NATURALSHRIMP INCORPORATED
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES D CONVERTIBLE PREFERRED STOCK
The
undersigned, Gerald Easterling, does hereby certify
that:
1. He is the Chief Executive Officer, of
NaturalShrimp Incorporated., a Nevada corporation (the
“Corporation”
or the “Company”).
2.
The Corporation is authorized to issue up to 200,000,000 shares of
preferred stock.
3. The following resolutions were duly adopted by
the board of directors of the Corporation (the
“Board of
Directors”):
WHEREAS,
the Articles of Incorporation of the Corporation provides for a
class of its authorized stock known as preferred stock, consisting
of Two Hundred Million (200,000,000) shares, $0.0001 par value per
share, issuable from time to time in one or more
series;
WHEREAS,
the Board of Directors is authorized to fix the dividend rights,
dividend rate, voting rights, conversion rights, rights and terms
of redemption and liquidation preferences of any wholly unissued
series of preferred stock and the number of shares constituting any
series and the designation thereof, of any of them;
and
WHEREAS,
it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to Series D Preferred
Stock, a series of the preferred stock, which shall consist of,
except as otherwise set forth in the Purchase Agreement, up to
Twenty Thousand (20,000) shares of the preferred stock which the
Corporation has the authority to issue, as follows:
NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issuance of Series D Preferred Stock, a series of
preferred stock for cash or exchange of other securities, rights or
property and does hereby fix and determine the rights, preferences,
restrictions and other matters relating to such series of preferred
stock as follows:
TERMS OF PREFERRED STOCK
Section 1. Definitions.
For the purposes hereof, the following terms shall have the
following meanings:
“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act.
“Alternate
Consideration” shall have
the meaning set forth in Section 7(e).
“Bankruptcy
Event” means any of the
following events: (a) the Corporation or any Significant
Subsidiary (as such term is defined in Rule 1-02(w) of Regulation
S-X) thereof commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction relating to the Corporation or any Significant
Subsidiary thereof, (b) there is commenced against the
Corporation or any Significant Subsidiary thereof any such case or
proceeding that is not dismissed within sixty (60) days after
commencement, (c) the Corporation or any Significant
Subsidiary thereof is adjudicated insolvent or bankrupt or any
order of relief or other order approving any such case or
proceeding is entered, (d) the Corporation or any Significant
Subsidiary thereof suffers any appointment of any custodian or the
like for it or any substantial part of its property that is not
discharged or stayed within sixty (60) calendar days after such
appointment, (e) the Corporation or any Significant Subsidiary
thereof makes a general assignment for the benefit of creditors,
(f) the Corporation or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts, or
(g) the Corporation or any Significant Subsidiary thereof, by
any act or failure to act, expressly indicates its consent to,
approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the
foregoing.
“Beneficial Ownership
Limitation” shall have
the meaning set forth in Section 6(d).
“Business
Day” means any day except
any Saturday, any Sunday, any day which is a federal legal holiday
in the United States or any day on which banking institutions in
the State of New York are authorized or required by law or other
governmental action to close.
“Change of Control
Transaction” means the
occurrence after the date hereof of any of (a) an acquisition
after the date hereof by an individual or legal entity or
“group” (as described in Rule 13d-5(b)(1) promulgated
under the Exchange Act) of effective control (whether through legal
or beneficial ownership of capital stock of the Corporation, by
contract or otherwise) of in excess of 49% of the voting securities
of the Corporation (other than by means of conversion or exercise
of Preferred Stock and the Securities issued together with the
Preferred Stock), (b) the Corporation merges into or
consolidates with any other Person, or any Person merges into or
consolidates with the Corporation and, after giving effect to such
transaction, the stockholders of the Corporation immediately prior
to such transaction own less than 33% of the aggregate voting power
of the Corporation or the successor entity of such transaction,
(c) the Corporation sells or transfers all or substantially
all of its assets to another Person and the stockholders of the
Corporation immediately prior to such transaction own less than 33%
of the aggregate voting power of the acquiring entity immediately
after the transaction, (d) a replacement at one time or within
a one year period of more than one-half of the members of the Board
of Directors which is not approved by a majority of those
individuals who are members of the Board of Directors on the
Original Issue Date (or by those individuals who are serving as
members of the Board of Directors on any date whose nomination to
the Board of Directors was approved by a majority of the members of
the Board of Directors who are members on the Original Issue Date),
or (e) the execution by the Corporation of an agreement to
which the Corporation is a party or by which it is bound, providing
for any of the events set forth in clauses (a) through
(d) above.
“Closing”
means the closing of the purchase and sale of the Securities
pursuant to Section 2.1 of the respective Purchase
Agreements.
“Closing
Date” means the
applicable Trading Day on which all of the Transaction Documents
have been executed and delivered by the applicable parties thereto
and all conditions precedent to (i) each Holder’s
obligations to pay the Subscription Amount for a Closing and
(ii) the Corporation’s obligations to deliver the
Securities have been satisfied or waived.
“Commission”
or the “SEC” means the United States Securities and
Exchange Commission.
“Common
Stock” means the
Corporation’s common stock, par value $0.0001 per share, and
stock of any other class of securities into which such securities
may hereafter be reclassified or changed.
“Common Stock
Equivalents” means any
securities of the Corporation or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common
Stock.
“Conversion
Amount” means the sum of
the Stated Value at issue.
“Conversion
Date” shall have the
meaning set forth in Section 5(a).
“Conversion
Price” shall have the
meaning set forth in Section 5(b).
“Conversion
Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of the shares of Preferred Stock in accordance with the terms
hereof.
“Corporation
Redemption” has the
meaning set forth in Section 8.
“Corporation Redemption
Price” has the meaning
set forth in Section 8.
“Corporation Redemption
Payment Date” has the
meaning set forth in Section 8.
“Designation, Amount and Par
Value” The series of preferred stock shall be
designated as Series D Convertible Preferred Stock and the number
of shares so designated shall be up to Twenty Thousand (20,000)
(which shall not be subject to increase without the written consent
of all of the Holders of the Preferred Stock). Each share of
Preferred Stock shall have a par value of $0.0001 per share and a
stated value of $1,200, subject to increase set forth in
Section 3 and/or elsewhere in this Certificate of Designation
below.
“DTC” means the Depository Trust
Company.
“DTC/FAST
Program” means the
DTC’s Fast Automated Securities Transfer
Program.
"Dividend"
shall have the meaning set forth in
Section 2.
“DWAC
Eligible” means that (a)
the Common Stock is eligible at DTC for full services pursuant to
DTC’s Operational Arrangements, including without limitation
transfer through DTC’s DWAC system, (b) the Corporation has
been approved (without revocation) by the DTC’s underwriting
department, (c) the Transfer Agent is approved as an agent in the
DTC/FAST Program, (d) the Conversion Shares are otherwise eligible
for delivery via DWAC, and € the Transfer Agent does not have
a policy prohibiting or limiting delivery of the Conversion Shares
via DWAC.
“Exchange
Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“New York
Courts” shall have the
meaning set forth in Section 12(d).
“Fundamental
Transaction” shall have
the meaning set forth in Section 7(e).
“GAAP”
means United States generally accepted accounting
principles.
“Holders”
means Holders of the Preferred Stock.
“Indemnified Party”
shall have the meaning set forth in
Section 11(f).
“Junior
Securities” means the
Common Stock and all other Common Stock Equivalents of the
Corporation other than those securities which are explicitly senior
or pari passu
to the Preferred Stock in dividend
rights or liquidation preference.
“Late Fees” shall have the meaning set forth in Section
2(d).
“Liquidation”
shall have the meaning set forth in
Section 4.
“Losses”
shall have the meaning set forth in Section
11(f).
“Notice of
Conversion” shall have
the meaning set forth in Section 5.
“Original Issue
Date” means the date of
the first issuance of any shares of the Preferred Stock regardless
of the number of transfers of any particular shares of Preferred
Stock and regardless of the number of certificates which may be
issued to evidence such Preferred Stock.
“Person”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any
kind.
“Preferred
Stock” shall mean
Series D Convertible Preferred Stock.
“Premium
Rate” shall have the
meaning set forth in Section 8(a).
“Purchase
Agreement” means that
certain Securities Purchase Agreement, dated on or about the first
Original Issue Date, among the Corporation and the original
Holders, as amended, modified or supplemented from time to time in
accordance with its terms.
“Registration”
shall have the meaning set forth in Section
11(a).
“Registration
Statement” shall have the
meaning set forth in Section 11(a).
“Securities”
means the Preferred Stock and the Underlying
Shares.
“Securities
Act” means the Securities
Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
“Share Delivery
Date” shall have the
meaning set forth in Section 5(c)(i).
“Stated
Value” shall mean
$1,200, subject to increase set forth in Section 3 and/or
elsewhere in this Certificate of Designation.
“Subscription
Amount” shall mean, as to
each Holder, the aggregate amount to be paid for the Preferred
Stock purchased pursuant to the Purchase Agreement as specified
below such Holder’s name on the signature page of the
Purchase Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately
available funds.
“Subsidiary”
means any subsidiary of the Corporation as set forth on
Schedule
3.1(a) of the Purchase
Agreement and shall, where applicable, also include any direct or
indirect subsidiary of the Corporation formed or acquired after the
date of the Purchase Agreement.
“Successor
Entity” shall have the
meaning set forth in Section 3.
“Trading Day or
Date” means a day on
which the principal Trading Market is open for
business.
“Trading
Market” means any of the
following markets or exchanges on which the Common Stock (or any
other common stock of any other Person that references the Trading
Market for its common stock) is listed or quoted for trading on the
date in question: The NASDAQ Global Market, The NASDAQ Global
Select Market, The NASDAQ Capital Market, the New York Stock
Exchange, NYSE Arca, the NYSE MKT, or the OTCQX Marketplace, the
OTCQB Marketplace, the OTC Pink Marketplace or any other tier
operated by OTC Markets Group Inc. (or any successor to any of the
foregoing).
“Transaction
Documents” means this
Certificate of Designation, the Purchase Agreement, all exhibits
and schedules thereto and hereto and any other documents or
agreements executed in connection with the transactions
contemplated pursuant to the Purchase
Agreement.
“Transfer
Agent” means
Transhare Corporation, the current
transfer agent of the Company, with a mailing address of
2849
Executive Dr, Suite 200, Clearwater FL 33762 and any successor transfer agent of the
Company.
“Triggering
Event” shall have the
meaning set forth in Section 10(a).
“Triggering Redemption
Amount” means, for each
share of Preferred Stock, the sum of (a) 135% of the Stated
Value and (b) all accrued but unpaid dividends thereon and
(c) all liquidated damages, Late Fees and other costs,
expenses or amounts due in respect of the Preferred Stock
including, but not limited to legal fees and expenses of legal
counsel to the Holder in connection with, related to and/or arising
out of a Triggering Event.
“Triggering Redemption
Payment Date” shall have
the meaning set forth in Section 10(b).
“Underlying
Shares” means the shares
of Common Stock issued and issuable upon conversion of the
Preferred Stock.
Section 2. Dividends.
(a) Dividends in Cash or in Kind.
Each share of Preferred Stock shall be entitled to receive, and the
Corporation shall pay, cumulative dividends of 12% per annum,
payable quarterly, beginning on the Original Issuance Date and
ending on the date that such share of Preferred Share has been
converted or redeemed (the “Dividend End Date”).
Dividends may be paid in cash or in shares of Preferred Stock at
the discretion of the Company.
(b) Participating Dividends on
As-Converted Basis. From and after the initial Closing Date,
in addition to the payment of dividends pursuant to Section 2(a),
each Holder shall be entitled to receive, and the Corporation shall
pay, dividends on shares of Preferred Stock equal to (on an
as-if-converted-to-Common-Stock basis) and in the same form as
dividends actually paid on shares of the Common Stock when, as and
if such dividends are paid on shares of the Common Stock. The
Corporation shall pay no dividends on shares of the Common Stock
unless it simultaneously complies with the previous
sentence.
(c) Dividend Calculations. Subject
to Section 3(a), dividends on the Preferred Stock shall be
calculated on the basis of a 360-day year, consisting of twelve
(12) thirty (30) calendar day periods, and shall accrue and
compound daily commencing on the Original Issue Date, and shall be
deemed to accrue from such date whether or not earned or declared
and whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends.
Dividends shall cease to accrue with respect to any Preferred Stock
redeemed or converted, provided that the Corporation actually
delivers the Conversion Shares within the time period required by
Section 6(c)(i) herein.
(d) Late Fees. Any dividends that
are not paid on the Dividend Payment Date shall continue to accrue
and shall entail a late fee (“Late Fees”), which must
be paid in cash, at the rate of 18% per annum or the lesser
rate permitted by applicable law which shall accrue and compound
daily from the Dividend Payment Date through and including the date
of actual payment in full.
(e) Other Securities. So long as
any Preferred Stock shall remain outstanding, neither the
Corporation nor any Subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities or
pari passu securities other than any Preferred Stock purchased to
the terms of this Certificate of Designation. So long as any
Preferred Stock shall remain outstanding, neither the Corporation
nor any Subsidiary thereof shall directly or indirectly pay or
declare any dividend or make any distribution upon (other than a
dividend or distribution described in Section 2 or dividends
due and paid in the ordinary course on preferred stock of the
Corporation at such times when the Corporation is in compliance
with its payment and other obligations hereunder), nor shall any
distribution be made in respect of, any Junior Securities or
pari passu securities as long as any
dividends due on the Preferred Stock remain unpaid, nor shall any
monies be set aside for or applied to the purchase or redemption
(through a sinking fund or otherwise) of any Junior Securities or
pari passu
securities.
Section 3. Voting
Rights. The Preferred Stock
will vote together with the common stock on an as-converted basis
subject to the Beneficial Ownership Limitations. However, as long
as any shares of Preferred Stock are outstanding, the Corporation
shall not, without the affirmative vote of the Holders of a
majority of the then outstanding shares of the Preferred Stock
directly and/or indirectly (a) alter or change adversely the
powers, preferences or rights given to the Preferred Stock or alter
or amend this Certificate of Designation, (b) authorize or
create any class of stock ranking as to redemption or distribution
of assets upon a Liquidation (as defined in Section 5) senior
to, or otherwise pari passu
with, the Preferred Stock or,
authorize or create any class of stock ranking as to dividends
senior to, or otherwise pari passu
with, the Preferred Stock, or
(c) enter into any agreement with respect to any of the
foregoing.
Section 4. Liquidation.
Upon any liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary (a “Liquidation”),
the Holders shall be entitled to receive out of the assets, whether
capital or surplus, of the Corporation an amount equal to the
Stated Value, plus any accrued and unpaid dividends thereon and any
other fees or liquidated damages then due and owing thereon under
this Certificate of Designation, for each share of Preferred Stock
before any distribution or payment shall be made to the holders of
any Junior Securities, and if the assets of the Corporation shall
be insufficient to pay in full such amounts, then the entire assets
to be distributed to the Holders shall be ratably distributed among
the Holders in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in
full. A Fundamental Transaction or Change of Control Transaction
shall not be deemed a Liquidation. The Corporation shall mail
written notice of any such Liquidation, not less than forty-five
(45) days prior to the payment date stated therein, to each
Holder.
Section 5. Conversion.
a) Conversions at Option of
Holder. Each share of Preferred Stock shall be convertible,
at any time and from time to time after one hundred eighty (180)
days following Original Issue Date at the option of the Holder
thereof, into that number of shares of Common Stock (subject to the
limitations set forth in Section 5(d)) determined by dividing
the Stated Value of such share of Preferred Stock by the Conversion
Price. Holders shall effect conversions by providing the
Corporation with the form of conversion notice attached hereto as
Annex A (a
“Notice of
Conversion”). Each Notice of Conversion shall specify
the number of shares of Preferred Stock to be converted, the number
of shares of Preferred Stock owned prior to the conversion at
issue, the number of shares of Preferred Stock owned subsequent to
the conversion at issue and the date on which such conversion is to
be effected, which date may not be prior to the date the applicable
Holder delivers by facsimile or email such Notice of Conversion to
the Corporation (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion to
the Corporation is deemed delivered hereunder. No ink-original
Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any
Notice of Conversion form be required. The calculations and entries
set forth in the Notice of Conversion shall control in the absence
of manifest or mathematical error. To effect conversions of shares
of Preferred Stock, a Holder shall not be required to surrender the
certificate(s) representing the shares of Preferred Stock to the
Corporation unless all of the shares of Preferred Stock represented
thereby are so converted, in which case such Holder shall deliver
the certificate representing such shares of Preferred Stock
promptly following the Conversion Date at issue. Shares of
Preferred Stock converted into Common Stock or redeemed in
accordance with the terms hereof shall be canceled and shall not be
reissued.
b) Conversion
Price. The conversion price
(the “Conversion
Price”) for the Preferred
Stock shall be the amount equal to $0.10 per share. All such
foregoing determinations will be appropriately adjusted for any
stock dividend, stock split, stock combination, reclassification or
similar transaction that proportionately decreases or increases the
Common Stock during such measuring period. Nothing herein shall
limit a Holder’s right to pursue actual damages including,
but not limited to, as a result of a Triggering Event pursuant to
Section 10 hereof and the Holder shall have the right to pursue all
remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to any
other Section hereof or under applicable law.
c) Mechanics of
Conversion
i. Delivery of Conversion
Shares Upon Conversion. Not
later than three (3) Trading Days after each Conversion Date
(the “Share Delivery
Date”), the Corporation
shall deliver, or cause to be delivered, to the converting Holder
(A) the number of Conversion Shares being acquired upon the
conversion of the Preferred Stock, which Conversion Shares shall be
free of restrictive legends and trading restrictions, and
(B) a bank check in the amount of accrued and unpaid dividends
(if the Corporation has elected or is required to pay accrued
dividends in cash). The Corporation shall deliver the Conversion
Shares electronically through the Depository Trust Company or
another established clearing corporation performing similar
functions.
ii. Failure to Deliver
Conversion Shares. If, in the
case of any Notice of Conversion, such Conversion Shares are not
delivered to or as directed by the applicable Holder by the Share
Delivery Date, the Holder shall be entitled to elect by written
notice to the Corporation at any time on or before its receipt of
such Conversion Shares, to rescind such Conversion, in which event
the Corporation shall promptly return to the Holder any original
Preferred Stock certificate delivered to the Corporation and the
Holder shall promptly return to the Corporation the Conversion
Shares issued to such Holder pursuant to the rescinded Notice of
Conversion.
iii. Obligation Absolute;
Partial Liquidated Damages. The
Corporation’s obligation to issue and deliver the Conversion
Shares upon conversion of Preferred Stock in accordance with the
terms hereof are absolute and unconditional, irrespective of any
action or inaction by a Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or
any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by such Holder or any other Person of
any obligation to the Corporation or any violation or alleged
violation of law by such Holder or any other person, and
irrespective of any other circumstance which might otherwise limit
such obligation of the Corporation to such Holder in connection
with the issuance of such Conversion Shares; provided,
however
, that such delivery shall not operate
as a waiver by the Corporation of any such action that the
Corporation may have against such Holder. In the event a Holder
shall elect to convert any or all of the Stated Value of its
Preferred Stock, the Corporation may not refuse conversion based on
any claim that such Holder or any one associated or affiliated with
such Holder has been engaged in any violation of law, agreement or
for any other reason, unless an injunction from a court, on notice
to Holder, restraining and/or enjoining conversion of all or part
of the Preferred Stock of such Holder shall have been sought and
obtained, and the Corporation posts a surety bond for the benefit
of such Holder in the amount of 150% of the Stated Value of
Preferred Stock which is subject to the injunction, which bond
shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds
of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of such injunction, the Corporation shall
issue Conversion Shares and, if applicable, cash, upon a properly
noticed conversion. If the Corporation fails to deliver to a Holder
such Conversion Shares pursuant to Section 5 on the second Trading
Day after the Share Delivery Date applicable to such conversion,
the Corporation shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, for each $5,000 of Stated Value of
Preferred Stock being converted, $100 per Trading Day (increasing
to $150 per Trading Day on the third Trading Day and increasing to
$200 per Trading Day on the sixth Trading Day after such damages
begin to accrue) for each Trading Day after such second Trading Day
after the Share Delivery Date until such Conversion Shares are
delivered or Holder rescinds such conversion. All liquidated
damages shall be paid to the Holder not later than the fifth
(5th)
Trading Day after notice is provided to the Company by the Holder
stating that any such liquidated damages are due pursuant to this
Section 5. Nothing herein shall limit a Holder’s right to
pursue actual damages or declare a Triggering Event pursuant to
Section 10 hereof for the Corporation’s failure to
deliver Conversion Shares within the period specified herein and
such Holder shall have the right to pursue all remedies available
to it hereunder, at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit a Holder from
seeking to enforce damages pursuant to any other Section hereof or
under applicable law.
iv. [reserved]
v. Reservation of Shares
Issuable Upon Conversion. The Company covenants that, at all times
during which the Preferred Stock is outstanding, it will reserve
and keep available out of its authorized and unissued shares of
Common Stock a number of shares of Common Stock at least equal to
300% of the Required Minimum for the sole purpose of issuance upon
conversion of the Preferred Stock and payment of dividends on the
Preferred Stock, all as herein provided, free from preemptive
rights or any other actual contingent purchase rights of Persons
other than the Purchasers, not less than such aggregate number of
shares of the Common Stock as shall (subject to the terms and
conditions set forth in the Purchase Agreement) be issuable (taking
into account the adjustments and restrictions of Section 7, but
ignoring any Beneficial Ownership Limitations or other restrictions
and/or limitations on conversions set forth herein or elsewhere)
upon the conversion of the then outstanding shares of the Preferred
Stock and payment of dividends hereunder. The Company covenants
that all shares of Common Stock that shall be so issuable shall,
upon issue, be duly authorized, validly issued, fully paid and
nonassessable, and, at such times as a registration statement
covering such shares is then effective under the Securities Act,
will be registered for public resale in accordance with such
registration statement. For purposes of this Certification of
Designation, the term “Required Minimum” shall be defined
as the
product of (i) 300%, multiplied by (ii) the quotient of
(A)(x) all
outstanding Stated Value of all issued and outstanding shares of
the Preferred Stock, (y) all unpaid dividends thereon (whether
accrued or not), and (z) all fees and/or any costs and expenses
relating to the Transaction Documents including, but not
limited to Late Fees and liquidation damages, divided by (B)
the Conversion Price on the date of Closing.
vi. Fractional
Shares. No fractional shares or
scrip representing fractional shares shall be issued upon the
conversion of the Preferred Stock. As to any fraction of a share
which the Holder would otherwise be entitled to purchase upon such
conversion, the Corporation shall at its election, either pay a
cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Conversion Price or round
up to the next whole share.
vii. Transfer Taxes and
Expenses. The issuance of
Conversion Shares on conversion of this Preferred Stock shall be
made without charge to any Holder for any documentary stamp or
similar taxes that may be payable in respect of the issue or
delivery of such Conversion Shares, provided that the Corporation
shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such
Conversion Shares upon conversion in a name other than that of the
Holders of such shares of Preferred Stock and the Corporation shall
not be required to issue or deliver such Conversion Shares unless
or until the Person or Persons requesting the issuance thereof
shall have paid to the Corporation the amount of such tax or shall
have established to the satisfaction of the Corporation that such
tax has been paid. In the event that the Holder requests same-day
processing for a Notice of Conversion, such Holder shall pay all
Transfer Agent fees required for such same-day processing and all
fees to the Depository Trust Company (or another established
clearing corporation performing similar functions) required for
same-day electronic delivery of the Conversion
Shares.
d) Beneficial Ownership
Limitation. The Corporation
shall not effect any conversion of the Preferred Stock, and a
Holder shall not have the right to convert any portion of the
Preferred Stock, to the extent that, after giving effect to the
conversion set forth on the applicable Notice of Conversion, such
Holder (together with such Holder’s Affiliates, and any
Persons acting as a group together with such Holder or any of such
Holder’s Affiliates) would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by such Holder and its Affiliates shall
include the number of shares of Common Stock issuable upon
conversion of the Preferred Stock with respect to which such
determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (i) conversion of the
remaining, unconverted Stated Value of Preferred Stock beneficially
owned by such Holder or any of its Affiliates and
(ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Corporation subject to a
limitation on conversion or exercise analogous to the limitation
contained herein (including, without limitation, the Preferred
Stock or the Warrants) beneficially owned by such Holder or any of
its Affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 6(d), beneficial ownership shall
be calculated in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. To the
extent that the limitation contained in this Section 6(d)
applies, the determination of whether the Preferred Stock is
convertible (in relation to other securities owned by such Holder
together with any Affiliates) and of how many shares of Preferred
Stock are convertible shall be in the sole discretion of such
Holder, and the submission of a Notice of Conversion shall be
deemed to be such Holder’s determination of whether the
shares of Preferred Stock may be converted (in relation to other
securities owned by such Holder together with any Affiliates) and
how many shares of the Preferred Stock are convertible, in each
case subject to the Beneficial Ownership Limitation. To ensure
compliance with this restriction, the Holder will be deemed to
represent to the Corporation each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the
restrictions set forth in this paragraph and the Corporation shall
have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status
as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this
Section 6(d), in determining the number of outstanding shares
of Common Stock, the Holder may rely on the number of outstanding
shares of Common Stock as stated in the most recent of the
following: (i) the Corporation’s most recent periodic or
annual report filed with the Commission, as the case may be,
(ii) a more recent public announcement by the Corporation or
(iii) a more recent written notice by the Corporation or the
Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the
Corporation shall within two (2) Trading Days confirm orally and in
writing to such Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Corporation, including
the Preferred Stock, by such Holder or its Affiliates since the
date as of which such number of outstanding shares of Common Stock
was reported. The “Beneficial Ownership
Limitation” shall
be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon conversion of Preferred Stock
held by the applicable Holder.
Section
6. Intentionally
Omitted.
Section 7.
Certain
Adjustments.
a) Stock Dividends and
Stock Splits. If the
Corporation, at any time while this Preferred Stock is outstanding:
(i) pays a stock dividend or otherwise makes a distribution or
distributions that is payable in shares of Common Stock on shares
of Common Stock or any other Common Stock Equivalents (which, for
avoidance of doubt, shall not include any shares of Common Stock
issued by the Corporation upon conversion of, or payment of a
dividend on, the Preferred Stock), (ii) subdivides outstanding
shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues, in the event of a reclassification of shares
of the Common Stock, any shares of capital stock of the
Corporation, then the Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of
Common Stock (excluding any treasury shares of the Corporation)
outstanding immediately before such event, and of which the
denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made
pursuant to this Section 7(a) shall become effective
immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and
shall become effective immediately after the effective date in the
case of a subdivision, combination or
re-classification.
b) Most Favored Nation
Provision. From the date hereof until the date when
the Holder no longer holds any shares of Series D Preferred Stock,
upon any issuance by the Company of
Series D Preferred Stock for cash consideration, (a
“Subsequent
Financing”), the
Holder may elect, in its sole discretion, to exchange (in lieu of
conversion), if applicable, all or some of the shares of Series D
Preferred Stock then held for any securities or units issued in a
Subsequent Financing on a $1.00 for $1.00 basis. The Company
shall provide the Holder with notice of any such Subsequent
Financing in the manner set forth below Additionally, if in
such Subsequent Financing there are any contractual provisions or
side letters that provide terms more favorable to the investors
than the terms provided for hereunder, then the Company shall
specifically notify the Holder of such additional or more favorable
terms and such terms, at Holder’s option, shall become a part
of the transaction documents with the Holder. The types of
terms contained in another security that may be more favorable to
the holder of such security include, but are not limited to, terms
addressing stock sale price, private placement price per share, and
warrant coverage. For purposes of illustration, if a Subsequent
Financing were to occur whereby the Company sells and issues a
convertible note with a conversion price that includes a discount
to the market price of its Common Stock, the Holder will be
entitled to receive the same convertible note on the exact same
terms on a dollar for dollar basis via the exchange of the Series D
Preferred Stock the Holder holds on the date of the sale and
issuance of the convertible note. For the avoidance of doubt, this
provision is intended to ensure that one Series D Preferred Stock
holder does not receive in the future, by way of amendment or
otherwise, terms which are more favorable than terms or any other
Series D Preferred holder.
c) [reserved]
d) Pro Rata
Distributions. During such time
as this Preferred Stock is outstanding, if the Corporation shall
declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of shares of Common
Stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a “Distribution”),
at any time after the issuance of this Preferred Stock, then, in
each such case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have
participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Preferred
Stock (without regard to any limitations on exercise hereof,
including without limitation, the Beneficial Ownership Limitation)
immediately before the date of which a record is taken for such
Distribution, or, if no such record is taken, the date as of which
the record holders of shares of Common Stock are to be determined
for the participation in such Distribution (provided,
however,
to the extent that the Holder’s right to participate in any
such Distribution would result in the Holder exceeding the
Beneficial Ownership Limitation, then the Holder shall not be
entitled to participate in such Distribution to such extent (or in
the beneficial ownership of any shares of Common Stock as a result
of such Distribution to such extent) and the portion of such
Distribution shall be held in abeyance for the benefit of the
Holder until such time, if ever, as its right thereto would not
result in the Holder exceeding the Beneficial Ownership
Limitation).
e) Fundamental
Transaction.
1) General.
The Company shall not enter into or be party to a Fundamental
Transaction unless (i) the Successor Entity (as defined below)
assumes in writing all of the obligations of the Company under this
Certificate of Designation in accordance with the provisions of
this Section 7.e) pursuant to written agreements in form and
substance satisfactory to the Holder and approved by the Holder
prior to such Fundamental Transaction, including agreements to
deliver to the Holder in exchange for shares of Preferred Stock a
security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to the Preferred Stock,
including, without limitation, which is convertible into a
corresponding number of shares of capital stock equivalent to the
shares of Common Stock acquirable and receivable upon conversion of
the Preferred Stock (without regard to any limitations on the
conversion of the Preferred Stock) prior to such Fundamental
Transaction, and with a conversion price which applies the
conversion price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common
Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock, such adjustments to the number of
shares of capital stock and such conversion price being for the
purpose of protecting the economic value of the Preferred Stock
immediately prior to the consummation of such Fundamental
Transaction) and (ii) if the Fundamental Transaction occurs within
six (6) months of the Closing Date, the Successor Entity (including
its Parent Entity) is a publicly traded corporation whose common
stock is quoted on or listed for trading on an Eligible Market.
Upon the consummation of each Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that
from and after the date of the applicable Fundamental Transaction,
the provisions of this Certificate of Designation referring to the
“Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall
assume all of the obligations of the Company under this Certificate
of Designation with the same effect as if such Successor Entity had
been named as the Company herein. Upon consummation of each
Fundamental Transaction, the Successor Entity shall deliver to the
Holder confirmation that there shall be issued upon conversion of
the Preferred Stock at any time after the consummation of the
applicable Fundamental Transaction, in lieu of the shares of Common
Stock (or other securities, cash, assets or other property)
issuable upon the conversion of the Preferred Stock prior to the
applicable Fundamental Transaction, such shares of publicly traded
common stock (or its equivalent) of the Successor Entity (including
its Parent Entity) which the Holder would have been entitled to
receive upon the happening of the applicable Fundamental
Transaction had the Preferred Stock been converted immediately
prior to the applicable Fundamental Transaction (without regard to
any limitations on the conversion of the Preferred Stock), as
adjusted in accordance with the provisions of this Certificate of
Designation. Notwithstanding the foregoing, and without limiting
Section 5 hereof, the Holder may elect, at its sole option, by
delivery of written notice to the Company to waive this Section
7.e) to permit the Fundamental Transaction without the assumption
of the Preferred Stock. In addition to and not in substitution for
any other rights hereunder, prior to the consummation of each
Fundamental Transaction pursuant to which holders of shares of
Common Stock are entitled to receive securities or other assets
with respect to or in exchange for shares of Common Stock (a
“Corporate
Event”), the Company
shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon a conversion of the
Preferred Stock at any time after the consummation of the
applicable Fundamental Transaction but prior to the Expiration
Date, in lieu of the shares of the Common Stock (or other
securities, cash, assets or other property) issuable upon the
conversion of the Preferred Stock prior to such Fundamental
Transaction, such shares of stock, securities, cash, assets or any
other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to
receive upon the happening of the applicable Fundamental
Transaction had this Note been exercised immediately prior to the
applicable Fundamental Transaction (without regard to any
limitations on the conversion of the Preferred Stock). Provision
made pursuant to the preceding sentence shall be in a form and
substance reasonably satisfactory to the
Holder.
2) Black
Scholes Value. Notwithstanding
the foregoing and the provisions of Section 5 above, at the request
of the Holder delivered at any time commencing on the earliest to
occur of (x) the public disclosure of any Fundamental Transaction,
(y) the consummation of any Fundamental Transaction and (z) the
Holder first becoming aware of any Fundamental Transaction through
the date that is ninety (90) days after the public disclosure of
the consummation of such Fundamental Transaction by the Company
pursuant to a Current Report on Form 8-K filed with the SEC, the
Company or the Successor Entity (as the case may be) shall purchase
the Preferred Stock from the Holder on the date of such request by
paying to the Holder cash in an amount equal to the Black Scholes
Value.
3) Fundamental
Transaction.
If, at any time while any Preferred
Stock is outstanding, (i) the Company, directly or indirectly, in
one or more related transactions effects any merger or
consolidation of the Company with or into another Person, (ii) the
Company, directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related
transactions, (iii) any, direct or indirect, purchase offer, tender
offer or exchange offer (whether by the Company or another Person)
is completed pursuant to which holders of Common Stock are
permitted to sell, tender or exchange their shares for other
securities, cash or property and has been accepted by the holders
of 50% or more of the outstanding Common Stock, (iv) the Company,
directly or indirectly, in one or more related transactions effects
any reclassification, reorganization or recapitalization of the
Common Stock or any compulsory share exchange pursuant to which the
Common Stock is effectively converted into or exchanged for other
securities, cash or property, or (v) the Company, directly or
indirectly, in one or more related transactions consummates a stock
or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person or group of
Persons whereby such other Person or group acquires more than 50%
of the outstanding shares of Common Stock (not including any shares
of Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other
business combination) (each a “Fundamental
Transaction”), then, upon
any subsequent conversion of the Preferred Stock, the Holder shall
have the right to receive, for each Conversion Share that would
have been issuable upon such conversion immediately prior to the
occurrence of such Fundamental Transaction, at the option of the
Holder (without regard to any limitation in Section 6 on the
conversion of the Preferred Stock), the number of shares of Common
Stock of the successor or acquiring corporation or of the Company,
if it is the surviving corporation, and any additional
consideration (the “Alternate
Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock into which each share of
Preferred Stock is convertible immediately prior to such
Fundamental Transaction (without regard to any limitation in
Section 6 on the conversion of the Preferred Stock). For purposes
of any such conversion, the determination of the Conversion Price
shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the
Conversion Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given
any choice as to the securities, cash or property to be received in
a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any
conversion of this Note following such Fundamental Transaction.
Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction, the Company or any Successor Entity shall,
at the Holder’s option, exercisable at any time concurrently
with, or within 30 days after, the consummation of the Fundamental
Transaction, purchase the shares of Preferred Stock from the Holder
by paying to the Holder an amount of cash equal to the Black
Scholes Value of the remaining unconverted shares of Preferred
Stock on the date of the consummation of such Fundamental
Transaction. “Black Scholes
Value” means the value of
the unconverted shares of Preferred Stock remaining on the date of
the Holder’s request pursuant to Section 7(e)(2) which value
is calculated using the Black Scholes Option Pricing Model for a
“call” or “put” option, as elected by the
Holder, as obtained from the “OV” function on Bloomberg
utilizing (i) an underlying price per share equal to the greater of
(1) the highest Closing Sale Price of the Common Stock during the
period beginning on the Trading Day immediately preceding the
announcement of the applicable Fundamental Transaction (or the
consummation of the applicable Fundamental Transaction, if earlier)
and ending on the Trading Day of the Holder’s request
pursuant to Section 7(e)(2) and (2) the sum of the price per share
being offered in cash in the applicable Fundamental Transaction (if
any) plus the value of the non-cash consideration being offered in
the applicable Fundamental Transaction (if any), (ii) a strike
price equal to the Conversion Price in effect on the date of the
Holder’s request pursuant to Section 7(e)(2), (iii) a
risk-free interest rate corresponding to the U.S. Treasury rate as
of the date of the Holder’s request pursuant to Section
7(e)(2) if such request is prior to the date of the consummation of
the applicable Fundamental Transaction, (iv) a zero cost of borrow
and (v) an expected volatility equal to the greater of 100% and the
30 day volatility obtained from the “HVT” function on
Bloomberg (determined utilizing a 365 day annualization factor) as
of the Trading Day immediately following the earliest to occur of
(A) the public disclosure of the applicable Fundamental
Transaction, (B) the consummation of the applicable Fundamental
Transaction and (C) the date on which the Holder first became aware
of the applicable Fundamental Transaction. The Company shall cause
any successor entity in a Fundamental Transaction in which the
Company is not the survivor (the “Successor
Entity”) to assume in
writing all of the obligations of the Company under this
Certificate of Designation and the other Transaction Documents in
accordance with the provisions of this Section 7(e) pursuant to
written agreements in form and substance reasonably satisfactory to
the Holder and approved by the Holder (without unreasonable delay)
prior to such Fundamental Transaction and shall, at the option of
the Holder, deliver to the Holder in exchange for the Preferred
Stock a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to the
Preferred Stock which is convertible into a corresponding number of
shares of capital stock of such Successor Entity (or its parent
entity) equivalent to the shares of Common Stock acquirable and
receivable upon conversion of the Preferred Stock (without regard
to any limitations on the conversion of the Preferred Stock) prior
to such Fundamental Transaction, and with a conversion price which
applies the Conversion Price hereunder to such shares of capital
stock (but taking into account the relative value of the shares of
Common Stock pursuant to such Fundamental Transaction and the value
of such shares of capital stock, such number of shares of capital
stock and such conversion price being for the purpose of protecting
the economic value of the Preferred Stock immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Note and the other Transaction Documents referring to the
“Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall
assume all of the obligations of the Company under this Note and
the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company
herein.
f) Calculations.
All calculations under this Section 7 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 7, the number of shares of Common
Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding any
treasury shares of the Corporation) issued and
outstanding.
g) Notice to the
Holders.
i. Adjustment to
Conversion Price. Whenever the
Conversion Price is adjusted pursuant to any provision of this
Section 7, the Corporation shall promptly deliver to each
Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow
Conversion by Holder. If
(A) the Corporation shall declare a dividend (or any other
distribution in whatever form) on the Common Stock, (B) the
Corporation shall declare a special nonrecurring cash dividend on
or a redemption of the Common Stock, (C) the Corporation shall
authorize the granting to all holders of the Common Stock of rights
or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any
stockholders of the Corporation shall be required in connection
with any reclassification of the Common Stock, any consolidation or
merger to which the Corporation is a party, any sale or transfer of
all or substantially all of the assets of the Corporation, or any
compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property (E) the Corporation
shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation (F) the
Corporation shall take any action to effectuate an Corporation
Redemption, or (G) a Triggering Event shall have occurred, then, in
each case, the Corporation shall cause to be filed at each office
or agency maintained for the purpose of conversion of this
Preferred Stock, and shall cause to be delivered to each Holder at
its last address as it shall appear upon the stock books of the
Corporation, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified (unless a
greater or lesser time period is expressly required elsewhere in
this Certificate of Designation), a notice stating (x) the
date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of the
Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that
holders of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation,
merger, sale, transfer or share exchange, provided that the failure
to deliver such notice or any defect therein or in the delivery
thereof shall not affect the validity of the corporate action
required to be specified in such notice. To the extent that any
notice provided hereunder constitutes, or contains, material,
non-public information regarding the Corporation or any of the
Subsidiaries, the Corporation shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form 8-K.
The Holder shall remain entitled to convert the Conversion Amount
of this Preferred Stock (or any part hereof) during the 20-day
period commencing on the date of such notice through the effective
date of the event triggering such notice except as may otherwise be
expressly set forth in this Certificate of
Designation.
Section 8.
Corporation
Redemption.
(a) The
Corporation shall have the right to redeem (a
“Corporation
Redemption”), all (or
part) of the Preferred Stock issued and outstanding at any time
after the Original Issue Date, upon three (3) business days’
notice, at a redemption price per Preferred Stock then issued and
outstanding (the “Corporation Redemption
Price”), equal to the
product of (i) the Premium Rate multiplied by (ii) the sum of (x)
the Stated Value, (y) all accrued but unpaid dividends, and (z) all
other amount due to the Holder pursuant to this Certificate of
Designation and/or any Transaction Document including, but not
limited to Late Fees, liquidated damages and the legal fees and
expenses of the Holder’s counsel relating to this
Certification of Designation, any other Transaction Document and/or
the transactions contemplated thereunder and/or hereunder.
“Premium Rate” means (a) 1.15 if all of the Preferred
Stock is redeemed within ninety (90) calendar days from the
issuance date thereof; (b) 1.2 if all of the Preferred Stock is
redeemed after ninety (90) calendar days and within one hundred
twenty (120) calendar days from the issuance date thereof; (c) 1.25
if all of the Preferred Stock is redeemed after one hundred twenty
(120) calendar days and within one hundred eighty (180) calendar
days from the issuance date thereof. The Corporation shall be
permitted to redeem the Preferred Stock at any time in cash. Each
share of Preferred Stock shall be redeemed by the Corporation on
the Date that is no later than one (1) calendar year from the date
of its issuance.
(b) [reserved].
(c) The Corporation Redemption Price required to be
paid by the Corporation to each Holder shall be paid in the cash to
each Holder of shares of Preferred Stock no later than five (5)
calendar days from the date of mailing of the notice of redemption
(the “Corporation Redemption
Payment Date”).
(d) Notwithstanding
the delivery of a notice of redemption, following the one hundred
eighty (180) day anniversary of the Original Issue Date, a Holder
may convert some or all of its shares of Preferred Stock until the
date it receives in full Corporation Redemption Price.
(e) Notwithstanding the
foregoing, in the event of a Qualified Offering, the Holders shall
have the right to convert the Preferred Stock issued and outstanding, upon five (5) business
days’ notice following the Qualified Offering, at a
conversion price equal to the product of (i) 0.65 (representing a
35% discount) multiplied by (ii) the sum of (x) the Stated Value,
(y) all accrued but unpaid dividends, and (z) all other amount due
to the Holder pursuant to this Certificate of Designation and/or
any Transaction Document including, but not limited to Late Fees,
liquidated damages and the legal fees and expenses of the
Holder’s counsel relating to this Certification of
Designation, any other Transaction Document and/or the transactions
contemplated thereunder and/or hereunder.
“Qualified
Offering” shall mean an offering of Common Stock (or
units consisting of Common Stock and warrants to purchase Common
Stock) for an aggregate price of at least $5,000,000 resulting in
the listing for trading of the Common Stock on the NYSE American,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market or the New York Stock Exchange (or any
successors to any of the foregoing).
Section 9.
Negative
Covenants. From the date hereof
until the date no shares of Preferred Stock are issued and
outstanding, unless Holders of at least 75% in Stated Value of the
then outstanding shares of Preferred Stock shall have otherwise
given prior written consent, the Corporation shall not, and shall
not permit any of the Subsidiaries to, directly or
indirectly:
(d)
repay, repurchase or offer to repay, repurchase or otherwise
acquire of any shares of its Common Stock, Common Stock Equivalents
or Junior Securities, other than as to the Conversion Shares as
permitted or required under the Transaction Documents,
(f)
enter into any transaction with any Affiliate of the Corporation
which would be required to be disclosed in any public filing with
the Commission, unless such transaction is made on an
arm’s-length basis and expressly approved by a majority of
the disinterested directors of the Corporation (even if less than a
quorum otherwise required for board approval); or
(g)
enter into any agreement with respect to any of the
foregoing.
Section 10.
Redemption
Upon Triggering Events.
(a) “Triggering
Event” means, wherever
used herein any of the following events (whatever the reason for
such event and whether such event shall be voluntary or involuntary
or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any
administrative or governmental body):
i.
the Corporation shall fail to deliver Conversion Shares issuable
upon a conversion hereunder that comply with the provisions hereof
prior to the fifth Trading Day after such shares are required to be
delivered hereunder, or the Corporation shall provide written
notice to any Holder, including by way of public announcement, at
any time, of its intention not to comply with requests for
conversion of any shares of Preferred Stock in accordance with the
terms hereof;
iii.
the Corporation shall fail to have available a sufficient number of
authorized and unreserved shares of Common Stock to issue to such
Holder upon a conversion hereunder;
iv.
unless specifically addressed elsewhere in this Certificate of
Designation as a Triggering Event, the Corporation shall fail to
observe or perform any other covenant, agreement or warranty
contained in, or otherwise commit any breach of the Transaction
Documents, and such failure or breach shall not, if subject to the
possibility of a cure by the Corporation, have been cured within 5
calendar days after the date on which written notice of such
failure or breach shall have been delivered;
v. the Corporation shall redeem Junior Securities
or pari passu
securities;
vi.
the Corporation shall be party to a Change of Control
Transaction;
vii.
there shall have occurred a Bankruptcy Event;
viii.
any monetary judgment, writ or similar final process shall be
entered or filed against the Corporation, any subsidiary or any of
their respective property or other assets for more than $500,000
(provided that amounts covered by the Corporation’s insurance
policies are not counted toward this $500,000 threshold), and such
judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of thirty (30) Trading
Days;
ix.
the electronic transfer by the Corporation of shares of Common
Stock through the Depository Trust Company or another established
clearing corporation once established subsequent to the date of
this Certificate of Designation is no longer available or is
subject to a ‘freeze” and/or
“chill”;
x.
the Corporation shall no longer be DWAC eligible;
xi.
the failure to consummate the closing of the financing with
VeroBlue Farms USA, Inc. within thirty (30) calendar days of the
date hereof;
xii.
the failure to consummate a listing of the Corporation’s
common stock on the NASDAQ Capital Markets, the New York Stock
Exchange, or a similar higher exchange; or
xiii.
any “Event of Default,” as defined in the Purchase
Agreement.
b) Upon the occurrence of a Triggering Event and
following a five (5) opportunity to cure following written notice,
each Holder shall (in addition to all other rights it may have
hereunder or under applicable law) have the right, exercisable at
the sole option of such Holder, to require the Corporation to
redeem all of the Preferred Stock then held by such Holder for a
redemption price, in cash, equal to the Triggering Redemption
Amount, and increase the dividend rate on all of the outstanding
Preferred Stock held by such Holder to 18% per annum
thereafter. The Triggering Redemption Amount, whether payable in
cash or in shares, shall be due and payable or issuable, as the
case may be, within five (5) Trading Days of the date on which the
notice for the payment therefor is provided by a Holder (the
“Triggering Redemption
Payment Date”). If the
Corporation fails to pay in full the Triggering Redemption Amount
hereunder on the date such amount is due in accordance with this
Section (whether in cash or shares of Common Stock), the
Corporation will pay interest thereon at a rate equal to the lesser
of 18% per annum or the maximum rate permitted by applicable
law, accruing and compounding daily from such date until the
Triggering Redemption Amount, plus all such interest thereon, is
paid in full.
Section 11. Registration
Rights.
a) If
the Corporation shall fail to complete an uplist to the Nasdaq
Capital Markets, New York Stock Exchange or similar high exchange
within one hundred twenty (120) calendar days from the issuance of
the Preferred Stock, the Company shall, within ten (10) calendar
days, file a registration statement covering the shares of common
stock underlying the Preferred Shares (“Registration”).
In addition, the Corporation shall include the shares of common
stock underlying the Preferred Shares in any registration statement
which is currently (as of the date of this Certificate of
Designation) being filed by the Corporation’s existing
investment banker, provided, that said registration statement is
not yet effective with the SEC and provided that the Corporation
receives the prior written approval of said investment banker. The
Company shall cause such Preferred Stock to be included in such
registration and shall cause the managing underwriter or
underwriters of a proposed underwritten offering to permit the
Preferred Stock requested to be included in a Registration on the
same terms and conditions as any similar securities of the Company
and to permit the sale or other disposition of such Preferred Stock
in accordance with the intended method(s) of distribution thereof.
All Holders proposing to distribute their Preferred Stock through a
Registration that involves an underwriter or underwriters shall
enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such
Registration
b) Any
Holder may elect to withdraw such Holder’s request for
inclusion of Preferred Stock in any Registration by giving written
notice to the Company of such request to withdraw prior to the
effectiveness of the Registration Statement. The Company (whether
on its own determination or as the result of a withdrawal by
persons making a demand pursuant to written contractual
obligations) may withdraw a Registration Statement at any time
prior to the effectiveness of such Registration Statement.
Notwithstanding any such withdrawal, the Company shall pay all
expenses incurred by the Holders in connection with such
Registration (including but not limited to any legal
fees).
c) The
Company shall notify the Holders at any time when a prospectus
relating to such Holder’s Securities is required to be
delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing. At the request of such Holder, the
Company shall also prepare, file and furnish to such Holder a
reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of the Preferred Stock, such prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing. The Holders shall not offer or sell
any Preferred Stock covered by the Registration Statement after
receipt of such notification until the receipt of such supplement
or amendment.
d) the
Company may request a Holder to furnish the Company such
information with respect to such Holder and such Holder’s
proposed distribution of the Preferred Stock pursuant to the
Registration Statement as the Company may from time to time
reasonably request in writing or as shall be required by law or by
the Commission in connection therewith, and such Holders shall
furnish the Company with such information.
e) All
fees and expenses incident to the performance of or compliance with
this Section 11 by the Company shall be borne by the Company
whether or not any Preferred Stock are sold pursuant to a
Registration Statement. The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees
and expenses of the Company’s counsel and independent
registered public accountants) (A) with respect to filings made
with the Commission, (B) with respect to filings required to be
made with any Trading Market on which the Common Stock are then
listed for trading, (C) in compliance with applicable state
securities or Blue Sky laws reasonably agreed to by the Company in
writing (including, without limitation, fees and disbursements of
counsel for the Company in connection with Blue Sky qualifications
or exemptions) and (D) with respect to any filing that may be
required to be made by any broker through which a Holder intends to
make sales of Preferred Stock with FINRA, (ii) printing expenses,
(iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company, (v) Securities Act
liability insurance, if the Company so desires such insurance, and
(vi) fees and expenses of all other persons or entities retained by
the Company in connection with the consummation of the transactions
contemplated by this Section 11.
f) The
Company and its successors and assigns shall indemnify and hold
harmless each purchaser, each Holder, the officers, directors,
members, partners, agents and employees (and any other individuals
or entities with a functionally equivalent role of a person holding
such titles, notwithstanding a lack of such title or any other
title) of each of them, each individual or entity who controls each
purchaser or any such Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, members, stockholders, partners, agents and
employees (and any other individuals or entities with a
functionally equivalent role of a person holding such titles,
notwithstanding a lack of such title or any other title) of each
such controlling individual or entity (each, an “Indemnified Party”), to
the fullest extent permitted by applicable law, from and against
any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys’ fees) and expenses
(collectively, “Losses”), as incurred,
arising out of or relating to (1) any untrue or alleged untrue
statement of a material fact contained in a Registration Statement,
any related prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus,
or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any such prospectus or
supplement thereto, in light of the circumstances under which they
were made) not misleading or (2) any violation or alleged violation
by the Company of the Securities Act, the Exchange Act or any state
securities law, or any rule or regulation thereunder, in connection
with the performance of its obligations under this Section 11,
except to the extent, but only to the extent, that such untrue
statements or omissions are based upon information regarding a
purchaser or such Holder furnished to the Company by such party for
use therein. The Company shall notify each purchaser and each
Holder promptly of the institution, threat or assertion of any
proceeding arising from or in connection with the transactions
contemplated by this Section 11 of which the Company is aware. If
the indemnification hereunder is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless for any
Losses, then the Company shall contribute to the amount paid or
payable by such Indemnified Party, in such proportion as is
appropriate to reflect the relative fault of the Company and
Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of the
Company and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by,
or relates to information supplied by, the Company or the
Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to
include any reasonable attorneys’ or other fees or expenses
incurred by such party in connection with any proceeding to the
extent such party would have been indemnified for such fees or
expenses if the indemnification provided for herein was available
to such party in accordance with its terms. It is agreed that it
would not be just and equitable if contribution pursuant to this
Section 11(f) were determined by pro rata allocation or by any
other method of allocation that does not take into account the
equitable considerations referred to in the immediately preceding
sentence. Notwithstanding the provisions of this Section 11(f),
neither the purchaser nor any Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by such party from the
sale of all of their Registrable Securities pursuant to such
Registration Statement or related prospectus exceeds the amount of
any damages that such party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission.
Section
12. Miscellaneous.
a) Notices.
Any and all notices or other communications or deliveries to be
provided by the Holders hereunder including, without limitation,
any Notice of Conversion, shall be in writing and delivered
personally or sent by a nationally recognized overnight courier
service and by facsimile or e-mail, addressed to the Corporation,
at an address as the Corporation may specify for such purposes by
prior written notice to the Holders delivered in accordance with
this Section 12. Any and all notices or other communications
or deliveries to be provided by the Corporation hereunder shall be
in writing and delivered personally, by facsimile, or sent by a
nationally recognized overnight courier service addressed to each
Holder at the facsimile number or address of such Holder appearing
on the books of the Corporation, or if no such facsimile number or
address appears on the books of the Corporation, at the principal
place of business of such Holder, as set forth in the Purchase
Agreement. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth in
this Section prior to 5:30 p.m. (New York City time) on any date,
(ii) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the
facsimile number set forth in this Section on a day that is not a
Trading Day or later than 5:30 p.m. (New York City time) on any
Trading Day, (iii) the second Trading Day following the date
of mailing, if sent by U.S. nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.
b) Absolute
Obligation. Except as expressly
provided herein, no provision of this Certificate of Designation
shall alter or impair the obligation of the Corporation, which is
absolute and unconditional, to pay liquidated damages, accrued
dividends and accrued interest, as applicable, on the shares of
Preferred Stock at the time, place, and rate, and in the coin or
currency, herein prescribed.
c) Lost or Mutilated
Preferred Stock Certificate. If
a Holder’s Preferred Stock certificate shall be mutilated,
lost, stolen or destroyed, the Corporation shall execute and
deliver, in exchange and substitution for and upon cancellation of
a mutilated certificate, or in lieu of or in substitution for a
lost, stolen or destroyed certificate, a new certificate for the
shares of Preferred Stock so mutilated, lost, stolen or destroyed,
but only upon receipt of evidence of such loss, theft or
destruction of such certificate, and of the ownership hereof
reasonably satisfactory to the Corporation.
d) Governing
Law. All questions concerning
the construction, validity, enforcement and interpretation of this
Certificate of Designation shall be governed by and construed and
enforced in accordance with the internal laws of the State of
Nevada, without regard to the principles of conflict of laws
thereof. Each party agrees that all legal proceedings concerning
the interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective Affiliates, directors,
officers, stockholders, employees or agents) shall be commenced in
the state and federal courts sitting in the Borough of Manhattan,
New York, New York, (the “New York
Courts”). Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of
the New York Courts for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the
enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Certificate of
Designation and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by applicable law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted
by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Certificate of
Designation or the transactions contemplated hereby. If any party
shall commence an action or proceeding to enforce any provisions of
this Certificate of Designation, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its
attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or
proceeding.
e) Waiver.
Any waiver by the Corporation or a Holder of a breach of any
provision of this Certificate of Designation shall not operate as
or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this
Certificate of Designation or a waiver by any other Holders. The
failure of the Corporation or a Holder to insist upon strict
adherence to any term of this Certificate of Designation on one or
more occasions shall not be considered a waiver or deprive that
party (or any other Holder) of the right thereafter to insist upon
strict adherence to that term or any other term of this Certificate
of Designation on any other occasion. Any waiver by the Corporation
or a Holder must be in writing.
f) Severability.
If any provision of this Certificate of Designation is invalid,
illegal or unenforceable, the balance of this Certificate of
Designation shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it
shall be found that any interest or other amount deemed interest
due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under
applicable law.
g) Next Business
Day. Whenever any payment or
other obligation hereunder shall be due on a day other than a
Business Day, such payment shall be made on the next succeeding
Business Day.
h) Headings.
The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designation and shall not
be deemed to limit or affect any of the provisions
hereof.
i) Status of Converted or
Redeemed Preferred Stock.
Shares of Preferred Stock may only be issued pursuant to a Purchase
Agreement. If any shares of Preferred Stock shall be converted,
redeemed or reacquired by the Corporation, such shares shall resume
the status of authorized but unissued shares of preferred stock and
shall no longer be designated as Series D Convertible Preferred
Stock.
RESOLVED, FURTHER, that the Chairman, the president or any
vice-president, and the secretary or any assistant secretary, of
the Corporation be and they hereby are authorized and directed to
prepare and file this Certificate of Designation of Preferences,
Rights and Limitations in accordance with the foregoing resolution
and the provisions of Nevada law.
IN WITNESS WHEREOF, the undersigned have executed
this Certificate this 16th
day of December,
2020.
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/s/ Gerald Easterling
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Name:
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Gerald Easterling
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Title:
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Chief Executive Officer
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ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES
OF PREFERRED STOCK)
The undersigned hereby elects to convert the number of shares of
Series D Convertible Preferred Stock indicated below into shares of
common stock, par value $0.0001 per share (the “
Common
Stock ”), of
NaturalShrimp Incorporated, a Nevada corporation (the
“ Corporation
”), according to the conditions
hereof, as of the date written below. If shares of Common Stock are
to be issued in the name of a Person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions
as may be required by the Corporation in accordance with the
Purchase Agreement. No fee will be charged to the Holders for any
conversion, except for any such transfer taxes.
Conversion calculations:
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Date to Effect Conversion:
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Number of shares of Preferred Stock owned prior to Conversion:
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Number of shares of Preferred Stock to be Converted:
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Stated Value of shares of Preferred Stock to be Converted:
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Dollar amount of Interest to be Converted:
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Other amounts owed to the Undersigned by the Corporation under the
Certificate of Designation and/or any other Transaction Document to
be Converted:
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Number of shares of Common Stock to be Issued:
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Applicable Conversion Price:
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Number of shares of Preferred Stock subsequent to Conversion:
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Address for Delivery:
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Or
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DWAC Instructions:
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Broker no:
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Account no:
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Name of Entity Holder______________ (Please Print)
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By:
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Name:
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Title:
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Name of Individual Holder______________ (Please Print)
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______________________ (Signature of Individual
Holder)
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SECURITIES
PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”) is dated as
of December 16, 2020, between NaturalShrimp Incorporated, a Nevada
corporation (the “Company”), and the
purchaser identified on the signature page hereto (including its
successors and assigns, the “Purchaser”).
WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and Rule 506 promulgated thereunder, the
Company desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase from the Company, securities of the
Company as more fully described in this Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Company
and the Purchaser agrees as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement: (a)
capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Certificate of Designation (as
defined herein), and (b) the following terms have the meanings set
forth in this Section 1.1:
“Acquiring Person” shall
have the meaning ascribed to such term in Section 4.5.
“Action” shall have the
meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
“Board of Directors”
means the board of directors of the Company.
“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
“Certificate
of Designation” means the Certificate of Designation
to be filed prior to the Closing by the Company with the Secretary
of State of the State of Nevada, in the form of Exhibit A attached
hereto.
“Closing Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto in
connection with the Closing, and, to the extent applicable, all
conditions precedent to (i) the Purchaser’s obligations to
pay the Subscription Amount as to the Closing and (ii) the
Company’s obligations to deliver the Securities as to the
Closing, in each case, have been satisfied or waived.
“Closing” means the
closing of the purchase and sale of the Securities pursuant to
Section 2.1, which shall occur on the Closing Date. The Closing
will be for the purchase of up to five thousand (5,000) Preferred
Shares at the purchase price of $5,000,000, equal to $1,000 per
Preferred Share.
“Commission” means the
United States Securities and Exchange Commission.
“Commitment Shares” means
six million (6,000,000) Shares issued upon the Closing as an equity
incentive.
“Common
Stock” means the common stock of the Company, par
value $0.0001 per share, and any other class of securities into
which such securities may hereafter be reclassified or
changed.
“Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right,
option, warrant 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.
“Company Counsel” means
Lucosky
Brookman LLP.
“Conversion Shares” shall
have the meaning as set forth in the Certificate of
Designation.
“Disclosure Schedules”
shall have the meaning ascribed to such term in Section
3.1.
“Dividend” means twelve
percent (12%) per annum of the stated value of any purchased
Preferred Share, paid quarterly by the Company, and at the
Company’s discretion, in cash or in Preferred
Stock.
“Evaluation Date” shall
have the meaning ascribed to such term in Section
3.1(r).
“Event of Default”
means any of the following events: (i) the suspension, cessation
from trading or delisting of the Company's Common Stock on the
Principal Market for a period of two (2) consecutive trading days
or more; (ii) the failure by the Company to timely comply with the
reporting requirements of the Exchange Act (including applicable
extension periods); (iii) the failure for any reason by the Company
to issue Commitment Shares, Dividends or Conversion Shares to the
Purchaser within the required time periods; (iv) the Company
breaches any representation, warranty, covenant or other term of
condition contained in the definitive agreements between the
parties; (v) the Company files for Bankruptcy or receivership or
any money judgment writ, liquidation or a similar process is
entered by or filed against the Company for more than $50,000 and
remains unvacated, unbonded or unstayed for a period of twenty (20)
calendar days; (vi) any cessation of operations by the Company or
failure by the Company to maintain any assets, intellectual,
personal or real property or other assets which are necessary to
conduct its business (vii) the Company shall lose the "bid" price
for its Common stock on the Principal Market; or (viii) if at any
time the Common Stock is no longer DWAC eligible.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“FCPA” means the Foreign
Corrupt Practices Act of 1977, as amended.
“GAAP” means generally
accepted accounting principles in the U.S.
“Intellectual
Property Rights” shall have the meaning ascribed to
such term in Section 3.1(o).
“Liens” means a lien,
charge, pledge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
“Material Adverse Effect”
shall have the meaning assigned to such term in Section
3.1(b).
“Material Permits” shall
have the meaning ascribed to such term in Section
3.1(m).
“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Preferred Stock” means,
five thousand (5,000) shares of the Company’s Series D
Preferred Stock issued hereunder having the rights, preferences and
privileges set forth in the Certificate of Designation, in the form
of Exhibit A
hereto.
“Proceeding”
means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
“Purchaser Party” shall
have the meaning ascribed to such term in Section 4.7.
“Registration Statement”
means any Registration Statement under which the shares of the
Company’s common stock is registered.
“Required Approvals” shall
have the meaning ascribed to such term in Section
3.1(e).
“Rule
144” means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended or
interpreted from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.
“Rule 424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“SEC Reports” shall have
the meaning ascribed to such term in Section 3.1(g).
“Securities”
means the Preferred Stock or the common shares into which the
Preferred Stock is converted.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Short
Sales” means all “short sales” as defined
in Rule 200 of Regulation SHO under the Exchange Act (but shall not
be deemed to include the location and/or reservation of borrowable
shares of Common Stock).
“Stated Value” means
$1,200 per share of Series D Preferred Stock.
“Subscription Amount”
shall mean the aggregate amount to be paid for the Preferred Stock
purchased hereunder as specified on the signature page under the
heading “Subscription Amount,” in United States dollars and in immediately
available funds.
“Subsidiary” means any
subsidiary of the Company as set forth on Schedule 3.1(a) and shall,
where applicable, also include any direct or indirect subsidiary of
the Company formed or acquired after the date hereof.
“Trading Day” means a day
on which the principal Trading Market is open for
trading.
“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE MKT,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange, the OTCQB or the
OTC Markets (or any successors to any of the
foregoing).
“Transaction Documents”
means this Agreement, the Certificate of Designation, all exhibits
and schedules thereto and hereto and any other documents or
agreements executed in connection with the transactions
contemplated hereunder.
“Transfer Agent” means
TransShare Corporation the current transfer agent of the Company,
with a mailing address of 2849 Executive Drive, Suite 200,
Clearwater, FL 33762 and any successor transfer agent of the
Company.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. Upon the terms and
subject to the conditions set forth herein, substantially
concurrent with the execution and delivery of this Agreement by the
parties hereto, the Company agrees to sell, and each Purchaser
agrees to purchase, up to five
thousand (5,000) shares of Preferred Stock at price of
$1,000 per share of Preferred Stock. Each Purchaser shall deliver
to the Company, via wire transfer immediately available funds equal
to the Purchaser’s Subscription Amount as set forth on the
signature page hereto executed by the Purchaser, and the Company
shall deliver to the Purchaser such number of shares of the
Preferred Stock purchased, as determined pursuant to Section 2.2(a)
and such Purchaser shall deliver the other items set forth in
Section 2.2 deliverable at the Closing. Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the
Closing shall occur at the offices of Company Counsel or such other
location as the parties shall mutually agree.
2.2.
Deliveries.
(a) On or prior to the
Closing Date (or as otherwise indicated below), the Company shall
deliver or cause to be delivered to each Purchaser the
following:
(i) This Agreement duly
executed by the Company;
(ii) one
or more certificates evidencing up to five thousand (5,000) shares
of Preferred Stock, representing the Purchased Shares for a
purchase price of $1,000 per Preferred Share;
(iii) one
or more certificates evidencing up to six million (6,000,000)
shares of Common Stock (in the specific amounts specified on the
Purchaser’s signature page hereto), representing the
Commitment Shares; and
(iv) one
or more irrevocable letters of instruction to the Company's
Transfer Agent, instructing the Transfer Agent to maintain for the
benefit of the relevant Purchasers, up to an aggregate of
163,636,364 shares of its common stock (32,727 shares of Common
Stock to be reserved per share of Preferred Stock purchased by each
Purchaser).
(b) On or prior to the
Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company, as applicable, the following:
(i) This Agreement duly
executed by the Purchaser; and
(ii) the
Purchaser’s Subscription Amount by wire transfer to the
account specified in writing by the Company together with the
subscription form attached as an Exhibit below.
(a) The obligations of
the Company hereunder in connection with the Closing are subject to
the following conditions being met:
(i) the accuracy in all
material respects on the applicable Closing Date of the
representations and warranties of the Purchaser contained herein
(unless as of a specific date therein in which case they shall be
accurate as of such date);
(ii) all
obligations, covenants and agreements of the Purchaser required to
be performed at or prior to the applicable Closing Date shall have
been performed;
(iii) the
delivery to the Purchasers of a written waiver approving the
transaction contemplated hereby from the Company’s existing
investment banker; and
(iv) the
delivery by the Purchaser of the items set forth in Section 2.2(b)
of this Agreement.
(b) The obligations of
the Purchaser hereunder in connection with the Closing are subject
to the following conditions being met:
(i) the accuracy in all
material respects when made and on the applicable Closing Date of
the representations and warranties of the Company contained herein
(unless as of a specific date therein);
(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the applicable Closing Date shall have
been performed;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
(v) from the date
hereof to the applicable Closing Date, trading in the Common Stock
shall not have been suspended by the Commission or the
Company’s principal Trading Market and, at any time prior to
the applicable Closing Date, trading in securities generally as
reported by Bloomberg L.P. shall not have been suspended or
limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared
either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of
the Purchaser, makes it impracticable or inadvisable to purchase
the Securities at the Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations
and Warranties of the Company. Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a
part hereof and shall qualify any representation or otherwise made
herein to the extent of the disclosure contained in the
corresponding section of the Disclosure Schedules, the Company
hereby makes the following representations and warranties to the
Purchaser:
(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company are set forth on
Schedule 3.1(a).
The Company owns, directly or indirectly, all of the capital stock
or other equity interests of each Subsidiary, and all of the issued
and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities. If the Company has no subsidiaries, all other
references to the Subsidiaries or any of them in the Transaction
Documents shall be disregarded.
(b) Organization and Qualification.
The Company and each of the Subsidiaries is an entity duly
incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use
its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have
or reasonably be expected to result in: (i) a material adverse
effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business, prospects or condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or
(iii), a “Material
Adverse Effect”) and no Proceeding has been instituted
in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or
qualification.
(c) Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and
no further action is required by the Company, the Board of
Directors or the Company’s stockholders in connection
herewith or therewith other than in connection with the Required
Approvals. This Agreement and each other Transaction Document to
which it is a party has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except: (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(d) No Conflicts. The execution,
delivery and performance by the Company of this Agreement and the
other Transaction Documents to which it is a party, the issuance
and sale of the Securities and the consummation by it of the
transactions contemplated hereby and thereby do not and will not:
(i) conflict with or violate any provision of the Company’s
or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, (ii) conflict
with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the
Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in
a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect.
(e) Filings, Consents and
Approvals. The Company has timely filed all quarterly and
annual reports required to be filed by it with the SEC pursuant to
the reporting requirements of the Securities Exchange Act of 1934,
as amended (the “1934 Act”) (all of the foregoing filed
prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents (other
than exhibits to such documents) incorporated by reference therein,
being hereinafter referred to herein as the “SEC
Documents”). The Company has delivered to Purchaser true and
complete copies of the SEC Documents, except for such exhibits and
incorporated documents, and except as such Documents are available
EDGAR filings on the SEC’s sec.gov website. As of their
respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were
filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Documents
is, or has been, required to be amended or updated under applicable
law (except for such statements as have been amended or updated in
subsequent filings prior the date hereof). As of their respective
dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with United States
generally accepted accounting principles, consistently applied,
during the periods involved and fairly present in all material
respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the SEC Documents,
the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business
subsequent to November 30, 2020, and (ii) obligations under
contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting
principles to be reflected in such financial statements, which,
individually or in the aggregate, are not material to the financial
condition or operating results of the Company. The Company is
subject to the reporting requirements of the 1934 Act. For the
avoidance of doubt, filing of the documents required in this
Section 3(g) via the SEC’s Electronic Data Gathering,
Analysis, and Retrieval system (“EDGAR”) shall satisfy
all delivery requirements of this Section 3(g).
The
Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing
or registration with, any court or other federal, state, local or
other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filings required
pursuant to Section 4.4 of this Agreement, (ii) the notice and/or
application(s) to each applicable Trading Market for the issuance
and sale of the Securities, and (iii) such filings as are required
to be made under applicable state and federal securities laws
(collectively, the “Required
Approvals”).
(f) Issuance of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents.
(g) Capitalization. The
capitalization of the Company is as set forth on Schedule 3.1(g), which
Schedule 3.1(g)
shall also include the number of shares of Common Stock owned
beneficially, and of record, by Affiliates of the Company as of the
date hereof. Except as set forth on Schedule 3.1(g), the Company
has not issued any capital stock since its most recently filed periodic report under the
Exchange Act, other than pursuant to the exercise of
employee stock options under the Company’s stock option
plans, the issuance of shares of Common Stock to employees pursuant
to the Company’s employee stock purchase plans and pursuant
to the conversion and/or exercise of Common Stock Equivalents
outstanding as of the date of the most recently filed periodic
report under the Exchange Act (“SEC Reports”). No
Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as
set forth on Schedule
3.1(g) and except as a result of the purchase and sale of
the Securities, there are no outstanding options, warrants, scrip
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire any shares of Common
Stock, or contracts, commitments, understandings or arrangements by
which the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock or Common Stock Equivalents. The
issuance and sale of the Securities will not obligate the Company
to issue shares of Common Stock or other securities to any Person
and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under
any of such securities. All of the outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully
paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and none of such outstanding
shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. No further approval
or authorization of any stockholder, the Board of Directors or
others is required for the issuance and sale of the Securities.
There are no stockholders agreements, voting agreements or other
similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s
stockholders.
(h) Intentionally
omitted.
(i) Intentionally
omitted.
(j) Litigation. Except as disclosed
in Schedule 3.1(j),
there is no action, suit, inquiry, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an
“Action”) which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has
not been, and to the knowledge of the Company, there is not pending
or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or
the Securities Act.
(k) Labor Relations. Except as
disclosed in Schedule
3.1(k), no labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the
Company, which could reasonably be expected to result in a Material
Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates
to such employee’s relationship with the Company or such
Subsidiary, and neither the Company nor any of its Subsidiaries is
a party to a collective bargaining agreement, and the Company and
its Subsidiaries believe that their relationships with their
employees are good. To the knowledge of the Company, no executive
officer of the Company or any Subsidiary, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or
any restrictive covenant in favor of any third party, and the
continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. The Company and its
Subsidiaries are in compliance with all U.S. federal, state, local
and foreign laws and regulations relating to employment and
employment practices, terms and conditions of employment and wages
and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(l) Compliance. Neither the Company
nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or
any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it
is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it
or any of its properties is bound (whether or not such default or
violation has been waived) except as disclosed in Schedule 3.1(l), (ii) is in
violation of any judgment, decree or order of any court, arbitrator
or other governmental authority, except as set forth on
Schedule 3.1(l) or
(iii) is or has been in violation of any statute, rule, ordinance
or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to
taxes, other than tax payments related to payroll that are late,
environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each
case as could not have or reasonably be expected to result in a
Material Adverse Effect.
(m) Regulatory Permits. The Company
and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the
failure to possess such permits could not reasonably be expected to
result in a Material Adverse Effect (“Material Permits”), and
neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any
Material Permit.
(n) Title to Assets. Except as
disclosed in Schedule 3.1(n), the Company and the Subsidiaries have
good and marketable title in fee simple to all real property owned
by them and good and marketable title in all personal property
owned by them that is material to the business of the Company and
the Subsidiaries, in each case free and clear of all Liens, except
for (i) Liens as do not materially affect the value of such
property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the
Subsidiaries and (ii) Liens for the payment of federal, state or
other taxes, for which appropriate reserves have been made therefor
in accordance with GAAP and, the payment of which is neither
delinquent nor subject to penalties. Any real property and
facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases with
which the Company and the Subsidiaries are in
compliance.
(o) Intellectual Property. The
Company and the Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights
as described in the SEC Reports as necessary or required for use in
connection with their respective businesses and which the failure
to so have could have a Material Adverse Effect (collectively, the
“Intellectual
Property Rights”). Except as disclosed on Schedule 3.1(o), none of, and
neither the Company nor any Subsidiary has received a notice
(written or otherwise) that any of, the Intellectual Property
Rights has expired, terminated or been abandoned, or is expected to
expire or terminate or be abandoned, within two (2) years from the
date of this Agreement. Neither the Company nor any Subsidiary has
received, since the date of the latest audited financial statements
included within the SEC Reports, a written notice of a claim or
otherwise has any knowledge that the Intellectual Property Rights
violate or infringe upon the rights of any Person, except as could
not have or reasonably be expected to not have a Material Adverse
Effect. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property
Rights. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties, except where failure to do
so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(p) Insurance. Except as set forth
on Schedule 3.1(p),
the Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage at
least equal to the aggregate Subscription Amount. Neither the
Company nor any Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business without a
significant increase in cost.
(q) Transactions with Affiliates and
Employees. Except as set forth in the SEC Reports, none of
the officers or directors of the Company or any Subsidiary and, to
the knowledge of the Company, none of the employees of the Company
or any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from,
providing for the borrowing of money from or lending of money to or
otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for: (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company. Except as set forth on
Schedule 3.1(q),
all employee salaries and contractor fees have been paid to date
and no such amounts are outstanding or past due.
(r) Sarbanes-Oxley; Internal Accounting
Controls. Except as may be disclosed in the SEC Reports, the
Company and the Subsidiaries are in compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are
effective as of the date hereof, and any and all applicable rules
and regulations promulgated by the Commission thereunder that are
effective as of the date hereof and as of each Closing Date.
Except as disclosed in the SEC
Reports, the Company and the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The
Company and the Subsidiaries have established disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and the Subsidiaries and designed such
disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the
Commission’s rules and forms. The Company’s certifying
officers have evaluated the effectiveness of the disclosure
controls and procedures of the Company and the Subsidiaries as of
the end of the period covered by the most recently filed periodic
report under the Exchange Act (such date, the
“Evaluation
Date”). The Company
presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on
their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the internal control over
financial reporting (as such term is defined in the Exchange Act)
of the Company and its Subsidiaries that have materially affected,
or is reasonably likely to materially affect, the internal control
over financial reporting of the Company and its
Subsidiaries.
(s) Certain Fees. No brokerage or
finder’s fees or commissions are or will be payable by the
Company or any Subsidiary to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchaser shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by the Transaction Documents.
(t) Private Placement. Assuming the
accuracy of the Purchaser’s representations and warranties
set forth in Section 3.2, no registration under the Securities Act
is required for the offer and sale of the Securities by the Company
to the Purchaser as contemplated hereby. The issuance and sale of
the Securities hereunder does not contravene the rules and
regulations of the Trading Market.
(u) Investment Company. The Company
is not, and is not an Affiliate of, and immediately after receipt
of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the
Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become an
“investment company” subject to registration under the
Investment Company Act of 1940, as amended.
(v) Registration Rights. No Person
has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company or any
Subsidiary.
(w) Listing and Maintenance
Requirements. The Company has not in the twelve (12) months
preceding the date hereof, received notice from any Trading Market
on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is and
has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements.
(x) [RESERVED]
(y) Disclosure. Except with respect
to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms
that neither it nor any other Person acting on its behalf has
provided the Purchaser or its agents or counsel with any
information that it believes constitutes or might constitute
material, non-public information. The Company understands and
confirms that the Purchaser will rely on the foregoing
representation in effecting transactions in securities of the
Company. All of the disclosure furnished by or on behalf of the
Company to the Purchaser regarding the Company and its
Subsidiaries, their respective businesses and the transactions
contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. The
press releases disseminated by the Company during the twelve months
preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made and when made, not misleading. The Company
acknowledges and agrees that the Purchaser does not make and has
not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set
forth in Section 3.2 hereof.
(z) No Integrated Offering.
Assuming the accuracy of the Purchaser’s representations and
warranties set forth in Section 3.2, neither the Company, nor any
of its Affiliates, nor any Person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of
(i) the Securities Act which would require the registration of any
such securities under the Securities Act, or (ii) any applicable
shareholder approval provisions of any Trading Market on which any
of the securities of the Company are listed or
designated.
(aa) Tax
Status. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and its Subsidiaries each (i)
has made or filed all United States federal, state and local income
and all foreign income and franchise tax returns, reports and
declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due
on such returns, reports and declarations and (iii) has set aside
on its books provision reasonably adequate for the payment of all
material taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company or of any
Subsidiary know of no basis for any such claim. Immediately after
closing of this transaction, the Company covenants to pay to the
Past Due Taxes.
(bb) No
General Solicitation. Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only
to the Purchaser.
(cc) Foreign
Corrupt Practices. Neither the Company nor any Subsidiary,
nor to the knowledge of the Company or any Subsidiary, any agent or
other person acting on behalf of the Company or any Subsidiary,
has: (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company or any Subsidiary (or made by any
person acting on its behalf of which the Company is aware) which is
in violation of law or (iv) violated in any material respect any
provision of FCPA.
(dd) Accountants.
The Company’s accounting firm is set forth on Schedule 3.1(dd) of the
Disclosure Schedules. To the knowledge and belief of the Company,
such accounting firm: (i) is a registered public accounting firm as
required by the Exchange Act and (ii) shall express its opinion
with respect to the financial statements to be included in the
Company’s Annual Report for the fiscal year ending March 31,
2021.
(ee) Acknowledgment
Regarding Purchaser’s Purchase of Securities. The
Company acknowledges and agrees that the Purchaser is acting solely
in the capacity of an arm’s length purchaser with respect to
the Transaction Documents and the transactions contemplated
thereby. The Company further acknowledges that the Purchaser is not
acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and
the transactions contemplated thereby and any advice given by the
Purchaser or any of its representatives or agents in connection
with the Transaction Documents and the transactions contemplated
thereby is merely incidental to the Purchaser’s purchase of
the Securities. The Company further represents to the Purchaser
that the Company’s decision to enter into this Agreement and
the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by
the Company and its representatives.
(ff) Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein
to the contrary notwithstanding, it is understood and acknowledged
by the Company that: (i) the Purchaser has not been asked by the
Company to agree, nor has the Purchaser agreed, to desist from
purchasing or selling, securities of the Company, or
“derivative” securities based on securities issued by
the Company or to hold the Securities for any specified term, (ii)
past or future open market or other transactions by the Purchaser,
specifically including, without limitation,
“derivative” transactions, before or after a closing of
this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded
securities (iii) Omit and (iv) the Purchaser shall not be deemed to
have any affiliation with or control over any arm’s length
counter-party in any “derivative” transaction.
The Company further understands and acknowledges that (y) the
Purchaser may engage in hedging activities at various times during
the period that the Securities are outstanding, and (z) such
hedging activities (if any) could reduce the value of the existing
stockholders’ equity interests in the Company at and after
the time that the hedging activities are being conducted. The
Company acknowledges that such aforementioned hedging activities do
not constitute a breach of any of the Transaction
Documents.
(gg) Regulation
M Compliance. The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or
agreed to pay to any Person any compensation for soliciting another
to purchase any other securities of the Company, other than, in the
case of clauses (ii) and (iii), compensation paid to the
Company’s placement agent in connection with the placement of
the Securities.
(hh) Reserved.
(ii) Stock
Option Plans. Each stock option granted by the Company under
the Company’s stock option plan was granted (i) in accordance
with the terms of the Company’s stock option plan and (ii)
with an exercise price at least equal to the fair market value of
the Common Stock on the date such stock option would be considered
granted under GAAP and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The
Company has not knowingly granted, and there is no and has been no
Company policy or practice to knowingly grant, stock options prior
to, or otherwise knowingly coordinate the grant of stock options
with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their
financial results or prospects.
(jj) Office
of Foreign Assets Control. Neither the Company nor any
Subsidiary nor, to the Company's knowledge, any director, officer,
agent, employee or affiliate of the Company or any Subsidiary is
currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department
(“OFAC”).
(kk) U.S.
Real Property Holding Corporation. The Company is not and
has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company shall so certify upon Purchaser’s
request.
(ll) Bank
Holding Company Act. Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation
by the Board of Governors of the Federal Reserve System (the
“Federal
Reserve”). Neither the Company nor any of its
Subsidiaries or Affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of
any class of voting securities or twenty-five percent or more of
the total equity of a bank or any entity that is subject to the
BHCA and to regulation by the Federal Reserve. Neither the Company
nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal
Reserve.
(mm) Money
Laundering. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, applicable money laundering statutes and applicable rules
and regulations thereunder (collectively, the “Money Laundering Laws”),
and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
the Company or any Subsidiary with respect to the Money Laundering
Laws is pending or, to the knowledge of the Company or any
Subsidiary, threatened.
3.2 Representations
and Warranties of the Purchaser. The Purchaser hereby
represents and warrants as of the date hereof and as of the Closing
Dates to the Company as follows (unless as of a specific date
therein):
(a) Organization;
Authority. The Purchaser is either an individual or an
entity duly incorporated or formed, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
formation with full right, corporate, partnership, limited
liability company or similar power and authority to enter into and
to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of the Transaction Documents
and performance by the Purchaser of the transactions contemplated
by the Transaction Documents have been duly authorized by all
necessary corporate, partnership, limited liability company or
similar action, as applicable, on the part of the Purchaser. Each
Transaction Document to which it is a party has been duly executed
by the Purchaser, and when delivered by the Purchaser in accordance
with the terms hereof, will constitute the valid and legally
binding obligation of the Purchaser, enforceable against it in
accordance with its terms, except: (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(b) Own
Account. The Purchaser understands that the Securities are
“restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and
is acquiring the Securities as principal for its own account and
not with a view to or for distributing or reselling such Securities
or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of
distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or
indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities in
violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting the
Purchaser’s right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable
federal and state securities laws).
(c) Purchaser
Status. At the time the Purchaser was offered the
Securities, it was, and as of the date hereof it is and on each
date on which it converts any shares of Preferred Stock, either:
(i) an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act or (ii) a “qualified institutional buyer” as
defined in Rule 144A(a) under the Securities Act.
(d) Experience
of the Purchaser. The Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in
the Securities, and has so evaluated the merits and risks of such
investment. The Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
(e) General
Solicitation. The Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or
general advertisement.
The
Company acknowledges and agrees that the representations contained
in Section 3.2 shall not modify, amend or affect the
Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The Securities may
only be disposed of in compliance with state and federal securities
laws. As a condition of transfer, any such transferee shall agree
in writing to be bound by the terms of this Agreement and shall
have the rights and obligations of the Purchaser under this
Agreement.
(b) The Purchaser
agrees to the imprinting, so long as is required by this Section
4.1, of a legend on any of the Securities in the following
form:
THIS
SECURITY HAS NOT 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 AS EVIDENCED BY
A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR”
AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
The
Company acknowledges and agrees that the Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and who agrees to be bound by the provisions of
this Agreement and, if required under the terms of such
arrangement, the Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are
registered under a registration statement, the preparation and
filing of any required prospectus supplement under Rule 424(b)(3)
under the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of selling
stockholders thereunder.
4.2 Acknowledgment
of Dilution of Voting Power. The Company acknowledges that
the issuance of the Securities will result in dilution of the
voting power of the outstanding shares of Common Stock, which
dilution will be substantial.
4.3 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities
or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is
obtained before the closing of such subsequent
transaction.
4.4 Securities
Laws Disclosure; Publicity. The Company and the Purchaser
shall consult with each other in issuing any other press releases
with respect to the transactions contemplated hereby including for
the initial press release pursuant to Section 4.8, and neither the
Company nor the Purchaser shall issue any such press release nor
otherwise make any such public statement without the prior consent
of the Company, with respect to any press release of the Purchaser,
or without the prior consent of the Purchaser, with respect to any
press release of the Company, which consent shall not unreasonably
be withheld or delayed, except if such disclosure is required by
law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of the Purchaser, or include the name of
the Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of the
Purchaser, except: (a) as required by federal securities law in
connection with the filing of final Transaction Documents with the
Commission and (b) to the extent such disclosure is required by law
or Trading Market regulations, in which case the Company shall
provide the Purchaser with prior notice of such disclosure
permitted under this clause (b).
4.5 Shareholder
Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that
the Purchaser is an “Acquiring Person” under any
control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that the Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents or under any other
agreement between the Company and the Purchaser.
4.6 Non-Public
Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction
Documents, the Company covenants and agrees that neither it, nor
any other Person acting on its behalf, will provide the Purchaser
or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior
thereto the Purchaser shall have entered into a written agreement
with the Company regarding the confidentiality and use of such
information. The Company understands and confirms that the
Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.
4.7 Indemnification
of Purchaser. Subject to the provisions of this Section 4.7,
the Company will indemnify and hold the Purchaser and their
respective directors, officers, shareholders, members, partners,
employees and agents (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title), each Person who controls
the Purchaser (within the meaning of Section 15 of the Securities
Act and Section 20 of the Exchange Act), and the directors,
officers, shareholders, agents, members, partners or employees (and
any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any
other title) of such controlling persons (each, a
“Purchaser
Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs
and reasonable attorneys’ fees and costs of investigation
that any such Purchaser Party may suffer or incur as a result of or
relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents or (b) any action
instituted against the Purchaser Parties in any capacity, or any of
them or their respective Affiliates, by any stockholder of the
Company who is not an Affiliate of such Purchaser Party, with
respect to any of the transactions contemplated by the Transaction
Documents (unless such action is based upon a breach of such
Purchaser Party’s representations, warranties or covenants
under the Transaction Documents or any agreements or understandings
such Purchaser Party may have with any such stockholder or any
violations by such Purchaser Party of state or federal securities
laws or any conduct by such Purchaser Party which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any
action shall be brought against any Purchaser Party in respect of
which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and
the Company shall have the right to assume the defense thereof with
counsel of its own choosing reasonably acceptable to the Purchaser
Party. Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense
of such Purchaser Party except to the extent that (i) the
employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period
of time to assume such defense and to employ counsel or such
defense once started is subsequently delayed owing to lack of
timely payment by the Company of legal fees and expenses or (iii)
in such action there is, in the reasonable opinion of counsel, a
material conflict on any material issue between the position of the
Company and the position of such Purchaser Party, in which case the
Company shall be responsible for the reasonable fees and expenses
of no more than one such separate counsel. The Company will not be
liable to any Purchaser Party under this Agreement (y) for any
settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (z) to the extent, but only to
the extent that a loss, claim, damage or liability is attributable
to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such
Purchaser Party in this Agreement or in the other Transaction
Documents. The
indemnification required by this Section 4.7 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or are
incurred. The indemnity agreements contained herein shall be in
addition to any cause of action or similar right of any Purchaser
Party against the Company or others and any liabilities the Company
may be subject to pursuant to law.
4.8 Certain
Transactions and Confidentiality. The Purchaser, covenants
that neither it, nor any Affiliate acting on its behalf or pursuant
to any understanding with it will (i) execute any Short Sales, of
any of the Company’s securities during the period commencing
with the execution of this Agreement and ending at such time that
the transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in
Section 4.4 or (ii) from the date hereof until the earlier of the
12 month anniversary of the date hereof and the date that the
Preferred Stock is no longer outstanding, execute any Short Sales
of the Common Stock (a “Prohibited Short Sale”).
The Purchaser covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the
Company pursuant to the initial press release as described in
Section 4.4, the Purchaser will maintain the confidentiality of the
existence and terms of this transaction and the information
included in the Transaction Documents and the Disclosure Schedules.
Notwithstanding the foregoing, and notwithstanding anything
contained in this Agreement to the contrary, the Company expressly
acknowledges and agrees that (i) the Purchaser does not make any
representation, warranty or covenant hereby that it will not engage
in effecting transactions in any securities of the Company after
the time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the initial press release as
described in Section 4.4, (ii) except for a Prohibited Short Sale,
the Purchaser shall not be restricted or prohibited from effecting
any transactions in any securities of the Company in accordance
with applicable securities laws from and after the time that the
transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in
Section 4.4 and (iii) the Purchaser shall have no duty of
confidentiality to the Company or its Subsidiaries after the
issuance of the initial press release as described in Section
4.4.
4.9 Form D; Blue Sky Filings. The
Company agrees to timely file a Form D with respect to the
Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of the Purchaser. The Company shall
take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to the Purchaser under applicable securities
or “Blue Sky” laws of the states of the United States,
and shall provide evidence of such actions promptly upon request of
the Purchaser.
4.10 Redemption.
The Company shall have the right to redeem the Securities,
in accordance with the Certificate of
Designation.
4.11 Dividends
The Company shall pay a dividend as
provided in the Certificate of Designation.
4.12 [reserved].
4.13
Event of
Default Upon an Event of
Default, it shall be a Triggering Event and the Holder shall have
the rights as provided in the Certificate of
Designation.
ARTICLE V.
MISCELLANEOUS
5.1 Termination.
This Agreement may be terminated by the Purchaser, as to the
Purchaser’s obligations hereunder, if the Closing has not
been consummated within five (5) Business Days of the date hereof;
provided,
however, that such
termination will not affect the right of any party to sue for any
breach by any other party (or parties).
5.2 Fees
and Expenses. Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the
fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all Transfer
Agent fees (including, without limitation, any fees required for
same-day processing of any instruction letter delivered by the
Company), stamp taxes and other taxes and duties levied in
connection with the delivery of any Securities to the
Purchaser.
5.3 Entire
Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and thereof
and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.
5.4 Notices.
Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of: (a) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages
attached hereto at or prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages
attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c) the second
(2nd)
Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (d) upon actual
receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set
forth on the signature pages attached hereto.
5.5 Amendments;
Waivers. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument
signed, in the case of an amendment, by the Company and the holders
of at least 75% in interest of the Securities then outstanding or,
in the case of a waiver, by the party against whom enforcement of
any such waived provision is sought. No waiver of any default with
respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.
5.6 Headings.
The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.7 Successors
and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the
Purchaser (other than by merger). The Purchaser may assign any or
all of its rights under this Agreement to any Person to whom the
Purchaser assigns or transfers any Securities, provided that such
transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction
Documents that apply to the “Purchaser.”
5.8 No
Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as
otherwise set forth in Section 4.7 and this Section
5.8.
5.9 Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the
internal laws of the State of Nevada, without regard to the
principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto
or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state or federal courts sitting in the Borough
of Manhattan, New York, New York Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal
courts sitting in the Borough of Manhattan, New York, New York for
the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is improper or is an
inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by law. If either party shall commence an action,
suit or proceeding to enforce any provisions of the Transaction
Documents, then, in addition to the obligations of the Company
under Section 4.7, the prevailing party in such action, suit or
proceeding shall be reimbursed by the other party for its
reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of
such action or proceeding.
5.10 Survival.
The representations and warranties contained herein shall survive
each Closing and the delivery of the Securities.
5.11 Execution.
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or
“.pdf” signature page were an original
thereof.
5.12 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
5.13 Rescission
and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions
of) any of the other Transaction Documents, whenever any Purchaser
exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related
obligations within the periods therein provided, then the Purchaser
may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or
election in whole or in part without prejudice to its future
actions and rights.
5.14 Replacement
of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof (in the case of mutilation), or in
lieu of and substitution therefor, a new certificate or instrument,
but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction. The applicant for a new
certificate or instrument under such circumstances shall also pay
any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement
Securities.
5.15 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, the
Purchaser and the Company will be entitled to specific performance
under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations contained in the Transaction
Documents and hereby agree to waive and not to assert in any action
for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.16
Payment Set Aside.
To the extent that the Company makes a payment or payments to the
Purchaser pursuant to any Transaction Document or the Purchaser
enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by
or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
5.17 Liquidated
Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not
terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument
or security pursuant to which such partial liquidated damages or
other amounts are due and payable shall have been
canceled.
5.18 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 next succeeding
Business Day.
5.19 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto. In addition, each
and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the
date of this Agreement.
5.20 WAIVER
OF JURY TRIAL. IN ANY
ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY
PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY
WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
IN
WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
|
NATURALSHRIMP INCORPORATED
|
Address for Notice:
15150 Preston Road
Suite 300
|
|
By:__________________________________________
Name:
Gerald Easterling
Title:
Chief Executive Officer
With a
copy to (which shall not constitute notice):
|
Dallas, TX 75248
|
|
Attn:
Lucosky Brookman LLP
Email:
jlucosky@lucbro.com; sbrookman@lucbro.com
|
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
[PURCHASER
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
Name of
Purchaser:
Signature of Authorized Signatory of
Purchaser: __________________________
Name of
Authorized Signatory:
Title
of Authorized Signatory:
Address
for Notice to Purchaser:
Address
for Delivery of Securities to Purchaser (if not same as address for
notice):
Facsimile
Number:
Subscription
Amount: $
Subscription
Date:
Shares
of Preferred Stock:
Commitment
Shares:
Exhibit A
Certificate of
Designation
[list
of Disclosure Schedules: content to be provided by
Company]:
(please read each section for specific content, topic below listed
for convenience only)
Schedule 3.1(a) - subsidiaries
Schedule 3.1(g) - capitalization
Schedule 3.1(j) - litigation
Schedule 3.1(k) - labor disputes
Schedule 3.1(l) - compliance
Schedule 3.1(n) - title to assets
Schedule 3.1(o) -intellectual property
Schedule 3.1(p) - insurance
Schedule 3.1(q) -transactions with affiliates and
employees
Schedule 3.1(aa) - tax status
Schedule 3.1(dd) - accountants
FORM OF CLOSING NOTICE
TO:
DATE:
December 16, 2020
We
refer to the Securities Purchase Agreement, dated December 16, 2020
(the “Agreement”), entered into
by and between NaturalShrimp Incorporated and you. Capitalized
terms defined in the Agreement shall, unless otherwise defined
herein, have the same meaning when used herein.
We
hereby:
1)
Give you notice
that we require you to purchase _____ shares of Series D Preferred
Stock; and
2)
The purchase price
per share, pursuant to the terms of the Agreement, is $1,000;
and
3)
Certify that, as of
the date hereof, the conditions set forth in Section 2.3 of the Agreement,
as related to the obligations of the Company, are
satisfied.
Closing
will occur in accordance with the terms and conditions of Section 2
of the Agreement.
NATURALSHRIMP
INCORPORATED.
Title:
Chief Executive
Officer
Schedule 3.1(a)
As of the date hereof, NaturalShrimp
Incorporated., a Nevada corporation,
has the following wholly and partially-owned
subsidiaries:
|
Subsidiary Name
|
|
Jurisdiction of Incorporation
|
|
NaturalShrimp
Corporation
|
|
Delaware
|
|
NaturalShrimp
Global, Inc.
|
|
Delaware
|
|
Natural
Aquatic Systems, Inc.
|
|
Texas
|
|
NaturalShimp/Ecoponex,
LLC (51%)
|
|
Texas
|
Schedule 3.1(g)
As of the date hereof, NaturalShrimp
Incorporated., a Nevada corporation,
has the following capitalization:
Common Stock
●
Common
stock, $0.0001 par value, 900,000,000 shares
authorized
●
533,693,794
issued and outstanding as of the date hereof
Preferred Stock
●
Series
A Convertible Preferred stock, $0.0001 par value, 5,000,000 shares
authorized, 5,000,000 shares issued and outstanding as of the date
hereof
●
Series
B Convertible Preferred stock, $0.0001 par value, 5,000 shares
authorized, 1,672 shares issued and outstanding as of the date
hereof
Schedule 3.1(j)
Vista Capital Investments, LLC
On
April 30, 2019, a complaint was filed against the Company in the
U.S. District Court in Dallas, Texas alleging that the Company
breached a provision in a common stock purchase warrant (the
“Vista Warrant”) issued by the Company to Vista Capital
Investments, LLC (“Vista”). Vista alleged that the
Company failed to issue certain shares of the Company’s
Common Stock as was required under the terms of the Warrant. Vista
sought money damages in the approximate amount of $7,000,000, as
well as costs and reimbursement of expenses.
On
April 9, 2020, the Company, Vista and David Clark
(“Clark’), a principal of Vista, (the
“Parties”) entered into a Settlement Agreement and
Release (the “Settlement Agreement”) whereby the
Company shall (i) pay to Vista the sum of $75,000, which the
Company wired on April 10, 2020, and (ii) issue to Vista 17,500,000
shares of the Company’s Common Stock (the “Settlement
Shares”). For a period of time equal to 90-days from the date
of the settlement, or July 8, 2020, the Company shall have the
right, but not the obligation, to purchase back from Vista
8,750,000 of the Settlement Shares at a price equal to the greater
of (i) the volume weighted-average trading price of the
Company’s common shares over the five preceding trading days
prior to the date of the delivery of the Company’s written
notice of such repurchase or (ii) $0.02 per share. On May 18, 2020,
the Company received $50,000 as consideration for waiving the
purchase option on the Settlement Shares, thereby allowing Vista to
retain all of the Settlement Shares. The Vista warrants outstanding
were cancelled as part of the Settlement Agreement.
RGA Labs, Inc.
On
February 18, 2020, RGA Labs, Inc. (“RGA”) filed suit
against the Company in the Illinois Circuit Court (23rd District)
alleging that the Company owed RGA money pursuant to a written
contract for the design and manufacture of certain water treatment
equipment commissioned by the Company. The Company disputed the
allegations and has counterclaimed against RGA for additional costs
and expenses incurred by the Company in correcting, repairing and
retro-fitting the equipment to enable it to work in the
Company’s facilities. The amount in controversy is not
material.
Gary Shover
A
shareholder of NaturalShrimp Holdings, Inc. (“NSH”),
Gary Shover, filed suit against the Company on August 11, 2020 in
the Northern District of Texas, Dallas Division, alleging breach of
contract for the Company’s failure to exchange common shares
of the Company for shares Mr. Shover owns in NSH. The Company has
filed its answer to the complaint and is seeking to settle the
matter with Mr. Shover with the approval of the Federal District
Court. A settlement stipulation has been prepared and approved by
the parties and will be filed with the Court along with a proposed
order.
Schedule 3.1(k)
There
are no labor disputes.
Schedule 3.1(l)
The
Company is not out of compliance with any matters related to this
item.
Schedule 3.1(n)
There
are no exceptions under this provision.
Schedule 3.1(o)
There
are no exceptions under this provision.
Schedule 3.1(p)
There
are no exceptions under this schedule that need to be
included.
Schedule 3.1(q)
There
are no transactions with affiliates or employees that have not
already been disclosed under the Company’s SEC
filings.
Schedule 3.1(aa)
The
Company is taxed as a C-Corp.
Schedule 3.1(dd)
Turner,
Stone & Company, L.L.P.