UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 16, 2018 |
Marina Biotech, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 000-13789 | 11-2658569 | ||
| (State or other jurisdiction | (Commission | (I.R.S. Employer | ||
| of incorporation) | File Number) | Identification No.) |
|
17870 Castleton Street, Suite 250 City of Industry, CA |
91748 | |
| (Address of principal executive offices) | (Zip Code) |
| Registrant’s telephone number, including area code: | 626-964-5788 |
| N/A | ||
| 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:
| [ ] | 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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 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 1.01. Entry into a Material Definitive Agreement.
On April 16, 2018, Marina Biotech, Inc. (the “Company”) entered into Subscription Agreements (the “Purchase Agreements”) with certain accredited investors and conducted a closing pursuant to which the Company sold 2,334 shares of the Company’s Series E convertible preferred stock, par value of $0.01 per share (the “Preferred Stock”), at a purchase price of $5,000 per share of Preferred Stock. Each share of Preferred Stock is initially convertible into shares of the Company’s common stock, par value $0.006 per share (the “Common Stock”), at a conversion price of $0.50 per share of Common Stock. In addition, each investor received a 5-year warrant (the “Warrants”, and collectively with the Preferred Stock, the “Securities”, and the offering of the Securities, the “Private Placement”) to purchase 0.75 shares of Common Stock for each share of Common Stock issuable upon the conversion of the Preferred Stock purchased by such investor at an exercise price equal to $0.55 per share of Common Stock, subject to adjustment thereunder.
The Company received total gross proceeds of approximately $11.7 million from the issuance of the Securities described above, prior to deducting placement agent fees and estimated expenses payable by the Company associated with such closing. The Company currently intends to use the proceeds of the Private Placement for funding operations, working capital needs, capital expenditures, the repayment of certain liabilities and other general corporate purposes in pursuit of advancing its commercial, clinical and preclinical efforts, including advancing its commercial operations relating to the sale and promotion of the Company’s Prestalia® product. Prestalia is a single-pill fixed dose combination of perindopril arginine, an angiotensin-converting-enzyme inhibitor, and amlodipine besylate, a calcium channel blocker, which has been approved by the U.S. Food and Drug Administration and is actively marketed in the U.S.
The Securities are being offered and sold in a private placement pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), afforded by Section 4(a)(2) and Rule 506(b) of Regulation D promulgated thereunder. To the extent that any shares of Common Stock are issued in connection with the conversion of the Preferred Stock or the exercise of the Warrants, the Common Stock may not be offered, transferred or sold in the United States absent registration or the availability of an applicable exemption from the registration requirements of the Securities Act.
The Company agreed in the Subscription Agreements, promptly following receipt of a written request therefor from the investors who purchased a majority of the Securities issued pursuant to the Subscription Agreements (the “Majority Subscribers”), to increase the number of directors constituting the Company’s entire Board of Directors from five (5) directors to seven (7) directors, and to cause two (2) persons designated by the Majority Subscribers to be appointed to fill the vacancies created thereby (each, an “Initial Designee” and together the “Initial Designees”). The Company also agreed to, promptly following the date of the closing, establish a committee of its Board of Directors (the “Budget Committee”) consisting of three (3) directors (two (2) of whom will be the Initial Designees and the third of whom will be any independent member of the Board of Directors) to oversee certain budgetary matters regarding the Company, and to maintain the Budget Committee until the earlier to occur of: (x) the thirtieth (30 th ) day following the date on which the Common Stock is first listed for trading on a national securities exchange; and (y) the date on which the Company has achieved one quarter of positive net income. Further, the Company granted to the Majority Subscribers the right to designate three (3) nominees to be included in the Company’s proxy statement on Schedule 14A regarding the Company’s 2018 Annual Meeting of Stockholders.
Description of Series E Preferred Stock
The rights, preferences and privileges of the Preferred Stock are set forth in a Certificate of Designation of Preferences, Rights and Limitations of the Series E Convertible Preferred Stock of Marina Biotech, Inc. (the “Certificate of Designation”), a copy of which is attached as Exhibit 3.1 to this Current Report on Form 8-K. The Certificate of Designation was filed with the Delaware Secretary of State on April 16, 2018.
Voting
The holders of the Preferred Stock will be entitled to vote with the holders of Common Stock (and any other class or series that may similarly be entitled to vote with the holders of Common Stock as the Board may authorize and issue) and not as a separate class, at any annual or special meeting of stockholders of the Company, and may act by written consent in the same manner as the holders of Common Stock. In the event of any such vote or action by written consent, each holder of shares of Preferred Stock shall be entitled to that number of votes equal to the whole number of shares of Common Stock into which the aggregate number of shares of Preferred Stock held of record by such holder are convertible as of the close of business on the record date fixed for such vote or such written consent based on a conversion price, solely for such purpose, equal to the greater of the then-effective conversion price and the closing price of our Common Stock on the date such Preferred Stock was issued. In addition, for as long as any of the shares of Preferred Stock remain outstanding, without the consent of holders of at least a majority of the then outstanding shares of Preferred Stock, the Company may not (a) amend the Company’s Certificate of Incorporation, Bylaws or other charter documents of the Company, or file any charter documents with the Secretary of State of the State of Delaware, so as to adversely affect any powers, preferences or rights of the holders of the Preferred Stock, (b) authorize, increase or designate any preferred stock that is senior to, or on parity with, the Preferred Stock as to rights in liquidation, dissolution, dividend, voting, distribution or redemption, (c) increase or decrease (other than by conversion of the Preferred Stock) the authorized number of shares of Preferred Stock, (d) amend the Certificate of Designation, (e) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of Common Stock or Common Stock equivalents or (e) enter into any agreement or understanding with respect to (a) through (e).
Dividends
The holders of Preferred Stock shall be entitled to receive, and the Company shall pay, each year cumulative dividends or distributions at the annual rate of 8% of the stated value per share of Preferred Stock (subject to adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock). Such dividend shall be paid in cash or, at the discretion of the Board of Directors, in shares of Common Stock, or a combination thereof. Holders of Preferred Stock shall be entitled to receive, and the Company shall pay, dividends on shares of Preferred Stock equal (on an as-if-converted-to-Common Stock basis) to and in the same form as dividends (other than dividends in the form of Common Stock) declared or actually paid on shares of the Common Stock or other junior securities when, as and if such dividends (other than dividends in the form of Common Stock) are paid on shares of the Common Stock or other junior securities. The Company shall declare or pay no dividends or other distributions on shares of the Common Stock or other junior securities unless it simultaneously complies with the foregoing provisions regarding the payment of dividends.
Liquidation
The Preferred Stock will rank senior to the Common Stock and each other class of capital stock of the Company or series of preferred stock of the Company currently authorized or authorized by the Board in the future that does not expressly provide that such class or series ranks senior to, or on parity with, the Preferred Stock (“Junior Securities”). In the event of a Liquidation Event (as defined in the Certificate of Designation), the holders of the Preferred Stock shall be entitled to receive, out of the assets of the Company or proceeds thereof legally available therefor, an amount in cash equal to the greater of (i) 100% of the stated value of the Preferred Stock, plus any accrued and unpaid dividends thereon (unless such dividends have already increased the sated value of the Preferred Stock) and any other fees or liquidated damages then due and owing therein under the Certificate of Designation, and (ii) the amount per share such holders would receive if such holders converted such shares of Preferred Stock into shares of Common Stock immediately prior to the date of such payment, before any payment or distribution of the assets of the Company is made or set apart for the holders of Junior Securities. In addition, prior to such Liquidation Event, the holders of Preferred Stock shall be entitled to notice so that they may exercise their conversion rights prior to such event.
Conversion
At any time after the date of issuance, each share of the Preferred Stock, at the holder’s sole and absolute discretion, shall initially be convertible into 10,000 shares of Common Stock at a conversion price equal to $0.50 per share of Common Stock, subject to adjustment. Holders may immediately convert their Preferred Stock prior to the occurrence of certain Liquidation Events (as defined in the Certificate of Designation). Each share of Preferred Stock will automatically convert, initially, into shares of Common Stock on the earliest to occur of (a) any date that is more than thirty trading days after the closing date of the offering that the closing price of the Common Stock on each of the thirty days immediately prior to such conversion exceeds $5.00 per share (subject to adjustment in the event of a stock dividend or split), (b) the three year anniversary of the closing of the offering, or (c) upon the majority vote of the voting power of the then outstanding shares of Preferred Stock. The conversion price of the Preferred Stock will be subject to adjustment as described in the Certificate of Designation, including but not limited to adjustments upon certain subsequent equity issuances in which any person is entitled to acquire shares of Common Stock at an effective price per share lower than the then conversion price. The Company is not required to issue any fractional shares of Preferred Stock or Common Stock in connection with the conversion of Preferred Stock and may, in each case, at the Company’s discretion, pay the holder such amount in cash or deliver an additional whole share in lieu thereof.
Limitations of Conversion
The number of shares of Common Stock issuable upon a conversion of the Preferred Stock that may be acquired by a holder shall be limited to the extent necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), does not exceed 4.99% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% of the total number of shares of Common Stock then issued and outstanding provided that such increase in percentage shall not be effective until sixty-one days after notice to the Company.
Dilution Protection .
In the event the Company, at any time after the first date of issue of the Preferred Stock and while at least one share of Preferred Stock is outstanding: (a) pays a dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of the Preferred Stock or any debt securities), (b) subdivides outstanding shares of Common Stock into a larger number of shares, (c) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (d) issues by reclassification of shares of Common Stock any shares of capital stock of the Company, then in each case the conversion price of the Preferred Stock shall be multiplied by a fraction of which (x) the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and (y) the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this section shall become effective immediately after the effective date of the applicable event described in subsections (a) through (d) above. In the event that the Company or any of its subsidiaries, as applicable, at any time while the Preferred Stock is outstanding, but on or prior to February 10, 2020, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or any securities of the Company or any of its subsidiaries which would entitle the holder thereof to acquire at any time Common Stock entitling any person to acquire shares of Common Stock at an effective price per share that is lower than the then conversion price, then the conversion price will be reduced to such lower price.
Description of Warrants
The terms of the Warrants are as set forth in the form of Warrant attached as Exhibit 4.1 to this Current Report on Form 8-K. The Warrants will have an exercise price equal to $0.55, will be immediately exercisable and will be subject to customary anti-dilution adjustments. The Warrants will be exercisable for five (5) years following the closing date. The Warrants are subject to a provision prohibiting the exercise of such Warrants to the extent that, after giving effect to such exercise, the holder of such Warrant (together with the holder’s affiliates, and any other persons acting as a group together with the holder or any of the holder’s affiliates), would beneficially own in excess of 9.99% of the outstanding Common Stock. The Warrants will also provide for “full-ratchet” anti-dilution protection with respect to subsequent equity sales in which any person will be entitled to acquire shares of Common Stock at an exercise price per share that is lower than the then exercise price of the Warrants, subject to customary exceptions.
The foregoing summaries of the material terms of the Certificate of Designation and the form of Warrant are not complete and are qualified in their entirety by reference to the full text thereof, copies of which are filed herewith as Exhibits 3.1 and 4.1, respectively, and incorporated by reference herein.
Item 3.02. Unregistered Sales of Equity Securities.
Offering of Securities to Investors and the Placement Agent
The information set forth in “Item 1.01. Entry into a Material Definitive Agreement” relating to the issuance of the Securities to the Investors is incorporated by reference herein in its entirety. In addition, the Company issued to the placement agent for the Private Placement a Warrant to purchase 2,334,000 shares of Common Stock, which Warrant was issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder.
Issuance of Securities to June 2016 Noteholders
On April 16, 2018, and in connection with the closing described in Item 1.01, the Company issued to the holders (such holders, the “June 2016 Noteholders”) of those certain promissory notes in the original principal amount of $300,000 that the Company issued pursuant to that certain Note Purchase Agreement dated June 20, 2016 by and among the Company and the June 2016 Noteholders (the “2016 Notes”) an aggregate of 71.46 shares of Preferred Stock and Warrants to purchase up to 535,950 shares of Common Stock as a result of the conversion of the 2016 Notes. As a result of the conversion of the 2016 Notes and the issuance of the Securities to the June 2016 Noteholders, the entire unpaid principal balance of the 2016 Notes, and the accrued and unpaid interest thereon, has been satisfied in full, and such notes are no longer outstanding.
In addition, on April 16, 2018, and in connection with the closing described in Item 1.01, the Company issued to the June 2016 Noteholders an aggregate of 75 shares of Preferred Stock and Warrants to purchase up to 562,500 shares of Common Stock in full and complete satisfaction of the Company’s obligations to issue $375,000 worth of “Consideration Securities” to the 2016 Noteholders pursuant to that certain amendment agreement dated July 3, 2017 by ad among the Company and the June 2016 Noteholders.
The Securities that were issued to the June 2016 Noteholders have the same terms and conditions as the Securities that were issued to investors in the offering. The Securities were issued to the June 2016 Noteholders in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder.
Issuance of Securities to June 2017 Noteholders
On April 16, 2018, and in connection with the closing described in Item 1.01, the Company issued to the holders of those certain promissory notes in the original principal amount of $400,000 (the “2017 Notes”) that the Company issued to select accredited investors (the “June 2017 Noteholders”) pursuant to Note Purchase Agreements that the Company entered into with the June 2017 Noteholders during June 2017 an aggregate of 83.44 shares of Preferred Stock and Warrants to purchase up to 625,800 shares of Common Stock as full and complete satisfaction of the unpaid principal balance (and accrued but unpaid interest thereon) owed by the Company to the June 2017 Noteholders under the 2017 Notes. As a result of the conversion of the 2016 Notes and the issuance of the Securities to the June 2016 Noteholders, the entire unpaid principal balance of the 2016 Notes, and the accrued and unpaid interest thereon, has been satisfied in full, and such notes are no longer outstanding. The Securities that were issued to the June 2017 Noteholders have the same terms and conditions as the Securities that were issued to investors in the offering. The Securities were issued to the June 2017 Noteholders in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder.
Issuance of Securities to Blech Trust
On April 16, 2018, and in connection with the closing described in Item 1.01, the Company issued to a trust affiliated with Isaac Blech, a member of the Board of Directors of the Company, an aggregate of 103.7 shares of Preferred Stock and Warrants to purchase up to 777,750 shares of Common Stock as a result of the conversion of that certain secured convertible promissory note in the original principal amount of $500,000 that the Company issued to such investor on November 22, 2017 (the “Blech Note”). As a result of the conversion of the Blech Note and the issuance of the Securities to the holder thereof, the entire unpaid principal balance of the Blech Notes, and the accrued and unpaid interest thereon, has been satisfied in full, and the Blech Note is no longer outstanding. The Securities that were issued to the holder of the Blech Note have the same terms and conditions as the Securities that were issued to investors in the offering. The Securities were issued to the holder of the Blech Note in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder.
Issuance of Securities to Satisfy Lines of Credit
On April 16, 2018, and in connection with the closing described in Item 1.01, the Company issued to Vuong Trieu, Ph.D., its Executive Chairman, 114.63 shares of Preferred Stock and Warrants to purchase up to 859,725 shares of Common Stock as full and complete satisfaction of the unpaid principal balance (and accrued but unpaid interest thereon) owed by the Company to Dr. Trieu under that certain line of credit in the amount of up to $540,000 that was provided by Dr. Trieu to the Company, all of which had been drawn down as of the date of the closing described in Item 1.01. The line of credit was extended pursuant to a Line Letter dated November 15, 2016 by and between the Company and Dr. Trieu. The Securities that were issued to Dr. Trieu have the same terms and conditions as the Securities that were issued to investors in the offering. The Securities were issued to Dr. Trieu in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.
On April 16, 2018, and in connection with the closing described in Item 1.01, the Company issued to Autotelic Inc. 19 shares of Preferred Stock and Warrants to purchase up to 142,500 shares of Common Stock as full and complete satisfaction of the unpaid principal balance (and accrued but unpaid interest thereon) owed by the Company to Autotelic Inc. under that certain line of credit in the amount of up to $500,000 that was provided by Autotelic Inc. to the Company, of which $90,816 had been drawn down as of the date of the closing described in Item 1.01. The line of credit was extended pursuant to a Line Letter dated April 4, 2017 by and between the Company and Autotelic Inc. Vuong Trieu, the Executive Chairman of the Company, serves as Chairman of the Board of Autotelic Inc. The Securities that were issued to Autotelic Inc. have the same terms and conditions as the Securities that were issued to investors in the offering. The Securities were issued to Autotelic Inc. in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or rule 506(b) of Regulation D promulgated thereunder.
Issuance of Securities for Payables
On April 16, 2018, and in connection with the closing described in Item 1.01, the Company entered into a Compromise and Settlement Agreement with Autotelic Inc. pursuant to which the Company agreed to issue to Autotelic Inc. an aggregate of 162.59 shares of Preferred Stock and Warrants to purchase up to 2,564,465 shares of Common Stock to satisfy accrued and unpaid fees in the aggregate amount of approximately $812,967, and other liabilities, owed to Autotelic Inc. as of March 31, 2018 pursuant to that certain Master Services Agreement dated as of November 15, 2016 by and between the Company and Autotelic Inc. Vuong Trieu, the Executive Chairman of the Company, serves as Chairman of the Board of Autotelic Inc. The Securities that were issued to Autotelic Inc., which were issued upon the closing described in Item 1.01, have the same terms and conditions as the Securities that were issued to investors in the offering. The Securities were issued to Autotelic Inc. in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder.
Issuance of Preferred Stock and Warrants to Directors
On April 16, 2018, and in connection with the closing described in Item 1.01, the Company entered into Compromise and Settlement Agreements with four of the current members of its Board of Directors (Isaac Blech, Philip Ranker, Vuong Trieu and Donald A. Williams) and one former member of its Board of Directors (Stefan Loren, Ph.D.) pursuant to which the Company agreed to issue to such directors an aggregate of 58.25 shares of Preferred Stock and Warrants to purchase up to 436,875 shares of Common Stock to satisfy accrued and unpaid fees owed to such directors for service to the Company as members of the Board of Directors during the period ending on December 31, 2017 in the aggregate amount of approximately $291,250. The Securities that were issued to the directors, which were issued upon the closing described in Item 1.01, have the same terms and conditions as the Securities that were issued to investors in the offering. The Securities were issued to the directors in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder.
Item 3.03. Material Modification of Rights to Security Holders.
The information set forth in “Item 5.03. Amendments to the Articles of Incorporation or Bylaws; Change in Fiscal Year” is incorporated by reference herein in its entirety.
Possible Effects on Rights of Existing Stockholders
Existing stockholders will suffer significant dilution in ownership interests and voting rights as a result of the issuance of the Preferred Stock, and may suffer additional dilution upon the issuance of shares of our Common Stock upon the conversion of the Preferred Stock or the exercise of the Warrants. The Preferred Stock will be senior to our Common Stock with respect to dividends and liquidation preferences, the holders of Preferred Stock will vote with the holders of Common Stock in any vote on an adjusted, as-converted basis. The potential dilution described above is also in addition to potential dilution from (i) the issuance of additional shares of Common Stock due to potential future anti-dilution adjustments on the Preferred Stock, (ii) the issuance of shares of Common Stock pursuant to other outstanding options and warrants or (iii) any other future issuances of our Common Stock. The sale into the public market of these shares also could materially and adversely affect the market price of our Common Stock
Item 5.03. Amendments to Articles of Incorporation or Bylaws, Change in Fiscal Year.
The statements in Item 1.01 above describing the Certificate of Designation, which the Company filed with the Delaware Secretary of State on April 16, 2018, are incorporated by reference into this Item 5.03.
Item 9.01. Financial Statements and Exhibits.
| Exhibit No. | Description | |
| 3.1 | Certificate of Designation of Preferences, Rights and Limitations of the Series E Convertible Preferred Stock of Marina Biotech, Inc. | |
| 4.1 | Form of Warrant. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Marina Biotech, Inc. | ||
| April 19, 2018 | By: | /s/ Vuong Trieu |
| Name: | Vuong Trieu | |
| Title: | Executive Chairman | |
EXHIBIT INDEX
| Exhibit No. | Description | |
| 3.1 | Certificate of Designation of Preferences, Rights and Limitations of the Series E Convertible Preferred Stock of Marina Biotech, Inc. | |
| 4.1 | Form of Warrant. |
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF THE
SERIES E CONVERTIBLE PREFERRED STOCK
OF
MARINA BIOTECH, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
WHEREAS, the undersigned does hereby certify that the following resolution was duly adopted by the Board of Directors (the “ Board ”) of Marina Biotech, Inc., a Delaware corporation (the “ Corporation ”), with the voting powers, designations, preferences and relative, participating, optional or other special rights, qualifications, limitations or restrictions set forth therein having been fixed by the Board pursuant to authority granted to it under Article IV of the Corporation’s Certificate of Incorporation, as amended (the “ Certificate of Incorporation ”) and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware:
RESOLVED, that, pursuant to authority conferred upon the Board by the Certificate of Incorporation, the Board hereby authorizes 3,500 shares of Series E Convertible Preferred Stock, par value $0.01 per share, of the Corporation and hereby fixes the voting powers, designations, preferences and relative, participating, optional or other special rights, qualifications, limitations or restrictions, of such shares in accordance with this Certificate of Designation of Preferences, Rights and Limitations (the “ Certificate of Designation ”), in addition to those set forth in the Certificate of Incorporation, as follows:
Capitalized terms used but not separately defined herein shall have the meanings given to them in the Certificate of Incorporation.
1. Designation, Amount and Par Value : Series E Convertible Preferred Stock, $0.01 par value (“ Series E Preferred Stock ”).
(a) Stated Value . The stated value of the Series E Preferred Stock shall be $5,000.00 per share (the “ Stated Value ”), subject to adjustment for stock splits, dividends, combinations and related transactions as set forth herein.
(b) Number and Designation . 3,500 shares of Preferred Stock shall be designated as Series E Preferred Stock, which shall not be subject to increase without the vote or written consent of the holders (each, a “ Holder ” and collectively, the “ Holders ”) of a majority of the voting power of the then outstanding Series E Preferred Stock voting as a class (a “ Majority Vote ”), unless otherwise specified herein
(c) Rank . The Series E Preferred Stock shall rank, with respect to rights upon liquidation, dissolution and winding up, (i) senior to the Common Stock and each other class of capital stock of the Corporation or series of Preferred Stock of the Corporation previously established or established hereafter by the Board, the terms of which do not expressly provide that such class or series ranks senior to, or on a parity with, the Series E Preferred Stock as to rights upon liquidation, dissolution and winding up (collectively, including the Series A Junior Participating Preferred Stock of the Corporation, the Series B Preferred Stock of the Corporation, the Series C Convertible Preferred Stock of the Corporation and the Series D Convertible Preferred Stock of the Corporation, “ Junior Securities ”); (ii) equally with each other class or series of capital stock of the Corporation established hereafter by the Board the terms of which expressly provide that such class or series will rank on equally with the Series E Preferred Stock as to rights upon liquidation, dissolution and winding up (collectively, “ Parity Securities ”); and (iii) junior to each other class or series of capital stock of the Corporation established hereafter by the Board (subject to the Holders’ voting rights under Section 5(b) hereof) the terms of which expressly provide that such class or series will rank senior to the Series E Preferred Stock as to rights upon liquidation, dissolution and winding up (collectively, “ Senior Securities ”). The definitions of Junior Securities, Parity Securities and Senior Securities shall each also include any rights or options exercisable for or convertible into Junior Securities, Parity Securities and Senior Securities, respectively.
2. Dividends .
(a) From and after the date of the issuance of any shares of Series E Preferred Stock, the holders of Series E Preferred Stock shall be entitled to receive, and the Corporation shall pay, each year cumulative dividends or distributions at the annual rate of 8% of the Stated Value per share of Series E Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series E Preferred Stock). Such dividend shall be paid in cash or at the Board’s direction, in duly authorized, validly issued, fully paid and non-assessable shares of Common Stock, or a combination thereof. All declared but unpaid dividends on shares of Series E Preferred Stock shall increase the Stated Value of such shares, but when such dividends are actually paid any such increase in the Stated Value shall be rescinded.
(b) Holders of Series E Preferred Stock shall be entitled to receive, and the Corporation shall pay, dividends on shares of Series E Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends (other than dividends in the form of Common Stock) declared or actually paid on shares of the Common Stock or other Junior Securities when, as and if such dividends (other than dividends in the form of Common Stock) are paid on shares of the Common Stock or other Junior Securities.
(c) The Corporation shall declare or pay no dividends or other distributions on shares of the Common Stock or other Junior Securities unless it simultaneously complies with the foregoing provisions of this Section 2.
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3. Liquidation Preference .
(a) In the event of a Liquidation Event (as defined below), before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of Junior Securities, and after and subject to the payment in full of all amounts required to be distributed to the Corporation’s creditors or the holders of Senior Securities, each Holder shall be entitled to receive, pari passu with the holders of Parity Securities, out of the assets of the Corporation or proceeds thereof (whether capital, surplus or earnings) legally available therefor, an amount in cash equal to the greater of (A) 100% of the Stated Value, plus any accrued and unpaid dividends thereon (unless such dividends have already increased the Stated Value of the Series E Preferred Stock) and any other fees or liquidated damages then due and owing therein under this Certificate of Designation and (B) the amount per share such Holder would receive if such Holder converted such shares of Series E Preferred Stock into shares of Common Stock immediately prior to the date of such payment (the “ Liquidation Preference ”) with respect to each share of Series E Preferred Stock held by the Holder; provided , that the Corporation shall provide the Holders with notice of any Liquidation Event at least ten (10) calendar days prior to the record date with respect to such Liquidation Event (or, with respect to any Liquidation Event for which no record date is set, the effective date thereof) and, for the avoidance of doubt, following receipt of such notice, any Holder may exercise such Holder’s voluntary conversion rights in accordance with Section 4(a). If, upon the occurrence of any Liquidation Event, the assets of the Corporation, or proceeds thereof, distributable after payment in full of the Corporation’s creditors and Senior Securities shall be insufficient to pay in full the aggregate Liquidation Preference to all Holders and any amounts due to the holders of Parity Securities, the assets of the Corporation, or the proceeds thereof, shall be distributed among the Holders and the holders of any such Parity Securities ratably. For purposes of this Certificate of Designation, the term “ Liquidation Event ” shall mean, at any time while a share of Series E Preferred Stock is outstanding, (i) any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or (ii) the Corporation, directly or indirectly, in one or more related transactions, (A) effects any merger or consolidation of the Corporation with or into another person, (B) effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets, (C) is the subject of any purchase offer, tender offer or exchange offer (whether by the Corporation or another person) and 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 such offer has been accepted by the holders of 50% or more of the outstanding Common Stock, (D) 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, (E) 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” (as such term is defined in Section 13(d) of the Exchange Act) 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), in each case other than any such transaction (1) that does not result in a reclassification, conversion, exchange or cancellation of outstanding Common Stock; (2) which is effected solely to change the Corporation’s jurisdiction of incorporation and results in a reclassification, conversion or exchange of outstanding shares of the Common Stock solely into shares of common stock of the surviving entity; (3) where the voting capital stock of the Corporation outstanding immediately prior to such transaction is converted into or exchanged for voting capital stock of the surviving entity constituting a majority of the outstanding shares of such voting capital stock of such surviving entity immediately after giving effect to such issuance; or (4) that the Holders deem not to be a Liquidation Event by a Majority Vote.
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(b) In the event of a Liquidation Event, subject to the rights of the holders of any Senior Securities or Parity Securities, after payment shall have been made in full to the Holders as provided in Section 3(a), any other series or class of Junior Securities shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed to holders of capital stock of the Corporation, and the Holders shall not be entitled to share therein.
4. Conversion Rights .
(a) Voluntary Right to Convert . At the Holder’s sole option, each share of Series E Preferred Stock may be converted, at any time and from time to time, from and after the date of the applicable closing at which such shares of Series E Preferred Stock are sold into a number of whole shares of Common Stock determined by dividing the then Stated Value by the Conversion Price (as defined below).
(b) Mandatory Conversion . Each outstanding share of Series E Preferred Stock shall be converted into a number of whole shares of Common Stock, determined by dividing the Stated Value by the Conversion Price on the earliest to occur of (i) any date more than 30 trading days after the Final Closing (as defined in the Subscription Agreements by and between the Corporation and the Holders (the “ Subscription Agreements ”) related to Holders’ subscription for the Series E Preferred Stock that the closing price of the Common Stock on each of the thirty (30) days immediately prior to such conversion on the OTC Markets (or any other market or exchange where the same is quoted or traded) exceeds $5.00 per share (subject to adjustment in the manner described herein with respect to the Conversion Price), (ii) the three year anniversary of the Final Closing (as defined in the Subscription Agreements) and (iii) a Majority Vote to convert (any of (i), (ii) or (iii), a “ Mandatory Conversion Trigger ”).
(c) Conversion Price; Conversion Shares . The “ Conversion Price ” of the Series E Preferred Stock shall be $0.50, subject to adjustment as described herein. Any shares of Common Stock issuable upon a conversion of Series E Preferred Stock pursuant to Section 4(a) or 4(b) are referred to herein as the “ Conversion Shares .”
(d) Mechanics of Conversion .
(i) Voluntary Conversion Mechanics . The Holder will give notice of its decision to exercise its right to convert the Series E Preferred Stock pursuant to Section 4(a) by delivering an executed and completed Notice of Conversion in the form attached as Annex A to this Certificate of Designation to the Corporation in accordance with Section 6(a). The Holder’s election shall be deemed effective upon receipt of a properly completed Notice of Conversion by the Corporation; provided, that if the Notice of Conversion is received by the Corporation after 3:00 p.m. Eastern Time on any day or at any time on a non-business day, it shall be deemed to be received on the following business day (the “ Conversion Date ”). The Corporation will, or will cause the Corporation’s transfer agent to, transmit the Common Stock certificates (or similar electronic notification) representing such Conversion Shares to the Holder within two (2) business days after receipt by the Corporation of the properly completed Notice of Conversion and the certificate(s) representing the converted shares of Series E Preferred Stock (the “ Delivery Date ”). A new Series E Preferred Stock certificate representing any shares of Series E Preferred Stock not converted will also be provided by the Corporation promptly following the Conversion Date. To the extent a Holder elects not to surrender its Series E Preferred Stock for reissuance upon partial payment or conversion, the Holder hereby indemnifies the Corporation against any and all loss or damage attributable to a third-party claim in an amount in excess of the actual amount of the Series E Stated Value then owned by the Holder. Shares of Series E Preferred Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued.
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(ii) Mandatory Conversion Mechanics . The Corporation shall effect a mandatory conversion pursuant to Section 4(b) by providing the Holders with written notice as provided in Section 6(a) and (i) stating that the Mandatory Conversion Trigger has been satisfied, (ii) specifying the then applicable Conversion Price, the aggregate number of shares of Series E Preferred Stock outstanding, and the aggregate number of Conversion Shares to be issued in connection with such conversion, and (iii) the date on which such conversion will be effective (the “ Mandatory Conversion Date ”). The calculations and entries set forth in the Corporation’s notice shall control in the absence of manifest or mathematical error. From and after the date of such notice, the shares of Series E Preferred Stock shall be null and void and only represent the right to receive the applicable number of Conversion Shares. The Corporation shall issue certificates representing the Conversion Shares promptly following surrender by a Holder of the certificate(s) representing the converted shares of Series E Preferred Stock to the Corporation.
(iii) Date of Conversion . In the case of the exercise of the conversion rights set forth in Section 4(a) or 4(b), the record date for such conversion shall be the Conversion Date or the Mandatory Conversion Date, respectively, and the record Holder as of such date shall be entitled to receive the corresponding Conversion Shares.
(iv) Adjustments . Upon the conversion of any shares of Series E Preferred Stock, no adjustment or payment shall be made with respect to the corresponding Conversion Shares on account of any cash dividend paid to the holders of Common Stock after the Original Issuance Date.
(v) Fractional Shares . The Corporation shall not be required, in connection with any conversion of Series E Preferred Stock, to issue any fractional shares of Series E Preferred Stock or any fractional Conversion Shares and may, in each case, at the Corporation’s discretion, pay the Holder such amount in cash or deliver an additional whole share in lieu thereof.
(e) Limitations of Conversion . Notwithstanding anything to the contrary contained herein, the number of Conversion Shares that may be acquired by the Holder upon conversion of the Series E Preferred Stock (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Securities and Exchange Act of 1934, as amended (the “ Exchange Act ”), does not exceed 4.99% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. The Holder, upon not less than 61 days’ prior notice to the Corporation, may increase or decrease the beneficial ownership limitations provision of this Section, provided that the beneficial ownership limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of the Series E Preferred Stock held by the Holder and the provisions of this Section shall continue to apply. Any such increase or decrease will not be effective until the 61’ day after such notice is delivered to the Corporation. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section to correct this paragraph (or any portion hereof) which 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. The limitations contained in this paragraph shall apply to a successor Holder.
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(f) Stock Dividends and Splits . If the Corporation, at any time after the first date of issue of the Series E Preferred Stock (the “ Original Issuance Date ”) and while at least one share of Series E Preferred Stock is outstanding: (i) pays a dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of or payment of dividends on Series E Preferred Stock or any debt securities of the Corporation), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of Common Stock any shares of capital stock of the Corporation, then in each case the Conversion Price shall be multiplied by a fraction of which (x) the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and (y) the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this section shall become effective immediately after the effective date of the applicable event described in subsections (i) through (iv) above.
(g) Subsequent Equity Sales . If the Corporation or any Subsidiary, as applicable, at any time while the Series E Preferred Stock is outstanding, but prior to the close of business on February 10, 2020, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or any securities of the Corporation or any of its subsidiaries which would entitle the holder thereof to acquire at any time Common Stock (“ Common Stock Equivalents ”) entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “ Base Conversion Price ” and such issuances, collectively, a “ Dilutive Issuance “) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 4(g) in respect of an Exempt Issuance. The Corporation shall notify the Holders in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 4(g), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “ Dilutive Issuance Notice ”). For purposes of clarification, whether or not the Corporation provides a Dilutive Issuance Notice pursuant to this Section 4(g), upon the occurrence of any Dilutive Issuance, the Holders are entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether a Holder accurately refers to the Base Conversion Price in the Notice of Conversion.
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“ Exempt Issuance ” means the issuance of: (a) shares of Common Stock or options to employees, officers or directors of the Corporation pursuant to any stock or option plan duly adopted for such purpose by a majority of the non-employee members of the Board or a majority of the members of a committee of non-employee directors established for such purpose, including, without limitation, the Corporation’s 2014 Long-Term Incentive Plan; (b) securities upon the exercise or exchange of or conversion of any securities issued pursuant to the Subscription Agreement and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of the Subscription Agreement, provided that such securities have not been amended since the date of the Subscription Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of any such securities or to extend the term of such securities; or (c) securities pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Corporation, provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Corporation and shall provide to the Corporation significant additional benefits in addition to the investment of funds, but shall not include a transaction in which the Corporation is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.
(h) Subsequent Rights Offerings . In addition to any adjustments pursuant to Section 4(f) above, if at any time the Corporation grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “ Purchase Rights ”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of such Holder’s Series E Preferred Stock (without regard to any limitations on exercise hereof) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, 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 grant, issue or sale of such Purchase Rights.
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(i) Fundamental Transaction . If, at any time while this Series E Preferred Stock is outstanding, (i) the Corporation, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the Corporation, 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 Corporation 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 Corporation, 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 Corporation, 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 whereby such other Person 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 this Series E 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 (without regard to any limitation in Section 4 herein), the number of shares of Common Stock of the successor or acquiring company or of the Corporation, if it is the surviving company, 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 for which this Series E Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4 herein). 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 Corporation 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 Series E Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holders new preferred stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate Consideration. The Corporation shall cause any successor entity in a Fundamental Transaction in which the Corporation is not the survivor (the “ Successor Entity “) to assume in writing all of the obligations of the Corporation under this Certificate of Designation in accordance with the provisions of this Section 4(i) 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 of this Series E Preferred Stock, deliver to the Holder in exchange for this Series E Preferred Stock a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Series E Preferred Stock which is convertible for 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 this Series E Preferred Stock (without regard to any limitations on the conversion of this Series E 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 this Series E 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 Certificate of Designation referring to the “Corporation” shall refer instead to the Successor Entity), and may exercise every right and power of the Corporation and shall assume all of the obligations of the Corporation under this Certificate of Designation with the same effect as if such Successor Entity had been named as the Corporation herein.
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(j) Calculations . All calculations under this Section 4 shall be made to the nearest cent or the nearest 1/100 th of a share, as the case may be.
(k) Reservation of Shares . The Corporation covenants and agrees that any Conversion Shares issued upon the conversion of the Series E Preferred Stock will, upon issuance, be validly issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Corporation further covenants and agrees that the Corporation will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for issuance of the Conversion Shares upon the conversion of the Series E Preferred Stock.
(l) Payment of Taxes . The Corporation and its paying agent shall be entitled to withhold taxes on all payments on the Series E Preferred Stock and Conversion Shares to the extent required by law. Prior to the date of any such payment, each Holder shall deliver to the Corporation or its paying agent a duly executed, valid, accurate and properly completed Internal Revenue Service Form W-9 or an appropriate Internal Revenue Service Form W-8, as applicable. The Corporation shall pay any and all documentary, stamp and similar issue or transfer tax due on (A) the issue of the Series E Preferred Stock and (B) the issue of Conversion Shares; provided, however, in the case of any conversion of Series E Preferred Stock, the Corporation shall not be required to pay any tax or duty that may be payable in respect of any transfer involved in the issue and delivery of Conversion Shares in a name other than that of the Holder of the shares to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax or duty, or has established to the satisfaction of the Corporation that such tax or duty has been paid.
(m) Buy-In . If, following receipt by the Corporation of a duly executed and properly completed conversion notice from a Holder, the Corporation fails, prior to the applicable Delivery Date, to, at its option, (i) deliver to such Holder the applicable certificate or certificates or (ii) cause its transfer agent to credit the account of such Holder or such Holder’s broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission system, and if after such Delivery Date such Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm is required to purchase, shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to receive upon the conversion relating to such Delivery Date (a “ Buy-In ”), then the Corporation shall (A) pay in cash to such Holder the amount by which (x) such Holder’s total purchase price (including any brokerage commissions) for the shares of Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue (or, if less, the number of shares actually delivered in satisfaction of such sale) multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of such Holder, either reissue (if surrendered) the shares of Series E Preferred Stock equal to the number of shares of Series E Preferred Stock submitted for conversion or deliver to such Holder the number of shares of Common Stock that would have been issued if the Corporation had timely complied with its delivery requirements. For example, if a Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Series E Preferred Stock with respect to which the actual sale price (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Corporation shall be required to pay such Holder $1,000. The Holder shall provide the Corporation written notice indicating the amounts payable to such Holder in respect of the Buy-In and, upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver certificates representing shares of Common Stock upon conversion of the shares of Series E Preferred Stock as required pursuant to the terms hereof.
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5. Voting Rights .
(a) Except as otherwise provided herein or as required by law, Holders shall be entitled to vote with the holders of shares of Common Stock (and any other class or series that may similarly be entitled to vote with the holders of Common Stock) and not as a separate class, at any annual or special meeting of stockholders of the Corporation, and may act by written consent in the same manner as the holders of Common Stock. In the event of any such vote or action by written consent, each Holder shall be entitled to that number of votes equal to the whole number of shares of Conversion Shares into which the aggregate number of shares of Series E Preferred Stock held of record by such Holder would be convertible pursuant to Section 4(a) hereof as of the close of business on the record date fixed for such vote or such written consent; provided, that solely for purposes of this Section 5(a), as of any date of determination, the Conversion Price shall be deemed to be the greater of (i) the Conversion Price and (ii) the closing price of the Common Stock as reported by OTC Markets on the date of the applicable Closing (as defined in the Subscription Agreements) with respect to such shares of Series E Preferred Stock. The Holders shall be entitled to notice of any meeting of stockholders in accordance with the bylaws of the Corporation (the “ Bylaws ”).
(b) In addition to any other vote or consent required herein or by applicable law, for as long as any of the shares of Series E Preferred Stock originally issued as of immediately after the Final Closing (as defined in the Subscription agreements) are outstanding, a Majority Vote shall be necessary for effecting or validating the following actions:
(i) amend the Corporation’s certificate of incorporation, bylaws or other charter documents or file any charter documents with the Secretary of State of the Corporation’s state of incorporation so as to adversely affect any powers, preferences or rights of the Holders;
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(ii) authorize, increase or designate any preferred stock that is senior to, or on a parity with, the Series E Preferred Stok as to rights in liquidation, dissolution, dividend, voting, distribution or redemption;
(iii) increase or decrease (other than by conversion) the authorized number of the Series E Preferred Stock;
(iv) amend this Certificate of Designation;
(v) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock, Common Stock Equivalents or Junior Securities; or
(vi) enter into any agreement or understanding with respect to any of the foregoing.
(c) For the avoidance of doubt, in addition to any other vote or consent required or permitted hereby, the Holders may waive any rights under this Certificate of Designation pursuant to a Majority Vote.
6. Miscellaneous .
(a) Notices . All notices or communications in respect of the Series E Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, sent in portable document format (“ pdf ’) via electronic mail, or if given in such other manner as may be permitted in this Certificate of Designation, the Certificate of Incorporation, the Corporation’s Bylaws, as amended, or by applicable law or regulation. Notwithstanding the foregoing, if the Series E Preferred Stock is issued in book-entry form through The Depository Trust Corporation or any similar facility, such notices may be given to the Holders in any manner permitted by such facility.
(b) Lost or Mutilated Preferred Stock Certificate . If any certificate or instrument evidencing any shares of Series E Preferred Stock is mutilated, lost, stolen or destroyed, the Corporation shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Corporation of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement securities. If a replacement certificate or instrument evidencing any securities is requested due to a mutilation thereof, the Corporation may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.
(c) Severability . If any term of the Series E Preferred Stock (or part thereof) set forth herein is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other terms (or parts thereof) set forth herein which can be given effect without the invalid, unlawful or unenforceable term will, nevertheless, remain in full force and effect, and no term herein (or parts thereof) set forth will be deemed dependent upon any other such term unless so expressed herein.
(d) Headings . The headings of the paragraphs of this Certificate of Designation are for convenience of reference only and shall not define, limit or affect any of the provisions hereof.
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IN WITNESS WHEREOF, Marina Biotech, Inc. has caused this Certificate of Designation to be duly executed by the undersigned authorized officer on the 16 th day of April, 2018.
| MARINA BIOTECH, INC. | ||
| By: | /s/ Joseph W. Ramelli | |
| Name: | Joseph W. Ramelli | |
| Title: | Chief Executive Officer | |
| Marina Biotech, Inc. | ||
| 17870 Castleton Street, Suite 250 | ||
| City of Industry, California 91748 | ||
ANNEX A
NOTICE OF CONVERSION
(To Be Executed By the Registered Holder in Order to Convert Shares of Series E Convertible Preferred Stock of Marina Biotech, Inc. into Shares of Common Stock of Marina Biotech, Inc.)
The undersigned hereby irrevocably elects to convert $____________ of the Stated Value of the above Series E Convertible Preferred Stock into shares of Common Stock of Marina Biotech, Inc. pursuant to the terms and conditions of the Certificate of Designation with respect thereto, as of the date written below.
| Date of Conversion: | |
| Applicable Conversion Price per Share: | |
| Number of Common Shares Issuable Upon This Conversion: |
Select one:
A Series E Convertible Preferred Stock certificate is being delivered to Marina Biotech, Inc. herewith. The unconverted portion of such certificate should be reissued and delivered to the undersigned.
A Series E Convertible Preferred Stock certificate is not being delivered to Marina Biotech, Inc. herewith.
| Signature: | ||
| Print Name: | ||
| Address: |
This Notice of Conversion Should Be Delivered to:
Marina Biotech, Inc.
17870 Castleton Street, Suite 250
City of Industry, CA 91748
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
MARINA BIOTECH, INC.
| Warrant Shares: __________ | Initial Exercise Date: _______, 2018 |
THIS COMMON STOCK PURCHASE WARRANT (the “ Warrant ”) certifies that, for value received, __________________________________________________ (the “ Holder ”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “ Initial Exercise Date ”) and on or prior to the close of business on the five (5) year anniversary of the final closing date of the Offering (the “ Termination Date ”) but not thereafter, to subscribe for and purchase from Marina Biotech, Inc., a Delaware corporation (the “ Company ”), up to _____ shares (the “ Warrant Shares ”) of the Company’s common stock, par value $0.006 per share (“ Common Stock ”).
Section 1 . Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Subscription Agreement (the “Subscription Agreement”) dated [●], 2018, by and between the Company and the Holder.
Section 2. Exercise.
a) Exercise of Warrant . Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time and from time to time on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto; and, within three (3) business days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the Warrant Shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank, or, if available, pursuant to the cashless exercise procedure specified in Section 2(d) below. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) business days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form within four (4) business days of receipt of such notice. In the event of any dispute or discrepancy, the records of the Company shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
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b) Exercise Price . The exercise price per share of the Common Stock under this Warrant shall be equal to $0.55, subject to adjustment as provided herein (the “Exercise Price”).
c) Exercise Limitation . Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be acquired by the Holder upon exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), does not exceed 9.99% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
d) Cashless Exercise . This Warrant may be exercised, in whole or in part, from time to time in accordance with the terms hereof (including this Section 2(d)) by means of a “cashless exercise” (the “ Cashless Exercise ”) in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
| (A) = | the closing price of the Company’s Common Stock on the Trading Market on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise, or, if the Company’s Common Stock is not quoted or reported on a Trading Market, the fair market value of the Company’s Common Stock as determined by the Company’s Board of Directors in good faith; | |
| (B) = | the Exercise Price of this Warrant, as adjusted hereunder; and | |
| (X) = | the number of Warrant Shares that would be issuable upon such exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
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“ Trading Day ” means a day on which the principal Trading Market is open for trading.
“ Trading Market ” means the OTCQB tier of the OTC Markets; provided, that if the Common Stock ceases to be listed thereon, “Trading Market” shall mean (i) any other securities market or exchange on which the Common Stock is principally listed or quoted for trading on the date in question, including the NYSE MKT, the NASDAQ Capital Market, the Nasdaq Global Market or the Nasdaq Global Select Market (or any successors to any of the foregoing) or (ii) if the Common Stock is not then listed or quoted for trading on any such securities market or exchange and if prices for the Common Stock are then reported in the “Pink Sheets,” OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices).
e) Mechanics of Exercise.
(i) Delivery of Certificates Upon Exercise . Certificates for the Warrant Shares purchased or exercised hereunder shall be transmitted by the Company’s transfer agent to the Holder by crediting the account of the Holder’s broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is then a participant in such system and either (A) there is an effective registration statement permitting to the resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within five (5) business days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required), and payment of the aggregate Exercise Price as set forth above (unless such Warrant Shares are exercised pursuant to the Cashless Exercise, if permitted) (such date, the “ Warrant Share Delivery Date ”). This Warrant shall be deemed to have been exercised, the Warrant Shares shall be deemed to have been issued, and the Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price (or by Cashless Exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, have been paid.
(ii) Delivery of New Warrants Upon Exercise . If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant, promptly deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant in all material respects.
(iii) Rescission Rights . If, following receipt by the Company of a duly executed and properly completed Notice of Exercise Form from a Holder, the Company fails to cause the Company’s transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
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(iv) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise . If, following receipt by the Company of a duly executed and properly completed Notice of Exercise Form from a Holder, the Company fails, prior to the applicable Warrant Share Delivery Date, to, in accordance with the provisions of Section 2(d)(i) above, (i) deliver to such Holder the applicable certificate or certificates or (ii) cause its transfer agent to credit the account of such Holder or such Holder’s broker, and if after such Warrant Share Delivery Date the Holder is required by its broker to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm is required to purchase, shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Warrant Shares which such Holder was entitled to receive upon such exercise (a “ Buy-In ”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the product of (1) the aggregate number of Warrant Shares that the Holder was entitled to receive from the exercise at issue (or, if less, the number of shares actually delivered in satisfaction of such sale) and (2) the actual price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions), and (B) at the option of the Holder, either reissue (if surrendered) the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
(v) No Fractional Shares or Scrip . No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company 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 Exercise Price or round up to the next whole share.
(vi) Charges, Taxes and Expenses . Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by (x) the Assignment Form attached hereto duly executed by the Holder, and such other documentation as the Company may require regarding the assignee, as a condition thereto, and (y) the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto, if any.
(vii) Closing of Books . The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
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Section 3. Certain Adjustments.
a) Stock Dividends and Splits . If the Company, at any time while this Warrant is outstanding: (i) pays a dividend or otherwise makes a distribution or distributions on shares of Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant or upon the conversion of the Company’s Series C Convertible Preferred Stock or Series D Convertible Preferred Stock, or any debt securities), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of Common Stock any shares of capital stock of the Company, then, in each case, (1) the Exercise Price shall be multiplied by a fraction of which (x) the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and (y) the denominator shall be the number of shares of Common Stock outstanding immediately after such event and (2) the number of shares issuable upon exercise of this Warrant shall be proportionally adjusted (rounded up to the nearest whole share), such that the aggregate Exercise Price for all of the Warrant Shares shall remain unchanged (subject to rounding). Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the effective date of the applicable event described in subsection (i) through (iv) above.
b) Subsequent Equity Sales . If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Exercise Price (such lower price, the “ Base Share Price ” and such issuances collectively, a “ Dilutive Issuance ”) (it being understood for purposes of the foregoing that if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price shall be reduced and only reduced to equal the Base Share Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued or deemed issued. Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 3(b) in respect of an Exempt Issuance. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “ Dilutive Issuance Notice ”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive Warrant Shares at the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise.
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“ Common Stock Equivalents ” means any securities of the Company or its 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.
“ Exempt Issuance ” means the issuance of: (a) shares of Common Stock or options to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, including, without limitation, the Company’s 2014 Long-Term Incentive Plan; (b) securities upon the exercise or exchange of or conversion of any securities issued pursuant to the Subscription Agreement and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of the Subscription Agreement, provided that such securities have not been amended since the date of the Subscription Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of any such securities or to extend the term of such securities; or (c) securities pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company significant additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.
c) Fundamental Transaction . If, at any time while this Warrant is outstanding, the Company, directly or indirectly, in one or more related transactions, (i) effects any merger or consolidation of the Company with or into another person, (ii) effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets, (iii) is the subject of any purchase offer, tender offer or exchange offer (whether by the Company or another person) and 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 such offer has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) 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, (v) 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” (as such term is defined in Section 13(d) of the Exchange Act) 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 exercise of this Warrant in accordance with the terms hereof (including payment of the Exercise Price), the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 2(c) on the exercise of this Warrant), the number of shares of capital stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration, whether in cash, securities or otherwise (the “ Alternate Consideration ”), payable with respect to each share of Common Stock in connection with such Fundamental Transaction. For purposes of any such exercise, the Exercise Price shall be appropriately allocated 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, in its sole discretion, apportion the Exercise 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 exercise of this Warrant following such 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 Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(c) and shall, at the option and request of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for the Alternate Consideration, and with an exercise price equal to the Exercise Price. 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 Warrant 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 Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
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d) Calculations . All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
e) Notice to the Holder.
(i) Adjustment to Exercise Price . Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
(ii) Notice to Allow Exercise by Holder . If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock 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 Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, 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 mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice.
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Section 4. Transfer of Warrant.
a) Transferability . Subject to compliance with any applicable federal and state securities laws and the satisfaction and delivery of any reasonable conditions and documentation required by the Company, and to the provisions of Section 1.9 of the Subscription Agreement, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants . This Warrant may be divided or combined with other Warrants upon presentation hereof at the principal office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a) as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Initial Exercise Date and shall be identical with this Warrant in all material respects except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register . The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
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Section 5. Miscellaneous.
a) No Rights as Stockholder Until Exercise . This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(a).
b) Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will, make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays, etc . If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a business day, then, such action may be taken or such right may be exercised on the following business day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to allow for the issuance of the Warrant Shares upon the exercise of this Warrant. The Company further covenants that its officers are authorized to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation or of any requirements of the trading market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent waived or consented to by the Holder, the Company shall not, including, without limitation, by amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of its obligations pursuant to this Warrant, but will at all times act in good faith in the carrying out of all its obligations hereunder. Without limiting the generality of the foregoing, the Company will (A) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (B) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (C) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant, including, without limitation, in connection with any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price.
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e) Jurisdiction . All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with Section 6.6 of the Subscription Agreement.
f) Restrictions . The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses . No course of dealing or any delay or failure to exercise any right hereunder on the part of either party shall operate as a waiver of such right or otherwise prejudice either party’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable and documented attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices . Any notice, request or other document required or permitted to be given or delivered pursuant to this Warrant shall be delivered in accordance with the notice provisions of Section 6.1 of the Subscription Agreement.
i) Limitation of Liability . No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies . The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to seek specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns . Subject to applicable federal and state securities laws, this Warrant and the rights and obligations evidenced hereby are intended to be and shall inure to the benefit of, and be binding upon and enforceable by, the successors of the Company and the successors and permitted assigns of the Holder.
l) Amendment . This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m) Severability . Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings . The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| MARINA BIOTECH, INC. | ||
| By: | ||
| Name: | Vuong Trieu | |
| Title: | Executive Chairman | |
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NOTICE OF EXERCISE
TO: MARINA BIOTECH, INC.
(1) The undersigned hereby elects to purchase Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] by the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 1(d), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 1(d).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
______________________________
The Warrant Shares shall be delivered to the following DWAC Account Number:
______________________________
______________________________
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER]
| Name of Investing Entity: |
| Signature of Authorized Signatory of Investing Entity: |
| Name of Authorized Signatory: |
| Title of Authorized Signatory: |
| Date: |
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ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, [__] all of or [___] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to
______________________________________________________whose address is
____________________________________________________________________
____________________________________________________________________
| Dated: _________ _________ | |||
| the Holder’s Signature: | |||
| the Holder’s Address: | |||
Signature Guaranteed: ___________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
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