as Series D Convertible Preferred Stock and the number
of shares so designated shall be up to Twenty Thousand (20,000)
(which shall not be subject to increase without the written consent
of all of the Holders of the Preferred Stock). Each share of
Preferred Stock shall have a par value of $0.0001 per share and a
stated value of $1,200, subject to increase set forth in
Section 3 and/or elsewhere in this Certificate of Designation
below.
“DTC” means the Depository Trust
Company.
“DTC/FAST
Program” means the
DTC’s Fast Automated Securities Transfer
Program.
"Dividend"
shall have the meaning set forth in
Section 2.
“DWAC
Eligible” means that (a)
the Common Stock is eligible at DTC for full services pursuant to
DTC’s Operational Arrangements, including without limitation
transfer through DTC’s DWAC system, (b) the Corporation has
been approved (without revocation) by the DTC’s underwriting
department, (c) the Transfer Agent is approved as an agent in the
DTC/FAST Program, (d) the Conversion Shares are otherwise eligible
for delivery via DWAC, and € the Transfer Agent does not have
a policy prohibiting or limiting delivery of the Conversion Shares
via DWAC.
“Exchange
Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“New York
Courts” shall have the
meaning set forth in Section 12(d).
“Fundamental
Transaction” shall have
the meaning set forth in Section 7(e).
“GAAP”
means United States generally accepted accounting
principles.
“Holders”
means Holders of the Preferred Stock.
“Indemnified Party”
shall have the meaning set forth in
Section 11(f).
“Junior
Securities” means the
Common Stock and all other Common Stock Equivalents of the
Corporation other than those securities which are explicitly senior
or pari passu
to the Preferred Stock in dividend
rights or liquidation preference.
“Late Fees” shall have the meaning set forth in Section
2(d).
“Liquidation”
shall have the meaning set forth in
Section 4.
“Losses”
shall have the meaning set forth in Section
11(f).
“Notice of
Conversion” shall have
the meaning set forth in Section 5.
“Original Issue
Date” means the date of
the first issuance of any shares of the Preferred Stock regardless
of the number of transfers of any particular shares of Preferred
Stock and regardless of the number of certificates which may be
issued to evidence such Preferred Stock.
“Person”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any
kind.
“Preferred
Stock” shall mean
Series D Convertible Preferred Stock.
“Premium
Rate” shall have the
meaning set forth in Section 8(a).
“Purchase
Agreement” means that
certain Securities Purchase Agreement, dated on or about the first
Original Issue Date, among the Corporation and the original
Holders, as amended, modified or supplemented from time to time in
accordance with its terms.
“Registration”
shall have the meaning set forth in Section
11(a).
“Registration
Statement” shall have the
meaning set forth in Section 11(a).
“Securities”
means the Preferred Stock and the Underlying
Shares.
“Securities
Act” means the Securities
Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
“Share Delivery
Date” shall have the
meaning set forth in Section 5(c)(i).
“Stated
Value” shall mean
$1,200, subject to increase set forth in Section 3 and/or
elsewhere in this Certificate of Designation.
“Subscription
Amount” shall mean, as to
each Holder, the aggregate amount to be paid for the Preferred
Stock purchased pursuant to the Purchase Agreement as specified
below such Holder’s name on the signature page of the
Purchase Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately
available funds.
“Subsidiary”
means any subsidiary of the Corporation as set forth on
Schedule
3.1(a) of the Purchase
Agreement and shall, where applicable, also include any direct or
indirect subsidiary of the Corporation formed or acquired after the
date of the Purchase Agreement.
“Successor
Entity” shall have the
meaning set forth in Section 3.
“Trading Day or
Date” means a day on
which the principal Trading Market is open for
business.
“Trading
Market” means any of the
following markets or exchanges on which the Common Stock (or any
other common stock of any other Person that references the Trading
Market for its common stock) is listed or quoted for trading on the
date in question: The NASDAQ Global Market, The NASDAQ Global
Select Market, The NASDAQ Capital Market, the New York Stock
Exchange, NYSE Arca, the NYSE MKT, or the OTCQX Marketplace, the
OTCQB Marketplace, the OTC Pink Marketplace or any other tier
operated by OTC Markets Group Inc. (or any successor to any of the
foregoing).
“Transaction
Documents” means this
Certificate of Designation, the Purchase Agreement, all exhibits
and schedules thereto and hereto and any other documents or
agreements executed in connection with the transactions
contemplated pursuant to the Purchase
Agreement.
“Transfer
Agent” means
Transhare Corporation, the current
transfer agent of the Company, with a mailing address of
2849
Executive Dr, Suite 200, Clearwater FL 33762 and any successor transfer agent of the
Company.
“Triggering
Event” shall have the
meaning set forth in Section 10(a).
“Triggering Redemption
Amount” means, for each
share of Preferred Stock, the sum of (a) 135% of the Stated
Value and (b) all accrued but unpaid dividends thereon and
(c) all liquidated damages, Late Fees and other costs,
expenses or amounts due in respect of the Preferred Stock
including, but not limited to legal fees and expenses of legal
counsel to the Holder in connection with, related to and/or arising
out of a Triggering Event.
“Triggering Redemption
Payment Date” shall have
the meaning set forth in Section 10(b).
“Underlying
Shares” means the shares
of Common Stock issued and issuable upon conversion of the
Preferred Stock.
Section 2. Dividends.
(a) Dividends in Cash or in Kind.
Each share of Preferred Stock shall be entitled to receive, and the
Corporation shall pay, cumulative dividends of 12% per annum,
payable quarterly, beginning on the Original Issuance Date and
ending on the date that such share of Preferred Share has been
converted or redeemed (the “Dividend End Date”).
Dividends may be paid in cash or in shares of Preferred Stock at
the discretion of the Company.
(b) Participating Dividends on
As-Converted Basis. From and after the initial Closing Date,
in addition to the payment of dividends pursuant to Section 2(a),
each Holder shall be entitled to receive, and the Corporation shall
pay, dividends on shares of Preferred Stock equal to (on an
as-if-converted-to-Common-Stock basis) and in the same form as
dividends actually paid on shares of the Common Stock when, as and
if such dividends are paid on shares of the Common Stock. The
Corporation shall pay no dividends on shares of the Common Stock
unless it simultaneously complies with the previous
sentence.
(c) Dividend Calculations. Subject
to Section 3(a), dividends on the Preferred Stock shall be
calculated on the basis of a 360-day year, consisting of twelve
(12) thirty (30) calendar day periods, and shall accrue and
compound daily commencing on the Original Issue Date, and shall be
deemed to accrue from such date whether or not earned or declared
and whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends.
Dividends shall cease to accrue with respect to any Preferred Stock
redeemed or converted, provided that the Corporation actually
delivers the Conversion Shares within the time period required by
Section 6(c)(i) herein.
(d) Late Fees. Any dividends that
are not paid on the Dividend Payment Date shall continue to accrue
and shall entail a late fee (“Late Fees”), which must
be paid in cash, at the rate of 18% per annum or the lesser
rate permitted by applicable law which shall accrue and compound
daily from the Dividend Payment Date through and including the date
of actual payment in full.
(e) Other Securities. So long as
any Preferred Stock shall remain outstanding, neither the
Corporation nor any Subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities or
pari passu securities other than any Preferred Stock purchased to
the terms of this Certificate of Designation. So long as any
Preferred Stock shall remain outstanding, neither the Corporation
nor any Subsidiary thereof shall directly or indirectly pay or
declare any dividend or make any distribution upon (other than a
dividend or distribution described in Section 2 or dividends
due and paid in the ordinary course on preferred stock of the
Corporation at such times when the Corporation is in compliance
with its payment and other obligations hereunder), nor shall any
distribution be made in respect of, any Junior Securities or
pari passu securities as long as any
dividends due on the Preferred Stock remain unpaid, nor shall any
monies be set aside for or applied to the purchase or redemption
(through a sinking fund or otherwise) of any Junior Securities or
pari passu
securities.
Section 3. Voting
Rights. The Preferred Stock
will vote together with the common stock on an as-converted basis
subject to the Beneficial Ownership Limitations. However, as long
as any shares of Preferred Stock are outstanding, the Corporation
shall not, without the affirmative vote of the Holders of a
majority of the then outstanding shares of the Preferred Stock
directly and/or indirectly (a) alter or change adversely the
powers, preferences or rights given to the Preferred Stock or alter
or amend this Certificate of Designation, (b) authorize or
create any class of stock ranking as to redemption or distribution
of assets upon a Liquidation (as defined in Section 5) senior
to, or otherwise pari passu
with, the Preferred Stock or,
authorize or create any class of stock ranking as to dividends
senior to, or otherwise pari passu
with, the Preferred Stock, or
(c) enter into any agreement with respect to any of the
foregoing.
Section 4. Liquidation.
Upon any liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary (a “Liquidation”),
the Holders shall be entitled to receive out of the assets, whether
capital or surplus, of the Corporation an amount equal to the
Stated Value, plus any accrued and unpaid dividends thereon and any
other fees or liquidated damages then due and owing thereon under
this Certificate of Designation, for each share of Preferred Stock
before any distribution or payment shall be made to the holders of
any Junior Securities, and if the assets of the Corporation shall
be insufficient to pay in full such amounts, then the entire assets
to be distributed to the Holders shall be ratably distributed among
the Holders in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in
full. A Fundamental Transaction or Change of Control Transaction
shall not be deemed a Liquidation. The Corporation shall mail
written notice of any such Liquidation, not less than forty-five
(45) days prior to the payment date stated therein, to each
Holder.
Section 5. Conversion.
a) Conversions at Option of
Holder. Each share of Preferred Stock shall be convertible,
at any time and from time to time after one hundred eighty (180)
days following Original Issue Date at the option of the Holder
thereof, into that number of shares of Common Stock (subject to the
limitations set forth in Section 5(d)) determined by dividing
the Stated Value of such share of Preferred Stock by the Conversion
Price. Holders shall effect conversions by providing the
Corporation with the form of conversion notice attached hereto as
Annex A (a
“Notice of
Conversion”). Each Notice of Conversion shall specify
the number of shares of Preferred Stock to be converted, the number
of shares of Preferred Stock owned prior to the conversion at
issue, the number of shares of Preferred Stock owned subsequent to
the conversion at issue and the date on which such conversion is to
be effected, which date may not be prior to the date the applicable
Holder delivers by facsimile or email such Notice of Conversion to
the Corporation (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion to
the Corporation is deemed delivered hereunder. No ink-original
Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any
Notice of Conversion form be required. The calculations and entries
set forth in the Notice of Conversion shall control in the absence
of manifest or mathematical error. To effect conversions of shares
of Preferred Stock, a Holder shall not be required to surrender the
certificate(s) representing the shares of Preferred Stock to the
Corporation unless all of the shares of Preferred Stock represented
thereby are so converted, in which case such Holder shall deliver
the certificate representing such shares of Preferred Stock
promptly following the Conversion Date at issue. Shares of
Preferred Stock converted into Common Stock or redeemed in
accordance with the terms hereof shall be canceled and shall not be
reissued.
b) Conversion
Price. The conversion price
(the “Conversion
Price”) for the Preferred
Stock shall be the amount equal to $0.10 per share. All such
foregoing determinations will be appropriately adjusted for any
stock dividend, stock split, stock combination, reclassification or
similar transaction that proportionately decreases or increases the
Common Stock during such measuring period. Nothing herein shall
limit a Holder’s right to pursue actual damages including,
but not limited to, as a result of a Triggering Event pursuant to
Section 10 hereof and the Holder shall have the right to pursue all
remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to any
other Section hereof or under applicable law.
c) Mechanics of
Conversion
i. Delivery of Conversion
Shares Upon Conversion. Not
later than three (3) Trading Days after each Conversion Date
(the “Share Delivery
Date”), the Corporation
shall deliver, or cause to be delivered, to the converting Holder
(A) the number of Conversion Shares being acquired upon the
conversion of the Preferred Stock, which Conversion Shares shall be
free of restrictive legends and trading restrictions, and
(B) a bank check in the amount of accrued and unpaid dividends
(if the Corporation has elected or is required to pay accrued
dividends in cash). The Corporation shall deliver the Conversion
Shares electronically through the Depository Trust Company or
another established clearing corporation performing similar
functions.
ii. Failure to Deliver
Conversion Shares. If, in the
case of any Notice of Conversion, such Conversion Shares are not
delivered to or as directed by the applicable Holder by the Share
Delivery Date, the Holder shall be entitled to elect by written
notice to the Corporation at any time on or before its receipt of
such Conversion Shares, to rescind such Conversion, in which event
the Corporation shall promptly return to the Holder any original
Preferred Stock certificate delivered to the Corporation and the
Holder shall promptly return to the Corporation the Conversion
Shares issued to such Holder pursuant to the rescinded Notice of
Conversion.
iii. Obligation Absolute;
Partial Liquidated Damages. The
Corporation’s obligation to issue and deliver the Conversion
Shares upon conversion of Preferred Stock in accordance with the
terms hereof are absolute and unconditional, irrespective of any
action or inaction by a Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or
any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by such Holder or any other Person of
any obligation to the Corporation or any violation or alleged
violation of law by such Holder or any other person, and
irrespective of any other circumstance which might otherwise limit
such obligation of the Corporation to such Holder in connection
with the issuance of such Conversion Shares; provided,
however
, that such delivery shall not operate
as a waiver by the Corporation of any such action that the
Corporation may have against such Holder. In the event a Holder
shall elect to convert any or all of the Stated Value of its
Preferred Stock, the Corporation may not refuse conversion based on
any claim that such Holder or any one associated or affiliated with
such Holder has been engaged in any violation of law, agreement or
for any other reason, unless an injunction from a court, on notice
to Holder, restraining and/or enjoining conversion of all or part
of the Preferred Stock of such Holder shall have been sought and
obtained, and the Corporation posts a surety bond for the benefit
of such Holder in the amount of 150% of the Stated Value of
Preferred Stock which is subject to the injunction, which bond
shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds
of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of such injunction, the Corporation shall
issue Conversion Shares and, if applicable, cash, upon a properly
noticed conversion. If the Corporation fails to deliver to a Holder
such Conversion Shares pursuant to Section 5 on the second Trading
Day after the Share Delivery Date applicable to such conversion,
the Corporation shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, for each $5,000 of Stated Value of
Preferred Stock being converted, $100 per Trading Day (increasing
to $150 per Trading Day on the third Trading Day and increasing to
$200 per Trading Day on the sixth Trading Day after such damages
begin to accrue) for each Trading Day after such second Trading Day
after the Share Delivery Date until such Conversion Shares are
delivered or Holder rescinds such conversion. All liquidated
damages shall be paid to the Holder not later than the fifth
(5th)
Trading Day after notice is provided to the Company by the Holder
stating that any such liquidated damages are due pursuant to this
Section 5. Nothing herein shall limit a Holder’s right to
pursue actual damages or declare a Triggering Event pursuant to
Section 10 hereof for the Corporation’s failure to
deliver Conversion Shares within the period specified herein and
such Holder shall have the right to pursue all remedies available
to it hereunder, at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit a Holder from
seeking to enforce damages pursuant to any other Section hereof or
under applicable law.
iv. [reserved]
v. Reservation of Shares
Issuable Upon Conversion. The Company covenants that, at all times
during which the Preferred Stock is outstanding, it will reserve
and keep available out of its authorized and unissued shares of
Common Stock a number of shares of Common Stock at least equal to
300% of the Required Minimum for the sole purpose of issuance upon
conversion of the Preferred Stock and payment of dividends on the
Preferred Stock, all as herein provided, free from preemptive
rights or any other actual contingent purchase rights of Persons
other than the Purchasers, not less than such aggregate number of
shares of the Common Stock as shall (subject to the terms and
conditions set forth in the Purchase Agreement) be issuable (taking
into account the adjustments and restrictions of Section 7, but
ignoring any Beneficial Ownership Limitations or other restrictions
and/or limitations on conversions set forth herein or elsewhere)
upon the conversion of the then outstanding shares of the Preferred
Stock and payment of dividends hereunder. The Company covenants
that all shares of Common Stock that shall be so issuable shall,
upon issue, be duly authorized, validly issued, fully paid and
nonassessable, and, at such times as a registration statement
covering such shares is then effective under the Securities Act,
will be registered for public resale in accordance with such
registration statement. For purposes of this Certification of
Designation, the term “Required Minimum” shall be defined
as the
product of (i) 300%, multiplied by (ii) the quotient of
(A)(x) all
outstanding Stated Value of all issued and outstanding shares of
the Preferred Stock, (y) all unpaid dividends thereon (whether
accrued or not), and (z) all fees and/or any costs and expenses
relating to the Transaction Documents including, but not
limited to Late Fees and liquidation damages, divided by (B)
the Conversion Price on the date of Closing.
vi. Fractional
Shares. No fractional shares or
scrip representing fractional shares shall be issued upon the
conversion of the Preferred Stock. As to any fraction of a share
which the Holder would otherwise be entitled to purchase upon such
conversion, the Corporation shall at its election, either pay a
cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Conversion Price or round
up to the next whole share.
vii. Transfer Taxes and
Expenses. The issuance of
Conversion Shares on conversion of this Preferred Stock shall be
made without charge to any Holder for any documentary stamp or
similar taxes that may be payable in respect of the issue or
delivery of such Conversion Shares, provided that the Corporation
shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such
Conversion Shares upon conversion in a name other than that of the
Holders of such shares of Preferred Stock and the Corporation shall
not be required to issue or deliver such Conversion Shares unless
or until the Person or Persons requesting the issuance thereof
shall have paid to the Corporation the amount of such tax or shall
have established to the satisfaction of the Corporation that such
tax has been paid. In the event that the Holder requests same-day
processing for a Notice of Conversion, such Holder shall pay all
Transfer Agent fees required for such same-day processing and all
fees to the Depository Trust Company (or another established
clearing corporation performing similar functions) required for
same-day electronic delivery of the Conversion
Shares.
d) Beneficial Ownership
Limitation. The Corporation
shall not effect any conversion of the Preferred Stock, and a
Holder shall not have the right to convert any portion of the
Preferred Stock, to the extent that, after giving effect to the
conversion set forth on the applicable Notice of Conversion, such
Holder (together with such Holder’s Affiliates, and any
Persons acting as a group together with such Holder or any of such
Holder’s Affiliates) would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by such Holder and its Affiliates shall
include the number of shares of Common Stock issuable upon
conversion of the Preferred Stock with respect to which such
determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (i) conversion of the
remaining, unconverted Stated Value of Preferred Stock beneficially
owned by such Holder or any of its Affiliates and
(ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Corporation subject to a
limitation on conversion or exercise analogous to the limitation
contained herein (including, without limitation, the Preferred
Stock or the Warrants) beneficially owned by such Holder or any of
its Affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 6(d), beneficial ownership shall
be calculated in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. To the
extent that the limitation contained in this Section 6(d)
applies, the determination of whether the Preferred Stock is
convertible (in relation to other securities owned by such Holder
together with any Affiliates) and of how many shares of Preferred
Stock are convertible shall be in the sole discretion of such
Holder, and the submission of a Notice of Conversion shall be
deemed to be such Holder’s determination of whether the
shares of Preferred Stock may be converted (in relation to other
securities owned by such Holder together with any Affiliates) and
how many shares of the Preferred Stock are convertible, in each
case subject to the Beneficial Ownership Limitation. To ensure
compliance with this restriction, the Holder will be deemed to
represent to the Corporation each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the
restrictions set forth in this paragraph and the Corporation shall
have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status
as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this
Section 6(d), in determining the number of outstanding shares
of Common Stock, the Holder may rely on the number of outstanding
shares of Common Stock as stated in the most recent of the
following: (i) the Corporation’s most recent periodic or
annual report filed with the Commission, as the case may be,
(ii) a more recent public announcement by the Corporation or
(iii) a more recent written notice by the Corporation or the
Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the
Corporation shall within two (2) Trading Days confirm orally and in
writing to such Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Corporation, including
the Preferred Stock, by such Holder or its Affiliates since the
date as of which such number of outstanding shares of Common Stock
was reported. The “Beneficial Ownership
Limitation” shall
be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon conversion of Preferred Stock
held by the applicable Holder.
Section
6. Intentionally
Omitted.
Section 7.
Certain
Adjustments.
a) Stock Dividends and
Stock Splits. If the
Corporation, at any time while this Preferred Stock is outstanding:
(i) pays a stock dividend or otherwise makes a distribution or
distributions that is payable in shares of Common Stock on shares
of Common Stock or any other Common Stock Equivalents (which, for
avoidance of doubt, shall not include any shares of Common Stock
issued by the Corporation upon conversion of, or payment of a
dividend on, the Preferred Stock), (ii) subdivides outstanding
shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues, in the event of a reclassification of shares
of the Common Stock, any shares of capital stock of the
Corporation, then the Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of
Common Stock (excluding any treasury shares of the Corporation)
outstanding immediately before such event, and of which the
denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made
pursuant to this Section 7(a) shall become effective
immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and
shall become effective immediately after the effective date in the
case of a subdivision, combination or
re-classification.
b) Most Favored Nation
Provision. From the date hereof until the date when
the Holder no longer holds any shares of Series D Preferred Stock,
upon any issuance by the Company of
Series D Preferred Stock for cash consideration, (a
“Subsequent
Financing”), the
Holder may elect, in its sole discretion, to exchange (in lieu of
conversion), if applicable, all or some of the shares of Series D
Preferred Stock then held for any securities or units issued in a
Subsequent Financing on a $1.00 for $1.00 basis. The Company
shall provide the Holder with notice of any such Subsequent
Financing in the manner set forth below Additionally, if in
such Subsequent Financing there are any contractual provisions or
side letters that provide terms more favorable to the investors
than the terms provided for hereunder, then the Company shall
specifically notify the Holder of such additional or more favorable
terms and such terms, at Holder’s option, shall become a part
of the transaction documents with the Holder. The types of
terms contained in another security that may be more favorable to
the holder of such security include, but are not limited to, terms
addressing stock sale price, private placement price per share, and
warrant coverage. For purposes of illustration, if a Subsequent
Financing were to occur whereby the Company sells and issues a
convertible note with a conversion price that includes a discount
to the market price of its Common Stock, the Holder will be
entitled to receive the same convertible note on the exact same
terms on a dollar for dollar basis via the exchange of the Series D
Preferred Stock the Holder holds on the date of the sale and
issuance of the convertible note. For the avoidance of doubt, this
provision is intended to ensure that one Series D Preferred Stock
holder does not receive in the future, by way of amendment or
otherwise, terms which are more favorable than terms or any other
Series D Preferred holder.
c) [reserved]
d) Pro Rata
Distributions. During such time
as this Preferred Stock is outstanding, if the Corporation shall
declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of shares of Common
Stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a “Distribution”),
at any time after the issuance of this Preferred Stock, then, in
each such case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have
participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Preferred
Stock (without regard to any limitations on exercise hereof,
including without limitation, the Beneficial Ownership Limitation)
immediately before the date of which a record is taken for such
Distribution, or, if no such record is taken, the date as of which
the record holders of shares of Common Stock are to be determined
for the participation in such Distribution (provided,
however,
to the extent that the Holder’s right to participate in any
such Distribution would result in the Holder exceeding the
Beneficial Ownership Limitation, then the Holder shall not be
entitled to participate in such Distribution to such extent (or in
the beneficial ownership of any shares of Common Stock as a result
of such Distribution to such extent) and the portion of such
Distribution shall be held in abeyance for the benefit of the
Holder until such time, if ever, as its right thereto would not
result in the Holder exceeding the Beneficial Ownership
Limitation).
e) Fundamental
Transaction.
1) General.
The Company shall not enter into or be party to a Fundamental
Transaction unless (i) the Successor Entity (as defined below)
assumes in writing all of the obligations of the Company under this
Certificate of Designation in accordance with the provisions of
this Section 7.e) pursuant to written agreements in form and
substance satisfactory to the Holder and approved by the Holder
prior to such Fundamental Transaction, including agreements to
deliver to the Holder in exchange for shares of Preferred Stock a
security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to the Preferred Stock,
including, without limitation, which is convertible into a
corresponding number of shares of capital stock equivalent to the
shares of Common Stock acquirable and receivable upon conversion of
the Preferred Stock (without regard to any limitations on the
conversion of the Preferred Stock) prior to such Fundamental
Transaction, and with a conversion price which applies the
conversion price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common
Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock, such adjustments to the number of
shares of capital stock and such conversion price being for the
purpose of protecting the economic value of the Preferred Stock
immediately prior to the consummation of such Fundamental
Transaction) and (ii) if the Fundamental Transaction occurs within
six (6) months of the Closing Date, the Successor Entity (including
its Parent Entity) is a publicly traded corporation whose common
stock is quoted on or listed for trading on an Eligible Market.
Upon the consummation of each Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that
from and after the date of the applicable Fundamental Transaction,
the provisions of this Certificate of Designation referring to the
“Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall
assume all of the obligations of the Company under this Certificate
of Designation with the same effect as if such Successor Entity had
been named as the Company herein. Upon consummation of each
Fundamental Transaction, the Successor Entity shall deliver to the
Holder confirmation that there shall be issued upon conversion of
the Preferred Stock at any time after the consummation of the
applicable Fundamental Transaction, in lieu of the shares of Common
Stock (or other securities, cash, assets or other property)
issuable upon the conversion of the Preferred Stock prior to the
applicable Fundamental Transaction, such shares of publicly traded
common stock (or its equivalent) of the Successor Entity (including
its Parent Entity) which the Holder would have been entitled to
receive upon the happening of the applicable Fundamental
Transaction had the Preferred Stock been converted immediately
prior to the applicable Fundamental Transaction (without regard to
any limitations on the conversion of the Preferred Stock), as
adjusted in accordance with the provisions of this Certificate of
Designation. Notwithstanding the foregoing, and without limiting
Section 5 hereof, the Holder may elect, at its sole option, by
delivery of written notice to the Company to waive this Section
7.e) to permit the Fundamental Transaction without the assumption
of the Preferred Stock. In addition to and not in substitution for
any other rights hereunder, prior to the consummation of each
Fundamental Transaction pursuant to which holders of shares of
Common Stock are entitled to receive securities or other assets
with respect to or in exchange for shares of Common Stock (a
“Corporate
Event”), the Company
shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon a conversion of the
Preferred Stock at any time after the consummation of the
applicable Fundamental Transaction but prior to the Expiration
Date, in lieu of the shares of the Common Stock (or other
securities, cash, assets or other property) issuable upon the
conversion of the Preferred Stock prior to such Fundamental
Transaction, such shares of stock, securities, cash, assets or any
other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to
receive upon the happening of the applicable Fundamental
Transaction had this Note been exercised immediately prior to the
applicable Fundamental Transaction (without regard to any
limitations on the conversion of the Preferred Stock). Provision
made pursuant to the preceding sentence shall be in a form and
substance reasonably satisfactory to the
Holder.
2) Black
Scholes Value. Notwithstanding
the foregoing and the provisions of Section 5 above, at the request
of the Holder delivered at any time commencing on the earliest to
occur of (x) the public disclosure of any Fundamental Transaction,
(y) the consummation of any Fundamental Transaction and (z) the
Holder first becoming aware of any Fundamental Transaction through
the date that is ninety (90) days after the public disclosure of
the consummation of such Fundamental Transaction by the Company
pursuant to a Current Report on Form 8-K filed with the SEC, the
Company or the Successor Entity (as the case may be) shall purchase
the Preferred Stock from the Holder on the date of such request by
paying to the Holder cash in an amount equal to the Black Scholes
Value.
3) Fundamental
Transaction.
If, at any time while any Preferred
Stock is outstanding, (i) the Company, directly or indirectly, in
one or more related transactions effects any merger or
consolidation of the Company with or into another Person, (ii) the
Company, directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related
transactions, (iii) any, direct or indirect, purchase offer, tender
offer or exchange offer (whether by the Company or another Person)
is completed pursuant to which holders of Common Stock are
permitted to sell, tender or exchange their shares for other
securities, cash or property and has been accepted by the holders
of 50% or more of the outstanding Common Stock, (iv) the Company,
directly or indirectly, in one or more related transactions effects
any reclassification, reorganization or recapitalization of the
Common Stock or any compulsory share exchange pursuant to which the
Common Stock is effectively converted into or exchanged for other
securities, cash or property, or (v) the Company, directly or
indirectly, in one or more related transactions consummates a stock
or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person or group of
Persons whereby such other Person or group acquires more than 50%
of the outstanding shares of Common Stock (not including any shares
of Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other
business combination) (each a “Fundamental
Transaction”), then, upon
any subsequent conversion of the Preferred Stock, the Holder shall
have the right to receive, for each Conversion Share that would
have been issuable upon such conversion immediately prior to the
occurrence of such Fundamental Transaction, at the option of the
Holder (without regard to any limitation in Section 6 on the
conversion of the Preferred Stock), the number of shares of Common
Stock of the successor or acquiring corporation or of the Company,
if it is the surviving corporation, and any additional
consideration (the “Alternate
Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock into which each share of
Preferred Stock is convertible immediately prior to such
Fundamental Transaction (without regard to any limitation in
Section 6 on the conversion of the Preferred Stock). For purposes
of any such conversion, the determination of the Conversion Price
shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the
Conversion Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given
any choice as to the securities, cash or property to be received in
a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any
conversion of this Note following such Fundamental Transaction.
Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction, the Company or any Successor Entity shall,
at the Holder’s option, exercisable at any time concurrently
with, or within 30 days after, the consummation of the Fundamental
Transaction, purchase the shares of Preferred Stock from the Holder
by paying to the Holder an amount of cash equal to the Black
Scholes Value of the remaining unconverted shares of Preferred
Stock on the date of the consummation of such Fundamental
Transaction. “Black Scholes
Value” means the value of
the unconverted shares of Preferred Stock remaining on the date of
the Holder’s request pursuant to Section 7(e)(2) which value
is calculated using the Black Scholes Option Pricing Model for a
“call” or “put” option, as elected by the
Holder, as obtained from the “OV” function on Bloomberg
utilizing (i) an underlying price per share equal to the greater of
(1) the highest Closing Sale Price of the Common Stock during the
period beginning on the Trading Day immediately preceding the
announcement of the applicable Fundamental Transaction (or the
consummation of the applicable Fundamental Transaction, if earlier)
and ending on the Trading Day of the Holder’s request
pursuant to Section 7(e)(2) and (2) the sum of the price per share
being offered in cash in the applicable Fundamental Transaction (if
any) plus the value of the non-cash consideration being offered in
the applicable Fundamental Transaction (if any), (ii) a strike
price equal to the Conversion Price in effect on the date of the
Holder’s request pursuant to Section 7(e)(2), (iii) a
risk-free interest rate corresponding to the U.S. Treasury rate as
of the date of the Holder’s request pursuant to Section
7(e)(2) if such request is prior to the date of the consummation of
the applicable Fundamental Transaction, (iv) a zero cost of borrow
and (v) an expected volatility equal to the greater of 100% and the
30 day volatility obtained from the “HVT” function on
Bloomberg (determined utilizing a 365 day annualization factor) as
of the Trading Day immediately following the earliest to occur of
(A) the public disclosure of the applicable Fundamental
Transaction, (B) the consummation of the applicable Fundamental
Transaction and (C) the date on which the Holder first became aware
of the applicable Fundamental Transaction. The Company shall cause
any successor entity in a Fundamental Transaction in which the
Company is not the survivor (the “Successor
Entity”) to assume in
writing all of the obligations of the Company under this
Certificate of Designation and the other Transaction Documents in
accordance with the provisions of this Section 7(e) pursuant to
written agreements in form and substance reasonably satisfactory to
the Holder and approved by the Holder (without unreasonable delay)
prior to such Fundamental Transaction and shall, at the option of
the Holder, deliver to the Holder in exchange for the Preferred
Stock a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to the
Preferred Stock which is convertible into a corresponding number of
shares of capital stock of such Successor Entity (or its parent
entity) equivalent to the shares of Common Stock acquirable and
receivable upon conversion of the Preferred Stock (without regard
to any limitations on the conversion of the Preferred Stock) prior
to such Fundamental Transaction, and with a conversion price which
applies the Conversion Price hereunder to such shares of capital
stock (but taking into account the relative value of the shares of
Common Stock pursuant to such Fundamental Transaction and the value
of such shares of capital stock, such number of shares of capital
stock and such conversion price being for the purpose of protecting
the economic value of the Preferred Stock immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Note and the other Transaction Documents referring to the
“Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall
assume all of the obligations of the Company under this Note and
the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company
herein.
f) Calculations.
All calculations under this Section 7 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 7, the number of shares of Common
Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding any
treasury shares of the Corporation) issued and
outstanding.
g) Notice to the
Holders.
i. Adjustment to
Conversion Price. Whenever the
Conversion Price is adjusted pursuant to any provision of this
Section 7, the Corporation shall promptly deliver to each
Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow
Conversion by Holder. If
(A) the Corporation shall declare a dividend (or any other
distribution in whatever form) on the Common Stock, (B) the
Corporation shall declare a special nonrecurring cash dividend on
or a redemption of the Common Stock, (C) the Corporation shall
authorize the granting to all holders of the Common Stock of rights
or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any
stockholders of the Corporation shall be required in connection
with any reclassification of the Common Stock, any consolidation or
merger to which the Corporation is a party, any sale or transfer of
all or substantially all of the assets of the Corporation, or any
compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property (E) the Corporation
shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation (F) the
Corporation shall take any action to effectuate an Corporation
Redemption, or (G) a Triggering Event shall have occurred, then, in
each case, the Corporation shall cause to be filed at each office
or agency maintained for the purpose of conversion of this
Preferred Stock, and shall cause to be delivered to each Holder at
its last address as it shall appear upon the stock books of the
Corporation, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified (unless a
greater or lesser time period is expressly required elsewhere in
this Certificate of Designation), a notice stating (x) the
date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of the
Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that
holders of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation,
merger, sale, transfer or share exchange, provided that the failure
to deliver such notice or any defect therein or in the delivery
thereof shall not affect the validity of the corporate action
required to be specified in such notice. To the extent that any
notice provided hereunder constitutes, or contains, material,
non-public information regarding the Corporation or any of the
Subsidiaries, the Corporation shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form 8-K.
The Holder shall remain entitled to convert the Conversion Amount
of this Preferred Stock (or any part hereof) during the 20-day
period commencing on the date of such notice through the effective
date of the event triggering such notice except as may otherwise be
expressly set forth in this Certificate of
Designation.
Section 8.
Corporation
Redemption.
(a) The
Corporation shall have the right to redeem (a
“Corporation
Redemption”), all (or
part) of the Preferred Stock issued and outstanding at any time
after the Original Issue Date, upon three (3) business days’
notice, at a redemption price per Preferred Stock then issued and
outstanding (the “Corporation Redemption
Price”), equal to the
product of (i) the Premium Rate multiplied by (ii) the sum of (x)
the Stated Value, (y) all accrued but unpaid dividends, and (z) all
other amount due to the Holder pursuant to this Certificate of
Designation and/or any Transaction Document including, but not
limited to Late Fees, liquidated damages and the legal fees and
expenses of the Holder’s counsel relating to this
Certification of Designation, any other Transaction Document and/or
the transactions contemplated thereunder and/or hereunder.
“Premium Rate” means (a) 1.15 if all of the Preferred
Stock is redeemed within ninety (90) calendar days from the
issuance date thereof; (b) 1.2 if all of the Preferred Stock is
redeemed after ninety (90) calendar days and within one hundred
twenty (120) calendar days from the issuance date thereof; (c) 1.25
if all of the Preferred Stock is redeemed after one hundred twenty
(120) calendar days and within one hundred eighty (180) calendar
days from the issuance date thereof. The Corporation shall be
permitted to redeem the Preferred Stock at any time in cash. Each
share of Preferred Stock shall be redeemed by the Corporation on
the Date that is no later than one (1) calendar year from the date
of its issuance.
(b) [reserved].
(c) The Corporation Redemption Price required to be
paid by the Corporation to each Holder shall be paid in the cash to
each Holder of shares of Preferred Stock no later than five (5)
calendar days from the date of mailing of the notice of redemption
(the “Corporation Redemption
Payment Date”).
(d) Notwithstanding
the delivery of a notice of redemption, following the one hundred
eighty (180) day anniversary of the Original Issue Date, a Holder
may convert some or all of its shares of Preferred Stock until the
date it receives in full Corporation Redemption Price.
(e) Notwithstanding the
foregoing, in the event of a Qualified Offering, the Holders shall
have the right to convert the Preferred Stock issued and outstanding, upon five (5) business
days’ notice following the Qualified Offering, at a
conversion price equal to the product of (i) 0.65 (representing a
35% discount) multiplied by (ii) the sum of (x) the Stated Value,
(y) all accrued but unpaid dividends, and (z) all other amount due
to the Holder pursuant to this Certificate of Designation and/or
any Transaction Document including, but not limited to Late Fees,
liquidated damages and the legal fees and expenses of the
Holder’s counsel relating to this Certification of
Designation, any other Transaction Document and/or the transactions
contemplated thereunder and/or hereunder.
“Qualified
Offering” shall mean an offering of Common Stock (or
units consisting of Common Stock and warrants to purchase Common
Stock) for an aggregate price of at least $5,000,000 resulting in
the listing for trading of the Common Stock on the NYSE American,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market or the New York Stock Exchange (or any
successors to any of the foregoing).
Section 9.
Negative
Covenants. From the date hereof
until the date no shares of Preferred Stock are issued and
outstanding, unless Holders of at least 75% in Stated Value of the
then outstanding shares of Preferred Stock shall have otherwise
given prior written consent, the Corporation shall not, and shall
not permit any of the Subsidiaries to, directly or
indirectly:
(d)
repay, repurchase or offer to repay, repurchase or otherwise
acquire of any shares of its Common Stock, Common Stock Equivalents
or Junior Securities, other than as to the Conversion Shares as
permitted or required under the Transaction Documents,
(f)
enter into any transaction with any Affiliate of the Corporation
which would be required to be disclosed in any public filing with
the Commission, unless such transaction is made on an
arm’s-length basis and expressly approved by a majority of
the disinterested directors of the Corporation (even if less than a
quorum otherwise required for board approval); or
(g)
enter into any agreement with respect to any of the
foregoing.
Section 10.
Redemption
Upon Triggering Events.
(a) “Triggering
Event” means, wherever
used herein any of the following events (whatever the reason for
such event and whether such event shall be voluntary or involuntary
or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any
administrative or governmental body):
i.
the Corporation shall fail to deliver Conversion Shares issuable
upon a conversion hereunder that comply with the provisions hereof
prior to the fifth Trading Day after such shares are required to be
delivered hereunder, or the Corporation shall provide written
notice to any Holder, including by way of public announcement, at
any time, of its intention not to comply with requests for
conversion of any shares of Preferred Stock in accordance with the
terms hereof;
iii.
the Corporation shall fail to have available a sufficient number of
authorized and unreserved shares of Common Stock to issue to such
Holder upon a conversion hereunder;
iv.
unless specifically addressed elsewhere in this Certificate of
Designation as a Triggering Event, the Corporation shall fail to
observe or perform any other covenant, agreement or warranty
contained in, or otherwise commit any breach of the Transaction
Documents, and such failure or breach shall not, if subject to the
possibility of a cure by the Corporation, have been cured within 5
calendar days after the date on which written notice of such
failure or breach shall have been delivered;
v. the Corporation shall redeem Junior Securities
or pari passu
securities;
vi.
the Corporation shall be party to a Change of Control
Transaction;
vii.
there shall have occurred a Bankruptcy Event;
viii.
any monetary judgment, writ or similar final process shall be
entered or filed against the Corporation, any subsidiary or any of
their respective property or other assets for more than $500,000
(provided that amounts covered by the Corporation’s insurance
policies are not counted toward this $500,000 threshold), and such
judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of thirty (30) Trading
Days;
ix.
the electronic transfer by the Corporation of shares of Common
Stock through the Depository Trust Company or another established
clearing corporation once established subsequent to the date of
this Certificate of Designation is no longer available or is
subject to a ‘freeze” and/or
“chill”;
x.
the Corporation shall no longer be DWAC eligible;
xi.
the failure to consummate the closing of the financing with
VeroBlue Farms USA, Inc. within thirty (30) calendar days of the
date hereof;
xii.
the failure to consummate a listing of the Corporation’s
common stock on the NASDAQ Capital Markets, the New York Stock
Exchange, or a similar higher exchange; or
xiii.
any “Event of Default,” as defined in the Purchase
Agreement.
b) Upon the occurrence of a Triggering Event and
following a five (5) opportunity to cure following written notice,
each Holder shall (in addition to all other rights it may have
hereunder or under applicable law) have the right, exercisable at
the sole option of such Holder, to require the Corporation to
redeem all of the Preferred Stock then held by such Holder for a
redemption price, in cash, equal to the Triggering Redemption
Amount, and increase the dividend rate on all of the outstanding
Preferred Stock held by such Holder to 18% per annum
thereafter. The Triggering Redemption Amount, whether payable in
cash or in shares, shall be due and payable or issuable, as the
case may be, within five (5) Trading Days of the date on which the
notice for the payment therefor is provided by a Holder (the
“Triggering Redemption
Payment Date”). If the
Corporation fails to pay in full the Triggering Redemption Amount
hereunder on the date such amount is due in accordance with this
Section (whether in cash or shares of Common Stock), the
Corporation will pay interest thereon at a rate equal to the lesser
of 18% per annum or the maximum rate permitted by applicable
law, accruing and compounding daily from such date until the
Triggering Redemption Amount, plus all such interest thereon, is
paid in full.
Section 11. Registration
Rights.
a) If
the Corporation shall fail to complete an uplist to the Nasdaq
Capital Markets, New York Stock Exchange or similar high exchange
within one hundred twenty (120) calendar days from the issuance of
the Preferred Stock, the Company shall, within ten (10) calendar
days, file a registration statement covering the shares of common
stock underlying the Preferred Shares (“Registration”).
In addition, the Corporation shall include the shares of common
stock underlying the Preferred Shares in any registration statement
which is currently (as of the date of this Certificate of
Designation) being filed by the Corporation’s existing
investment banker, provided, that said registration statement is
not yet effective with the SEC and provided that the Corporation
receives the prior written approval of said investment banker. The
Company shall cause such Preferred Stock to be included in such
registration and shall cause the managing underwriter or
underwriters of a proposed underwritten offering to permit the
Preferred Stock requested to be included in a Registration on the
same terms and conditions as any similar securities of the Company
and to permit the sale or other disposition of such Preferred Stock
in accordance with the intended method(s) of distribution thereof.
All Holders proposing to distribute their Preferred Stock through a
Registration that involves an underwriter or underwriters shall
enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such
Registration
b) Any
Holder may elect to withdraw such Holder’s request for
inclusion of Preferred Stock in any Registration by giving written
notice to the Company of such request to withdraw prior to the
effectiveness of the Registration Statement. The Company (whether
on its own determination or as the result of a withdrawal by
persons making a demand pursuant to written contractual
obligations) may withdraw a Registration Statement at any time
prior to the effectiveness of such Registration Statement.
Notwithstanding any such withdrawal, the Company shall pay all
expenses incurred by the Holders in connection with such
Registration (including but not limited to any legal
fees).
c) The
Company shall notify the Holders at any time when a prospectus
relating to such Holder’s Securities is required to be
delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing. At the request of such Holder, the
Company shall also prepare, file and furnish to such Holder a
reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of the Preferred Stock, such prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing. The Holders shall not offer or sell
any Preferred Stock covered by the Registration Statement after
receipt of such notification until the receipt of such supplement
or amendment.
d) the
Company may request a Holder to furnish the Company such
information with respect to such Holder and such Holder’s
proposed distribution of the Preferred Stock pursuant to the
Registration Statement as the Company may from time to time
reasonably request in writing or as shall be required by law or by
the Commission in connection therewith, and such Holders shall
furnish the Company with such information.
e) All
fees and expenses incident to the performance of or compliance with
this Section 11 by the Company shall be borne by the Company
whether or not any Preferred Stock are sold pursuant to a
Registration Statement. The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees
and expenses of the Company’s counsel and independent
registered public accountants) (A) with respect to filings made
with the Commission, (B) with respect to filings required to be
made with any Trading Market on which the Common Stock are then
listed for trading, (C) in compliance with applicable state
securities or Blue Sky laws reasonably agreed to by the Company in
writing (including, without limitation, fees and disbursements of
counsel for the Company in connection with Blue Sky qualifications
or exemptions) and (D) with respect to any filing that may be
required to be made by any broker through which a Holder intends to
make sales of Preferred Stock with FINRA, (ii) printing expenses,
(iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company, (v) Securities Act
liability insurance, if the Company so desires such insurance, and
(vi) fees and expenses of all other persons or entities retained by
the Company in connection with the consummation of the transactions
contemplated by this Section 11.
f) The
Company and its successors and assigns shall indemnify and hold
harmless each purchaser, each Holder, the officers, directors,
members, partners, agents and employees (and any other individuals
or entities with a functionally equivalent role of a person holding
such titles, notwithstanding a lack of such title or any other
title) of each of them, each individual or entity who controls each
purchaser or any such Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, members, stockholders, partners, agents and
employees (and any other individuals or entities with a
functionally equivalent role of a person holding such titles,
notwithstanding a lack of such title or any other title) of each
such controlling individual or entity (each, an “Indemnified Party”), to
the fullest extent permitted by applicable law, from and against
any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys’ fees) and expenses
(collectively, “Losses”), as incurred,
arising out of or relating to (1) any untrue or alleged untrue
statement of a material fact contained in a Registration Statement,
any related prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus,
or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any such prospectus or
supplement thereto, in light of the circumstances under which they
were made) not misleading or (2) any violation or alleged violation
by the Company of the Securities Act, the Exchange Act or any state
securities law, or any rule or regulation thereunder, in connection
with the performance of its obligations under this Section 11,
except to the extent, but only to the extent, that such untrue
statements or omissions are based upon information regarding a
purchaser or such Holder furnished to the Company by such party for
use therein. The Company shall notify each purchaser and each
Holder promptly of the institution, threat or assertion of any
proceeding arising from or in connection with the transactions
contemplated by this Section 11 of which the Company is aware. If
the indemnification hereunder is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless for any
Losses, then the Company shall contribute to the amount paid or
payable by such Indemnified Party, in such proportion as is
appropriate to reflect the relative fault of the Company and
Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of the
Company and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by,
or relates to information supplied by, the Company or the
Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to
include any reasonable attorneys’ or other fees or expenses
incurred by such party in connection with any proceeding to the
extent such party would have been indemnified for such fees or
expenses if the indemnification provided for herein was available
to such party in accordance with its terms. It is agreed that it
would not be just and equitable if contribution pursuant to this
Section 11(f) were determined by pro rata allocation or by any
other method of allocation that does not take into account the
equitable considerations referred to in the immediately preceding
sentence. Notwithstanding the provisions of this Section 11(f),
neither the purchaser nor any Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by such party from the
sale of all of their Registrable Securities pursuant to such
Registration Statement or related prospectus exceeds the amount of
any damages that such party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission.
Section
12. Miscellaneous.
a) Notices.
Any and all notices or other communications or deliveries to be
provided by the Holders hereunder including, without limitation,
any Notice of Conversion, shall be in writing and delivered
personally or sent by a nationally recognized overnight courier
service and by facsimile or e-mail, addressed to the Corporation,
at an address as the Corporation may specify for such purposes by
prior written notice to the Holders delivered in accordance with
this Section 12. Any and all notices or other communications
or deliveries to be provided by the Corporation hereunder shall be
in writing and delivered personally, by facsimile, or sent by a
nationally recognized overnight courier service addressed to each
Holder at the facsimile number or address of such Holder appearing
on the books of the Corporation, or if no such facsimile number or
address appears on the books of the Corporation, at the principal
place of business of such Holder, as set forth in the Purchase
Agreement. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth in
this Section prior to 5:30 p.m. (New York City time) on any date,
(ii) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the
facsimile number set forth in this Section on a day that is not a
Trading Day or later than 5:30 p.m. (New York City time) on any
Trading Day, (iii) the second Trading Day following the date
of mailing, if sent by U.S. nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.
b) Absolute
Obligation. Except as expressly
provided herein, no provision of this Certificate of Designation
shall alter or impair the obligation of the Corporation, which is
absolute and unconditional, to pay liquidated damages, accrued
dividends and accrued interest, as applicable, on the shares of
Preferred Stock at the time, place, and rate, and in the coin or
currency, herein prescribed.
c) Lost or Mutilated
Preferred Stock Certificate. If
a Holder’s Preferred Stock certificate shall be mutilated,
lost, stolen or destroyed, the Corporation shall execute and
deliver, in exchange and substitution for and upon cancellation of
a mutilated certificate, or in lieu of or in substitution for a
lost, stolen or destroyed certificate, a new certificate for the
shares of Preferred Stock so mutilated, lost, stolen or destroyed,
but only upon receipt of evidence of such loss, theft or
destruction of such certificate, and of the ownership hereof
reasonably satisfactory to the Corporation.
d) Governing
Law. All questions concerning
the construction, validity, enforcement and interpretation of this
Certificate of Designation shall be governed by and construed and
enforced in accordance with the internal laws of the State of
Nevada, without regard to the principles of conflict of laws
thereof. Each party agrees that all legal proceedings concerning
the interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective Affiliates, directors,
officers, stockholders, employees or agents) shall be commenced in
the state and federal courts sitting in the Borough of Manhattan,
New York, New York, (the “New York
Courts”). Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of
the New York Courts for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the
enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Certificate of
Designation and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by applicable law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted
by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Certificate of
Designation or the transactions contemplated hereby. If any party
shall commence an action or proceeding to enforce any provisions of
this Certificate of Designation, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its
attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or
proceeding.
e) Waiver.
Any waiver by the Corporation or a Holder of a breach of any
provision of this Certificate of Designation shall not operate as
or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this
Certificate of Designation or a waiver by any other Holders. The
failure of the Corporation or a Holder to insist upon strict
adherence to any term of this Certificate of Designation on one or
more occasions shall not be considered a waiver or deprive that
party (or any other Holder) of the right thereafter to insist upon
strict adherence to that term or any other term of this Certificate
of Designation on any other occasion. Any waiver by the Corporation
or a Holder must be in writing.
f) Severability.
If any provision of this Certificate of Designation is invalid,
illegal or unenforceable, the balance of this Certificate of
Designation shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it
shall be found that any interest or other amount deemed interest
due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under
applicable law.
g) Next Business
Day. Whenever any payment or
other obligation hereunder shall be due on a day other than a
Business Day, such payment shall be made on the next succeeding
Business Day.
h) Headings.
The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designation and shall not
be deemed to limit or affect any of the provisions
hereof.
i) Status of Converted or
Redeemed Preferred Stock.
Shares of Preferred Stock may only be issued pursuant to a Purchase
Agreement. If any shares of Preferred Stock shall be converted,
redeemed or reacquired by the Corporation, such shares shall resume
the status of authorized but unissued shares of preferred stock and
shall no longer be designated as Series D Convertible Preferred
Stock.
RESOLVED, FURTHER, that the Chairman, the president or any
vice-president, and the secretary or any assistant secretary, of
the Corporation be and they hereby are authorized and directed to
prepare and file this Certificate of Designation of Preferences,
Rights and Limitations in accordance with the foregoing resolution
and the provisions of Nevada law.
IN WITNESS WHEREOF, the undersigned have executed
this Certificate this 16th
day of December,
2020.
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/s/ Gerald Easterling
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Name:
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Gerald Easterling
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Title:
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Chief Executive Officer
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ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES
OF PREFERRED STOCK)
The undersigned hereby elects to convert the number of shares of
Series D Convertible Preferred Stock indicated below into shares of
common stock, par value $0.0001 per share (the “
Common
Stock ”), of
NaturalShrimp Incorporated, a Nevada corporation (the
“ Corporation
”), according to the conditions
hereof, as of the date written below. If shares of Common Stock are
to be issued in the name of a Person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions
as may be required by the Corporation in accordance with the
Purchase Agreement. No fee will be charged to the Holders for any
conversion, except for any such transfer taxes.
Conversion calculations:
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Date to Effect Conversion:
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Number of shares of Preferred Stock owned prior to Conversion:
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Number of shares of Preferred Stock to be Converted:
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Stated Value of shares of Preferred Stock to be Converted:
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Dollar amount of Interest to be Converted:
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Other amounts owed to the Undersigned by the Corporation under the
Certificate of Designation and/or any other Transaction Document to
be Converted:
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Number of shares of Common Stock to be Issued:
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Applicable Conversion Price:
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Number of shares of Preferred Stock subsequent to Conversion:
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Address for Delivery:
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Or
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DWAC Instructions:
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Broker no:
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Account no:
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Name of Entity Holder______________ (Please Print)
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By:
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Name:
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Title:
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Name of Individual Holder______________ (Please Print)
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______________________ (Signature of Individual
Holder)
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