UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

 

Current Report

 

Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): April 27, 2020

 

ORIGINCLEAR, INC.

(Name of registrant as specified in its charter)

 

Nevada   333-147980   26-0287664
(State or other jurisdiction of   (Commission File Number)   (I.R.S. Employer
Incorporation or organization)       Identification Number)

 

2535 E. University Drive

McKinney, TX

 

 

75069

(Address of principal executive offices)   (Zip Code)

  

Registrant’s telephone number, including area code: (323) 939-6645

 

525 S. Hewitt Street

Los Angeles, CA 90013

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
   

Securities registered pursuant to Section 12(b) of the Act: None.

 

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b2 of the Securities Exchange Act of 1934 (§240.12b2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

  

 

 

 

 

 

Item 3.02 Unregistered Sales of Equity Securities.

 

Conversion of Notes


As previously reported, the Company entered into agreements by and between the Company and various investors by which investors hold convertible promissory notes convertible into shares of the Company’s common stock. On April 28, 2020, holders of convertible promissory notes converted an aggregate principal and interest amount of $10,500 into an aggregate of 350,000 shares of the Company’s common stock.

 

The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since, among other things, the transactions did not involve a public offering.

 

Conversion of Preferred Shares

 

As previously reported, on December 17, 2019, the Company filed a certificate of designation (the “Series M COD”) of Series M Preferred Stock (the “Series M”).  Pursuant to the Series M COD, the Company designated 800,000 shares of preferred stock as Series M. The Series M has a stated value of $25 per share and is convertible into shares of the Company’s common stock on the terms and conditions set forth in the Series M COD.

 

Between April 15, 2020 and April 30, 2020, holders of Series M Preferred Stock converted an aggregate of 320 Series M shares into an aggregate of 137,052 shares of the Company’s common stock.

 

The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since, among other things, the transactions did not involve a public offering.

 

Consultant Issuances

 

Between April 30, 2020 and May 1, 2020, the Company issued to consultants an aggregate of 230,606 shares of the Company’s common stock for services.

 

The securities referenced above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since, among other things, the transactions did not involve a public offering. 

 

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Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

 

On April 27, 2020, the Company filed a certificate of designation (the “Series O COD”) of Series O Preferred Stock (the “Series O”) and a certificate of designation (the “Series P COD”) of Series P Preferred Stock (the “Series P”) with the Secretary of State of Nevada.

 

Pursuant to the Series O COD, the Company designated 2,000 shares of preferred stock as Series O. The Series O will have a stated value of $1,000 per share, and will be entitled to cumulative dividends (i) in cash at an annual rate of 8% of the stated value, and (ii) in shares of common stock of the Company (valued based on the conversion price as in effect on the last trading day of the applicable fiscal quarter) at an annual rate of 4% of the stated value, payable quarterly within 60 days from the end of such fiscal quarter. The Series O will not be entitled to any voting rights except as may be required by applicable law. The Series O will be convertible into common stock of the Company in an amount determined by dividing 200% of the stated value of the Series O being converted by the conversion price, provided that, the Series O may not be converted into common stock to the extent such conversion would result in the holder beneficially owning more than 4.99% of the Company’s outstanding common stock. The conversion price will be equal to the average closing sale price of the common stock for the five trading days prior to the conversion date. The Company will have the right (but no obligation) to redeem the Series O at any time while the Series O are outstanding at a redemption price equal to the stated value plus any accrued but unpaid dividends. The foregoing description of the Series O COD is qualified by reference to the full text of the Series O COD, a copy of which is attached hereto as Exhibit 3.1.

 

Pursuant to the Series P COD, the Company designated 500 shares of preferred stock as Series P. The Series P will have a stated value of $1,000 per share, and will be entitled to receive dividends on an as-converted basis with the Company’s common stock. The Series P will vote on an as-converted basis with the common stock, subject, however, to the beneficial ownership limitation set forth in the Series P COD. The Series P will be convertible into shares of the Company’s common stock, on the terms and conditions set forth in the Series P COD, which includes certain make-good shares for certain prior investors, and provided that, the Series P may not be converted into common stock to the extent such conversion would result in the holder beneficially owning more than 4.99% of the Company’s outstanding common stock. The foregoing description of the Series P COD is qualified in its entirety by reference to the full text of the Series P COD, a copy of which is attached hereto as Exhibit 3.2.

 

Item 9.01 Financial Statements and Exhibits.

 

Exhibit No.   Description
     
3.1   Certificate of Designation of Series O Preferred Stock
3.2   Certificate of Designation of Series P Preferred Stock

  

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  ORIGINCLEAR, INC.
   
May 1, 2020 By:  /s/ T. Riggs Eckelberry
    Name: T. Riggs Eckelberry
Title:   Chief Executive Officer

 

 

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Exhibit 3.1

 

CERTIFICATE OF DESIGNATION

OF

ORIGINCLEAR, INC.

ESTABLISHING THE DESIGNATIONS, PREFERENCES,

LIMITATIONS AND RELATIVE RIGHTS OF ITS

SERIES O PREFERRED STOCK

 

OriginClear, Inc. (the “Company”), a corporation organized and existing under the laws of Nevada, does hereby certify that, pursuant to authority conferred upon the Board of Directors of the Company by the Articles of Incorporation of the Company, it has adopted resolutions (a) authorizing the issuance of up to 2,000 shares of Series O Preferred Stock of the Company and (b) providing for the designations, preferences and relative participating, optional or other rights, and the qualifications, limitations or restrictions thereof, as follows:

 

SECTION 1. DESIGNATION OF SERIES. There shall hereby be created and established a series of “Series O Preferred Stock” and the number of shares initially constituting such series shall be up to two thousand (2,000) shares.

 

SECTION 2. STATED VALUE. The Stated Value of the Series O Preferred Stock will be $1,000 per share.

 

SECTION 3. DIVIDENDS. The holders of Series O Preferred Stock (the “Holders”) will be entitled to receive, on any outstanding shares of Series O Preferred Stock held by such Holders, out of any funds and assets of the Company legally available prior and in preference to any declaration or payment of any dividend on the common stock of the Company (the “Common Stock”), cumulative dividends, payable quarterly (at the end of each fiscal quarter, and due for such fiscal quarter within 60 days of the end of such fiscal quarter), (i) in cash at an annual rate of 8% of the Stated Value, and (ii) in shares of common stock of the Company (valued based on the Conversion Price as in effect on the last trading day of such fiscal quarter) at an annual rate of 4% of the Stated Value. Such dividends will accrue commencing on the date of issuance.

 

SECTION 4. LIQUIDATION PREFERENCE. Upon any liquidation, dissolution or winding- up of the Company, the Holders will be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Series O Preferred Stock an amount equal to the Stated Value per share plus any accrued but unpaid cash dividends thereon before any distribution or payment may be made to the holders of any Common Stock.

 

SECTION 5. VOTING. The Series O Preferred Stock will not entitle the Holders to any voting rights except as required under applicable law.

 

SECTION 6. CONVERSION RIGHTS. The shares of the Series O Preferred Stock shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock on the terms and conditions set forth in this Section 6.

 

(a) Holder’s Conversion Right. Subject to the provisions of Section 6(d), at any time and from time to time, each Holder shall be entitled to convert any number (which may include fractional amounts) of shares of Series O Preferred Stock into validly issued, fully paid and non- assessable shares of Common Stock in accordance with this Section 6.

 

(i) Conversion Rate. The number of validly issued, fully paid and non- assessable shares of Common Stock issuable upon conversion of the Series O Preferred Stock pursuant to Section 6(a) shall be equal to 200% of the amount of the Stated Value of the Series O Preferred Stock being converted divided by the Conversion Price. The Conversion Price (subject in all cases to adjustment for stock dividends, stock splits, and similar transactions) will be equal to the average closing sale price of the Common Stock for the five trading days prior to the Conversion Date.

 

(iii) Fractional Shares. No fractional shares of Common Stock are to be issued upon the conversion of any Series O Preferred Stock. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share.

 

 

 

 

(b) Mechanics of Conversion. The conversion of Series O Preferred Stock shall be conducted in the following manner:

 

(i) Holder’s Conversion. To convert Series O Preferred Stock into validly issued, fully paid and non-assessable shares of Common Stock on any date (a “Conversion Date”), a Holder shall deliver (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion of the share(s) of Series O Preferred Stock subject to such conversion in a form reasonably acceptable to the Company. On or before the second (2nd) Trading Day following the date of receipt of a Conversion Notice, the Company shall instruct the Company’s Transfer Agent to process such Conversion Notice in accordance with the terms herein. On or before the second (2nd) Trading Day following the date of receipt by the Company of such Conversion Notice, the Company shall (1) provided that the Transfer Agent is participating in DTC Fast Automated Securities Transfer Program and provided that such shares may be sold under Rule 144 under the Securities Act of 1933, as amended, without the need for current public information, credit such aggregate number of shares of Common Stock to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit and Withdrawal at Custodian system, or (2) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, or the shares are not eligible to be sold without the need for current public information under Rule 144, issue and to the address as specified in such Conversion Notice, a certificate, registered in the name of such Holder or its designee, for the number of shares of Common Stock to which such Holder shall be entitled.

 

(ii) Record Holder. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of Series O Preferred Stock shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date

 

(c) Taxes. The Company shall pay any and all documentary, stamp, transfer (but only in respect of the registered holder thereof), issuance and other similar taxes that may be payable with respect to the issuance and delivery of shares of Common Stock upon the conversion of Series O Preferred Stock.

 

(d) Limitation on Beneficial Ownership. Notwithstanding anything to the contrary set forth in this Certificate of Designation, at no time may all or a portion of the Series O Preferred Stock be converted if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by the Holder at such time, the number of shares of Common Stock that would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and the rules thereunder) more than 4.99% of all of the Common Stock outstanding at such time (the “4.99% Beneficial Ownership Limitation”); provided, however, that, upon the Holder providing the Corporation with sixty-one (61) days’ advance notice (the “4.99% Waiver Notice”) that the Holder would like to waive this Section 6(d) with regard to any or all shares of Common Stock issuable upon conversion of the Series O Preferred Stock, this Section 6(d) will be of no force or effect with regard to all or a portion of the Series O Preferred Stock referenced in the 4.99% Waiver Notice but shall in no event waive the 9.99% Beneficial Ownership Limitation described below. Notwithstanding anything to the contrary set forth in this Certificate of Designation, at no time may all or a portion of the Series O Preferred Stock be converted if the number of shares of Common Stock to be issued pursuant to such conversion, when aggregated with all other shares of Common Stock owned by the Holder at such time, would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the 1934 Act and the rules thereunder) in excess of 9.99% of the then-issued and outstanding shares of Common Stock outstanding at such time (the “9.99% Beneficial Ownership Limitation” and the lower of the 9.99% Beneficial Ownership Limitation and the 4.99% Beneficial Ownership Limitation then in effect, the “Maximum Percentage”). By written notice to the Company, a holder of Series O Preferred Stock may from time to time decrease the Maximum Percentage to any other percentage specified in such notice. For purposes hereof, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of a holder of Series O Preferred Stock, the Company shall within three (3) Business 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 Company, including the Series O Preferred Stock, by the Holder and its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported, that in any event are convertible or exercisable, as the case may be, into shares of the Company’s Common Stock within 60 days’ of such calculation and that are not subject to a limitation on conversion or exercise analogous to the limitation contained herein. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(d) to correct this paragraph (or any portion hereof) that may be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation.

 

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SECTION 7. REDEMPTION RIGHTS

 

The Company may, in its sole discretion, at any time while the Series O Preferred Stock is outstanding, redeem all or any portion of the outstanding Series O Preferred Stock at a price equal to the Stated Value plus any accrued but unpaid cash dividends. The Company may exercise such redemption right by providing a minimum of 5 days written notice of such redemption to the Holders. In the event the Company exercises such redemption right for less than all of the then-outstanding shares of Series O Preferred Stock, the Company shall redeem the outstanding shares of the Holders of a pro rata basis.

 

SECTION 8. NOTICES. Any notice required hereby to be given to the Holders shall be deemed given if deposited in the United States mail, postage prepaid, or provided by fax or e-mail, to each Holder of record at his, her or its address appearing on the books of the Corporation.

 

SECTION 9. MISCELLANEOUS.

 

(a) The headings of the various sections and subsections of this Certificate of Designation are for convenience of reference only and shall not affect the interpretation of any of the provisions of this Certificate of Designation.

 

(b) Whenever possible, each provision of this Certificate of Designation shall be interpreted in a manner as to be effective and valid under applicable law and public policy. If any provision set forth herein is held to be invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions of this Certificate of Designation. No provision herein set forth shall be deemed dependent upon any other provision unless so expressed herein. If a court of competent jurisdiction should determine that a provision of this Certificate of Designation would be valid or enforceable if a period of time were extended or shortened, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law.

 

(c) Except as may otherwise be required by law, the shares of the Series O Preferred Stock shall not have any powers, designations, preferences or other special rights, other than those specifically set forth in this Certificate of Designation.

 

 

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Exhibit 3.2

 

CERTIFICATE OF DESIGNATION

OF

ORIGINCLEAR, INC.

ESTABLISHING THE DESIGNATIONS, PREFERENCES,

LIMITATIONS AND RELATIVE RIGHTS OF ITS

SERIES P PREFERRED STOCK

 

OriginClear, Inc. (the “Company”), a corporation organized and existing under the laws of Nevada, does hereby certify that, pursuant to authority conferred upon the Board of Directors of the Company by the Articles of Incorporation of the Company, it has adopted resolutions (a) authorizing the issuance of up to 500 shares of Series P Preferred Stock of the Company and (b) providing for the designations, preferences and relative participating, optional or other rights, and the qualifications, limitations or restrictions thereof, as follows:

 

SECTION 1. DESIGNATION OF SERIES. There shall hereby be created and established a series of “Series P Preferred Stock” and the number of shares initially constituting such series shall be up to five hundred (500) shares.

 

SECTION 2. STATED VALUE. The Stated Value of the Series P Preferred Stock will be $1,000 per share.

 

SECTION 3. DIVIDENDS. The holders of Series P Preferred Stock (the “Holders”) will be entitled to receive, on any outstanding shares of Series P Preferred Stock held by such Holders, dividends on an as-converted basis with the common stock of the Company (the “Common Stock”).

 

SECTION 4. LIQUIDATION. Upon any liquidation, dissolution or winding- up of the Company, the Holders will be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Series P Preferred Stock an amount equal to such amount as the Holder would have received had such share been converted to Common Stock, on a pari passu basis with the Common Stock..

 

SECTION 5. VOTING. The Series P Preferred Stock will vote on an as-converted basis with the Common Stock, subject however, to the Beneficial Ownership Limitation.

 

SECTION 6. CONVERSION RIGHTS. The shares of the Series P Preferred Stock shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock on the terms and conditions set forth in this Section 6.

 

(a) Holder’s Conversion Right. Subject to the provisions of Section 6(d), at any time and from time to time, each Holder shall be entitled to convert any number (which may include fractional amounts) of shares of Series P Preferred Stock into validly issued, fully paid and non- assessable shares of Common Stock in accordance with this Section 6.

 

(i) Conversion Rate. The number of validly issued, fully paid and non- assessable shares of Common Stock issuable upon conversion of the Series P Preferred Stocks pursuant to Section 6(a) shall be equal to the amount of the Stated Value of the Series P Preferred Stocks being converted divided by the Conversion Price, provided that, Prior Eligible Holders (as defined below) will be entitled to additional shares of Common Stock in accordance with clause (ii) below. The Conversion Price (subject in all cases for adjustment for stock splits, stock dividends, and similar transactions) will be equal to the lower of (a) closing price of the Common Stock on the date the Company has banked funds and received and accepted executed subscription documents and the purchase price under the subscription agreement under which such Series P Preferred Stocks being converted were purchased, or (b) the average closing sale price of the Common Stock for the five trading days prior to the Conversion Date (the “Variable Price”).

 

(ii) Make-Good Shares for Prior Eligible Holders. A Holder, who at the time such Holder was issued its shares of Series P Preferred Stock being converted, was a holder of the Company’s common stock, Series E Preferred Stock (such holder of Series E Preferred Stock is referred to herein as a “Prior E Series Holder”), Series F Preferred Stock, or Series G Preferred Stock (such holder of Series F Preferred Stock or Series G Preferred Stock is referred to herein as a “Prior Series F or G Holder”), which such Holder purchased from the Company in a financing transaction completed under Regulation D under the Securities Act of 1933, as amended since June 1, 2014 (a “Prior Eligible Holder”), upon any conversion of shares of Series P Preferred Stock, will be entitled to additional shares (the “Make-Good Shares”) of Common Stock (in addition to such shares as the Holder would receive pursuant to clause (i) above) in accordance with this clause (ii) (subject to adjustment in all cases for stock splits, stock dividends, and similar transactions).

 

 

 

 

(a) Make-Good Shares for Prior Series F or G Holders. A Prior Series F or G Holder will be entitled to Make-Good Shares calculated as follows. The number of Make-Good Shares for any such conversion will be equal to the difference between (a) the aggregate number of shares of common stock (multiplied by the New Investment Ratio and the Conversion Proportion) such Holder received as part of the Units purchased by such Holder that also included shares of Series F Preferred Stock or Series G Preferred Stock (the “Prior Units”), and (b) the number of such shares of common stock that the Holder would have received (multiplied by the New Investment Ratio and the Conversion Ratio) had the aggregate purchase price paid by the Holder for such Prior Units been equal to the Original Investment Amount, and had the price used to calculate the number of such shares of common stock been the Variable Price. The “Original Investment Amount” means the aggregate purchase price paid by the Prior Eligible Holder in the applicable prior financing transaction. The “New Investment Ratio” means the aggregate dollar amount of the Units including Series O Preferred Stock and Series P Preferred Stock purchased by the Holder (the “New Investment Amount”), divided by the Original Investment Amount (provided that the New Investment Ratio will not be greater than 1.0). The Conversion Proportion is equal to the number of shares of Series P Preferred Stock being converted divided by the aggregate total number of shares of Series P Preferred Stock originally issued to the Holder.

 

Solely by way of illustration, in the event a Prior Series F or G Holder purchased an aggregate of $200,000 in Original Investment Amount of Prior Units, such Holder was issued 1,000,000 shares of common stock as part of such Prior Units, calculated based on a price per share of common stock of $0.20, and such Holder purchased $100,000 in New Investment Amount, the New Investment Ratio for such Holder would be 0.5. In the event such Holder was issued 25 shares of Series P Preferred Stock, and converted 12.5 of such shares of Series P Preferred Stock to Common Stock, the Conversion Proportion for such conversion would be equal to 0.5. In the event the Variable Price for such conversion would be equal to $0.10, the number of Make-Good Shares for such conversion would be equal to 250,000 (calculated as follows: [($200,000/$0.10)] * 0.5 *0.5] – [(0.5 * 1,000,000)* 0.5])

 

(b) Make-Good Shares for Prior Series E Holders that are not Prior Series F or G Holders. A Prior Series E Holder that is not a Prior Series F or G Holder will be entitled to Make-Good Shares calculated as follows. The number of Make-Good Shares for any such conversion will be equal to the difference between (a) the aggregate number of shares of common stock (multiplied by the New Investment Ratio and the Conversion Proportion) such Holder received, on an as-converted basis based on the conversion rate set forth in the Certificate of Designation of Series E Preferred Stock (the “Prior Series E Securities”), and (b) the number of such shares of common stock that the Holder would have received (multiplied by the New Investment Ratio and the Conversion Ratio) had the aggregate purchase price paid by the Holder for such Prior Series E Securities been equal to the Original Investment Amount, and had the price used to calculate the number of such shares of common stock been the Variable Price.

 

(c) Make-Good Shares for Other Eligible Prior Holders. A Prior Eligible Holder that is not a Prior Series E Holder or a Prior Series F or G Holder will be entitled to Make-Good Shares calculated as follows. The number of Make-Good Shares for any such conversion will be equal to the difference between (a) the aggregate number of shares of common stock (multiplied by the New Investment Ratio and the Conversion Proportion) such Holder received upon such Holder’s most recent purchase of shares of common stock (any of which are still held by such Holder) of the Company in a financing transaction completed under Regulation D (the “Other Prior Eligible Securities”), and (b) the number of such shares of common stock that the Holder would have received (multiplied by the New Investment Ratio and the Conversion Ratio) had the aggregate purchase price paid by the Holder for such Other Prior Eligible Securities been equal to the Original Investment Amount, and had the price used to calculate the number of such shares of common stock been the Variable Price.

 

(iii) Fractional Shares. No fractional shares of Common Stock are to be issued upon the conversion of any Series P Preferred Stocks. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share.

 

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(b) Mechanics of Conversion. The conversion of each Series P Preferred Stock shall be conducted in the following manner:

 

(i) Holder’s Conversion. To convert a Series P Preferred Stock into validly issued, fully paid and non-assessable shares of Common Stock on any date (a “Conversion Date”), a Holder shall deliver (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion of the share(s) of Series P Preferred Stocks subject to such conversion in a form reasonably acceptable to the Company. On or before the second (2nd) Trading Day following the date of receipt of a Conversion Notice, the Company shall instruct the Company’s Transfer Agent to process such Conversion Notice in accordance with the terms herein. On or before the second (2nd) Trading Day following the date of receipt by the Company of such Conversion Notice, the Company shall (1) provided that the Transfer Agent is participating in DTC Fast Automated Securities Transfer Program and provided that such shares may be sold under Rule 144 under the Securities Act of 1933, as amended, without the need for current public information, credit such aggregate number of shares of Common Stock to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit and Withdrawal at Custodian system, or (2) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, or the shares are not eligible to be sold without the need for current public information under Rule 144, issue and to the address as specified in such Conversion Notice, a certificate, registered in the name of such Holder or its designee, for the number of shares of Common Stock to which such Holder shall be entitled.

 

(ii) Record Holder. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of Series P Preferred Stocks shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date

 

(c) Taxes. The Company shall pay any and all documentary, stamp, transfer (but only in respect of the registered holder thereof), issuance and other similar taxes that may be payable with respect to the issuance and delivery of shares of Common Stock upon the conversion of Series P Preferred Stocks.

 

(d) Limitation on Beneficial Ownership. Notwithstanding anything to the contrary set forth in this Certificate of Designation, at no time may all or a portion of the Series P Preferred Stock be converted if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by the Holder at such time, the number of shares of Common Stock that would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and the rules thereunder) more than 4.99% of all of the Common Stock outstanding at such time (the “4.99% Beneficial Ownership Limitation”); provided, however, that, upon the Holder providing the Corporation with sixty-one (61) days’ advance notice (the “4.99% Waiver Notice”) that the Holder would like to waive this Section 6(d) with regard to any or all shares of Common Stock issuable upon conversion of the Series P Preferred Stocks, this Section 6(d) will be of no force or effect with regard to all or a portion of the Series P Preferred Stock referenced in the 4.99% Waiver Notice but shall in no event waive the 9.99% Beneficial Ownership Limitation described below. Notwithstanding anything to the contrary set forth in this Certificate of Designation, at no time may all or a portion of the Series P Preferred Stocks be converted if the number of shares of Common Stock to be issued pursuant to such conversion, when aggregated with all other shares of Common Stock owned by the Holder at such time, would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the 1934 Act and the rules thereunder) in excess of 9.99% of the then-issued and outstanding shares of Common Stock outstanding at such time (the “9.99% Beneficial Ownership Limitation” and the lower of the 9.99% Beneficial Ownership Limitation and the 4.99% Beneficial Ownership Limitation then in effect, the “Maximum Percentage”). By written notice to the Company, a holder of Series P Preferred Stocks may from time to time decrease the Maximum Percentage to any other percentage specified in such notice. For purposes hereof, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of a holder of Series P Preferred Stocks, the Company shall within three (3) Business 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 Company, including the Series P Preferred Stocks, by the Holder and its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported, that in any event are convertible or exercisable, as the case may be, into shares of the Company’s Common Stock within 60 days’ of such calculation and that are not subject to a limitation on conversion or exercise analogous to the limitation contained herein. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(d) to correct this paragraph (or any portion hereof) that may be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation.

 

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SECTION 7. NO REDEMPTION RIGHTS OR OBLIGATIONS. The Series P Preferred Stock will not be subject to any redemption rights or obligations.

 

SECTION 8. NOTICES. Any notice required hereby to be given to the Holders shall be deemed given if deposited in the United States mail, postage prepaid, or provided by fax or e-mail, to each Holder of record at his, her or its address appearing on the books of the Corporation.

 

SECTION 9. MISCELLANEOUS.

 

(a) The headings of the various sections and subsections of this Certificate of Designation are for convenience of reference only and shall not affect the interpretation of any of the provisions of this Certificate of Designation.

 

(b) Whenever possible, each provision of this Certificate of Designation shall be interpreted in a manner as to be effective and valid under applicable law and public policy. If any provision set forth herein is held to be invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions of this Certificate of Designation. No provision herein set forth shall be deemed dependent upon any other provision unless so expressed herein. If a court of competent jurisdiction should determine that a provision of this Certificate of Designation would be valid or enforceable if a period of time were extended or shortened, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law.

 

(c) Except as may otherwise be required by law, the shares of the Series P Preferred Stock shall not have any powers, designations, preferences or other special rights, other than those specifically set forth in this Certificate of Designation.

 

 

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